Supreme Court Modifies Compensation for Land Acquisition in Madhya Pradesh

The Supreme Court ruled on a land acquisition dispute between the Union of India and Sagar Maize Products Ltd. regarding compensation for land acquired for the Dewas-Maksi Railway Line in Madhya Pradesh. The Court upheld partial compensation while modifying the High Court’s decision on severance damages.

Background of the Case

The case originated when the Government of India issued a notification under Section 4 of the Land Acquisition Act, 1894, on March 9, 1990, to acquire 7.2 hectares of land in Village Maksi and Village Jhokar for railway expansion. Sagar Maize Products Ltd., which owned 2.038 hectares in Village Maksi, claimed compensation for both acquired and remaining land.

Initially, the Land Acquisition Collector awarded Rs. 5 per square foot for the acquired land and Rs. 72,320 for pillars constructed on the land. Dissatisfied, the company sought an increase, and the Reference Court awarded Rs. 40 per square foot, including compensation for unacquired land due to its reduced usability.

The Madhya Pradesh High Court revised this valuation to Rs. 19 per square foot, leading to appeals from both parties—the Union of India seeking a reduction and the company seeking an increase to Rs. 40 per square foot.

Arguments Before the Supreme Court

Petitioner’s Arguments (Union of India)

The government argued that the compensation awarded by the High Court was excessive and lacked sufficient legal and evidentiary backing.
It contended that the Reference Court’s basis for valuation relied on an unrelated advertisement for residential plots from 1984, which was not comparable to the agricultural land in question.
The government challenged the grant of compensation for unacquired land, asserting that the company could still utilize the remaining land.

Respondent’s Arguments (Sagar Maize Products Ltd.)

The company maintained that the land was purchased for industrial use and that the railway acquisition rendered the remaining land unusable for its intended purpose.
It relied on evidence from witnesses, including revenue officials, who estimated the market value between Rs. 25-30 per square foot.
It further argued that the severance of its land by the railway line significantly devalued the remaining property, warranting full compensation.

Supreme Court’s Observations

The Supreme Court analyzed the valuation methodology used by the lower courts and noted that the reliance on developed residential plots as a benchmark for agricultural land valuation was flawed. The Court observed:

“The Reference Court relied on an advertisement for residential plots issued in 1984, which cannot form the basis for determining the market value of agricultural land. The valuation methodology applied was speculative and not supported by concrete sale instances.”

The Court also addressed the claim for compensation for unacquired land and the applicability of severance damages under Section 23 of the Land Acquisition Act:

“While the severance of land due to the railway line impacts usability, it does not render the entire unacquired land unfit for development. Compensation should be awarded only for the portion directly impacted.”

Supreme Court’s Verdict

The Supreme Court modified the High Court’s judgment as follows:

Confirmed Rs. 19 per square foot as compensation for the acquired land within 30 meters of the railway track.
Reduced compensation for severance of unacquired land to Rs. 9.5 per square foot, considering alternative usability.
Rejected additional claims for industrial development losses.
Upheld compensation of Rs. 14,34,300 for the construction of pillars on the land.

The Court also clarified that severance compensation would not be eligible for statutory benefits such as solatium and additional compensation under Section 23 of the Act.

Impact of the Judgment

This ruling establishes a crucial precedent for land acquisition disputes:

Reinforces the principle that land valuation must be based on comparable transactions, not speculative future potential.
Limits compensation for severance to actual economic impact rather than broad assumptions of unusability.
Clarifies that statutory benefits apply only to directly acquired land and not to severance damages.

By balancing public interest and fair compensation, the Supreme Court has provided clarity on land acquisition laws and compensation structures.

Petitioner Name: Union of India.
Respondent Name: Ramchandra & Ors..
Judgment By: Justice Hemant Gupta, Justice Vikram Nath.
Place Of Incident: Maksi, Madhya Pradesh.
Judgment Date: 11-08-2022.

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