Land Acquisition Act| Market Value Is Determined Based On Price Of A Willing Buyer To A Willing Seller Dealing At Arm's Length: SC

The Supreme Court has reiterated that the market value is determined based on the price of a willing buyer to a willing, but not too anxious buyer, dealing at arm’s length.

In that context, the Bench of Justice Surya Kant and Justice KV Viswanathan observed that, "It is well settled that market value is determined based on the price of a willing buyer- a willing seller at arm’s length."

The civil appeals challenged the High Court of Bombay's judgment dated June 17, 2013. The appellant's appeal was dismissed, and the State's appeal was allowed, directing the appellant to refund the excess amount withdrawn with 9% interest per annum.

The appellant owned land in Akola, Maharashtra, which was acquired under the Land Acquisition Act of 1894 for constructing a flood protection wall. The land acquisition notifications were issued on June 3, 1999, and December 2, 1999. The appellant initially claimed compensation at Rs. 500 per square foot but was awarded Rs. 5 per square foot by the Land Acquisition Officer.

Before the Reference Court, the appellant claimed additional compensation and damages, arguing that the land had been planned for non-agricultural purposes and had high potential value. The appellant presented evidence of nearby sale transactions at higher rates and testified about the land's potential and location. The State's witnesses argued that the land was in a "Blue Zone," meaning it was on the riverbed and unsuitable for development.

The Reference Court found the appellant's land to be within the municipal limits and surrounded by developed areas, rejecting the State's "Blue Zone" argument. It determined the land's market value at Rs. 100 per square foot and awarded compensation accordingly.

The High Court, however, concluded that the land was on the riverbank and significantly affected by the "Blue Zone," making it unsuitable for non-agricultural use. It found the Reference Court's valuation incorrect, reduced the compensation, and ordered the appellant to refund the excess amount with interest. The High Court dismissed the appellant's appeal and allowed the State's appeal, leading the appellant to file civil appeals before the Apex Court.

The Apex Court observed that, "the VIDC has not discharged the burden in demonstrating that statutorily there was a valid demarcation of a “Blue Zone” on the date of the Section 4 notification, under the Act."

On compensation, the Court noted that when faced with a choice between an exemplar where the transaction is between unrelated parties dealing at arm's length and another exemplar where the transaction is between related parties at a higher value, prudence and common sense dictate accepting the value from the arm's length transaction. The Court stated, "When there is a choice between an exemplar where the transaction is between unrelated parties dealing at arm's length and between an exemplar where the transaction is between related parties of a higher value, both of which are broadly around the same period, prudence would dictate and common sense would command that we accept the value set out in the transaction between unrelated parties."

Consequently, the Court accepted the market value of Rs. 100 per square foot and rejected the claim of Rs. 175 per square foot, emphasizing the reliability of transactions conducted at arm's length over those between related parties.

Cause Title: Kazi Akiloddin vs State of Maharashtra & Ors.

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