Madhya Pradesh Road Development Corporation vs. Vincent Daniel

2025 INSC 408
REPORTABLE


IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION


CIVIL APPEAL NO. 3998 OF 2024


MADHYA PRADESH ROAD DEVELOPMENT
CORPORATION

.....

APPELLANT

VERSUS

VINCENT DANIEL AND OTHERS ..... RESPONDENTS


W I T H

CIVIL APPEAL NO. 3999 OF 2024
CIVIL APPEAL NO. 4004 OF 2024
CIVIL APPEAL NO. 4005 OF 2024
CIVIL APPEAL NO. 4012 OF 2024
CIVIL APPEAL NO. 4002 OF 2024
CIVIL APPEAL NO. 4013 OF 2024
CIVIL APPEAL NO. 4006 OF 2024
CIVIL APPEAL NO. 4001 OF 2024
Signature Not Verified
Digitally signed by
babita pandey
Date: 2025.03.27
18:02:36 IST
Reason:
CIVIL APPEAL NO. 4000 OF 2024

Civil Appeal No. 3998 of 2024 & Ors. Page 1 of 45



CIVIL APPEAL NO. 4014 OF 2024
A N D
CIVIL APPEAL No.4003 OF 2024


J U D G M E N T


SANJIV KHANNA, CJI.

The issue raised in the present batch of appeals filed by the
appellant, Madhya Pradesh Road Development Corporation, relates to
the applicability of the “theory of deduction” for determining the
compensation payable under The Right to Fair Compensation and
Transparency in Land Acquisition, Rehabilitation and Resettlement
1
Act, 2013.

2. Before examining the legal position, it would be appropriate to set out
the facts in brief:
• By a Gazette Notification dated 12.09.2014, the Central
Government declared its intention of acquiring the stretch of land
falling within 3.4 km to 22.8 km of the Jabalpur-Mandla-Chilpi

1
Hereinafter, “Acquisition Act, 2013”.
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section, in the district of Jabalpur, State of Madhya Pradesh. The
purpose of the acquisition was stated to be widening, four-laning,
maintenance, management and operation of National Highway
No.12-A. On 30.10.2014, the notification was also published in two
newspapers.
• By a Gazette Notification dated 02.02.2015, the land was declared
to have been acquired.
• On 31.08.2015, the Competent Authority and Land Acquisition
Officer, Collectorate, Jabalpur passed an award determining the
compensation payable for the land acquired. The award relies on
the mandate of Section 105(3) of the Acquisition Act, 2013 (as
2
amended). It accordingly holds that for the acquisition in question,
provisions relating to the determination of compensation shall
apply in accordance with the First Schedule of the Acquisition Act,
2013. Further, provisions for rehabilitation and resettlement would
apply as per the Second Schedule, and those relating to

2
Section 105 (3) – The provisions of this Act relating to the determination of compensation in
accordance with the First Schedule, rehabilitation and resettlement in accordance with the
Second Schedule and infrastructure amenities in accordance with the Third Schedule shall apply
to the enactments relating to land acquisition specified in the Fourth Schedule with effect from 1st
January, 2015.
Civil Appeal No. 3998 of 2024 & Ors. Page 3 of 45


infrastructural amenities shall apply as per the Third Schedule of
the Acquisition Act, 2013.
• The First Schedule of the Acquisition Act, 2013 states that the
market value of the land has to be determined in accordance with
Section 26 of the Acquisition Act, 2013. Clause (a) to Section 26(1)
adopts the market value as specified under the Indian Stamp Act,
3
1899 . Based on the date of the Gazette Notification published as
per Section 11 of the Acquisition Act, 2013, i.e., on 12.09.2014, the
Competent Authority deemed it appropriate to compute the market
value according to the Collector’s Guidelines for the year 2014-
4
2015 . These guidelines have been formulated in the exercise of
the powers conferred under the Stamp Act. The Collector’s
Guidelines have been annexed as ‘Annexure P-1’ to the present
appeal.
• Paragraph 4.1 of the Collector’s Guidelines deals with municipal
corporation areas of Jabalpur amongst other districts. It provides
for the valuation of two kinds of land – converted agricultural land
and non-converted agricultural land. These are further divided into

