HM Journal

Appropriate method to determine increase in rates- Cumulative or Percentage?

Court Name– Supreme Court of India

Judgment Name– Civil Appeal Nos. 3875­3876 of 2009

Judgment Date– 13th September, 2021

Bench– Justice M. R. Shah, Justice Aniruddha Bose

Plaintiff– Ramesh Kumar

Respondent– Bhatinda Integrated Cooperative Cotton Spinning Mill and Ors.

Introduction– This is the judgment which has arisen out of the impugned common judgment and order passed on 19th Sept, 2008 by the High Court in RFA No.3476 of 1999 filed by the original claimants (who have not preferred to challenge the order) for increase and RFA No.1507 of 1999 filed by the Bhatinda Integrated Co­operative Cotton Spinning & Ginning Mills Ltd. The case revolves around determining the appropriate compensation for land owners whose land was acquitted for public purposes.

Brief facts of the case-

  • The land owned by the original claimants is allocated in the revenue estate of Jassi Pau Wali, Distt. Bhatinda, Punjab amidst 297 Kanals and 1 Marla. It was acquired for public purpose with the intention of establishing Batinda Integrated Cooperative Cotton Spinning and Ginning Mills Ltd.
  • The land acquisition officer determined the land to be of Rs. 25K per acre and awarded compensation accordingly. Then, the landowners approached the reference court which determined the land value to be determined the market value to be Rs.1,12,000/­ per acre.
  • Dissatisfied, the original applicants and Spinning Mill preferred an appeal to the High Court. It allowed the appeals preffered by spinning mill and reduced compensation Rs.88,400/­ per acre.
  • Unhappy with the common impugned Judgment of the High Court partly allowing the appeals preferred by the Spinning Mill and dismissing the appeals   preferred   by   the   land   owners for increased compensation and determining the value of the acquired land at Rs.88,400/­ per acre, the land owners have preferred the present appeals.

Contentions of appellant

Learned counsel appearing on behalf of landowners submitted that that both, the Reference Court as well as the High Court have failed to consider the sale deed dated 04.05.1981 by which the land admeasuring 70 meters away from the acquired land was sold at Rs.1,17,600/­ per acre. It was contended that the High Court has erred in taking annual increase @12% at the flat rate which would lead to anomalous results as opposed to cumulative rate. Reference was made to ONGC case wherein it was held that it is logical, practical and appropriate to apply cumulative rate as opposed to flat rate. This decision was later relied on in case of Ashok   Kumar   and   Ors. It was further submitted that considering the location and nature of the land that was acquired as well as the purpose for which it was acquired (for commercial purpose for   spinning   mill) the market price should not be reduced and landowners had the right to market price without any cut. Further reliance was made upon the cases of Anjani Molu Dessai vs. State of Goa and Trishala Jain and Anr. Vs. State of Uttaranchal. In the end, it was prayed to allow the present appeals and enhance the amount of compensation considering the value of the land of Rs.1,50,000/­ per acre.

Contentions of Defendants

All the appeals were opposed by Learned Counsel appearing on behalf of the Liquidator of Spinning Mill. It was submitted that the mill was a Co­operative Society and became operational only in 1992. The mill suffered heavy losses due to various factors that led to the complete erosion of the capital due to the fact that the mill was introduced to make vide orders dated 09.05.2003. All landowners have been paid in full according to a High Court Decision. It is also submitted that Punjab was engulfed in militancy from 1979 to 1992. As a result of the military prices, they had dropped to about Rs.25,000/acre. Even the compensation given to the landowners is already on the high side so the complaint should be dismissed.

Principles and observation

The court observed that the percentage increase is always based on the market value of the previous year, the correct way to accommodate the increase is cumulative and not a flat rate increase. It was also observed that the percentage of increase is always with   reference   to   the   previous   year’s   market   value, the appropriate method is to adopt the increase cumulatively and not applying a flat rate.  However, at the same time it is also observed that it is reasonably safe to determine the market value by providing appropriate escalation over the approved market value of surrounding lands in the recent years, when   relied   on   sale transactions/acquisitions precede the subject acquisition by only a few years, i.e., upto 4­5 years.

Judgment

The court chose not to interfere with the common Judgment and Order passed by the High Court and hence, the appeals were dismissed accordingly.

Author’s opinion: In my humble opinion, the court has made a fair decision for both the parties given that the time gap between the deed of sale depends on it and the date of notification of acquisition is more than 9 years, the courts have carefully recognized the reliance on the same and also taken care of the appropriate amount of compensation for landowners.

REFERENCES

  1. Section 4, Land Acquisition act, 1984
  2. Section 6, Land Acquisition act, 1984
  3. ONGC Ltd. vs.  Rameshbhai  Jivanbhai  Patel  &  Anr., (2008) 14 SCC 745
  4. Ashok Kumar and Ors. vs. State of Haryana and Ors., (2015) 15 SCC 200
  5. Anjani Molu Dessai vs. State  of  Goa  and  Anr., (2010) 13 SCC 710
  6. Trishala Jain and Anr. Vs. State of Uttaranchal and Anr., (2011) 6 SCC 47

Written by:  Himani Thareja (3rd Year), Christ University, Delhi.

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