Sale Instances Cannot Guide Us To The Market Value Of Land With Exactitude: Supreme Court
The Supreme Court was deciding a dispute related to the assessment of market value of the acquired land for the purpose of awarding compensation under the Land Acquisition Act, 1894.
Justice Surya Kant, Justice Ujjal Bhuyan, Supreme Court
The Supreme Court observed that sale instances cannot guide us to the market value of the land with exactitude.
The Court observed thus in a batch of Civil Appeals in which the dispute was related to the assessment of market value of the acquired land for the purpose of awarding compensation under the Land Acquisition Act, 1894 (LA Act).
The two-Judge Bench of Justice Surya Kant and Justice Ujjal Bhuyan reiterated, “Sale instances, however, cannot guide us to the market value of the land with exactitude. In some cases, direct examples of sale of comparable land may not be available, while in other cases, there may be relevant distinguishing features between the sale exemplar and the acquired land. In such cases, Courts adopt the process of guesstimation to apply the evidence and arrive at an equitable price for the acquired land.”
The Bench said that any sale exemplar which is presented to the Court ought to be considered on the touchstone of the requirements, so that the most representative sale instance can be determined.
Senior Advocates Neeraj Kishan Kaul, E. Ajay Reddy, and AOR Tatini Basu appeared on behalf of the Appellants/Landowners while Additional Solicitor General of India (ASGI) Aishwarya Bhati appeared on behalf of the Respondent/State.
Brief Facts
The Telangana High Court vide the impugned Judgments had enhanced the rate of compensation from the range of INR 9,45,000 and 28,00,000 per acre to INR 1,35,00,000 per acre. The Appeals before the Apex Court were the cross Appeals preferred by the landowners, State, and the Hyderabad Metropolitan Development Authority (HMDA). While the landowners were seeking further enhancement, the State and HMDA were aggrieved by the enhancement granted by the High Court. Three acquisitions were initiated by the State for adjoining parcels of land. Each acquisition led to separate proceedings for determining the compensation payable to the expropriated landowners.
During the pendency of the reference proceedings, the landowners, under protest, accepted payment of the compensation awarded by the Special Deputy Collector, Land Acquisition (LAC). All three awards of the Reference Court were then the subject matter of Appeals and cross-objections before the High Court. The High Court decided the Appeals and cross objections in the First and Third Acquisitions through a common Judgment, while the Appeal and cross Appeal in the Second Acquisition were decided by two separate Judgments which were passed in terms of the Lead Impugned Judgement. This was challenged by the parties before the Apex Court.
Reasoning
The Supreme Court in view of the above facts, remarked, “It is a settled position that computation of compensation for acquisition must be guided by the “market value of the land as on the date of publication of the Section 4 notification”. This principle is mandated by Section 23(1) of the 1894 Act. This court has, time and again, interpreted ‘market value’ to represent ‘the price that a willing buyer would pay to a willing seller in light of the land’s condition and potentiality’.”
The Court noted that in ordinary circumstances, the best way to identify this price is by considering instances of sale of similar or comparable lands. It added that such exemplars can serve as a foundation for determining compensation, so long as they fulfil the following requirements:
i. The sale exemplar depicts a genuine, open-market transaction;
ii. The land covered by the sale deed is in the vicinity of the acquired land;
iii. The land covered by the sale deed is similar in nature to the acquired land; and
iv. The sale was executed at a time proximate to the date of the notification issued under Section 4 of the 1894 Act.
“Applying 20% compounding escalation for 2004 and 2005 to the base rate of INR 31,00,000 per acre, we find that the market value of the acquired lands at the time of the publication of the notification under Section 4 of the 1894 Act would be INR 44,64,000 per acre”, it further said.
The Court was of the view that the High Court has erred in increasing the compensation in an exponential manner to the rate of INR 1,35,00,000 per acre. It also observed that the subject land could not be derived from auction sale instances of plots in a developed area or from post-Section 4 notification sale instances, and instead, it ought to be arrived at by considering appropriate pre-notification sale deeds and applying proper price escalation.
“As such, the High Court has erred in stipulating that the interest is payable on the enhanced amount at the rate of 12% per annum. The High Court cannot deviate from the explicit mandate under Section 34, and interest has to be awarded strictly in accordance with the statutory provision. In this respect, we accept the plea taken on behalf of the landowners for correcting the interest rate”, it remarked.
The Court was of the opinion that the grounds raised by the State to challenge the interest on the enhanced amount, i.e., the acceptance of the compensation in protest and burden on the exchequer, are wholly untenable and the clear stipulation under Section 34 is in consonance with equitable principles, and it vests an indefeasible right in favour of a landowner. It added that after market value has been originally determined by the Reference Court, enhancement in Appeal is a reflection of the true value which ought to have been granted at the threshold.
“There can, thus, be no dispute that all statutory benefits, including additional amount under Section 23(1A), additional consideration (solatium) under Section 23(2), and interest on the entire compensation under Section 34, would be due on the enhanced amount of compensation”, it concluded.
The Court, therefore, held that the High Court rightly granted interest and solatium, as well as interest on the solatium, on the enhanced market value, but it erred in granting interest at the rate of 12% per annum.
Accordingly, the Apex Court dismissed the Appeals of the landowners except to the extent of grant of interest and partly allowed the Appeals of the State and HMDA.
Cause Title- Barla Ram Reddy v. The State of Telangana (Neutral Citation: 2025 INSC 531)
Appearance:
Senior Advocates Neeraj Kishan Kaul, E. Ajay Reddy, ASGI Aishwarya Bhati, AORs Tatini Basu, Praseena Elizabeth Joseph, Rajiv Kumar Choudhry, Sravan Kumar Karanam, Advocates S. Udaya Kumar Sagar, Bina Madhavan, K. Ravi Kumar Chary, Tushar Singh, Byrapaneni Suyodhan, Obulapuram Keerthi, Aniket Singh, Abhiram Bannur, Anuradha, Shireesh Tyagi, and Anirudh Singh.
