Compensation Provisions and Determinants under The Land Acquisition Act

Introduction :

The Land Acquisition Act, 1894 is an act of the Indian parliament for the acquisition of land for public purposes. It was enacted by the British government in 1894, and was the first law enacted by India’s independent government in 1947. The act has been amended several times since then.

The act provides that no person shall be deprived of his property unless it is required for a public purpose and that he is adequately compensated. The compensation shall be determined with reference to

(i) the market value of such land, (ii) any direct loss or other consequential loss to him such as may result from his being unable to use or enjoy his property, and (iii) any other relevant consideration.

The act of acquiring a land, or any interest therein, is called acquisition. It is the process of buying or receiving property.

Purpose of land acquisition act :

The government can procure land for its own use or for public sector companies or for ‘public purpose’, which can include any of these:

  • For any work related to state or national security or defence services of India, which includes naval, military, air force or other armed forces, under the purview of the state or central government.
  • For building public infrastructure but excluding private hospitals, private educational institutions and private hotels.
  • For any project involving agriculture or allied industries, such as dairy, fisheries or meat processing, owned by the government or by farmer’s cooperatives.
  • For industrial corridors, manufacturing zones or other projects listed in the National Manufacturing Policy. This can also include mining activities.
  • For water harvesting, conservation structure projects or for planned development or improvement of village sites.
  • For government-aided educational and research institutions.
  • For planned development, such as creating housing projects for the weaker sections, in rural or urban areas.
  • For developing residential projects for the poor or landless, or for people affected by natural calamities.

The acquisition of property includes:

1) Acquisition by purchase;

2) Acquisition by gift;

3) Acquisition by inheritance; and

4) Acquisition in exchange for other property.

Rehabilitation, Resettlement and Compensation Provisions under the law :

The Acts’ Rehabilitation and Resettlement Package includes, in addition to monetary compensation, provisions for employment, allotment of alternative housing units, another land, and other entitlements, allowances, and grants to compensate for loss of occupation or opportunity due to displacement, and infrastructure facilities at the resettled location. Additionally, in case of acquisition of land that exceeds one hundred acres a Rehabilitation and Resettlement Committee is constituted containing the representative of various stakeholders to monitor and implement the Rehabilitation and Resettlement scheme. The Act stipulates a mechanism to provide for minimum compensation which includes payment of 1 to 2 times the Market Value of land, value of asset attached to the land together with Solatium, which is the amount payable in addition to compensation equalling 100 % of the Compensation Amount.

Determination of compensation under Section 23 of the Act :

(1) In determining the amount of compensation to be awarded for land acquired under this Act, the court shall take into consideration-

first, the market-value of the land at the date of the publication of the notification under section 4, sub-section (1);

secondly, the damage by the person interested, by reason of the taking of any standing crops or trees which may be on the land at the time of the Collector’s taking possession thereof;

thirdly, the damage (if any) sustained by the person interested, at the time of the Collector’s taking possession taking possession of the land, by the reason of severing such land from his other land;

fourthly, the damage (if any) sustained by the person interested, at the time of the Collector’s taking possession of the land, by reason of the acquisition injuriously affecting his other property, movable or immovable, in any other manner, or his earnings;

fifthly, if in the consequence of the acquisition of the land by the Collector, the person interested is compelled to change his residence or place of business, the reasonable expenses (if any) incidental to such change; and

sixthly, the damage (if any) bona fide resulting from diminution of the profits of the land between the time of the publication of the declaration under section 6 and the time of the Collector’s taking possession of the land.

(2) In addition to the market-value of the land as above provided the Court shall in every case award a sum of fifteen per centum on such market-value, in consideration of the compulsory nature of the acquisition. 

Relevant Case Laws :

In Special Land Acquisition and others vs M. S. Seshagiri Rao & Anr on 31 January, 1968, The Hon’ble Supreme Court held that, After obtaining possession of the land in  pursuance of  statutory authority under s. 17 of the Land Acquisition Act,  the Government could not seek to exercise the option conferred  by  the terms of the grant. The  grantees were entitled to Compensation for the land of which the ownership was  vested in them.  But in assessing compensation  payable to  the grantees, existence of the condition which  severely restricted their right could not be ignored.

The Act is silent as to the acquisition of partial interests in land but it cannot be inferred therefrom that interest in land  restricted because of the existence of rights of the State in the land cannot be acquired.  When land is notified for acquisition for a public purpose and the State  has  no interest   therein,  market  value  of the  land  must be determined and apportioned among the persons entitled to the land. Where the interest of the owner is clogged  by the right  of  the State, the compensation payable is  only the market value of that interest, subject to the clog.

Hon’ble Supreme Court in Nand Ram and others Vs. State of Haryana 1989 held that :-

The State cannot refuse to pay in respect of lands acquired under the same notification compen-ation awarded to the land whose similarly situated lands had been acquired under the same noti-fication for the same purpose by the notification of the same date.”

Again in the case of K. Periasmi Vs. Sub Tehsildar ( Land Acquisition) (1994) Hon’ble Supreme Court has observed that if higher rate has been awarded by the High Court in respect of lands covered in other appeals while lower rate is awarded by the Court in respect of the land of the appellant , though all the lands are situated in the same area and acquired by the same notification , then in such a situation the appellants will also be entitled to parity of market value for the acquired land.

Conclusion :

The basic principle is that if the market value of the property exceeds or equals to its fair market value, then the owner will be paid an amount equal to the difference between their market value and their fair market value. If, on the other hand, they are below its fair market value, then they will be paid an amount equal to their fair market value.

Compensatory terms defined in section 18 of the Land Acquisition Act as various kinds of compensation that must be given to a person residing on, or owning, land proposed for acquisition by the government. Compensations include repairs and improvements to buildings, lands, and crops; and also monetary payments for damages such as leases or crops lost. The effects that a compulsory acquisition has on those living in or around areas being acquired are crucial for establishing just compensation by considering the factors such as foreseeability of loss, proximity to land, permanence of loss, degree of upset and inconvenience caused by disturbance, duration until resumption is made, etc.

In conclusion, the compensation payment under land acquisition act is dependent on the nature of the land. It can be either paid in cash or in kind.

References :,_Rehabilitation_and_Resettlement_Act,_2013

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