3
Hereinafter, “Stamp Act”.
4
Hereinafter, “Collector’s Guidelines”.
Civil Appeal No. 3998 of 2024 & Ors. Page 4 of 45


Categories (A) and (B). Category (A) applies when the area of land
is less than or equal to 1000 square meters, while Category (B)
applies when the area of land exceeds 1000 square meters.
• The Competent Authority determined the concerned area to be
non-converted land of more than 1000 square meters, which
would fall under Category (B). According to the method prescribed
under Category (B), the first 1000 square meters are to be valued
in accordance with Category (A). This corresponds to the rate
applicable to residential plots set out in Form-1 of the Collector’s
Guidelines. The remaining area is to be valued at the rate for
agricultural land as specified in Form-3 of the Collector’s
Guidelines. In the present case, the Competent Authority applied
the rate for Village Katiyaghat, which is specified as
Rs.1,50,00,000 per hectare under Form-3. The Competent
Authority determined the value of the land to be Rs. 97,50,000.
Over this amount, the Competent Authority also factored in assets
attached to the land and the solatium payable.
• By following the aforesaid procedure, the total compensation
payable for the acquisition of the land belonging to Respondent
No. 1, Vincent Daniel, was calculated to be Rs. 2,05,42,164/-.
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• Dissatisfied with the compensation, Respondent No. 1, Vincent
Daniel, as the other landowners, appealed to the Commissioner
against the decision of the Competent Authority. One of the
grounds raised in the appeal was that the rate at which the
compensation was awarded was significantly lower than the
market rate.
• The appellant, Madhya Pradesh Road Development Corporation,
filed its reply raising several contentions. They submitted that for
an undeveloped piece of land, the compensation was
disproportionately high. A portion of the land would have to be
foregone to develop roads, drainage, electricity poles, etc., which
would come at a significant expense. Therefore, it was argued that
the principles of compensation for developed lands would not
apply in the present case.
• The Commissioner in his arbitral award held that the Collector’s
Guidelines were binding. However, the Competent Authority had
made an error in applying the same. For 0.650 hectares of land
situated inside the Katiyaghat road, at Khasra No. 53 of
village/mauja Katiyaghat, Jabalpur, the rate of Rs. 12,000 per
square meter should have been applied for the first 1000 square
Civil Appeal No. 3998 of 2024 & Ors. Page 6 of 45


meters, while applying the rate of Rs. 1,50,00,000 per hectare for
the balance land. After adding 100% solatium and interest, an
additional amount of Rs. 2,21,11,562/- was found to be payable.
• Against the Commissioner’s award, the appellant, Madhya
Pradesh Road Development Corporation, preferred objections
before the District Court under Section 34(3) of the Arbitration and
5
Conciliation Act, 1996 . One of the contentions raised was that the
compensation should not have been awarded by solely relying
upon the Collector’s Guidelines, as the land was undeveloped.
• The objections were dismissed by the District Judge. It was
observed that the land in question was situated within the
municipal areas on which the Collector’s Guidelines were
applicable. It was noted that the compensation was enhanced in
compliance with the Collector’s Guidelines. Form-1 of the
Collector’s Guidelines prescribes the rate of Rs. 20,000 per square
meter for residential plots and Rs. 40,000 per square meter for
commercial ones on the Katiyaghat road. However, for the
residential areas inside the Katiyaghat road, the rate is Rs. 12,000
per square meter, which was rightly applied by the Commissioner.

5
Hereinafter, “Arbitration Act”.
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It was also observed that the award passed was not in violation of
public policy and, therefore, Clause (b)(ii) to Section 34(2) of the
Arbitration Act would not be applicable.
• Consequently, the appellant, Madhya Pradesh Road Development
Corporation, preferred appeals under Section 37 of the Arbitration
Act before the High Court, which were dismissed by the impugned
judgment dated 13.04.2022.
• The impugned judgment dated 13.04.2022 passed by the High
Court of Madhya Pradesh, inter alia , distinguishes between the
6
provisions of the Land Acquisition Act, 1894 and the Acquisition
Act, 2013. It holds that according to Section 26(1) of the
Acquisition Act, 2013, if the market value as determined under the
Stamp Act is the highest of the other computed values, it will be
binding. The theory of deduction as applied by the courts in
determining the market value under the Acquisition Act, 1894, will
not apply when determining compensation under Section 26(1) of
the Acquisition Act, 2013. Thus, the judgments applying the theory
of deduction under the Acquisition Act, 1894 do not have any
precedential value under the Acquisition Act, 2013. The impugned

6
Hereinafter, “Acquisition Act,1894”.
Civil Appeal No. 3998 of 2024 & Ors. Page 8 of 45


judgment also refers to the Madhya Pradesh Preparation and
7
Revision of Market Value Guideline Rules, 2018 for the procedure
of calculating of the market value of land under the Stamp Act.
Lastly, the High Court states that it has limited power and
jurisdiction under Section 37 read with Section 34 of the Arbitration
Act to interfere with the award passed by the Commissioner.

3. In order to answer the issue before us, we would first refer to the theory
of deduction and the reasons for its application by this Court under the
Acquisition Act, 1894.

4. To compute compensation under the Acquisition Act, 1894, the general
threshold applied by the courts is to ascertain the market value of the
acquired land. This also includes its potential value with reference to
the conditions prevailing at the time of making a declaration under
8
Section 4(1) of the Acquisition Act, 1894. The International Valuation

7
Hereinafter, “2018 Rules”.
8
4. Publication of preliminary notification and powers of officers thereupon. —(1) Whenever
it appears to the appropriate Government that land in any locality is needed or is likely to be
needed for any public purpose or for a company a notification to that effect shall be published in
the Official Gazette and in two daily newspapers circulating in that locality of which at least one
shall be in the regional language and the Collector shall cause public notice of the substance of
such notification to be given at convenient places in the said locality (the last of the dates of such
publication and the giving of such public notice, being hereinafter referred to as the date of
publication of the notification).
Civil Appeal No. 3998 of 2024 & Ors. Page 9 of 45


Standards Council states that the market value of the land represents
the estimated amount that a willing buyer would pay prudently to a
willing seller in an arm’s length transaction, without compulsion, on a
9
particular valuation date. This estimate includes characteristics unique
to the land that would inflate or deflate its price but excludes special
concessions or considerations granted by anyone associated with the
sale. The buyer here refers to one who is motivated but is neither over-
eager nor determined to buy irrespective of the price quoted. Similarly,
the seller here is neither over-eager nor forced. Both parties are
assumed to be conducting the transaction in keeping with market
realities, rather than terms that are hypothetical or cannot be
anticipated to exist. The factual circumstances of the parties are not
part of this consideration.

