Actual land-use diversion is unnecessary when assessing land’s development potential for compensation.

The Madhya Pradesh Housing and Infrastructure Board acquired land situated at Village Panda, District Rewa, for implementing a housing scheme.

The acquisition proceedings were initiated under the Land Acquisition Act, 1894, pursuant to a notification under Section 4 dated 10 May 1991; the Section 6 declaration was published on 14 June 1991, and the award was subsequently made and approved by the competent authority.

The Collector awarded compensation at ₹95,200 per acre for unirrigated land and ₹1,23,760 per acre for irrigated land.

The landowners sought references under the Act, contending that the compensation was inadequate.

The Reference Court held that, on the date of the Section 4 notification, the acquired land had substantial potential for development into residential plots.

Relying on sale exemplars showing values ranging from ₹25 to ₹50 per square foot, it assessed the average market value at approximately ₹35 per square foot and deducted 30% towards development costs, determining the value at ₹24.50 per square foot.

The Housing Board challenged the enhancement in First Appeals Nos. 537, 538, 539 and 540 of 2014.

In First Appeal No. 1103 of 2015, Snehlata Tiwari and other landowners sought further enhancement of compensation.

Whether the acquired land possessed potential for development into residential or commercial plots on the date of the Section 4 notification, notwithstanding that it had not formally been diverted for non-agricultural use?

Whether the Reference Court correctly assessed the market value on the basis of the sale exemplars and the potentiality of the land?

Whether the deduction towards development costs required modification, having regard to the size of the acquired parcels?

Whether the landowners were entitled to further enhancement of compensation beyond the amount determined by the Reference Court?

Under Sections 4 and 23 of the Land Acquisition Act, 1894, market value is to be determined with reference to the date of the Section 4 notification, taking into account the land’s existing characteristics and its reasonable potentiality for development.

Formal diversion of agricultural land is not a prerequisite for considering development potential where surrounding circumstances demonstrate that the land could be developed for residential or commercial purposes.

Sale exemplars may be relied upon to determine market value, but where the exemplars concern small developed plots and the acquired land consists of a larger agricultural tract, appropriate deductions must be made for development costs, formation of roads, amenities and other development requirements.

The percentage of deduction may vary depending upon the size and nature of the acquired land.

The Court upheld the Reference Court’s finding that the land had development potential.

The surrounding area included Transport Nagar, Shanti Vihar Colony, an Agricultural College, existing residential colonies, the National Highway, commercial establishments, a timber market, shopping complexes and transport-related facilities.

These circumstances established that the land was situated in a developing area and could reasonably be used for residential or commercial development on the relevant date.

The Court rejected the Housing Board’s argument that the land’s lack of formal diversion prevented consideration of its residential potential.

Compensation had to be assessed on the basis of market potential as on the date of notification, and not solely on the land’s existing agricultural classification.

The Court accepted the sale exemplars relied upon by the Reference Court, which indicated an average value of approximately ₹39 per square foot.

However, it held that the 30% deduction adopted by the Reference Court was inadequate for large agricultural parcels requiring substantial development.

For the lands involved in First Appeals Nos. 537, 538 and 539 of 2014, each measuring more than one acre, a 60% deduction was considered appropriate, resulting in a value of ₹15.60 per square foot.

For the land involved in First Appeal No. 540 of 2014, measuring approximately 0.916 acre, a 50% deduction was applied, resulting in a value of ₹19.50 per square foot.

The Court found no basis for further enhancement sought by the landowners, particularly since the sale exemplars included small plots and both residential and commercial transactions, which had already been considered in determining the average value.

In First Appeals Nos. 537, 538 and 539 of 2014, the compensation was determined at ₹15.60 per square foot after applying a 60% development deduction.

In First Appeal No. 540 of 2014, the compensation was determined at ₹19.50 per square foot after applying a 50% deduction.

First Appeal No. 1103 of 2015, filed by the landowners seeking further enhancement, was dismissed.

The Reference Court’s awards were otherwise upheld, including the applicable statutory benefits and interest.

All connected appeals were disposed of by the common judgment.