Uttarakhand HC Restores 50% Deduction on Exemplar Sale Deed in THDC Land Acquisition, Faults Reference Court for Absence of Reasons
The High Court of Uttarakhand set aside a Reference Court order that had reduced the deduction on an exemplar sale deed from 50% to 30%, finding no cogent reasoning or supporting evidence for the change.
Justice Siddhartha Sah, sitting singly at the High Court of Uttarakhand at Nainital, allowed two first appeals filed by Tehri Hydro Development Corporation Ltd. (THDC) against a judgment of the District Judge, Haridwar, dated 26 September 2014. The Reference Court had reduced the deduction applied to an exemplar sale deed from 50% to 30% while determining compensation for land acquired for the rehabilitation of the Tehri Dam Project. The High Court found that the Reference Court had reached that conclusion without assigning any reasons and contrary to the evidence on record, and accordingly restored the 50% deduction applied by the Special Land Acquisition Officer (SLAO).
The Acquisition and the SLAO's Award
An area measuring 67.251 hectares (167.18 acres) in Village Salempur, Tehsil Roorkee, District Haridwar, was acquired for the rehabilitation of the Tehri Dam Project. A notification under Section 4(1) of the Land Acquisition Act was issued on 19 April 2004 and published in the Gazette on the same date. Further newspaper publications followed on 21 and 22 April 2004, with public notice on 27 April 2004. A notification under Section 6 was issued on 27 October 2004 and published in newspapers on 28 and 29 October 2004. The urgency clause under Section 17 of the Act was invoked, and possession of the acquired land was taken on 21 March 2005.
The SLAO, Haridwar, passed the Award on 28 December 2005. To determine the market value, the SLAO examined 144 sale deeds and selected one — Sale Deed No. 101, pertaining to Khasra No. 473, covering 323.51 square metres and executed on 5 May 2003 — as the exemplar sale deed. On that basis, the market value was assessed at Rs. 17,94,380.39 per hectare. After applying a 50% deduction in accordance with the Land Acquisition Manual, the compensation rate was fixed at Rs. 8,97,190.19 per hectare.
The Claimants' Reference and the Reference Court's Ruling
Dissatisfied with the Award, the claimants made a reference dated 8 February 2006 under Section 18 of the Land Acquisition Act, which was forwarded by the SLAO to the District Judge, Haridwar, and registered as L.A. Case No. 15 of 2006 (Smt. Archana Shukla v. State of Uttarakhand & Others) and L.A. Case No. 13 of 2006 (Kamta Prasad Verma v. State of Uttaranchal & Others).
The claimants contended that the acquired land was residential in character, that it was situated near significant government establishments — including the District and Sessions Court, the office of the District Magistrate, the District Prison, the office of the Senior Superintendent of Police, the BHEL plant, and an Aavas Vikas Colony — and that the compensation determined by the SLAO was wholly inadequate. They also argued that the land had access through State Highways and possessed industrial potential. The SLAO's 50% deduction was specifically challenged as excessive and arbitrary.
THDC and the District Magistrate, Haridwar, contested the reference. THDC argued that the BHEL plant was not near the acquired land, that there was no pakka road providing access, that SIDCUL had not been developed at the time of the Section 4 notification, and that the claimant — a resident of Rishikesh — cultivating six bighas for agriculture was not commercially viable. THDC further contended that the land was surrounded on two sides by rivers and on one side by forest, making it unsuitable for any purpose other than agriculture without substantial expenditure.
The Reference Court, by its judgment dated 26 September 2014, found the 50% deduction excessive and reduced it to 30%, partly allowing the reference. The Reference Court did not, however, record any specific reasoning or findings to justify why 30% was the appropriate figure.
THDC's Challenge Before the High Court
THDC preferred First Appeal No. 01 of 2015 and First Appeal No. 02 of 2015 before the High Court. The appeals were heard together, with facts from First Appeal No. 01 of 2015 taken as the reference point. The appeals were heard ex-parte against respondent no. 1, Smt. Archana Shukla, after she failed to appear despite service of notice, service through publication permitted by order dated 4 January 2019, and a further finding of non-appearance recorded on 30 June 2020. By order dated 29 July 2020, the Court directed that the appeals be posted for ex-parte hearing.
Mr. Shobhit Saharia, counsel for THDC, advanced several grounds. He argued that the Reference Court's judgment, running to 16 pages, contained no finding, reasoning, or justification for settling on 30% as against the 50% applied by the SLAO under the Land Acquisition Manual. He pointed out that the same Reference Court had, by a well-reasoned order dated 20 September 2012, dismissed 20 other land reference cases arising from the same Award dated 28 December 2005, involving similarly situated claimants. Two further appeals from those dismissed references — Land Reference No. 17 of 2006 (Krishnpal v. State of Uttaranchal) and Land Reference No. 19 of 2006 (Mithlesh Verma v. State of Uttaranchal) — had also been dismissed by the High Court. The Reference Court had not addressed this inconsistency.
Counsel also pressed the point that the total expenditure incurred in acquiring the land — including market value, value of trees, solatium, additional amount, and interest — came to approximately Rs. 9.20 crores, while the acquiring department had to spend a further Rs. 8 crores to make the land suitable for agricultural and residential use. This expenditure covered internal roads, drinking water facilities, electrification, and flood-control works. The claimants had not disputed this figure. Given that the development cost was nearly equal to the acquisition cost, counsel argued that a 50% deduction was not only proper but conservative.
On the physical character of the land, counsel submitted that the acquired land was sandy, uneven, and un-irrigated; that it was bounded by the Forest Department's land to the east, a river to the west, and a seasonal river to the north; that there was no pakka road connecting it to the district headquarters despite the land being only two to three kilometres away; and that only one crop per year could be cultivated given the proximity to the river.
The Legal Framework on Deduction for Development
The High Court considered the Supreme Court's decision in Shankarrao Bhagwantrao Patil v. State of Maharashtra, reported in (2022) 15 SCC 657, which itself drew on Chimanlal Hargovinddas v. LAO, (1988) 3 SCC 751, and Lal Chand v. Union of India, (2009) 15 SCC 769. The principle emerging from those decisions is that when a large block of land is valued by reference to a smaller exemplar plot, a deduction must be made to account for land required for roads, open spaces, and development works. The percentage is not fixed by any rule of law; it is a question of fact depending on the shape, size, situation, and state of development of the land in question, and can range from 20% to 75%.
The Court also noted the Supreme Court's observation in Mala and Others v. State of Punjab and Others, (2023) 9 SCC 315, that sale instances of small plots cannot ordinarily form a reasonable basis for valuing large tracts unless suitable deductions are made for development charges, with the quantum depending on the nature, topography, and special features of the land.
The High Court applied these principles to the facts. The acquired land was completely undeveloped at the time of acquisition, unsuitable for residential or agricultural use without major intervention, surrounded by rivers and forest, and without proper road access. The evidence of more than Rs. 8 crores spent post-acquisition to make the land habitable was on record and undisputed. Against this backdrop, the Reference Court's reduction of the deduction from 50% to 30% — without engaging with any of this material — could not be sustained.
Outcome
Justice Siddhartha Sah allowed both First Appeal No. 01 of 2015 and First Appeal No. 02 of 2015. The impugned judgments and orders dated 26 September 2014 passed by the District Judge, Haridwar, were set aside to the extent they had reduced the deduction from 50% to 30%. The 50% deduction applied by the SLAO in the Award dated 28 December 2005 was restored. The Court directed that the original records be transmitted to the court concerned.