Private Negotiations Between Two Govt Agencies For Land Transfer Does Not Determine Its True Market Value: Gujarat High Court

The bench of Justices Sonia Gokani and Hemant Prachchhak was hearing an appeal by the Corporation for setting aside the interim award passed by the Arbitrator, which was upheld by the District Judge.

The rate fixed by the Railway authority wrt to state's land was assessed at Rs.630/- per square meters. The arbitrator had awarded additional amount of compensation was fixed at Rs. 325 per square meter at 15% interest from the date of award till payment.

The Corporation stated that compensation was awarded in 2010 at INR 17.13 per sq ms but the landowners approached the Arbitrator for enhancement of compensation. Consequently, the interim award was passed since the determination of the final award would take time.

The Claimants averred that the market value of the land in question was assessed at Rs. 630 per sq ms by the specially constituted Committee which was accepted by the Railway Administration for acquisition of government land. Hence, the Claimants were entitled to compensation basis this assessment.

The Railway Administration opposed the assessment of market value on the ground that this assessment was for a different purpose, and it could not be adopted in the instant case.

Accordingly, vide the 2016 interim order, the Arbitrator had awarded additional compensation at Rs. 325 per sq ms. It was further insisted by the Corporation that awarding solatium at 60% was not permitted and interest at the rate of 15% was not recognised statutorily.

In appeal, the High Court referred to Section 20F of the Railways Amendment Act which provides that compensation for acquisition of land would be determined by the competent authority and any dispute regarding the same would be referred for arbitration. The provision also envisaged a solatium at the rate of 60% of the market value. Additionally, Sec 20G of the Act provided for the determination of market value of the land. Perusing these provisions, the High Court cautioned thus:

"We have to deal with interim award of arbitrator and the decisions of the Civil Court in not interfering with such interim award, in background of such statutory provisions. While doing so, we would also be conscious of the limited scope of the First Appeal against the order of the Civil Court refusing to set aside an arbitral award."

Keeping in view this principle, the Bench identified that the issue worth consideration was whether it was open for the arbitrator to be influenced by the assessment between the state and the Railway and whether he committed an error in awarding interim compensation basis the assessment.

As regards the first question, the High Court opined that the report of the specially constituted committee for assessing the market value of the land could not be 'brushed aside.' The Committee had taken into account the jantri rates while arriving at the figure of INR 630. However, the Bench was also of the view that private negotiations between the two government agencies for transfer of the land from one Government to another Government by itself cannot determine the true market value of the land in question.

As far as the question of compensation is concerned, the Bench expressed confusion as to how the adjustment was made from Rs. 630 to an additional Rs. 325. Keeping in view that the interim award could have 'far-reaching effect', the Bench decided to adjust the interim award. "Eventually if the final award in any manner is lower than the interim compensation awarded by the arbitrator, serious question of recovery of the Government monies would arise," it said.

Accordingly, it ordered the Western Dedicated Freight Corridor Corporation of India to deposit the entire amount of compensation awarded by the Arbitrator under interim awards with 60% solatium at an interest rate of 9%. The High Court further granted liberty to the Claimants to withdraw 50% of the compensation subject to the final award of the Arbitrator while the remaining 50% was to be invested in any nationalised bank in a Fixed Deposit of one year till passing of the final award.

Case No.: C/FA/1675/2022

Citation: 2022 LiveLaw (Guj) 261

Click Here To Read/Download Judgment