Purpose of acquisition of land – an essential factor for determining market value

The Hon’ble Supreme Court vide its judgment dated 09.11.2022 in “S. Shankaraiah through GPA holder & Ors. vs. The land acquisition officer & Revenue Divisional officer Peddapali, Karimnagar Dist. & Ors.” had the occasion of dealing with whether the purpose of acquisition of land plays any role in determining the market value of the said land.

Factual Matrix:

Notification under Section 4(1) of the Land Acquisition Act, 1894 (hereinafter referred to as ‘the Act’) for the purpose of acquisition of land came to be issued for a large extent of land in Karimnagar District on 13.05.1985. Thereafter, the land acquisition officer passed an award in 1987, wherein the market value of the acquired lands was fixed at Rs. 7,000/- per acre for dry lands under cultivation and at Rs. 6,000/- per acre for dry lands left fallow.

Dissatisfied with the said award, the land owners sought references to a Civil Court under Section 18 of the Act which thereby enhanced the market value of the acquired lands to Rs. 50,000/- per acre for dry lands under cultivation and Rs. 30,000/- per acre for dry lands left fallow alongwith Rs. 15,000/- per acre towards sub-soil mineral rights.

Feeling aggrieved with the reference order, the land owners filed an appeal before the Hon’ble Andhra Pradesh High Court which vide its order dated 06.12.2013 partly allowed the appeal by enhancing the market value of the acquired lands to Rs. 80,000/- per acre after deciding the market value of the said lands to be Rs. 1,23,0000/- and thereafter deducting 1/3^rd of that value for the cost incurred towards developing the said lands. Additionally, the High Court also awarded Rs. 10,000/- per acre towards sub-soil mineral rights.

Analysis of the judgment:

The Hon’ble Supreme Court vide its judgment dated 09.11.2022 allowed the appeal filed by the land owners i.e. the Appellants and fixed the market value of the acquired lands at Rs. 1,23,000/- per acre without making any deductions along with Rs. 10,000/- per acre towards sub-soil mineral rights.

The Hon’ble Supreme Court while relying on the law as settled in “Nelson Fernandes & Ors. vs. Special Land Acquisition Officer South Goa & Ors., (2207) 9 SCC 447” and “Basavva vs. Special Land Acquisition Officer, (1996) 9 SCC 640” held that the purpose for which acquisition of land is made is also a relevant factor for determining the market value and it must be taken into consideration.

Hence, in the present case, as the lands were being acquired solely for the purpose of mining Coal, the deduction of 1/3^rd market value of the said lands on the pretext of developmental charges as held at by the Hon’ble High Court should not be permissible as there exists no justification for such deduction. The lands are being acquired only for mining coal and thus, there will be no wastage of any portion of the lands on account of any developmental activities, such as roads, sewage lines, parks etc. which are required to be carved out in industrial/commercial/housing layouts and not for the purpose of mining.