Relevant Factors To Assess Compensation In Land Acquisition Proceedings : Supreme Court Explains

The Supreme Court on Wednesday (July 10) laid down the three categories of relevant factors that ought to be considered while determining the estimated value of the land to determine a fair amount of compensation in land acquisition proceedings.

The court has developed the belowmentioned categories of factors so that the valuation of the land could be ascertained based on these factors, and there would be no room left for judicial discretion to determine land valuation based on speculation.

The Court has divided such factors into three categories: -

"i. Characteristics of the land: The valuation of land is undeniably influenced by its inherent characteristics. A parcel of land endowed with advantageous features that enhance its accessibility and usability tends to command higher market price and thus, a greater valuation in comparison to lands lacking such attributes. Key factors contributing to such features include connectivity via roads and other means of transportation, the size and shape of the land, availability of essential utilities such as electricity and water, the evenness or levelling of the land's surface, width of frontage, and nature and status of the surrounding area etc.;

ii. Future potentiality of the land: In addition to its characteristics, the valuation of land is also influenced by its potentiality. Lands with the potential to be used for commercial or residential purposes; that are located in or near a developed area; or which are proximate to tourist destinations, are perceived to hold greater value in the future. Consequently, landowners may anticipate higher future prices and accordingly demand higher sale prices compared to lands lacking these attributes. Accordingly, these features also lead to an increase in valuation; and

iii. Factors denoting market sentiment: Market sentiments are powerful drivers of land valuation. Even if a particular piece of land possesses all desirable features, its valuation can still suffer if the market conditions at the time of publication of the notification under Section 4 of the 1894 Act were unfavourable. Factors such as economic recessions, political instability, speculative investments or real estate crisis can impact the perceived value of the land. Thus, these extraneous economic and political factors must also be considered when assessing land valuation.”

The bench comprising Justices Surya Kant and KV Viswanathan said that the aforesaid factors divided into three categories would be considered as a relevant factor which deciding the valuation of the land to assess the compensation to be paid to the landowners upon acquisition of their lands.

Because the valuation of the land is affected by a multitude of factors such as its location, surrounding market conditions, feasible uses, etc wherein evidence and calculations can aid in estimating the land value, however they ultimately serve as tools for approximation rather than precision, the court said.

“Accordingly, while the Court can use the principle of guesstimation in reasonably estimating the value of land in the absence of direct evidence, the exercise ought not to be purely hypothetical. Instead, the Court must embrace a holistic view and consider all relevant factors and existing evidence, even if not directly comparable, to arrive at a fair determination of compensation.” the Judgment authored by Justice Surya Kant observed.

Drawing reference from the case of Krishan Kumar v. Union of India (2015) 15 SCC 220 the court believed that the compensation could be determined by applying the principle of guesstimation, based on the circle rate after granting a marginal increase over the same.

Background

In the present case, the Court decided the plea of the New Okhla Industrial Development Authority (NOIDA) against the decision of the Allahabad High Court enhancing a compensation granted to the land owners from Rs 340 per sq yd to Rs. 449 per sq.yd.

The appellant/NOIDA contended that the circle rate might not accurately reflect the correct market value of the acquired land at the relevant cut-off dates, as the acquisition was made of an undeveloped large tract of agricultural land.

On the contrary, it was argued by the land owners/respondents that the factors necessary for evaluating the potentiality of land are the same as those used towards fixing the circle rate. The respondents pleaded that the amount of compensation awarded to them was justified as the acquired land was claimed to be situated amidst developed areas and near the Amity Public School, a large Golf Course, a Film City, and developed Residential Colonies and Shopping Areas on all three sides.

Finding force in the land owners contention, the Court noted that since the subject land had significant potential for future commercial development akin to the developments witnessed in Sector 18, NOIDA, therefore the landowners were entitled to an enhancement in the compensation awarded.

Allowing the appeal in part, the Court had directed the Appellant/NOIDA to grant compensation to the land owners @ Rs. 403 per sq yd. instead of Rs.449 per sq. yd. after considering the fact that the valuation of the land increased by 15% per annum.

Counsels For Appellant(s) Mr. Ravindra Kumar, Sr. Adv. Mr. Rachit Mittal, AOR Mr. Parish Mishra, Adv. Mr. Adarsh Srivastava, Adv. Mr. Praveen Swarup, AOR Mr. Jitendra Mohan Sharma, Sr. Adv. Mr. Sheo Kumar Gupa, Adv. Mr. Shekhar Kumar, AOR Mr. Ashok Kumar Sharma, Sr. Adv. Mr. Sheo Kumar Gupa, Adv. Mr. Shekhar Kumar, AOR Mr. Ravindra Kumar, Sr. Adv. Mr. Binay Kumar Das, AOR Ms. Priyanka Das, Adv. Ms. Neha Das, Adv. Mr. Shivam Saksena, Adv. Mr. Vipin Kumar Saxena, Adv. Mr. Vimlesh Kumar Shukla, Sr. Adv. Mr. Shrivandit Mishra, Adv. Mr. Suraj, Adv. M/s. Anuradha & Associates, AOR Mr. Dr. Rajeev Sharma, AOR Mr. Prashant Sharma, Adv. Mr. Raghuvir Sharma, Adv. Mr. Dharmendra Sharma, Adv. Mr. Vipin Kumar Sharma, Adv. Mr. Anil Kaushik, Adv.

Counsels For Respondent(s) Mr. Praveen Swarup, AOR Mr. Dr. Rajeev Sharma, AOR Mr. Prashant Sharma, Adv. Mr. Raghuvir Sharma, Adv. Mr. Dharmendra Sharma, Adv. Mr. Vipin Kumar Sharma, Adv. Mr. Anil Kaushik, Adv. Mr. Ravindra Kumar, Sr. Adv. Mr. Binay Kumar Das, AOR Mr. Vipin Kumar Saxena, Adv. Mr. Shivam Saksena, Adv.

Case Details: New Okhla Industrial Development Authority Versus Harnand Singh (Deceased) through LRs & Ors.

Citation : 2024 LiveLaw (SC) 456

Click here to read/download the Judgment