Purpose of Acquisition Cannot Justify Lower Compensation When Lands Are Comparable: Supreme Court Enhances Compensation for Dharuhera Land Acquisition by Applying De-Escalation and Comparable Sale Principle

In a recent judgement Supreme Court significantly enhanced the compensation awarded to landowners whose lands were acquired for the Dharuhera Institutional Sector 5A project. The Court, speaking through Justice K.V. Viswanathan (for the Bench comprising Justice B.R. Gavai and Justice K.V. Viswanathan), firmly held that, “Ordinarily, a classification based on the purpose of acquisition is not permissible for determining compensation. The landowner’s right is unaffected whether the acquisition is for an industrial, institutional or other public purpose.” 
The Court enhanced the compensation from Rs. 55,71,010/- per acre to Rs. 1,18,37,668/- per acre, granting parity with similarly situated lands acquired for Dharuhera Industrial Sectors 15, 16, and 17, while applying a justified de-escalation adjustment. 
The appeals arose from the acquisition of lands situated in Village Dharuhera under Section 4 Notification dated 12.12.2008, intended for the development of Institutional Sector 5A by the Haryana Urban Development Authority. The appellants sought parity with landowners of adjoining villages Malpura and Kapriwas, whose lands were acquired under a later notification dated 13.05.2010, and were awarded much higher compensation under judgments of the Supreme Court in Besco Ltd. And Habitat Estates Pvt. Ltd. 
The appellants contended that the Dharuhera lands were similarly located, possessed equal potential, and were part of the same integrated urban and industrial development of Dharuhera town. The Reference Court had earlier awarded Rs. 55,71,010/- per acre, which was upheld by the High Court of Punjab & Haryana. 
Rejecting the High Court’s restricted reliance on sale exemplar PW4/D, the Supreme Court held, “A perusal of the sketch reveals that exemplar PW-4/E and PW-4/F produced by the appellant are equidistant with PW4/D relied upon by the High Court.” 
The court criticized the High Court’s approach and observed: “The reasoning given by the High Court to only rely on PW4/D is not satisfactory. Equally, the reasoning given by the High Court that there was no evidence to prove that the acquired lands in village Malpura vide notification dated 13.05.2010 was comparable in its geographical location, and other factors with the lands of the appellant in these appeals is bereft of merit.” 
The Court found that the villages were adjoining and part of the same integrated Dharuhera urban development. The Court remarked, “The sketch indicates that the Revenue Estate Malpura and Bestech Mall are adjoining to the acquired lands. The acquired lands are surrounded by residential colonies, schools, commercial complexes, and hence had immense potentiality.” 
The Court strongly relied on the doctrine laid down in Nagpur Improvement Trust v. Vithal Rao, (1973) 1 SCC 500, holding that, “Ordinarily, a classification based on the public purpose is not permissible under Article 14 for the purpose of determining compensation. The position is different when the owner of the land himself is the recipient of benefits from an improvement scheme.” 
Since both sets of lands — those acquired in Besco and the appellants’ lands — were for Dharuhera sectors, the Court concluded, “Even though the acquired lands in this case were for institutional purposes and those in Besco were for industrial purposes, they cannot be treated differently merely on the basis of purpose. Both were part of Dharuhera’s urban development plan.” 
Recognizing the 17-month gap between the two acquisition notifications, the Court applied the principle of de-escalation: “Having arrived at the base value, we apply de-escalation @12% per annum for one year and an additional 6% for the remaining five months, thereby arriving at the figure of Rs.1,23,37,668/- per acre.” 
Further reducing Rs. 5 lakhs per acre towards Change of Land Use (CLU) charges, the Court finally fixed the market value at Rs.1,18,37,668/- per acre. 
The Court recognized that the appellants’ lands were part of a rapidly developing urban area, observing, “The acquired lands are surrounded by Modern Senior Secondary School, Huda Sector 4 residential colony, bus stand, commercial shops, Parshavnath residential flats, M2K city, and other developed areas. Hence, the lands had immense potentiality and that it could have been put to multifarious use cannot be disputed.” 
The Court rejected the State’s argument that Besco involved lands with CLU permission, stating that the deduction of Rs.5 lakh per acre for CLU appropriately balanced this distinction. 
 Allowing the appeals partly, the Supreme Court concluded, “We set aside the judgment of the High Court dated 20.09.2022 and direct that the appellants shall be paid a sum of Rs.1,18,37,668/- per acre and statutory benefits under Section 23(1A), 23(2) & 28 of the LA Act after deducting the amounts already paid.” 
 The Court directed that connected appeals shall be governed by the decision rendered in the Besco case. 
 Date of Decision: 3 April 2025