5. In Smt. Tribeni Devi and Others v. Collector of Ranchi and Vice
10
Versa , this Court acknowledged several methods for ascertaining the
market value of land, such as – (i) the opinion of experts; (ii) the price
paid in bona fide transactions for the purchase of adjacent lands

9
International Valuation Standards Council, International Valuation Standards 2025, effective 31
January 2025.
10
(1972) 1 SCC 480.
Civil Appeal No. 3998 of 2024 & Ors. Page 10 of 45


possessing similar advantages and disadvantages; and (iii)
capitalization of the actual and immediate prospective annual profits
from the land. However, this exercise must take into consideration
subjective features and special circumstances. Land values vary
based on their qualitative and quantitative attributes, location, proximity
to developed land, potential, etc. The lack of reliable local sale data,
coupled with variable land conditions, undermines accurate
assessment. Nevertheless, framing objective standards can help
arrive at an empirical value that most closely reflects the true market
price.

6. The theory of deduction, though not statutorily prescribed, has been
applied by courts to compute the compensation payable under the
Acquisition Act, 1894 primarily for two reasons. First, consideration of
the potential value of the land can result in arriving at an enhanced or
increased value, especially for undeveloped lands. Secondly, in
acquisitions of large underdeveloped lands, a significant portion of the
land would have to be utilised for making minimum amenities like
roads, drains, sewers, water and electrical lines available. Thus,
making the land usable would involve a substantial expense for the
buyer in the form of development charges.
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7. The theory of deduction was applied in the case of Tribeni Devi
(supra), which was decided in 1971. Recently, in a 2017 decision in
11
Jag Mahender and Another v. State of Haryana and Others as
well, the theory of deduction was applied to arrive at a fair and
reasonable market value. This judgment also states that the
prospective prices of smaller developed plots cannot be adopted to
determine the value of underdeveloped tracts of land. Further, the
peculiarities of the land – whether the same is plain or uneven, the soil
is soft or hard, whether the land is situated on a hill or is low-lying, etc.
are all relevant factors. A given parcel of land has multiple dimensions
– social, economic, territorial, and environmental. Accordingly, the
market value must be computed through a valuation model based on
attribute pricing rather than fixed prices. In some cases, sale deeds for
adjoining lands can be an ‘exemplar’, i.e., lands that are similarly
placed and have comparable attributes. However, computation of the
market value may require calibration, taking into consideration the
advantages and disadvantages of the acquired land relative to the
exemplars. The exemplars must be carefully chosen, especially as

11
(2017) SCC Online SC 2160.
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lands are often heuristically grouped in localities at the same rate due
to a lack of specific data.

8. On the question of the quantum of deduction, in Jag Mahender
(supra), this Court held that the computed value can be reduced by
one-third to account for development charges, though in certain cases
deduction up to 50% has also been allowed while applying the theory
12

of deduction. In Tribeni Devi (supra) this Court had deducted 33.3%
towards the cost of development.

13
9. In Lal Chand v. Union of India and Another , this Court stated that
‘fair deduction’ for development has two components. First, the area
required to be utilised for development, and second, the cost of such
development. For instance, the Delhi Development Authority is
required to utilise as much as 40% of the area in the layout for roads,
drains, parks, playgrounds, civic amenities, community facilities, etc.
The cost of developing an underdeveloped land into a developed
layout is substantial and, in some cases, can be as much as 75% of

12
Haryana State Agricultural Market Board v. Krishan Kumar , (2011) 15 SCC 297; Dy. Director,
Land Acquisition v. Malla Atchinaidu and Others , (2006) 12 SCC 87; Mummidi Apparao (D EAD )
THROUGH LR S . v. Nagarjuna Fertilizers and Chemicals Limited and Another , AIR 2009 SC 1506
and Lal Chand v. Union of India , (2009) 15 SCC 769.
13
(2009) 15 SCC 769.
Civil Appeal No. 3998 of 2024 & Ors. Page 13 of 45


the cost of the developed plot. At the same time, it was observed that
if the acquired land is in a semi-developed urban area and not in an
underdeveloped rural area, the deduction for development would be
minimal. Thus, the theory of deduction is fact and situation-specific.

10. This Court has also applied other principles, such as the “principle of
belting”, to arrive at an accurate market value. In Bijender and Others
14
v. State of Haryana and Another , this Court observed that the
principle of belting is a judicially accepted method for determining the
market value of the acquired land fairly. It is applied when different
parcels of land with different survey numbers, having different
locations, are acquired and put together to form a large chunk of land.
This large chunk cannot be taken as a compact block. The acquired
land is usually divided into two or three belts depending upon the facts
of each case. The market value of the front road abutting the main road
is taken to fetch the maximum value whereas the second belt fetches
lesser value and the third belt, if carved out, would command a value
lower still.


