Land Acquisition Compensation - In Exceptional Cases, Courts Can Direct Market Value Be Determined Based On A Date After Prelim Notification : Supreme Court
The Supreme Court today (Jan. 2) observed that although the land acquisition compensation is to be determined at the market rate prevailing on the date of issuance of the notification regarding the acquisition of land, the compensation can be determined based on a later date in exceptional circumstances when the delay in the disbursal of the compensation has been inordinate.The bench of...
The Supreme Court today (Jan. 2) observed that although the land acquisition compensation is to be determined at the market rate prevailing on the date of issuance of the notification regarding the acquisition of land, the compensation can be determined based on a later date in exceptional circumstances when the delay in the disbursal of the compensation has been inordinate.
The bench of Justices BR Gavai and KV Viswanathan heard a case challenging the Karnataka High Court's decision to reject the appellant's plea for compensation based on a later valuation date, contending that delays in payment had significantly impacted the land's market value, warranting compensation based on the later date rather than the date of the land acquisition notification.
Briefly put, between 1995 and 1997, the appellants purchased residential plots in Karnataka. A Framework Agreement (FWA) in 1997 between the Karnataka government and NICE (respondent) initiated the Bengaluru-Mysuru Infrastructure Corridor Project, requiring significant land acquisition.
The Karnataka Industrial Areas Development Board (KIADB) issued a preliminary notification in 2003. The appellants' land was taken over in 2005, but compensation awards were delayed for years. By 2019, an award was passed by the Special Land Acquisition Officer, shifting the reference date for valuation to 2011, which significantly impacted the compensation amount.
The High Court set aside the award on the ground that the SLAO had no power to postpone the date. While the Supreme Court agreed with the High Court's reasoning, it said that the High Court ought not to have relegated the parties back to the SLAO again.
"we do not find any error in the approach adopted by the learned Single Judge of the High Court in holding that the SLAO could not have shifted the date and it could have been done only by this Court in exercise of powers under Article 32/142 of the Constitution of India or by the High Court under Article 226 of the Constitution of India. However, the learned Single Judge of the High Court instead of relegating the appellants to again go through the rigors of determination by SLAO, ought to have exercised powers under Article 226 of the Constitution to do complete justice."
Ideally, as per Section 11 of the Land Acquisition Act, 1894 ("Act"), the land acquisition compensation is to be determined based on the prevailing market rate at the time of issuance of notification for land acquisition. However, the Appellant argued that the payment of compensation in their case should be determined by taking 2019 as the valuation year (the year of the award passed by SLAO) because of the huge delay that occurred in the payment of compensation to them.
Setting aside the High Court's decision, the Judgment authored by Gavai J. accepted the Appellant's argument that the shift in date for determining land acquisition compensation is necessary considering the huge delay in granting compensation to them.
The Court reaffirmed that under the Land Acquisition Act, 1894, compensation must typically align with the market value at the time of the preliminary notification. However, in the interest of justice, any shift in the date for determining market value to ensure fair compensation for landowners requires exceptional circumstances and can only be approved by higher courts, not by administrative authorities like SLAO.
“It cannot be gainsaid that the appellants herein have been deprived of their legitimate dues for almost 22 years ago. It can also not be controverted that money is what money buys. The value of money is based on the idea that money can be invested to earn a return, and that the purchasing power of money decreases over time due to inflation. What the appellants herein could have bought with the compensation in 2003 cannot do in 2025. It is, therefore, of utmost importance that the determination of the award and disbursal of compensation in case of acquisition of land should be made with promptitude.”, the court said.
The Court added that "If the compensation to be awarded at the market value as of the year 2003 is permitted, it would amount to permitting a travesty of justice and making the constitutional provisions under Article 300-A a mockery."
The Court referred to the recent case of Ultra-Tech Cement Ltd. v. Mast Ram and Others (2024), where the bench led by Pardiwala J. held that delay in payment of compensation to landowners whose property is acquired by the state is a violation of their right to property under Article 300A of the Constitution.
"We find that in the present case, the appellants were required to knock at the doors of the courts on number of occasions during the period of last twenty-two years. The appellants have been deprived of their property without paying any compensation for the same in the said period of last twenty-two years. As already discussed hereinabove, the appellants had purchased the plots in question for construction of residential houses. Not only have they not been able to construct, but they have also not been even paid any compensation for the same. As discussed hereinabove, though Right to Property is no more a fundamental right, in view of the provisions of Article 300-A of the Constitution of India, it is a constitutional right. A person cannot be deprived of his property without him being paid adequate compensation in accordance with law for the same.", the court said.
Also, the court referred to number of precedents supporting the shift in date for determining the land acquisition compensation, it observed:
"It can thus be seen that this Court in the aforesaid case observed that normally, compensation is determined as per the market price of land on the date of issuance of the notification regarding acquisition of land but there are judgments of this Court where in similar situations instead of quashing the impugned notification, this Court shifted the date of the notification so that the landowners are adequately compensated."
"In that view of the matter, we find that it is a fit case wherein this Court in exercise of its powers under Article 142 of the Constitution should direct shifting of the date for determination of the market value of the land in question of the appellants.", the court added.
Accordingly, the Court directed the SLAO to determine the compensation to be awarded to the appellants on the basis of the market value prevailing as on 22nd April 2019(the date of award)with all other statutory benefits associated with the LA Act.
“We, therefore, in exercise of power of this Court under Article 142 of the Constitution of India, find it appropriate in the interest of justice that the SLAO be directed to determine the compensation to be awarded to the appellants herein on the basis of the market value prevailing as on 22nd April 2019. The appellants shall also be entitled to all the statutory benefits as are available to them under the 1894 LA Act. This shall be without prejudice to the rights/contentions of either party, in case they make a reference before an appellate authority, if they are so aggrieved by the fresh determination of compensation by the SLAO.”, the court directed.
Case Title: BERNARD FRANCIS JOSEPH VAZ AND OTHERS VERSUS GOVERNMENT OF KARNATAKA AND OTHERS
Citation : 2025 LiveLaw (SC) 2