Land Acquisition Compensation

Source: Supreme Court  

Why in News? 

Recently, the bench of Chief Justice BR Gavai and Justice AG Masih has held that when determining compensation for compulsorily acquired land, courts must consider the highest bona fide sale transaction among available exemplars rather than averaging different sale prices. 

• The Supreme Court held this in the matter of Manohar and Others v. State of Maharashtra & Others. (2025). 

What was the Background of Manohar and Others v. State of Maharashtra & Others. (2025) Case? 

• The appellants were farmers who owned agricultural land measuring 16 hectares and 79 acres situated at Village Pungala in Parbhani District, Maharashtra. 
• The state government acquired their land in the 1990s under the Maharashtra Industrial Development Act, 1961 for establishing an industrial area near Jintur town.  
• The Land Acquisition Officer initially awarded compensation of merely Rs. 10,800 per acre in 1994, which the farmers considered grossly inadequate for their prime agricultural land. 
• Dissatisfied with the meager compensation, the landowners filed a reference under Section 18 of the Land Acquisition Act, 1894 seeking enhancement of the awarded amount. 
• The Reference Court in 2007 increased the compensation to Rs. 32,000 per acre but refused to consider a 1990 sale exemplar showing much higher value of Rs. 72,900 per acre for similar land in the vicinity. 
• The farmers' land was strategically located just 2 kilometers from Jintur town, adjacent to the Nashik-Nirmal State Highway, and had significant non-agricultural potential. 
• The Reference Court had before it ten sale exemplars of similar lands, with prices ranging from Rs. 25,000 to Rs. 72,900 per acre, but chose to ignore the highest transaction without providing adequate reasoning.  
• The Bombay High Court in 2022 upheld the Reference Court's decision, prompting the farmers to approach the Supreme Court.  
• The case provides the fundamental issue of whether courts can arbitrarily exclude the highest bona fide sale transaction when determining fair market value for acquired land. 

What were the Court’s Observations? 

• The Supreme Court observed that it is well-settled law that compensation payable to landowners is determined by reference to the price which a seller might reasonably expect from a willing purchaser in the market.  
• The court noted that when several exemplars of similar land transactions exist, the highest bona fide transaction should ordinarily be considered rather than taking an average of different sale prices.  
• The apex court found that the land in question was situated at a prime location, being adjacent to Jintur town with market facilities, dairy business and other basic amenities available within 2 kilometers. 
• The court observed that the acquired land was located near the T-point of Nashik-Nirmal State Highway and possessed significant non-agricultural potential, with a percolation tank providing sufficient water supply just opposite to the property.  
• The Supreme Court noted that the Reference Court had erroneously ignored the sale exemplar dated 31st March 1990 showing Rs. 72,900 per acre without recording any reasons for excluding this bona fide transaction.  
• The court observed that averaging of sale prices is permissible only when several sales of similar lands have marginal price variations within a narrow bandwidth. 
• The Supreme Court found that the High Court had made contradictory observations, first acknowledging that the Reference Court did not consider the highest sale exemplar, then incorrectly stating that it had been considered.  
• The court observed that the sale instances at serial numbers 9 and 10 from Jintur showed prices of Rs. 61,500 and Rs. 60,000 respectively, which were closer to the highest exemplar than to the lower-priced transactions used for averaging. 
• The apex court concluded that the farmers deserved compensation based on the highest sale exemplar, with only a reasonable 20% deduction for bulk transaction, resulting in enhanced compensation of Rs. 58,320 per acre. 

What are the Legal Provisions Referred? 

Land Acquisition Act, 1894: 

• Section 18   
  • This provision allows landowners to file a reference for enhancement of compensation when they are dissatisfied with the amount awarded by the Land Acquisition Officer.  
  • The farmers in this case successfully invoked this section to challenge the inadequate compensation of Rs. 10,800 per acre initially awarded in 1994. 
• Section 4  
  • This section deals with the publication of preliminary notification for land acquisition, and the court held that land must be valued with reference to its condition at the time of this notification. 
  • The market value determination date is crucial as it fixes the point in time for assessing comparable sale transactions in the vicinity. 
• Section 51A  
  • This section provides that certified copies of documents have presumptive value as evidence of transactions recorded therein.  
  • The court relied on this provision to accept the sale exemplars as valid evidence since the state did not produce any rebuttal evidence to challenge their authenticity. 
• Section 23(1-A) - 
  • This provision deals with solatium (additional amount) payable over and above the market value as compensation. The Supreme Court directed that all consequential benefits under this section be granted to the appellants along with the enhanced compensation amount. 
• Section 23(2) 
  • This section provides for additional amount for compulsory acquisition, and the court ensured that farmers receive this statutory benefit. The provision recognizes that compulsory acquisition deserves higher compensation than voluntary sale transactions between willing parties. 
• Section 28  
  • This provision deals with interest payable on compensation amount from the date of taking possession until actual payment.  
  • The Supreme Court specifically directed that interest on enhanced compensation be calculated and paid under this section to compensate for delayed payment.