14
(2018) 11 SCC 180.
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11. The decision in Lal Chand (supra) is relevant for another reason. It
analyses whether the circle rates or guideline values fixed under the
Stamp Act can be relied upon for computing the market value, which
forms the basis for determining the compensation payable. It refers to
a series of judgments, including Jawajee Nagnatham v. Revenue
15
Divisional Officer, Adilabad, A.P. and Others and Krishi Utpadan
Mandi Samiti. Sahaswan, District Badaun v. Bipin Kumar and
16
Another , which, inter alia , hold that the market value under Section
23 of the Land Acquisition Act, 1894 cannot be fixed solely on the basis
of the rates mentioned in the basic valuation registers. These registers
are maintained to curb the under-valuation of land, a practice adopted
to evade the payment of proper stamp duty. Jawajee Nagnatham
(supra) observes that the basic valuation register is maintained to
ensure the collection of stamp duty under Section 47A of the Stamp
Act, as amended in Andhra Pradesh. Section 47A confers no express
power on the Government to determine the market value of land.

12. In its ratio, Lal Chand (supra) observes that the circle rate or guideline
value rate can only be considered a prima facie basis for ascertaining

15
(1994) 4 SCC 595.
16
(2004) 2 SCC 283.
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the market value. The purpose of determination of circle rates through
the relevant guidelines is to protect the State’s revenue collection. The
judgment in Lal Chand (supra) also refers to R. Sai Bharathi v. J.
17
Jayalalitha and Others , a case pertaining to the Prevention of
Corruption Act, 1988, wherein this Court observes that circle or
guideline rates fixed by the authorities under the Stamp Act are merely
prima facie rates prevailing in the area and are not final and
determinative. Thus, the guideline or circle rate fixed by the Collector
does not take away the right of a person to show that the property in
question is correctly valued. It is open, both to the registering authority
as well as the person seeking registration, to prove the actual market
value of the land/property before the authorities.

13. Lal Chand (supra) also draws a distinction between guideline values
prescribed by non-statutory valuation registers, and circle rates
determined by expert committees constituted under the Stamp Act.
State legislations can lay down a detailed procedure, assigning the
task of valuation to expert committees. The expert committees
comprise valuation specialists and officers from the Departments of

17
(2004) 2 SCC 9.
Civil Appeal No. 3998 of 2024 & Ors. Page 16 of 45


Revenue, Survey and Settlement, Public Works, etc. They must follow
a scientific process for the assessment of market values of different
types of lands. The valuation framework must prescribe distinct
methods for valuing land, plots, houses, and buildings, accounting for
variable factors. For agricultural land, such variables would include the
nature of the soil, location, nature of the crop, the yield for specified
years, proximity to roads, markets, etc. The valuation committees are
required to invite objections and suggestions from the public both
before the initial fixation of rates and during their periodic revision.
Circle rates computed through a detailed and scientific exercise would
be a relevant piece of evidence for determining the market value, being
equivalent to expert evidence.

14. As observed above, to account for the unique factors affecting a piece
of land, methods such as the comparative sale/exemplar method,
belting method and expert opinion method have been evolved through
judicial pronouncements to arrive at the accurate market value. The
computation of circle rates and market values is a complex exercise
that involves detailed research, data collection, and the use of scientific
methods. International standards reflect this complexity, noting that the
concept of market value takes on different colours depending on the
Civil Appeal No. 3998 of 2024 & Ors. Page 17 of 45


18
subject to which it is applied. For example, the valuation of land
involves entirely different considerations from the valuation of financial
instruments. These standards also recognise the wide range of
variables that influence land valuation specifically, and the need for
distinct approaches to determine accurate market value. Authorities
and institutions must be cognizant of these aspects while forming
policies, as well as when giving meaning to legislation and interpreting
the law.

15. We now turn our attention to the statutory provisions of the Acquisition
Act, 1894 and the Acquisition Act, 2013. At the outset, we must observe
that the impugned judgment primarily refers to Section 23 of the
Acquisition Act, 1894 and Section 26 of the Acquisition Act, 2013 and
draws a distinction between the language of the two sections.
However, to address the issue before us, we must refer to a few other
provisions as well. We would like to refer to Sections 11, 15, 24 and 25
in addition to Section 23 of the Acquisition Act, 1894. For the
Acquisition Act, 2013, we would like to refer to Sections 23, 27 and 28
in addition to Section 26. However, for clarity, we have juxtaposed

18
Supra note 10.
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Section 28 of the Acquisition Act, 2013 with Section 23 of the
Acquisition Act, 1894 as they are similar, and Section 27 of the
Acquisition Act, 2013 with Section 25 of the Acquisition Act, 1894.

