Temporary acquisition rental compensation is properly assessed at 15% of the prevailing land market value.

The appellant, ONGC, temporarily acquired land situated at Village Kotha, Taluka Kalol, District Gandhinagar, for drilling purposes under Section 35 of the Land Acquisition Act, 1894.

The Special Land Acquisition Officer awarded rental compensation at ₹2.50 per square metre. The claimants sought a reference under Section 18 of the Act.

By a common judgment and award dated 15 May 2019, the Reference Court awarded additional compensation of ₹17.30 per square metre per annum for three years from the date of possession, together with interest at 9% per annum on the additional amount.

In the present appeal, the additional compensation payable was valued at approximately ₹23,944, which was below ₹5 lakh for both jurisdictional and court-fee purposes.

Whether the appeal, involving a compensation amount below ₹5 lakh, ought to be dismissed on the ground of smallness of the amount pursuant to the State Government circular dated 25 October 2016, notwithstanding that it arose from a common judgment involving other appeals?

Whether the Reference Court was justified in determining compensation for temporary acquisition by adopting the methodology of awarding 15% of the market value of the land, reflected in the State Government Resolution dated 6 July 2015?

Whether the compensation for the temporarily acquired land could be reduced by relying on other decisions fixing rental compensation at ₹3.60 per square metre?

Whether the Reference Court was legally justified in awarding interest at 9% per annum on the additional rental compensation?

Temporary acquisition under Section 35 of the Land Acquisition Act, 1894 requires determination of fair rental compensation rather than compensation for permanent transfer of ownership.

The Court treated the State Government Resolution dated 6 July 2015—which prescribed rent at 15% of the market value for government land temporarily allotted to ONGC for drilling—as a permissible methodology for assessing fair rental value, rather than as a retrospectively applied substantive rule.

The Court relied on Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi, 1975 1 SCC 421, for the principle that statutory corporations functioning as instrumentalities of government and carrying on business of public importance fall within the concept of “State” under Article 12 of the Constitution.

It also applied the State Government circular dated 25 October 2016, which required withdrawal or dismissal of claims in Lok Adalat/First Appeal matters involving ₹5 lakh or less, while noting that such disposal would not constitute a precedent.

The Court distinguished State of Maharashtra v. Maimuma Banu, (2003) 7 SCC 448, on interest, as that case concerned possession taken before statutory acquisition proceedings and an equitable award of interest, rather than compensation determined under Section 35 proceedings.

The Court held that ONGC, as a government-controlled statutory corporation and an Article 12 instrumentality, could not contend that the State Government’s policy concerning small-value appeals was inapplicable to it, particularly when ONGC had accepted dismissal on that basis in other matters.

Although the appeal was liable to dismissal on the ground that the amount involved was only ₹23,944, the Court nevertheless examined the merits to address ONGC’s objections.

It rejected the proposed reliance on decisions fixing compensation at ₹3.60 per square metre because those decisions concerned different villages and circumstances, and the relevant Supreme Court/High Court decision was stated to be under stay.

The Court further held that using the 15% formula from the 2015 Government Resolution did not amount to retrospective application of that Resolution; it merely supplied a rational and consistent method for calculating fair rental value.

Since the Government itself charged ONGC rent at 15% of market value for temporary drilling use of government land, applying the same methodology to privately owned land compulsorily acquired for the same purpose was considered equitable and legally permissible.

The challenge to 9% interest was not accepted, as Maimuma Banu was found distinguishable on facts and law.

It found no error in the Reference Court’s award of additional compensation at ₹17.30 per square metre per annum for three years, calculated by applying the 15% market-value methodology, and left the award of interest undisturbed.

The Registry was directed to return the record and proceedings to the Reference Court, which was directed to disburse the deposited compensation, after deduction of court fees and verification of the claimants’ identity and entitlement, together with applicable interest.