Calculating market value & compensation
The High Court discusses the method of determination of market value of a land slated for acquisition under Section 26 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (2013 Act), and the award of additional market value for structures under Section 30(3) in State of Kerala v V. J. Mathew S/o Varkey Joseph [2024 3 KHC 413].
What is meant by market value?
Market value is the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller, after proper marketing and where the parties had each acted prudently and with proper information, but without any coercion or undue influence.
Drastic changes in calculating compensation
The method and formula determining compensation had undergone a substantial change from the land acquisition Act, 1894 to the 2013 Act. The Collector has wide power to determine the market value under both the land acquisition Act, 1894 and Section 26 of the 2013 Act.
Determining market value u/s 26 of 2013 Act
The Collector shall decide market value after considering the market value specified in the Stamp Act for registration of sale deed and average sale price for similar type of land in the nearest village or vicinity.
If there are multiple sale deeds, some indicating a standard average price, and other deeds showing substantial differences, opinion can be arrived at by the Collector to exclude such deeds showing substantial difference from consideration on the question of average sale price.
In the light of the principles of average sale price, if numerous deeds are present, it is an easy job for the Collector to exclude such deeds if there is substantial difference with average sale price in all other deeds.
The Collector must provide reasons for exclusion of such deeds and will have to reckon the value of the land shown in all other comparable deeds to discount such deeds from consideration. This is merely an enabling power to be exercised cautiously and carefully.
The average sale price referred to in clause 26 (b) of the 2013 Act shall be determined considering the sale deeds or the agreements to sell registered for similar type of area in the near village or near vicinity area during immediately preceding three years of the year in which such acquisition of land is proposed to be made.
Sale deed beyond three years can also be considered
The provision of considering three years is advantageous for claimants. If the Collector is allowed to rely upon any sale deeds beyond three years, in normal course it may adversely affect the claimant as the presumption is that the market value escalates every year. Therefore, this being a beneficial provision, it has to be construed as a provision not to restrict any advantage if available to the claimant based on a deed prior to three years, but not to adversely affect a claimant by placing reliance on a deed beyond three years.
If the provision is understood as above, there is no harm in placing reliance on a deed beyond three years if it is beneficial to the claimant. The Legislature, in fact, intended to adopt any criteria which is higher and beneficial to the claimant. Therefore, there is no embargo under the law in placing reliance on a deed beyond three years provided it is beneficial to the claimant.
Collector can exclude any sale deed with reasoning
The Collector has the authority to exclude any sale deed if he is of the opinion that it is not indicative of actual prevailing market value. The fancy price normally does not reflect the market value.
The market value is determined by the factors of various market forces. It is primarily determined by the interplay of demand and supply between willing buyers and willing sellers. If there is a huge difference in market value among the sale deeds which is comparable from others, the Collector will have to find out whether it is indicative of the actual prevailing value or not.
Market price will be multiplied
Then, the market value will be multiplied by the factor specified in the fist schedule of the 2013 Act. The factor for the urban area is 1 whereas for the rural area it is 1 to 2.
Compensation for assets attached to the land
Then the Collector will calculate the amount of compensation to be paid for all the assets attached to the land under Section 27 of the 2013 Act.
The services of a competent engineer or any other specialist will be used for the purpose, as provided under Section 29 of the Act.
Other items to be added to the compensation
- The Collector will consider the damage sustained by reason of severing such land from other land
- Then the Collector will provide reasonable expenses for the person for changing his residence or business
- The reduction of profits of the land between the Collector’s publication of declaration and taking possession of the land
- And any other ground which may be beneficial to the affected family
Claimant would get 100 per cent solatium
The claimants would also be entitled for a solatium amount of 100 per cent of the compensation amount, determined by the Collector, under Section 29 of the 2013 Act.
Twelve per cent interest will also be allowed
In addition to the market value of the land provided under section 26, the Collector shall, in every case, award an amount calculated at the rate of twelve per cent. per annum on such market value for the period commencing on and from the date of the publication of the notification of the Social Impact Assessment study under Section 4 (2), in respect of such land, till the date of the award of the Collector or the date of taking possession of the land, whichever is earlier.
Dispute resolution regarding compensation
To adjudicate on the disputes regarding compensation or other matters there will be a Land Acquisition Rehabilitation and Resettlement Authority.
If any person, who has not accepted the award, can make a written application to the Collector to refer the matter regarding objection to the measurement of the land, the amount of compensation, the person to whom it is payable, the apportionment of the compensation among the persons, under Section 64 of the 2013 Act, to the Land Acquisition Rehabilitation and Resettlement Authority, within six weeks from the date of the award. Alternatively, the party can make an application directly before the authority within six months.
The Authority will decide the matter before it as per the parameters provided under Section 26 and 30 of the 2013 Act. The award will be a deemed decree.
Appeal to the High Court
Any person aggrieved by the award of the passed by the above said authority can file an appeal before the High Court, under Section 74 of the 2013 Act, within sixty days of the award.
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