Land Acquisition- Period To Be Applied Is A Major Factor To Be Considered For Awarding Annual Increase In Compensation: SC

The Supreme Court has held the period to be applied is a major factor to be considered while determining annual increase for ajust compensation, in a case arising out of land acquisition under the Land Acquisition Act, 1894. In this case, the Court held that an annual increase of 8% with a cumulative effect on the compensation would be suitable considering the period of 11 years which is substantial. 

The Court allowed an Appeal challenging the enhancement of compensation by the High Court, whereby, the enhancement was increased up to 15%. The Court emphasized that a balance needed to be struck between just and fair compensation for the landowners and a balanced market value that does not put an additional burden on the State.

The Bench comprising Justice Vikram Nath and Justice Ahsanuddin Amanullah observed, “Taking an overall view in the matter and the consistent view of this Court, the fair and reasonable compensation in the present case would be best determined if we apply 8% annual increase with cumulative effect. This is for the reason that the gap is huge i.e. 11 years. For shorter period of 3-5 years, it could have been 10% or 12%. But in no case 15% would be justified for a period of 11 years as awarded by the High Court in the impugned order. In the present case, given the 11 years gap, 8% would be considered just and proper”.

Advocate Rachna Gupta appeared for the Appellant and Senior Advocate Rakesh Kumar Khanna appeared for the Respondents.

A notification was issued under Section 4 of the Land Acquisition Act, 1894 (Act) for acquiring the land for the benefit of the Appellant, and a declaration under Section 6 was also issued. The Land Acquisition Collector (Collector) authorised to give the award, started the process by serving notices under Section 9 of the Act. The Land Acquisition Collector determined the rate of compensation at Rs.3.50 lacs per acre, which would be equivalent to Rs.2,187.50 Ps. per Marla and further equivalent to Rs.72.31 per square yard being the market value.

However, the Respondent preferred a reference under Section 18 of the Act seeking enhancement. The Reference Court allowed the prayer and determined the market value at Rs.6,310/- per Marla equivalent to Rs.208.59/- per square yard by taking into account a 12% (simple/flat) increase per annum for 11 years from 1989 to 2000. Aggrieved with the enhancement, both parties appealed before the High Court, whereby an annual increase at the rate of 15% on a cumulative basis for a period of 11 years. The Appellant thereby, approached the Court challenging the judgment and order of the High Court.

The Court framed the following issue: “What would be a fair and just compensation so as to do justice between the parties that is to say that land owners may get a fair and reasonable amount of compensation for losing their land, and at the same time balancing the State exchequer by not awarding an amount which may be in excess of the market value so as not to put an additional burden on the appellant which is a State entity”.

The Bench placed reliance on numerous cases and held that an annual increase of 8% with the cumulative effect would be appropriate due to the period of years being huge that is 11 years. The Court held that the High Court’s enhancement by applying the cumulative annual increase of 15% was wrong.

Accordingly, the Court allowed the Appeal and set aside the impugned judgment and order of the High Court.

Cause Title: The Central Warehousing Corporation v Thakur Dwara Kalan Ul-Maruf Baraglan Wala (Dead) & Ors. (2023 INSC 940)

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