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16. Under the Land Acquisition Act, 1894, Section 11 deals with enquiry
and the award of the Collector. The award should state (i) the true area
of the land; (ii) the compensation which in the Collector’s opinion
should be allowed for the land; and (iii) the apportionment of the
compensation among interested persons. Section 15 states that in
Civil Appeal No. 3998 of 2024 & Ors. Page 26 of 45


determining the amount of compensation, the Collector shall be guided
by the factors stated in Sections 23 and 24. Section 23 sets out the
factors that must be considered while determining the amount of
compensation. The first factor specified is the market value of the land,
which must be determined as on the date of publication of the
notification under Section 4(1) of the Acquisition Act, 1894. For the
present decision, we need not refer to the other clauses, except noting
that they deal with relevant aspects for determining compensation,
such as the damage sustained by the owner, payment of solatium for
compulsory acquisitions, etc. Section 24 lists the factors to be ignored
while calculating the compensation. These include urgency,
unwillingness to part with the land, or any such damage that would not
be actionable if caused by a private person. It also excludes any outlay,
improvements, or sale made without the Collector’s approval after
publication of the notification under Section 4(1). Increases in value
due to unlawful use of the land are also to be ignored. Section 25 states
that the amount of compensation awarded by the court cannot be less
than the compensation awarded by the Collector under Section 11.

17. Under the Acquisition Act, 2013, Section 23 states that after conducting
an enquiry into the objections raised by interested persons, the
Civil Appeal No. 3998 of 2024 & Ors. Page 27 of 45


Collector shall make an award as to (i) the true area of the land; (ii) the
compensation determined under Section 27, along with the
Rehabilitation and Resettlement Award as per Section 31 of the
Acquisition Act, 2013, and which in the Collector’s opinion should be
allowed for the land; and (iii) the apportionment of the said
compensation among interested persons. In particular, the appellant,
Madhya Pradesh Road Development Corporation, relies upon the
expression “which in his (Collector’s) opinion should be allowed for the
land” under Section 23(b), referring to the compensation under Section
27 and Section 31 of the Acquisition Act, 2013. We will elaborate on
this submission subsequently.

18. Section 26 deals with the determination of the market value of the land
by the Collector. Sub-section (1) to Section 26 consists of three
Clauses, (a), (b) and (c), each prescribing a criterion or standard for
assessing the market value. Clause (a) prescribes the consideration of
the market value specified in the Stamp Act for the registration of
agreements/sale deeds in the area where the concerned land is
situated.

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19. Clause (b) to Section 26(1) requires the Collector to consider the
average sale price for similar types of land situated in the nearest
village or the nearest vicinity. This test of average sale price is similar
to the exemplar test which is adopted and applied in cases of
acquisition under the Land Acquisition Act, 1894, but with modifications
in terms of Explanations 1 to 4. Computation under Clause (b) is in
relative terms. Therefore, while drawing a comparison with the average
price of the other lands under Clause (b), the Collector must consider
all such factors that have been held to be relevant for accurate
valuation by this Court. These include the theory of deduction, the
principle of belting, and accounting for other advantages or
disadvantages of the acquired land, in comparison to the lands existing
in the same vicinity.

20. Clause (c) to Section 26(1) of the Acquisition Act, 2013 requires the
Collector to take into consideration the amount of compensation
agreed upon by the parties under Section 2(2) of the Acquisition Act,
2013 in cases involving the acquisition of land for private companies
or public-private partnership projects. These agreements are entered
Civil Appeal No. 3998 of 2024 & Ors. Page 29 of 45


into voluntarily, based upon consent terms, and reflect the market
value as settled inter se the parties.

21. It is important to note that the values computed in terms of Clauses (a),
(b) and (c) of Section 26(1) of the Acquisition Act, 2013 are not to be
averaged. The highest of the values as determined by Clauses (a), (b)
and (c), is to be treated as the market value under Section 26(1) of the
Acquisition Act, 2013.

22. There are four Explanations to Section 26(1) of the Acquisition Act,
2013. Explanations can form part of the main provision and, when so,
can be as central as the provision itself. This Court in The Bengal
19
Immunity Co. Ltd. v. State of Bihar and Others stated that an
explanation appended to a Section or Clause gets incorporated into it,
becomes an integral part of it, and has no independent existence apart
from it. There is, in the eye of law, only one enactment, of which both
the Section and the Explanation are two inseparable parts. They move
in a body if they move at all. Similarly, in Coromandel Fertilizers Ltd.
20
v. Union of India and Others , this Court, in the context of an

19
AIR 1955 SC 661.
20
1984 Supp SCC 457.
Civil Appeal No. 3998 of 2024 & Ors. Page 30 of 45


Explanation attached to a notification, observed that the
notification/provision has to be read as a whole and should not be
construed in terms that are contrary to the main provision.
Explanations to Section 26(1) are equally important as the main
provision. Apart from clarifying the procedure under Clauses (a), (b)
and (c), the Explanations also confer and refer to the discretion which
the Collector may exercise in determining the market value of the
acquired land. Thus, while the statutory language makes the procedure
under Clauses (a), (b) and (c) mandatory, the value as computed
according to the Explanations can be increased, decreased or even
discarded.

23. Explanation 1 states that the determination of the average sale price
under Clause (b) must be based on sale deeds or agreements to sell
registered for similar type of lands in the same vicinity, during the
immediately preceding three years from the year in which acquisition
was proposed. Thus, transactions older than three years would be
excluded. Explanation 2 states that to determine the average sale price
under Explanation 1, one-half of the total sale deeds or agreements to
sell in which the highest sale price is mentioned, shall be taken into
account. This also implies that there should be multiple deeds available
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for reference. Singular deals may not supply adequate and reliable
data. Explanation 3 states that while determining the market value
under Section 26 and the average sale price referred to in Explanation
1 or 2, the price paid as compensation for land acquired under the
provisions of this Act on an earlier occasion in the district, shall not be
taken into consideration. Thus, referring to compensation paid for an
earlier acquisition in the concerned district is expressly barred.

