Land Acquisition Compensation: Supreme Court Partially Restores Claim for Injurious Affection
The Supreme Court of India, in its judgment dated February 4, 2022, partially allowed the appeal of Walchandnagar Industries Ltd. regarding compensation for land acquired by the Maharashtra government for the Bhima (Ujjani) Irrigation Project. The Court upheld the Bombay High Court’s decision in most aspects but reinstated compensation for the company’s trolley line affected by the acquisition.
Background of the Case
The case concerns the acquisition of land belonging to Walchandnagar Industries Ltd. for the Bhima (Ujjani) Irrigation Project in Maharashtra. The company had established a township on 16,000 acres and constructed a 36 km narrow gauge trolley line from Walchandnagar to Bhigwan for transporting goods.
In 1972, the Maharashtra government initiated land acquisition for the irrigation project, which included land covering a 6 km section of the trolley line. The company sought compensation not only for the land but also for the injurious affection caused to the remaining 28 km of the trolley line and associated infrastructure.
Legal Proceedings
- December 9, 1981: The Land Acquisition Officer awarded compensation of Rs. 1,27,198.31, rejecting the company’s claim for injurious affection.
- January 12, 1982: The company filed a reference under Section 18 of the Land Acquisition Act, seeking enhanced compensation.
- March 14, 1990: The Reference Court increased compensation to Rs. 80,09,725 for severance and injurious affection.
- November 19, 2008: The Bombay High Court reduced the compensation significantly, awarding Rs. 26,80,607.80 for severance and Rs. 9,61,064 for injurious affection.
- February 4, 2022: The Supreme Court partially restored compensation for rails and sleepers but upheld the High Court’s ruling on rolling stock and transportation costs.
Arguments Presented
Petitioner’s (Walchandnagar Industries Ltd.) Arguments
The company contended:
- The acquisition made its entire 36 km trolley line redundant.
- They were entitled to compensation for the loss of rails, sleepers, rolling stock, and increased transportation costs.
- The High Court wrongly rejected their claim on the assumption that costs could be passed to customers.
Respondent’s (State of Maharashtra) Arguments
The state countered:
- The company abandoned the trolley line before the acquisition and switched to road transport.
- The claim for rolling stock and rails was excessive and unsupported by evidence.
- The company did not suffer actual losses since its profits remained stable.
Supreme Court’s Observations
On Compensation for Rails and Sleepers
The Supreme Court ruled:
“The refusal of the High Court to grant compensation for the injurious affection sustained by the appellant to rails and sleepers forming the trolley line for a distance of 28 km is clearly unsustainable.”
It held that the High Court’s logic—requiring the company to build an alternative line—was flawed.
On Compensation for Rolling Stock
The Court upheld the High Court’s ruling, noting:
“The company continued using the rolling stock within its premises till 1983. The valuation provided by the expert witness was based on 1986 prices, making it unreliable.”
On Increased Transportation Costs
The Court ruled against compensation, stating:
“There is no evidence that the increased transportation costs directly impacted the company’s profitability. The costs could have been absorbed or passed on to customers.”
Final Judgment
The Supreme Court ruled:
- The High Court’s reduction of compensation for rails and sleepers was reversed, restoring Rs. 31,21,860 for this loss.
- The rejection of compensation for rolling stock and increased transportation costs was upheld.
- The appellant must return any excess compensation withdrawn beyond the reinstated amount.
Implications of the Judgment
This ruling has significant implications:
- Clarifies Land Acquisition Law: Reinforces that compensation extends beyond land value to consequential losses.
- Sets a Precedent for Severance Claims: Supports claims for lost infrastructure due to acquisition.
- Limits on Transport Cost Claims: Establishes that businesses must prove direct financial losses, not just increased expenses.
The Supreme Court’s decision ensures fair compensation while preventing speculative claims in land acquisition cases.
Petitioner Name: Walchandnagar Industries Ltd..Respondent Name: The State of Maharashtra & Anr..Judgment By: Justice Hemant Gupta, Justice V. Ramasubramanian.Place Of Incident: Maharashtra.Judgment Date: 04-02-2022.
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