Land acquisition compensation principles: market value, severance compensation and solatium assessed using comparable sales and rental evidence.

Compensation for acquired land under the Land Acquisition Act, 1894 is to be determined by fixing market value as on the section 4 notification date, using comparable bona fide sales, expert evidence and, where appropriate, capitalisation of actual or prospective rent. Potentiality is relevant only as part of market value, not as a separate head. The remote sale instance was rejected as an unsafe guide, while smaller comparable sales and lease rental evidence were treated as more reliable, with development deduction and rent adjustment applied. Severance compensation was justified because the balance land lost value, and solatium under section 23(2) was payable on the market value.

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Issues: Determination of the market value of the acquired land and the proper components of compensation, including severance compensation and solatium.

Analysis: The governing principles for compensation under the Land Acquisition Act, 1894 require the market value to be fixed as at the date of the section 4 notification, having regard to comparable bona fide sales, expert opinion, and, where appropriate, capitalisation of actual or prospective rent. The acquired land had to be valued on an objective basis, and potentiality could be taken into account only as part of the market value, not as a separate addition. On the facts, the sale relied upon by the High Court was too remote and not a safe guide, while the smaller comparable instances and the lease rental evidence furnished more reliable indicators. The evidence also supported a deduction for development in using the higher sale instance, and the rental had to be adjusted to the correct figure. Severance compensation was warranted because the remainder of the holding suffered diminution in value. Solatium under section 23(2) was also payable on the market value.

Conclusion: The market value was fixed at Rs. 1,35,000 per acre, 5% severance compensation and 15% solatium were upheld, and the separate addition for potential value was rejected.

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