24. Explanation 4 requires specific attention, as it brings the element of
discretion while computing the market value under Section 26(1) to the
forefront. Explanation 4 is divided into two parts. The first part refers to
sub-section (1) to Section 26 – the higher value determined as per
Clauses (a), (b) and (c) of Section 26(1) of the Acquisition Act, 2013.
The second part is specific to the average sale price referred to in
Clause (b) to Section 26(1) read with Explanations 1 and 2. In either
case, where the Collector is of the opinion that the value/price
computed by applying these provisions is not indicative of the actual
prevailing market value, they may discount or enhance it to arrive at
the accurate market value.

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25. Explanation 4 uses the word “and” in conjoining the values referred to
in the two parts of the Explanation. This is done to expand the scope
of application of the Collector’s discretion to the entire provision, as is
also evident from the phrase “while determining the market value under
this section”. The discretion should not be interpreted as restricting the
discretion to only the average sale price under Explanations 1 and 2.
The two parts must be given a disjunctive reading, attracting the
application of Explanation 4 when either of the values does not reflect
the actual market value. Thus, though the word “and” is used to
connect the two parts, it should be read as “or” to effectuate the
21
legislative intent.

26. This interpretation is also supported by the use of the same phrase in
both Explanations 3 and 4. The first part of Explanation 3, which refers
to determining the market value under this Section, will apply with
equal vigour to both Clauses (b) and (c) of Section 26(1) of the
Acquisition Act, 2013. The latter part of Explanation 3 – as in the case

21
Maharishi Mahesh Yogi Vedic Vishwavidyalaya v. State of Madhya Pradesh and Others , (2013)
th
15 SCC 677. See also, Justice G. P. Singh, Principles of Statutory Interpretation, 14 Edition.,
530-534.
Civil Appeal No. 3998 of 2024 & Ors. Page 33 of 45


of Explanation 4, which refers to Explanations 1 and 2 – will specifically
apply to Clause (b).

27. Under Explanation 4, the formation of the Collector’s opinion and any
discounting or enhancing of the value must be supported by recorded
reasons. At this stage, if the Collector chooses to make adjustments to
the market value under Explanation 4, the theory of deduction, the
principle of belting and other material factors will also be taken into
account. The reason for this is two-fold. First, because the calculation
of accurate market value is not an exact science, and therefore the
Collector must be mindful of the unique factors which affect the
valuation of a piece of land. Secondly, apart from Clause (b) to Section
26(1), the mandatory procedure of computation under the other two
Clauses, (a) and (c), does not take into account these theories and
factors, which may result in inaccuracy. Though not determinative in
the facts of the present case, a contrary interpretation may cause
injustice to the landowners in many situations.

28. Sub-section (2) to Section 26 provides that the market value computed
under sub-section (1), including any adjustment under Explanation 4,
Civil Appeal No. 3998 of 2024 & Ors. Page 34 of 45


shall be multiplied by the factors set out in the First Schedule of the
Acquisition Act, 2013.

29. Sub-section (3) to Section 26 applies when the market value cannot
be determined under sub-sections (1) and (2) for the three reasons
stated in Clauses (a), (b) and (c) to Section 26(3) – (a) when land
transactions in the area are restricted by or under any law for the time
being in force; (b) if registered sale deeds and agreements to sell for
similar lands are not available for the preceding three years as required
by Clause (b) to sub-section (1); and (c) when the market value has
not been specified under the Stamp Act by the appropriate authority. In
the statutory language of Clause (b) to Section 26(3), reference to
Clause (a) to Section 26(1) appears to be in error. The consideration
of sale deeds or agreements to sell from the preceding three years, as
required by Explanation 1 to Section 26(1) is for calculating the
average sale price under Clause (b) to Section 26(1) and not Clause
(a) to Section 26(1).

30. If any of the three situations stated in Clauses (a) to (c) to Section 26(3)
are attracted, the State Government is required to specify the floor
price per unit area for the land. This floor price must be based on the
Civil Appeal No. 3998 of 2024 & Ors. Page 35 of 45


price of similar types of land situated in the immediately adjoining
areas, calculated according to the procedure under Section 26(1). We
are not concerned and need not interpret the first proviso or the second
proviso. The third proviso states that the Collector, before initiating a
land acquisition process in any area, shall take all necessary steps to
revise and update the market value on the basis of the prevalent
market rate in that area.

31. Section 27 relates to the determination of the amount of compensation.
The Collector having determined the market value of the land under
Section 26, has to calculate the amount of compensation to be paid to
the land owner, as mandated in terms of Section 23 of the Acquisition
Act, 2013. While Section 26(1) of the Acquisition Act, 2013 uses the
word “criteria” for computing the highest value under Clauses (a) to (c),
and mandates that the exercise is undertaken applying the four
Explanations, the final determination vests with the Collector under
Section 27 of the Acquisition Act, 2013. This is also evident from the
language of Section 26(1) as well as Section 23(b), which use the
expression “which in his (Collector’s) opinion should be allowed for the
land.”

