New Delhi: In a significant victory for landowners and farmers, the Supreme Court has clarified the guiding principle for determining compensation in compulsory land acquisition cases, ruling that authorities must generally consider the highest comparable bona fide sale price (or “exemplar”) rather than resorting to an average.
The ruling, delivered by a bench of Chief Justice B.R. Gavai and Justice Augustine George Masih, emphasizes that the goal of compensation is to reflect the price a “willing seller might reasonably expect to obtain from a willing purchaser.” Crucially, this valuation must take into account not just the land’s current condition, but also its potential future value.
The Principle of the “Highest Exemplar”
The Court established a strong legal precedent regarding how sale deeds of nearby lands—the primary tool for market valuation—should be treated. The bench stated clearly that even when multiple sales of similar lands are available, the highest price from a genuine, verified transaction must be used as the base for calculating compensation.
The only exception, the Court noted, is if several similar sales fall within a “narrow bandwidth,” in which case an average could be acceptable. This judgment fundamentally shifts the burden, requiring the acquiring authority to actively justify why the highest recorded sale in the vicinity should be ignored.
Enhancing Compensation for Maharashtra Farmers
This critical clarification came while adjudicating an appeal filed by Manohar and other farmers against a Bombay High Court judgment. The case involved land in Village Pungala, Maharashtra, which was acquired in the 1990s for setting up an industrial area under the Maharashtra Industrial Development Act.
The farmers had long been fighting for fair compensation, pointing to a sale deed from 1990 that reflected a much higher market value (Rs 72,900 per Acre) than what they were initially awarded. The Reference Court and the High Court had both incorrectly overlooked or dismissed this high-value sale, believing it to be “abnormally high.”
Overturning Lower Court Errors
The Supreme Court rejected the argument that a high-value transaction could be excluded simply because of its price. The bench found that the lower courts had failed to provide adequate reasons why the highest exemplar was not a bona fide or genuine transaction—a necessary step for exclusion.
Ultimately, the Supreme Court allowed the appeal and directed a substantial increase in compensation for the farmers. The compensation was enhanced from the original Rs 32,000 per Acre to Rs 58,320 per Acre. The Court applied a 20 per cent deduction to the highest exemplar value because that particular sale involved smaller plots compared to the acquired land, a standard procedure in such valuations.
This landmark decision provides a powerful tool for landowners across the country, ensuring that state authorities are held to a higher standard of fairness when assessing the market value of acquired private property.
