Circle Rates For Lands Must Be Scientifically Fixed Reflecting Real Market Value, Use Experts' Services : Supreme Court To State Govts

The Supreme Court advised the Governments that the circle rates (minimum government-determined price at which a property can be registered during a sale or transfer) be fixed in a scientific manner, using the services of experts if needed.

"It would be advisable that the circle rates be fixed by expert committees, which not only have officers from the government but also other specialists who understand the market conditions. Methodically and scientifically fixed circle rates can contribute to strengthening the economy and boosting tax collections," the Court observed.

A bench comprising Chief Justice of India Sanjiv Khanna and Justice Sanjay Kumar observed that fixing fair and accurate circle rates has a direct impact on each citizen.

"An inflated rate results in an unfair financial burden on purchasers. Conversely, an undervalued rate leads to inadequate stamp duty collection, adversely affecting the State's revenue. Circle rates which reflect the market price ensure proper revenue collection for the State by preventing under-valuation of properties," the Court observed.

"Circle rates, when determined while accounting for factors that cause variations in the market price of land, can facilitate predictability in transactions and curtail litigation. The standardized circle rates should be fixed at the floor or baseline price, as it would be grossly unfair to ask the public to pay stamp duty on over-valued circle rates," the Court added.

The judgment authored by CJI Sanjiv Khanna stated that accurate circle rates would simultaneously deter non-compliant taxpayers by preventing under-valuation. Rational and fair circle rates reflect and are a prerequisite for good governance. The Court noted with regret that proper fixation of circle rates has not received adequate attention from public authorities.

"In our opinion, other State Governments would also be well advised in formulating guidelines that can act as a ready reference for determining and revising circle rates regularly, in order for them to reflect market realities," the Court suggested.

The Court was hearing the case in which the Appellant, MP Road Development Corporation (a Madhya Pradesh government undertaking), approached the Supreme Court in a batch of civil appeals, arguing that the notified circle rate set by the State Government was inflated, resulting in higher stamp duty costs when acquiring land from private individuals for road development.

Dismissing the appeal, the Court observed that if the Appellant believed the notified circle rates were inflated, it was the responsibility of the State Government to take corrective measures to ensure that the rates were neither excessive nor disproportionately low. However, the Appellant cannot object to paying stamp duty based on the notified circle rates, as citizens are also required to do so when purchasing property.

“Concerned authorities should fix circle rates scientifically and in accordance with the law. It is their responsibility to ensure that circle rates are neither inflated nor disproportionately low. When the citizens are required to pay stamp duty on the notified circle rate, the public authorities, including state development corporations acquiring land from private individuals, must adhere to the same. We do not appreciate the appellant, Madhya Pradesh Road Development Corporation complaining about the circle rate fixed by the State Government. If the circle rate is inflated or does not reflect the true market value, it is incumbent upon the State Government to take corrective steps. The State Government or the development corporation under the State Government cannot complain that they have been compelled to acquire land at the circle rate fixed by the State.”, the Court observed.

The Case

The aforesaid observation came in the case which involved a dispute over land acquisition compensation under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (“LARR Act, 2013”).

The central issue was whether the "theory of deduction" (used to reduce compensation for undeveloped land) applies under the 2013 Act, or if compensation must be determined strictly based on stamp duty/circle rates (Collector's Guidelines).

In this case, the land acquisition compensation was determined as per the notified circle rates fixed by the State Government. After the Commissioner enhanced the amount of compensation, the Appellant argued for a deduction (claiming the land was undeveloped and required infrastructure costs).

The High Court upheld the compensation amount determined by the Commissioner rejecting the deduction theory under the 2013 Act.

Following this, the Appellant-MP Road Development Corp. appealed to the Supreme Court.

The Court observed that the 2013 Act's scheme ensures fair compensation without arbitrary reductions. If the State believes circle rates are inflated, it must revise them (not seek deductions in court), the Court clarified.

Accordingly, the appeal was dismissed.

Case Title: MADHYA PRADESH ROAD DEVELOPMENT CORPORATION VERSUS VINCENT DANIEL AND OTHERS

Citation : 2025 LiveLaw (SC) 364

Click here to read/download the judgment

Appearances:

For Appellant(s) Mr. K.M. Nataraj, ASG Mr. Harmeet Singh Ruprah, AOR Mr. Sharath Nambiar, Adv.

For Respondent(s) Mr. Raghvendra Kumar, AOR Mr. Anand Kumar Dubey, Adv. Mr. Simanta Kumar, Adv. Mr. Maneesh Pathak, Adv. Mr. Varun Singh, Adv. Mr. Nishant Verma, Adv. Mr. Randhir Kumar Ojha, AOR Mr. Santosh Paul, Sr. Adv. Mr. Sanjeev Kumar Chaturvedi, Adv. Mr. Sriharsh Nahush Bundela, AOR Mr. Vedant Mishra, Adv. Mr. Manish Jain, Adv. Mr. Virendra Mohan, Adv. Mr. Akshat Shrivastava, AOR Mr. Satvic Mathur, Adv. Ms. Pooja Shrivastava, Adv.