Landowners of Adjacent Villages Must Be Paid Equally If Potential Is Comparable: Supreme Court Rectifies Disparity in Land Acquisition Compensation

“Artificial boundaries created for administrative convenience cannot obstruct the fundamental principle of fairness in compensation”, - In a landmark judgment Supreme Court of India held that differential land acquisition compensation for similarly situated landowners in adjacent villages is constitutionally impermissible unless justified by clear, objective evidence. The Court ruled that landowners in Kukrola village must receive the same compensation as those in Fazalwas, as both shared similar locational advantages and developmental potential. The judgment brings clarity to the application of the belting method and reinforces parity in determining compensation for compulsory land acquisitions under the Land Acquisition Act, 1894.

The appeals arose from acquisition proceedings initiated by the State of Haryana for building the Chaudhary Devi Lal Industrial Model Township. A common notification under Section 4 of the Land Acquisition Act, 1894 was issued on April 25, 2008, covering lands in several villages including Kukrola and Fazalwas in Tehsil Manesar, District Gurgaon. Compensation was initially awarded uniformly at ₹30,00,000 per acre by the Land Acquisition Collector (LAC).

However, the Reference Court enhanced the compensation to ₹62,14,421 per acre for both villages. The High Court later modified this, applying the belting method—awarding ₹1,21,00,000 per acre for Fazalwas and only ₹87,34,885 per acre for Kukrola for lands within 5 acres of National Highway-8 (NH-8), while maintaining ₹62,14,421 per acre for lands beyond the inner belt in both villages. Dissatisfied, both the Haryana State Industrial and Infrastructure Development Corporation (HSIIDC) and the landowners approached the Supreme Court.

Parity and the Belting Method
The Supreme Court began by emphasizing that: “Adjacent lands or villages possessing similar potential and advantages must be compensated equitably, unless distinctions are clearly and substantially justified.”

Rejecting the High Court’s inconsistent valuations, the Court observed: “The lands acquired from Kukrola and Fazalwas were virtually indistinguishable and their trajectories before various judicial fora were undeniably intertwined.”
The Court was unequivocal in stating: “The High Court offered no factual finding to support the conclusion that lands abutting NH-8 in Kukrola must be valued differently from those in Fazalwas… The differential compensation is unsustainable and must be set aside.”

Quoting from Land Acquisition Officer v. Karigowda [(2010) 5 SCC 708], the Court reminded: “Once it is shown that situation and potential of the land in two different villages are the same then they could be awarded similar compensation.”

The bench also observed the fallacy in awarding lower compensation to lands that were actually closer to the National Capital Region, stating: “Consistency demands the application of a uniform standard across both villages Kukrola and Fazalwas… especially when Kukrola is geographically closer to Delhi.”

Validation of the Belting Method
While rectifying the disparity, the Supreme Court upheld the belting method used to distinguish compensation based on proximity to NH-8. The Court explained: “The belting method is a recognised technique whereby the land is divided into zones based on proximity to infrastructural assets… it constitutes an exception to the general rule of uniformity in compensation.”
The Court approved the application of a 5-acre depth belt and affirmed its utility: “This is a fit case for the application of the belting method… the High Court was wholly correct in its artificial division of the acquired lands.”

Sale Exemplars, Escalation, and Deductions: Supreme Court’s Rational Basis
Analyzing various sale deeds, the Court ruled that Exhibit P-3 dated 07.12.2006 was the most appropriate exemplar, recording the highest rate of ₹1,03,89,104 per acre for land abutting NH-8. However, the Court preferred Exhibit P-2 for calculation, noting: “Ex. P-2 contemplates a marginally lower sale price than Ex. P-3 but deals with a larger plot of land… This makes it more reliable for extrapolating fair compensation.”

The Court applied a 10% annual escalation on the sale exemplar for the two-year gap between the sale and the notification date, finding: “The escalation rate of 10% is just and fair, considering the rapid development owing to planned infrastructure.”

For the outer belt lands, the Court upheld a 30% development cut applied by the High Court but ruled against such a deduction for inner belt lands: “The inner belt—comprising lands abutting NH-8—already commands a premium due to superior locational advantage… Applying a development cut would unjustifiably reduce compensation.”

The Court noted that: “The inner belt lands are broadly development-ready due to their proximity to major infrastructure… compensation must reflect their true, enhanced value.”

The Supreme Court enhanced the compensation for lands in Kukrola’s inner belt from ₹87,34,885 to ₹1,21,00,000 per acre, bringing it at par with Fazalwas. The compensation for the outer belt lands remained ₹62,14,421 per acre for both villages. “Artificial boundaries created for administrative convenience cannot be allowed to obstruct the application of the fundamental principle of fairness.”

The Court dismissed the appeals by HSIIDC and Fazalwas landowners for further modification and held: “The appeals concerning Kukrola’s inner belt lands succeed to the extent indicated above.”

The Supreme Court's judgment is a definitive reaffirmation that equitable compensation is a constitutional imperative under the land acquisition regime. It prevents arbitrary discrimination between similarly situated landowners and fortifies the principle that uniformity must be the norm unless factual distinctions are clearly established. It also provides judicial endorsement to the belting method when grounded in objective criteria.

Date of Decision: May 7, 2025