Land Acquisition Compensation | Highest Bona Fide Sale Exemplar To Be Considered To Fix Market Value : Supreme Court

Reinforcing the landowners' right in acquisition proceedings, the Supreme Court on Monday (July 28) enhanced the land acquisition compensation for compulsorily acquired agricultural land by 82%, holding that lower courts erred in ignoring the highest bona fide sale transaction without adequate reasoning.

“It can thus be seen that it is a settled position of law that when there are several exemplars with reference to similar land, usually the highest of the exemplars, which is a bona-fide transaction, will be considered.”, the court said.

The bench comprising Chief Justice BR Gavai and Justice AG Masih set aside the Bombay High Court's decision, which upheld the Reference Court's decision to grant Rs. 32,000/- per acre compensation to the landowners. Instead, it enhanced the compensation to Rs. 58,320 per acre after taking note of factors such as the land was situated at prime location, its non-agricultural potential of the land, and being adjacent to a state highway.

The case stems from the 1990s acquisition of agricultural lands for industrial development. The initial award in 1994 fixed compensation at a meagre ₹10,800 per acre, prompting the landowners to seek enhancement under Section 18 of the Land Acquisition Act, 1894.

Although the Reference Court in 2007 revised the amount to ₹32,000 per acre, it refused to consider a 1990 sale exemplar showing a much higher value of ₹72,900 per acre. The Bombay High Court, in 2022, upheld this determination, leading to the present appeal before the Supreme Court.

Disagreeing with the High Court's reasoning, the judgment authored by CJI Gavai noted that the Appellant's land was situated at the prime location, thereby deserving a benefit of highest sale exemplar. (Refer Mehrawal Khewaji Trust (Registered), Faridkot and Others v. State of Punjab and Others, (2012) 5 SCC 432

“It is well-settled that the compensation payable to the owner of the land is determined by reference to the price which a seller might reasonably expect to obtain from a willing purchaser. It is further settled law that the land acquired has to be valued not only with reference to its condition at the time of notification under Section 4 of the LA Act but its potential value must be taken into account. In this respect, the sale deeds of lands situated in the vicinity and the comparable benefits and advantages which they have, provide a ready method of computing the market value.”, the court observed.

“In the instant case, it is not in dispute that the land was acquired for public purpose for the establishment of Jintur Industrial Area. Further, the lands in question are situated at village Pungala, which is at a distance of 2 kilometres from Jintur, a taluka place and where the market committee, Wakhar Mahamandal, dairy business and other basic facilities are available. Not only that but the Courts below found that the lands acquired are situated near T-point of Nashik-Nirmal State Highway; that the acquired land has non-agricultural potential and that a percolation tank just opposite to the acquired lands, having sufficient water, could be found. It would also be relevant to note that the sale instances at Sr. Nos.1, 2 and 3 are of April/May of 1989 and the notice under Section 32(2) of the Act of 1961 was issued on 19th July 1990, as such, the sale exemplar at Sr. No.4 i.e., the sale instance dated 31st March 1990, is the most proximate to the date of transaction. Further, the sale instances at Sr. Nos.9 and 10, from Jintur, show that after the notice under the Act of 1961, there has been a very high rise in the prices of the land in the nearby areas. We are, therefore, of the considered opinion that the land of the Appellants was situated in a prime location and they deserve the benefit of the highest sale exemplar.”, the court added.

Average Sale Price Cannot Be Taken When Highest Of Similar Land Sale Exemplar Exists

The Court rejected the Respondent's argument of taking into account the average sale price instead of referencing the highest sale exemplar, stating that the average sale price would be taken into account only when there exists several sales of similar lands whose prices range in a narrow bandwidth, the average thereof can be taken, as representing the market price. However, when there are several exemplars with reference to similar lands, usually the highest of the exemplars, which is a bonafide transaction will be considered, the court clarified.

“It was sought to be contended by the learned counsel for the Respondent No. 3 (MIDC) that the Reference Court has rightly used the principle of averaging of sale price of sale exemplars at Sr. No. 1, 2, 3 and 5 for determination of market value of acquired land. However, it is clear from a reading of paragraph 20 of the judgment of this Court in the case of Anjani Molu Dessai (supra) that the legal position is that even where there are several exemplars with reference to similar lands, usually the highest of the exemplars, which is a bonafide transaction will be considered. Further, only where there are several sales of similar lands whose prices range in a narrow bandwidth, the average thereof can be taken, as representing the market price.”, the court observed.

Accordingly, the appeal was allowed.

Cause Title: MANOHAR AND OTHERS VERSUS THE STATE OF MAHARASHTRA AND OTHERS

Citation : 2025 LiveLaw (SC) 746

Click here to read/download the judgment

Appearance:

For Petitioner(s) : Mr. Deshmukh Adith Satish, AOR Mr. Bharat Thakorlal Manubarwala, AOR

For Respondent(s) : Ms. Rukhmini Bobde, Adv. Mr. Siddharth Dharmadhikari, Adv. Mr. Aaditya Aniruddha Pande, AOR Ms. Soumya Priyadarshinee, Adv. Mr. Vinayak Aren, Adv. Mr. Amlaan Kumar, Adv. Mr. Naveen Kumar Bhardwaj, Adv. Ms. Shyamali Gadre, Adv. (Through VC) Mr. Soumik Ghosal, AOR Mr. G Pal, Adv. Mr. Ashutosh Chaturvedi, Adv.

Related: Land Acquisition Act | Supreme Court Explains Principle Of De-Escalation, Says Highest Of Sale Exemplars Must Be Taken