'Adverse Circumstances' Should Be Taken Into Account Before Adopting Standard Escalation For Calculating Compensation For Land Acquisition: Supreme Court

A Supreme Court Bench consisting of Justice MR Shah and Justice Aniruddha Bose has reiterated that 'Adverse Circumstances' should be taken into consideration by Courts while deciding disputes of compensation for land acquisition. The Court took into consideration, militancy in Punjab from 1979 till 1992 while applying the principle.

The Bench dismissed appeals filed by landowners against the Judgment of Punjab and Haryana High Court, which reduced the quantum of compensation that had been enhanced by the Reference Court.

Facts of the Case

In the present case, the Notification under Section 4 of the Land Acquisition Act, 1894 was issued on 06.06.1988. The land in question was acquired for the public purpose of establishing Bhatinda Integrated Cooperative Cotton Spinning and Ginning Mills Ltd. The Land Acquisition Officer, Bhatinda, awarded compensation considering the value of the land at the rate of Rs.25,000/­ per acre. The Reference Court relying upon the sale deed dated 24.05.1979 determined the compensation at Rs.1,12,000/­ per acre. Thereafter, the High Court by its common Judgment, allowed the appeals preferred by the spinning mills and dismissed the appeals preferred by the land owners, by determining the value at Rs.88,400/­ per acre after adopting cut of 15%.

Based on the fact of the case, the Apex Ccourt framed two issues:-

(i) Whether in the facts and circumstances of the case the Courts below have erred in taking annual increase at the rate of 12% at the flat rate and not applying the cumulative rate?

(ii) Whether in the facts and circumstances of the case the High Court has erred in adopting the cut/deduction of 15%, while determining the value of the land acquired?

Regarding the Adverse Circumstance, the Bench observed, "After considering the case of Rameshbhai Jivanbhai Patel, it is observed and held by this Court in the case of Lal Chand that even if the transaction is 2 to 3 years prior to the acquisition, the Court should, before adopting a standard escalation satisfy itself that there were no adverse circumstances. It is further observed and held that the question is therefore, necessary before increasing the price with reference to the old transactions. Therefore, assuming that the appellants are right in submitting that the increase in land value should have been adopted on cumulative basis, in the peculiar facts and circumstances of the case noted hereinabove, we see no reason to interfere with the impugned judgment and order passed by the High Court."

The Bench held that the annual increase of land price ought to have been 10% maximum. The Court held that, "We are of the opinion that, in the facts and circumstances of the case the annual increase/escalation ought to have been at the rate of 10% maximum. Even otherwise, it is required to be noted that State of Punjab suffered due to militancy from 1979 onwards till 1992 and because of that the prices would have crashed. Therefore, to grant the escalation/price rise at the rate of 12% would not be justified at all."

Regarding 15% cut on the value of the land towards developmental charges, the Bench found as follows:-

"Now so far as the deduction at the rate of 15% towards the development charges, it also does not call for any interference of this Court considering the fact that the land in question at the relevant time was an agricultural land. However, taking into consideration the fact that the sale instance dated 24.07.1979 relied upon was a quite big chunk of land and the location of the acquired land and the land was acquired for spinning mill, the High Court has rightly adopted 15% cut."

Parties: Ramesh Kumar Versus Bhatinda Integrated Cooperative Cotton Spinning Mill and Ors