Determination of compensation

Introduction:
The land acquisition 1894 is an Act that provides for the acquisition of land for
public purposes and for companies. The Act provides for a two-step process for
the acquisition of land. First, the government must declare that the land is
needed for a public purpose. Once the declaration is made, the government can
then acquire the land by paying compensation to the owners of the land. The Act
sets out the principles on which compensation is to be determined. The
compensation must be “fair and adequate” and must be based on the market
value of the land at the time of the declaration.
Meaning of market value:
The term "market value" refers to the price that a property would fetch in the
open market under normal circumstances.
Meaning of compensation:
A payment to make amends for loss or injury to person or property or as
recompense for some deprivation.
Relevant provision:
Section 23 of the Land Acquisition Act, 1894.
Matters to be considered by the court in determining the compensation.
According to section 23 of the land acquisition act, 1894:
In determining the amount of compensation to be awarded for land acquired
under this Act, the Court shall take into consideration:
(i) Market value of land section 23(1):
First, The market value of the land at the date of the publication of the
notification under section 4 of the land acquisition act.
Explanation:
 The Court is responsible for determining the market value of the land, and
in doing so, it must take into account the transfer of land that is similarly
situated and in similar use.
 This means that the Court will look at the prices at which similar land has
been sold in the past to determine the market value of the land being
acquired.
 However, the potential value of the land if it were to be put to a different
use will only be taken into consideration if it can be proven that similar land
has been transferred for that specific use before the notification was issued
under section 4 sub-section (1) of the Act.
 In other words, if the potential value of the land is based on a hypothetical
use that has not been proven to be feasible or has not been observed in
similar land transfers, it will not be considered in determining the market
value of the land being acquired.
 This provision is meant to ensure that the compensation awarded for the
land being acquired is based on its actual market value and not on
speculative or hypothetical values.
 By taking into account the transfer of similar land, the Court can arrive at a
fair and reasonable market value for the land being acquired, which is
essential for ensuring that the compensation awarded to the landowners is
just and proper.
Section 23(1)(ii):
Increase in market value due to unlawful use:
If the market value has been increased in consequences of the land being put
to a use which is unlawful or contrary to public policy that use shall be
disregarded and the market value shall be deemed to be the market-value of
the land if it were put to ordinary use.
Section 23 (1) (iii):
Increase in market value due to overcrowding:
If the market-value of any building has been increased in consequence of the
building being so overcrowded as to be dangerous to the health of the
inmates, such overcrowding shall be disregarded and the market-value shall be
deemed to be the market-value of the building if occupied by such number of
persons only as can be accommodated in it without risk of danger to health
from overcrowding.
 Compensation for standing crops or trees:
secondly, the damage sustained 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.
Explanation:
The term "person interested" refers to the landowner or any other person
who has an interest in the land being acquired, such as a tenant or a
mortgagee.
The "taking of any standing crops or trees" refers to the act of acquiring the
land by the Collector, which may involve uprooting or damaging any crops or
trees that are present on the land.
The compensation paid to the landowner for this damage is calculated based
on the market value of the crops or trees that were present on the land at the
time of acquisition.
Damage by severance:
Thirdly, the damage (if any) sustained by the person interested, at the time
of the Collector’s taking possession of the land, by reason of severing such land
from his other land.
The term "severing" means the act of separating or dividing the land that is
being acquired from the other land owned by the landowner.
Injurious affecting of the other property:
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.
Explanation:
The damage referred to in this clause is not limited to the land that has been
acquired, but also includes any other property, movable or immovable, that has
been injuriously affected by the acquisition.
For example, if a person's house is located on the land that has been acquired,
and the acquisition has made the house uninhabitable or has significantly reduced
its value, then the damage sustained by the person would include the loss of
value of the house.
Change of residence:
fifthly, if, in 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.
Explanation:
The term "reasonable expenses" refers to the actual expenses incurred by the
person interested in changing their residence or place of business, such as the
cost of moving their belongings, finding a new place to live or work, and any other
incidental expenses.
The purpose of this clause is to ensure that the person interested is not unfairly
burdened by the acquisition of their land and is adequately compensated for any
losses or expenses incurred due to the acquisition.
Diminution of profit:
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.
Example: A landowner owns a plot of land that is used as a farm. The government
publishes a declaration under Section 6 of the Land Acquisition Act, 1894, stating
that the land is needed for a public purpose. The landowner continues to farm the
land until the Collector takes possession of the land. During this time, the
landowner's profits from the farm decrease due to the uncertainty of the land
acquisition.
Explanation:
The term "bona fide" means genuine or in good faith. In this context, it means
that the damage resulting from the diminution of profits should be a genuine loss
and not a fabricated one.
"Diminution of profits" refers to the reduction in the income or revenue
generated by the land due to the acquisition process. This reduction can occur
due to various reasons such as the disturbance caused by the acquisition process,
the loss of access to certain resources, or the inability to cultivate the land due to
the acquisition.
The time period considered for calculating the loss of profits is from the date of
the publication of the declaration under section 6 of the Land Acquisition Act until
the Collector takes possession of the land. This period is also known as the
"interim period".
Section 23 (2):
In addition to the market-value of the land as above provided, the Court shall
award a sum of fifteen per centum on such market-value, in consideration of the
compulsory nature of the acquisition, if the acquisition has been made for a public
purpose and a sum of twenty-five per centum on such market-value if the
acquisition has been made for a Company.
Purpose of additional compensation:
The purpose of providing additional compensation is to ensure that the person
whose land has been acquired is not unfairly disadvantaged by the acquisition.
The compensation is meant to cover not only the market value of the land but
also the other damages that the person may have suffered due to the acquisition.