Market Value Determination Under Section 26(1) Of 2013 LA Act Cannot Be Based On A Single Sale Deed Of Dissimilar Land: Supreme Court

"Methodology for working out the ‘average sale price’ under Section 26(1)(b), as set out in Explanations 1 to 4 thereunder, does not permit placing reliance on a single sale deed for that purpose," Supreme Court, in a significant ruling dated May 12, 2026, held that the determination of market value for land acquisition must strictly adhere to the criteria laid down in Section 26 of the 2013 LA Act.

A bench of Justices Sanjay Kumar and K. Vinod Chandran observed that an arbitrator cannot enhance compensation by relying on a single sale exemplar of a "totally dissimilar type of land," as such an approach violates the statutory mandate.

The National Highways Authority of India (NHAI) acquired 1,394 square meters of land belonging to Alfa Remidis Ltd. for the widening of NH No. 547-E in Nagpur. While the competent authority originally awarded compensation at agricultural rates, an Arbitrator enhanced the amount to ₹3,588 per square meter based on a single sale deed of a small residential plot in an adjoining village. Although the District Court set aside this enhancement, the Bombay High Court restored the Arbitrator’s award, prompting NHAI to approach the Apex Court.

The primary question before the court was whether an Arbitrator could determine market value under Section 26(1)(b) of the 2013 LA Act by relying on a single sale transaction involving land of a different category. The court was also called upon to determine whether the Arbitrator's failure to follow the statutory methodology for calculating the "average sale price" constituted patent illegality.

Court’s Observations and Judgment

Applicability Of 2013 LA Act To National Highways Act

The Court began by clarifying the interplay between the National Highways Act, 1956, and the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (2013 LA Act). It noted that by virtue of the Removal of Difficulties Order, 2015, the compensation provisions of the 2013 LA Act apply to acquisitions under the NH Act.

NHAI v. P. Nagaraju Precedent Reaffirmed

The bench placed reliance on the precedent in National Highways Authority of India vs. P. Nagaraju alias Cheluvaiah, which established that all aspects contained in Sections 26 to 28 of the 2013 LA Act are applicable when fixing compensation under the NH Act. The Court emphasized that there can be "no doubt as to the applicability of the provisions of the 2013 LA Act" for determining compensation payable under Section 3G(1) of the NH Act.

Strict Criteria For Determining Market Value Under Section 26

The Court analyzed Section 26(1) of the 2013 LA Act, which provides three criteria for assessing market value: the stamp duty rates (Ready Reckoner), the average sale price for similar land in the vicinity, or a consented amount. The statute mandates that the Collector or Arbitrator must adopt "whichever is higher" among these options.

Arbitrator Erred In Comparing Dissimilar Land Types

In the present case, the Arbitrator had adopted the sale price of a small residential plot even though the acquired land was used for industrial purposes. The Court found this to be a fundamental error. It observed that the acquired land and the exemplar land "were not of a ‘similar type’ for the purposes of Section 26(1)(b) of the 2013 LA Act and the price in the said sale deed could not have been adopted."

"Average Sale Price" Requires Multiple Sale Deeds

The Court highlighted that Section 26(1)(b), read with its Explanations, requires the calculation of an "average" sale price over three years. Citing Madhya Pradesh Road Development Corporation vs. Vincent Daniel, the bench noted that the language of the Act implies that "there should be multiple deeds available for reference, as singular deals may not supply adequate and reliable data."

Patent Illegality In Ignoring Statutory Directives

Addressing the scope of judicial interference in arbitral awards, the Court held that the Arbitrator’s award was vitiated by patent illegality under Section 34(2A) of the Arbitration Act. The bench remarked that the Arbitrator "completely ignored the directives of Section 26(1)(b) of the 2013 LA Act" by adopting a single, dissimilar exemplar.

Ready Reckoner Rate Applied As The Higher Criterion

Since the "average sale price" method under clause (b) failed due to a lack of reliable data, the Court turned to Section 26(1)(a), which pertains to Ready Reckoner rates. The respondent had itself cited a Government rate of ₹2,020 per square meter for the relevant zone. The Court held that this was the appropriate statutory provision to apply in this specific context.

"The statutory provision that should have been applied for determination of the market value of respondent No.1’s land was Section 26(1)(a) of the 2013 LA Act."

The Supreme Court allowed the appeal and set aside the High Court's judgment. It modified the compensation rate to ₹2,020 per square meter, down from the Arbitrator's figure of ₹3,588 per square meter. The Court further directed that the respondent would be entitled to all consequential statutory benefits under the 2013 LA Act, with the ₹50 lakh already withdrawn to be adjusted against the final dues.

The ruling reinforces the principle that statutory authorities and arbitrators do not have unfettered discretion in land valuation. They must strictly follow the hierarchy and methodology prescribed under Section 26 of the 2013 LA Act, particularly the requirement to use multiple exemplars of similar land types when determining the average market price.

Date of Decision: May 12, 2026