Purchaser Of Developed Agricultural Land Not Entitled To 2013 Act Compensation: Supreme Court

"The appellant, having come into possession only in the year 2016, would be entitled to 9% interest per annum as determined by us and not under the Act of 1894 which could have incurred to the benefit of the original owner alone." Supreme Court, in a judgment, held that a purchaser of agricultural land who acquires the property with full knowledge that it has already been developed into an industrial estate is not entitled to compensation under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.

A bench of Justices J.B. Pardiwala and K. Vinod Chandran observed that a subsequent purchaser acquiring land surreptitiously after development cannot claim statutory benefits meant for original landowners dispossessed by acquisition.

The dispute arose from the establishment of the Sarigam Industrial Estate by the Gujarat Industrial Development Corporation in 1980 over various parcels of land. The subject land was initially treated as government land following ceiling proceedings initiated under the Gujarat Land Ceiling Act, 1960. After prolonged litigation, the ceiling proceedings were eventually dropped in favor of the original owner in 2014. The appellant subsequently purchased the land through sale deeds in 2016 and sought heavy compensation or restitution under the Act of 2013, leading to a fraudulent exchange deal with GIDC that was later struck down by the Gujarat High Court.

The primary question before the court was whether a purchaser of land, who acquired the property long after it had been taken over and developed by a state corporation, can claim compensation under the Act of 2013. The court was also called upon to determine the appropriate statutory framework and valuation mechanism for awarding reasonable compensation to such a purchaser.

Court Upholds Cancellation Of Malafide Allotments

The bench firmly reaffirmed the findings of the High Court regarding the mala fide nature of the exchange deed executed by the GIDC. The court noted that the transfer of twenty fully developed industrial plots in exchange for agricultural land smacked of blatant favoritism and abuse of official power.

"The allotment of industrial plots... suffers from grave error of law and smacks of mala fides," the court observed while refusing to interfere with the cancellation of the unlawful transfers.

Purchaser Not Entitled To 2013 Act Benefits

The court analyzed the timing of the acquisition and the conduct of the appellant in purchasing the property in 2016. It held that the appellant was fully aware that the land had already been transformed into a fully developed industrial estate by the GIDC without any investment from the purchaser's side.

"The mere statement that the same was converted as non-agricultural lands at that point of time, does not inure to the benefit of the appellant since the same was in pursuance of the establishment of the industrial estate."

Restricting Compensation To Original Status

Addressing the quantum of compensation, the bench ruled out valuations calculated under the Act of 2013 or based on post-development market rates. The court concluded that the compensation must be restricted strictly to the valuation of agricultural land under the Land Acquisition Act, 1894, pegged at Rs. 1,17,16,090.

"At best, the appellant could claim compensation on the valuation of the lands, that too in the nature of the agricultural lands under the Act of 1894 which would be Rs.1,17,16,090/-."

Direction For Interest And Deductions

The Supreme Court modified the interest parameters, holding that statutory solatium and interest under the 1894 Act were exclusively meant for the original dispossessed owner. Instead, the appellant was granted simple interest at 9 percent per annum running strictly from July 2016.

The court further directed that the final payout must account for any financial gains made by the appellant from three industrial plots already alienated to third parties under the cancelled exchange scheme. GIDC was mandated to verify the consideration received by the appellant for those three plots and deduct the equivalent amount from the core compensation payable.

The Supreme Court disposed of the appeals by restricting the appellant's relief to a baseline agricultural land valuation under the 1894 Act alongside moderated interest. The ruling firmly shuts the door on speculative purchasers attempting to exploit land acquisition laws following state development projects.

Date of Decision: 24 July 2026