2013 Supreme(SC) 1094

IN THE SUPREME COURT OF INDIA
G.S. SINGHVI, SHIVA KIRTI SINGH, C. NAGAPPAN, JJ.
Himmat Singh and others - Appellants
Versus
State of M.P. and another - Respondents
CIVIL APPEAL NO. 1248 OF 2007
Decided on : November 29, 2013

Headnote:Land Acquisition Act, 1894—Sections 18 and 54—Acquisition of land—Compensation—Enhancement—Exercise undertaken for fixing market value and determination of compensation payable to landowner should necessarily involve consideration of escalation in land prices—Appellants will be entitled to 10% annual escalation in compensation determined for acquisition—Appellants’ prayer for award of compensation on account of loss caused due to removal of fencing of Farm, severance of land due to laying of rail line and construction of road, loss caused due to destruction of crop/farming activity etc. was rejected by Reference Court without assigning cogent reasons and Single Judge of High Court did not even deal with the issue—Matter remitted to Reference Court for deciding the issue afresh.

       Held: Primarily, the increase in land prices depends on four factors: situation of the land, nature of development in surrounding area, availability of land for development in the area, and the demand for land in the area. In rural areas, unless there is any prospect of development in the vicinity, increase in prices would be slow, steady and gradual, without any sudden spurts or jumps. On the other hand, in urban or semi-urban areas, where the development is faster, where the demand for land is high and where there is construction activity all around, the escalation in market price is at a much higher rate, as compared to rural areas. In some pockets in big cities, due to rapid development and high demand for land, the escalations in prices have touched even 30% to 50% or more per year, during the nineties.

       On the other extreme, in remote rural areas where there was no chance of any development and hardly any buyers, the prices stagnated for years or rose marginally at a nominal rate of 1% or 2% per annum. There is thus a significant difference in increases in market value of lands in urban/semi-urban areas and increases in market value of lands in the rural areas. Therefore, if the increase in market value in urban/semi-urban areas is about 10% to 15% per annum, the corresponding increases in rural areas would at best be only around half of it, that is, about 5% to 7.5% per annum. This rule of thumb refers to the general trend in the nineties, to be adopted in the absence of clear and specific evidence relating to increase in prices. Where there are special reasons for applying a higher rate of increase, or any specific evidence relating to the actual increase in prices, then the increase to be applied would depend upon the same.

       Normally, recourse is taken to the mode of determining the market value by providing appropriate escalation over the proved market value of nearby lands in previous years (as evidenced by sale transactions or acquisitions), where there is no evidence of any contemporaneous sale transactions or acquisitions of comparable lands in the neighbourhood. The said method is reasonably safe where the relied-on sale transactions/acquisitions precede the subject acquisition by only a few years, that is, up to four to five years. Beyond that it may be unsafe, even if it relates to a neighbouring land. What may be a reliable standard if the gap is of only a few years, may become unsafe and unreliable standard where the gap is larger. For example, for determining the market value of a land acquired in 1992, adopting the annual increase method with reference to a sale or acquisition in 1970 or 1980 may have many pitfalls. This is because, over the course of years, the ‘rate’ of annual increase may itself undergo drastic change apart from the likelihood of occurrence of varying periods of stagnation in prices or sudden spurts in prices affecting the very standard of increase.”

       In view of the propositions laid down in the aforementioned judgments, we hold that the appellants will be entitled to 10% annual escalation in the compensation determined for the acquisition made vide notification dated 28.5.1987, which was published on 12.6.1987.

       The appellants’ prayer for award of compensation on account of loss caused due to removal of fencing of Sant Farm, severance of land due to laying of rail line and construction of road, loss caused due to destruction of crop/farming activity etc. was rejected by the Reference Court without assigning cogent reasons and the learned Single Judge of the High Court did not even deal with the issue. It is, therefore, apposite that the matter is remitted to the Reference Court for deciding this issue afresh keeping in view the evidence produced by the parties in the references made by the Collector for determination of compensation of the land acquired vide notifications dated 28.5.1987 and 27.12.1991.

       In the result, the appeal is partly allowed and it is declared that the appellants shall be entitled to compensation at the rate of Rs.5 per sq. ft. with benefit of escalation at the rate of 10% per annum for the period between 28.5.1987 and 27.12.1991. The appellants shall also be entitled to get interest on solatium. The respondents are directed to pay the enhanced compensation with interest etc. to the appellants within a period of six months from today.

       The issue relating to award of compensation in lieu of the loss caused due to removal of fencing of Sant Farm, segregation of land on account of laying of rail line and construction of road from Kolaras Town to Railway Station and loss caused due to damage to the crop and farming activity is remitted to the Reference Court for fresh adjudication in the light of the evidence produced by the parties in the references made by the Collector under Section 18 of the Act.

       Result: Appeal partly allowed.