Civil Appeal No. 3998 of 2024 & Ors. Page 36 of 45


32. Section 28 sets out the parameters to be considered by the Collector
in determining the award. It refers to seven factors for computing the
amount payable as compensation. The very first factor is the market
value as determined under Section 26, and the award amount
computed in accordance with the First and the Second Schedules to
the Acquisition Act, 2013. Other clauses cover damage sustained due
to factors such as loss of standing crops or trees, severance of land,
adverse effects on other property, loss of income, and costs or losses
from change in residence or place of business. Losses, if any, bona
fide resulting from the diminution of the profits are also to be accounted
for. The seventh ground is particularly important. It states that the
Collector can take into consideration any other ground which may be
in the interest of equity, justice and beneficial to the affected families.
This clause will not apply to reduce the market value of land
determined under Section 26, but the Collector can apply it to enhance
the market value in the interest of equity and justice if it is beneficial to
the affected families.

33. During the course of the hearing before us, our attention was drawn to
the process of fixing circle rates in the State of Madhya Pradesh. The
State of Madhya Pradesh formulated the Madhya Pradesh Preparation
Civil Appeal No. 3998 of 2024 & Ors. Page 37 of 45


and Revision of Market Value Guideline Rules, 2000, in accordance
with the powers conferred by the Stamp Act, which now stand revised
as the 2018 Rules. The Collector’s Guidelines dated 03.03.2014,
formed under these rules, have been relied upon by the competent
authority to determine the market value.

34. The impugned judgment refers to the revised 2018 Rules applicable to
the State of Madhya Pradesh and has quoted Rule 6, which reads as
under:
“ Procedure to prepare Market Value Guideline – While
working out the values of immovable property, the
committees shall take into account the following facts:-

(1) The case of lands :-

(a) classification of land as unirrigated or irrigated,
diverted or non-diverted and the like;
(b) classification under various categories in the
settlements register;
(c) the rate of revenue assessments for each
classification;
(d) other factors which influence the valuation of the
land in question;
(e) points, if any, mentioned by the parties to the
instrument or any other person which required
special consideration;
(f) value of adjacent land or lands in vicinity;
(g) average yield from the land, proximity to road and
market, distance from village site, level of land
transport facilities, facilities available for irrigation
in any form;
Civil Appeal No. 3998 of 2024 & Ors. Page 38 of 45


(h) the nature of Crops raised on the land;
(i) Use of land as residential, commercial or
industrial;
(j) the relative position of urban area and investment
area or development of the town.

(2) In case of house sites :-

(a) The general value of house sites in locality;
(b) Proximity to roads, railway stations, bus routes;
(c) Proximity to market, shop and the like;
(d) Amenities available in the place like, Public
Offices, Hospitals and Educational Institutes;
(e) Development activities, industrial improvements
in the vicinity;
(f) Any special feature having a special bearing on
the valuation of the site; and
(g) Commercialization of home location and affiliation
of these with reserved area by master plan or town
and country planning.

(3) In case of buildings :-

(a) type and structure,
(b) locality in which constructed,
(c) plinth area,
(d) year of construction,
(e) kind of material used,
(f) rate of depreciation,
(g) fluctuation in rates,
(h) any special feature having a special bearing on
the valuation of the site;
(i) the purpose for which the building is being used,
and the income, if any, by way of rent per annum
secured on the building; and
(j) relative position and reputation of the area where
the building is located.

(4) Other factors which the Committee considers
necessary .”
Civil Appeal No. 3998 of 2024 & Ors. Page 39 of 45



The factors noted above are relevant for computation and fixing the
circle rates.

35. In the last few decades, the Union of India and the State Governments
have laid emphasis on enhancing the ease of living and doing
business. Fixing fair and accurate circle rates has a direct impact on
each citizen. An inflated rate results in an unfair financial burden on
purchasers. Conversely, an undervalued rate leads to inadequate
stamp duty collection, adversely affecting the State’s revenue. Circle
rates which reflect the market price ensure proper revenue collection
for the State by preventing under-valuation of properties.

22
36. Sections 43CA, 45, 49, 50C, and 55 of the Income Tax Act, 1961 refer
to circle rates, incorporating the stamp duty value of assets. We need
not, for the purpose of the present decision, interpret the aforesaid
sections. However, we have referred to these provisions to point out
the significance and importance of circle rates for the direct tax
administration as well. The Central Government had to amend the
Income Tax Act when it was noticed that the circle rates at times in

22
Hereinafter, “Income Tax Act”.
Civil Appeal No. 3998 of 2024 & Ors. Page 40 of 45


certain localities were higher than the prevailing market value.
Accordingly, the safe harbour rule under the Income Tax Act was
23
amended and the limit was enhanced to 10% from 5%. Circle rates
often become a politically and economically contentious issue. This is
reflected in the frequent litigations across various jurisdictions, which
24
discuss the circle rates applicable to properties.

37. Circle rates, when determined while accounting for factors that cause
variations in the market price of land, can facilitate predictability in
transactions and curtail litigation. The standardized circle rates should
be fixed at the floor or baseline price, as it would be grossly unfair to
ask the public to pay stamp duty on over-valued circle rates.

