Land Acquisition Compensation: Supreme Court Reinstates Higher Valuation for Owners

The Supreme Court of India recently delivered a significant judgment in the case of Shankarrao Bhagwantrao Patil & Others vs. The State of Maharashtra & Others, where the issue of land acquisition compensation was thoroughly examined. The land in question, situated in Bhoom, Maharashtra, was acquired by the State Government, and the dispute revolved around the compensation amount awarded to the landowners.

Initially, the landowners were awarded compensation at Rs. 70 per square foot by the Reference Court. However, the High Court of Bombay, in an appeal, reduced this amount to Rs. 29 per square foot, leading the landowners to challenge the decision before the Supreme Court. The apex court reinstated the higher compensation of Rs. 70 per square foot, emphasizing proper valuation and the right of landowners to fair remuneration.

Background of the Case

The land in question, measuring 90R, was acquired through different phases, with possession taken as early as 1984 and 1992. The government had initially entered into private negotiations with the landowners for compensation but later issued a notification under Section 4 of the Land Acquisition Act in 1999.

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The Special Land Acquisition Collector awarded different compensations for various parcels of land, ranging from Rs. 168 to Rs. 232 per square meter. Dissatisfied with the awarded amount, the landowners sought an enhancement through a reference under Section 18 of the Act, claiming compensation at Rs. 150 per square foot.

Arguments by the Petitioner (Landowners)

• The landowners relied on two sale deeds to substantiate their claim for higher compensation:
• Exhibit 30: A plot measuring 2178 square feet was sold at Rs. 137.76 per square foot.
• Exhibit 31: A plot measuring 816.75 square feet was sold at Rs. 232.50 per square foot.
• The landowners argued that the High Court erroneously assumed that the land covered by these sale deeds had houses constructed on them. They contended that the permission for construction was granted only in 1997, after the sale in 1996.
• They further cited Supreme Court precedents, including Meharawal Khewaji Trust v. State of Punjab, which upheld using the highest sale price as a reference for valuation.
• The landowners contended that a deduction of 33% for development costs should be applied, leading to a fair valuation of Rs. 160 per square foot.
• They also argued that since possession was taken years before formal acquisition, interest should be granted from the date of possession.

Arguments by the Respondent (State of Maharashtra)

• The State argued that the land referenced in Exhibit 31 had existing constructions, as evidenced by tax records and municipal property numbers.
• They contended that the sale exemplars presented by the landowners were not reliable, as they did not pertain to the acquired land.
• The State maintained that a deduction of at least 50% should be applied to account for the costs associated with land development.

Key Observations by the Supreme Court

• The Court examined whether Exhibit 31 was a valid reference for valuation. It found that the property had been assessed for house tax since 1983-84, indicating prior construction. Therefore, the Court ruled that Exhibit 31 could not be used as a reliable basis for valuation.
• The Supreme Court held that the most suitable exemplar was Exhibit 30, which reflected a sale price of Rs. 137.76 per square foot.
• The Court cited Chimanlal Hargovinddas v. Special Land Acquisition Officer, Poona, where a deduction of 25% was applied to account for land development.
• In this case, the Court ruled that a 50% deduction was reasonable, given that the land was rocky and had moorum soil, making it unsuitable for agriculture.
• Applying the deduction, the Court arrived at a compensation of Rs. 70 per square foot, reinstating the Reference Court’s decision.

Decision on Interest for Pre-Acquisition Possession

Regarding the claim for interest from the date of possession, the Supreme Court noted that possession was taken in 1984 and 1992, while acquisition was formalized only in 1999. The Court ruled that interest at 9% per annum should be awarded from the date of possession until the date of acquisition.

Final Verdict

The Supreme Court allowed the appeal and reinstated compensation at Rs. 70 per square foot. It also granted interest at 9% from the date of possession until the date of acquisition, ensuring fair compensation for the landowners.

Petitioner Name: Shankarrao Bhagwantrao Patil & Others.
Respondent Name: The State of Maharashtra & Others.
Judgment By: Justice Hemant Gupta, Justice V. Ramasubramanian.
Place Of Incident: Bhoom, Maharashtra.
Judgment Date: 20-09-2021.

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