Read Judgment: Union of India and Others v. Premlata and Others 

Mansimran Kaur

New Delhi, April 8, 2022: Partly allowing an appeal against the judgment of the Nagpur Bench of the Bombay High Court, the Supreme Court has held that in a given case, the Court may determine the compensation on square foot basis after making a reasonable deduction towards development charges, in case there are no other sale instances available.

The Division Bench comprising Justice M.R. Shah and Justice B.V. Nagarathna also reaffirmed that small plots/parcels of land cannot offer the same market value as when a large tract of land is purchased in an open market by a willing and prudent purchaser.

The facts this case a notification under Section 4 of the Land Acquisition Act, 1894 was issued on November 5, 1992 seeking to acquire around 65 Hectares of land  situated at Borkhedi Tahsil, District Nagpur. The said land was sought to be acquired by the Ministry of Defence for its Research and Development Organization. Acquisition proceedings in respect of 19 Hectares 79 R of the land were dropped and the actual land acquired came to about 45 Hectares 89 R. The dispute was with respect to four pieces of land bearing Survey Nos. 40, 41, 43/2 and 44 owned by the original claimant herein . Thereafter the Land Acquisition Officer granted an award of Rs.1,13,500/- per Hectare in respect of land bearing survey No. 43/2 and Rs.1,35,000/- per Hectare for the land bearing survey Nos. 40, 41 and 44. In consequence  to the award, the original claimant made a reference under Section 18 of the Act. The Reference Court in pursuant to the same under Section 18 of the Act enhanced the compensation to Rs 6 per square foot after making deduction of 25 % as development charges. 

Aggrieved by the order of the Reference Court, the acquiring Authority preferred an appeal before the High Court. The High Court’s order dated September  21, 2016 quashed the order of the Reference Court,  remanded the proceedings to the file of the Reference Court on the ground that ample opportunity was not provided to the acquiring authority to contest the reference proceedings.  In consequence to the remand, the Reference Court through its order dated August 28, 2018 enhanced/determined the compensation to Rs 6 per square foot and development charges at 25 %. 

The original claimant assailed the  order of the Reference Court and instituted a first appeal before the High Court seeking to enhance the amount of compensation. Moreover the acquiring body also filed Cross objection assailing the  order of the Reference Court enhancing the amount of compensation. In pursuant to the same, the High Court reformed the order of the Reference Court and held that the claimant shall be compensated on the basis of Rs 6 per square foot, however the deduction shall be 1/3rd instead of 25 % towards development charges.  

It was this common impugned judgment of the High Court wherein the prayer of the original claimant was dismissed and the Cross Objection of the acquiring body was partially allowed which made both the original claimant and acquiring body to present the appeals before the Apex Court. 

It was contended form the petitioner’s side that factors detrimental in computation of  deduction charges toward development are based on two factors primarily : extent of utilization and cost of development. It was also contended that  determination of compensation on a square foot basis for a large extent of land is illegal. Thus it was submitted that the High Court and Reference Court erred in their findings by determining the compensation on square foot basis. 

The Counsel for original claimants on the other hand referred to the case of Bhagwathula Samanna & Others v. Special Tahsildar & Land Acquisition Officer, Visakhapatnam, Municipality and to the case of Trishala Jain v. State of Uttaranchal to emphasize  on the  fact that sale examples of small plots can be a factor in assessing the compensation of a large extent of land. Further case of Nelson Fernandes & Others v. Special Land Acquisition Officer, South Goa & Others was referred to stress on the fact the purpose of acquisition is a relevant factor in determining the extent of deduction. Reliance was also made to the cases of Mahesh Dattatray Thirthkar v. State of Maharashtra and of Udho Dass v. State of Haryana wherein it was urged that the report of the expert should be normally accepted. 

The Apex Court after considering the submissions of both the appellants observed that it is right that the compensation rate of the large extent of the land shall not be on square foot basis, however after deduction of reasonable  development charges, the Court can have the liberty to do so. 

The Top Court referred to the judgment of this Court in Lal Chand v. Union of India wherein it was held that the percentage of deduction for development to be made to arrive at the market value of large tracts of undeveloped agricultural land (with potential for development), with reference to the sale price of small developed plots, varies between 20% to 75% of the price of such developed plots, the percentage depending upon the nature of development of the layout in which the exemplar plots are situated.

The Apex Court also referred to its judgment in  Union of India vs. Dyagala Devamma wherein it was stated that  the Court in several cases have  laid down that while determining the true market value of the acquired land especially when the acquired land is a large chunk of undeveloped land, it is just and reasonable to make appropriate deductions towards expenses for development of acquired land. It has also been consistently held that at what percentage the deduction should be made varies from 10% to 86% and, therefore, the deduction should be made keeping in mind the nature of the land, area under acquisition, whether the land is developed or not and, if so, to what extent, the purpose of acquisition, etc.

The Bench asserted, “It is true that as a general rule, the compensation shall not be determined on square foot basis (Pitambar Hemlal Badgujar (dead) by LRs. V. Sub. Divisional Officer, Dhule). However, at the same time, in a given case, the Court may determine the compensation on square foot basis after making a reasonable deduction towards development charges, in case there are no other sale instances available.”

Thus by observing the above set principles, the Bench observed the land acquired in question was a large chunk of land which was not fully developed. The respondents (landowners) had not filed any exemplar sale deed relating to large pieces of land sold in acres to prove the market value of the acquired land and the exemplar relied on by the respondents pertained to very small pieces of land (19 guntas). Also,  the three distinguishing features noticed in the land in sale deed werenot present in the acquired land.

In view of the above observations and findings made in the judgments of this Court cited above, the Top Court partly allowed the civil appeal. The Top Court directed that the original claimant shall be entitled to the compensation at the rate of Rs.6/- per square foot, subject to 40% deduction towards development charges, with all statutory benefits.

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