In a significant ruling on April 3, 2024, the Supreme Court of India emphasized that the highest bona fide sale exemplar must be used while deciding land compensation in acquisition cases. The decision brings clarity to how compensation should be fairly determined, especially in urban or rapidly developing areas.
The bench of Justices B.R. Gavai and K.V. Viswanathan delivered this verdict while hearing an appeal filed by the legal representatives of late Ram Kishan, challenging the compensation amount decided by the Punjab & Haryana High Court for lands acquired in Dharuhera village, Haryana, in 2008.
The land was acquired under the Land Acquisition Act, 1894, and the High Court had fixed the compensation at ₹55.71 lakh per acre. However, the Supreme Court revised this figure upwards to ₹1.18 crore per acre, citing the importance of applying the principle of de-escalation and considering the highest comparable sale exemplar.
“It is also well settled that the potentiality of the land is also to be taken into consideration while assessing the market value. Potentiality refers to the use to which the land is either put or is reasonably capable of being put,” the Court observed.
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Background and the Issue at Hand:
The land in question, situated in a controlled urban zone of Dharuhera, was surrounded by several multinational companies, a large residential colony, schools, and townships — all within a 1 km radius. The area’s urban character made it suitable for non-agricultural use, a fact overlooked by the High Court.
“The High Court committed an error by relying selectively on lower-value sale deeds and ignoring nearby higher-value transactions,” the Court stated.
The Supreme Court criticized the High Court’s approach of not considering market proximity, development potential, and land utility, which are critical factors in land valuation.
Explaining Escalation and De-Escalation:
The principle of escalation adjusts a reference land value upwards to account for the increase in land prices over time when the reference date is earlier than the acquisition date.
In contrast, the principle of de-escalation adjusts the land value downwards when the reference sale or award is from a later period than the acquisition date.
The petitioners relied on the case of BESCO Ltd. v. State of Haryana (2023), where the Supreme Court had enhanced the compensation to ₹1.49 crore per acre for adjoining lands acquired in May 2010 — 17 months after the acquisition date in the current case (December 2008).
To ensure fairness, the Court applied a 12% annual de-escalation rate:
- 12% reduction for 12 months on ₹1.49 crore = ₹1.31 crore
- Additional 6% for 5 months = final value of ₹1.23 crore/acre
However, since in BESCO’s case, landowners had paid fees for Change of Land Use (CLU), the Court made a ₹5 lakh per acre deduction, bringing the final compensation in the Ram Kishan case to ₹1.18 crore per acre.
Case Title: RAM KISHAN (SINCE DECEASED) THROUGH HIS LRS ETC. VERSUS STATE OF HARYANA & ORS
Appearance:
For Petitioner(s) Mr. Varun Kumar, Adv. Mr. R. C. Kaushik, AOR Mr. Sureshan P., AOR Mr. Shivam Yadav, Adv. Ms. Kavita Wadia, Sr. Adv. Mr. Rohan Yadav, Adv. Mr. Tushar Mahajan, Adv. Mr. Ajit Kumar Ekka, AOR Mr. S.B. Upadhyay, Sr. Adv. Mr. Nishant Kumar, AOR 3 Mr. Gagan Gupta, Sr. Adv. Mr. Ananta Prasad Mishra, AOR
For Respondent(s) Mr. Alok Sangwan, Sr. AAG. Mr. Akshay Amritanshu, AOR Ms. Pragya Upadhyay, Adv. Ms. Drishti Saraf, Adv. Ms. Swati Mishra, Adv. Mr. Sumit Kumar Sharma, Adv. Mr. Rajat Sangwan, Adv.