Why the Reference Court Cannot Reduce the Compensation Amount Awarded by the Collector

When land is compulsorily acquired, one of the most common questions landowners, acquiring authorities, and beneficiary companies ask is whether the amount awarded by the Collector can be reduced by the reference Court. The short answer, well settled by judicial precedent, is no — the reference Court cannot reduce the compensation awarded by the Collector, and any reference seeking such a reduction is legally futile.

The Statutory Framework: Sections 11, 18 and 25

Under the Land Acquisition Act, 1894, the Collector makes an award of compensation under Section 11. A person interested who has not accepted that award may, under Section 18, seek a reference to the Court to have the compensation determined afresh. The critical constraint on the Court's power appears in Section 25, which provides that the amount of compensation awarded by the Court shall not be less than the amount awarded by the Collector under Section 11 2021 0 Supreme(MP) 785 and 2012 0 Supreme(Raj) 1047.

Reading Sections 18 and 25 conjointly, courts have held that Section 25 places a substantive restriction: the amount awarded by the Collector cannot be reduced by the reference Court. If a reference is made praying that the compensation be reduced, it is nothing but a futile exercise 2021 0 Supreme(MP) 684.

The Collector's Award Is Treated as an Offer

The rationale behind this bar lies in the legal character of the Collector's award. Courts have explained that:

• An award made by the Collector is in the form of an offer; it is in that sense only that the amount contained therein cannot be reduced 2007 0 Supreme(SC) 781.
• On a reference under Section 18, or on appeal against enhanced compensation, the Court cannot reduce compensation below the offer made by the Collector 1996 3 Supreme 438.
• Section 25 is a substantive provision, not a procedural one, and the amended provision is not retrospective in effect — it applies only to acquisitions made after its enactment 2002 1 Supreme 660.

Because the provision is substantive, it governs the right itself rather than the method of enforcement, and it cannot be interpreted to permit the Court to diminish the compensation already determined by the Collector.

Practical Consequences for Different Parties

For landowners. The reference under Section 18 is essentially a one-way street upwards. The landowner's task is to demonstrate that the compensation offered by the Collector is inadequate. The Court can award compensation higher than even the amount claimed before the Land Acquisition Officer, as there is no prohibition against granting a higher claim before the Court 2012 0 Supreme(Raj) 1047.

For acquiring authorities and beneficiary companies. A local authority or company for whom the land is acquired is a person interested only to the extent that it has a right to appear before the Collector or the Court and put up its stand on the computation of compensation. Section 50 specifically bars such parties from making a reference under Section 18. A reference seeking reduction of compensation at their instance is therefore not maintainable 2021 0 Supreme(MP) 684.

For references under the Works of Defence Act, 1903. The position is identical. Where the Defence Authorities sought a reference to reduce compensation, the Court held that since the restriction under Section 25 exists in both the 1894 Act and the 1903 Act, such a reference is meaningless and was dismissed as not maintainable 2021 0 Supreme(MP) 684.

Redetermination Under Section 28A: The Same Bar Applies

The prohibition extends beyond the initial reference. Under Section 28A, when the Court allows compensation in excess of the Collector's award, other persons interested in the remaining land covered by the same notification may apply for redetermination of their compensation on the same basis 2022 Supreme(Online)(All) 117 and 2022 0 Supreme(All) 1670.

Courts have squarely held that the amount of compensation determined by the Collector under Section 28A(2) cannot be reduced by the reference Court under Section 28A(3). Once there is a specific bar under Section 25, the Court shall not award compensation less than the amount awarded by the Collector, and permitting the beneficiary of the acquisition to seek such a reduction would frustrate the intention of the legislature 2023 0 Supreme(All) 1010 and 2023 0 Supreme(All) 1018. Further, the Collector's order under Section 28A is not appealable under Section 54, since the Collector is not a Court within the meaning of Section 3(d); the remedy lies in seeking a reference under Section 28A(3) 2022 0 Supreme(All) 1670.

Important Procedural Safeguards for Landowners

While pursuing enhancement, landowners should also remember that:

• A reference application must ordinarily be filed within six weeks from the date of the Collector's award, and accepting compensation without protest can bar a later reference under the principle of approbate and reprobate 2009 0 Supreme(All) 2371.
• Once a reference is properly made, the reference Court must decide it on merits, with limitation being a mixed question of law and fact to be determined only after framing of issues 2025 0 Supreme(MP) 555.
• The reference Court's jurisdiction is confined to the objections referred by the Collector, and it cannot dismiss proceedings on irrelevant technical grounds 2025 0 Supreme(Gau) 624.

Key Takeaways

1. The amount awarded by the Collector under Section 11 cannot be reduced by the reference Court on a reference under Section 18 1996 3 Supreme 438.
2. Section 25 is a substantive, non-retrospective provision that operates as a ceiling on the Court's power 2002 1 Supreme 660.
3. The Collector's award functions as an offer, and a reference seeking reduction is a futile exercise 2007 0 Supreme(SC) 781 and 2021 0 Supreme(MP) 684.
4. The same bar applies to redetermination proceedings under Section 28A 2023 0 Supreme(All) 1010.
5. Non-governmental beneficiaries of acquisition cannot maintain a reference for reduction; their role is limited to participating in the assessment of compensation 2021 0 Supreme(MP) 684.

This article is intended as general legal information, and anyone dealing with a specific acquisition dispute should seek advice tailored to their facts and the applicable version of the statute.