Supreme Court Reduces Annual Increase In Land Acquisition Compensation Citing ‘Period’ As Determining Factor

Supreme Court Reduces Annual Increase In Land Acquisition Compensation Citing ‘Period’ As Determining Factor

Decreases amount from 15 percent to 8 percent, as the case involved 11 years

The Supreme Court has set aside the order of the Punjab & Haryana High Court that enhanced the annual increase for determining compensation in a land acquisition case from 12 percent to 15 percent.

The division bench of Justice Vikram Nath and Justice Ahsanuddin Amanullah held that a 15 percent annual increase was excessive for a period of 11 years and reduced the rate to 8 percent with a cumulative effect.

The relevant facts included the issuance of a notification under Section 4 of the Land Acquisition Act, 1894 for the acquisition of land in Naraingarh, District Ambala, Punjab, for the benefit of the appellant, Central Warehousing Corporation.

Thereafter, on 19 March 2001, a declaration was issued. The Land Acquisition Collector, authorized to provide the award, determined the rate of compensation at Rs.3.50 lakhs per acre (equivalent to Rs.2,187.50 per Marla or Rs.72.31 per sq yard). This was considered as the prevailing market value on the date of the notification.

However, dissatisfied with the compensation, the respondent sought enhancement by filing a reference. The Reference Court allowed it and fixed the market value at Rs.6,310 per Marla (equivalent to Rs.208.59 per square yard). The calculation comprised a 12 percent annual increase for a period of 11 years (1989-2000).

Since both parties were dissatisfied with the decision of the Reference Court, they approached the Punjab & Haryana High Court, which, in its common impugned order, granted an annual increase at the rate of 15 percent.

Thus, the issue before the apex court was on what rate the annual increase should be set. While the Reference Court applied a 12 percent flat rate increase, the high court fixed a 15 percent cumulative increase.

Justice Nath and Justice Amanullah noted that the high court had referred to the General Manager, Oil and Natural Gas Corporation Limited vs. Rameshbhai Jivanbhai Patel and Another case.

The bench observed that the court determined the compensation based on an annual increase, but also cautioned that the increase could be considered for only 4-5 years. Beyond that, it would be unsafe to uniformly apply the same rate with cumulative effect.

The top court stated that the consistent view of the court for awarding an annual increase varied from case to case, and the major factor to be considered was the period applied to it.

Thus, the judges held that the fair and reasonable compensation be determined by applying an 8 percent annual increase with cumulative effect. The decision was based on the reasoning that the gap between the (11 years) valuation, was substantial. For 3-5 years, a higher rate of 10-12 percent might have been justified. But a 15 percent increase for 11 years, awarded by the high court, was extreme.

The Supreme Court stated that the compensation was equivalent to what was awarded by the Reference Court. The high court erred in enhancing the compensation.

Thus, the bench allowed the appeals while setting aside the judgment of the high court. It directed the Land Acquisition Collector to re-calculate the compensation rate.