Land Acquisition |Large Areas Don't Get Same Price As Small Plots; Some Deduction Permissible Due To Largeness : Supreme Court

Observing that large areas do not attract the same prices as that of smaller areas of land, the Supreme Court recently justified the 10% deduction in market rates of the land on account of largeness in area while determining the compensation in a land acquisition proceeding.

“It is also a settled principle of law that large areas do not attract the same price as is offered for the small plots of lands. Therefore, some amount of deduction is also normally permissible on account of largeness in area. Thus, deduction of at least 10% has to be applied to determine the rate of compensation.”, the court observed.

The bench comprising Justices Pankaj Mithal and SVN Bhatti heard the case where the Appellants were unsatisfied with the amount of compensation awarded to them for the land acquired by the Gujarat government for the Gujarat Industrial Development Corporation (GIDC).

The Special Land Acquisition Officer (SLAO) awarded compensation @ Rs. 11/sq. mt. (award dated 25.02.1992). The Reference Court, however, enhanced it to Rs. 30/sq. mt. (2011). The High Court upheld the Reference Court's decision (2015).

Unsatisfied with the amount of compensation, the Appellants approached the Supreme Court for further enhancement, arguing for Rs. 450/sq. mt. based on comparable land rates and income from fruit-bearing trees.

Affirming the impugned decision, the judgment authored by Justice Mithal rejected the Appellant's claim for enhancement of compensation citing parity with another plot situated in closer proximity with GIDC's land.

The Court said that the plot (1,900 sq. mt) referred by the Appellant for claiming the enhanced compensation was a commercial plot, whereas the Appellant's land (0.98 hectares) was agricultural.

The Court justified the 10% deduction to determine the market value of the plot along with the 40% deduction for the development work, stating that smaller plots command higher prices due to higher demand, easier transferability, and immediate usability, and larger tracts require subdivision, development, and marketing, which reduce their per-unit value.

Therefore, taking note of the fact that the Appellant's plot was situated in close proximity to the GIDC's land, the Court determined the market value of the acquired land by taking the GIDC's premium rate of Rs. 180/sq. mt. (revised to Rs. 190/sq. mt. for inflation), applying a 40% deduction for development costs (roads, utilities, etc.), and applying an additional 10% deduction for the "largeness of area."

The 10% deduction for area size was justified because the acquired land (0.98 hectares) was larger than the commercial plot (1,900 sq. mt.) used as an exemplar.

“Accordingly, the judgment and order dated 14.08.2015 is set aside and the award of the SLAO dated 25.02.1992 and that of the Reference Court dated 31.12.2011 is modified by fixing the compensation of the acquired land @ Rs.95/- per sq. mt. (after 50% cumulative deduction was applied to Rs. 190/ sq. mt.) with all statutory benefits including interest as permissible in law.”, the Court held.

Case Title: MANILAL SHAMALBHAI PATEL (DECEASED) THROUGH HIS LEGAL HEIRS & ORS. VERSUS OFFICER ON SPECIAL DUTY (LAND ACQUISITION) & ANR.

Citation : 2025 LiveLaw (SC) 354

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Appearance:

For Appellant(s) Mr. Neeraj K. Kaul, Sr. Adv. (argued by) Ms. Anushree Prashit Kapadia, AOR Mr. Dhruv Sharma, Adv. Ms. Dhanya Setlur Krishnan, Adv. Mr. Harsh Panwar, Adv. Ms. Pritha Suri, Adv. Ms. Shivangi Chawla, Adv.

For Respondent(s) Ms. Deepanwita Priyanka, AOR (argued by) Mr. Deepak Singh, Adv.