38. It would be advisable that the circle rates be fixed by expert
committees, which not only have officers from the government but also
other specialists who understand the market conditions. Methodically
and scientifically fixed circle rates can contribute to strengthening the
economy and boosting tax collections. While serving the interests of

23
See Section 43CA of the Income Tax Act.
24
See also Govt of NCT of Delhi Collectors of Stamps v. CTA Apparels Pvt. Ltd. , LPA 278/2019
(High Court of Delhi); Sameer Vasudev Morajkar and Another v. State of Goa , 2024 SCC OnLine
Bom 303 (High Court of Bombay); Narendra Kumar Berlia and Others v. Om Prakash Berlia and
Others , 2021 SCC OnLine Cal 2667 (Calcutta High Court); K. Natarajan v. District Collector and
Another , 2019 SCC OnLine Mad 26166 (Madras High Court).
Civil Appeal No. 3998 of 2024 & Ors. Page 41 of 45


honest taxpayers, accurate circle rates would simultaneously deter
non-compliant taxpayers by preventing under-valuation. Rational and
25
fair circle rates reflect and are a prerequisite for good governance.
Given the financial implications of fixation of circle rates on each
member of the society, the data and details for computation of circle
26
rates should be made public. Regrettably, proper fixation of circle
rates has not received adequate attention from public authorities.

39. The 2018 Rules framed by the State of Madhya Pradesh attempt to
comprehensively address the variable factors that influence the price
of land, and, therefore, lay the foundation for a more accurate valuation
of land prices. In our opinion, other State Governments would also be
well advised in formulating guidelines that can act as a ready reference
for determining and revising circle rates regularly, in order for them to
reflect market realities.


25
Germany, like India, uses reference values to compute the market value of a property. This
task is undertaken by expert committees in the relevant area, and they are required to update the
values every two years. These expert committees are neutral and independent from the public
authorities. Reference values for various localities are also published online for public access.
Regular revisions and transparency have facilitated the reduction of market volatility in Germany.
Public knowledge of the variables affecting property value has increased predictability and
created a more stable land market.
26
We wish to clarify that our reasons should not be read as a bar or prohibition on the Central
Government/local authorities from changing the circle rates as fixed by the State Government,
when they are not in accord with the market rate of the acquired land.
Civil Appeal No. 3998 of 2024 & Ors. Page 42 of 45


40. We now proceed to apply the above analysis to the facts of the present
case, which is an acquisition under the Acquisition Act, 2013. To
determine the compensation, the market value of the land must first be
computed under Section 26 of the Acquisition Act, 2013. This requires
the application of Clauses (a), (b), and (c) of Section 26(1). Clause (b)
would have no application in the present case as there are no
exemplars in the vicinity to draw a comparison and arrive at the
average sale price in terms of Explanations 1 and 2 to Section 26(1).
Further, as this acquisition does not involve private companies or
public-private partnerships, Clause (c) would also not apply. Therefore,
the highest value would be the one determined under Clause (a), i.e.,
the market value specified under the Stamp Act. In the present case,
this value would be the circle rate fixed for the year 2014-2015 under
the Collector’s Guidelines framed under the Stamp Act. The
Commissioner has applied the Collector’s Guidelines by using the rate
provided for non-converted agricultural land. The Commissioner has
further supplemented this amount by accounting for the assets
attached to the land and adding the solatium payable.

41. In view of the above-stated reasons, we hold that the compensation
has been calculated in accordance with the mandate of the Acquisition
Civil Appeal No. 3998 of 2024 & Ors. Page 43 of 45


Act, 2013. Thus, no reduction in the amount can be granted by applying
the theory of deduction. It has been left to the Collector’s discretion to
make adjustments to the market value determined through Section
26(1), if deemed necessary in the opinion of the Collector. In the facts
of the present case, there was no such formation of opinion by the
Competent Authority or the Commissioner.

42. In the absence of any material to support the same, we cannot accept
the argument advanced by the appellant, Madhya Pradesh Road
Development Corporation, that this circle rate is not the baseline or
floor rate, and is too high. Concerned authorities should fix circle rates
scientifically and in accordance with the law. It is their responsibility to
ensure that circle rates are neither inflated nor disproportionately low.
When the citizens are required to pay stamp duty on the notified circle
rate, the public authorities, including state development corporations
acquiring land from private individuals, must adhere to the same. We
do not appreciate the appellant, Madhya Pradesh Road Development
Corporation complaining about the circle rate fixed by the State
Government. If the circle rate is inflated or does not reflect the true
market value, it is incumbent upon the State Government to take
corrective steps. The State Government or the development
Civil Appeal No. 3998 of 2024 & Ors. Page 44 of 45


corporation under the State Government cannot complain that they
have been compelled to acquire land at the circle rate fixed by the
State.

43. Thus, while we disagree with the ratio and the reasoning of the High
Court, albeit for the reasons and findings recorded above, we uphold
the computation in the award passed by the Commissioner directing
payment of compensation on the basis of the circle rate. The appeals
filed by the appellant, Madhya Pradesh Road Development
Corporation, are accordingly, dismissed. There will be no order as to
costs.

................................CJI.
(SANJIV KHANNA)



....................................J.
(SANJAY KUMAR)

NEW DELHI;
MARCH 27, 2025.

Civil Appeal No. 3998 of 2024 & Ors. Page 45 of 45