Single Sale Deed Cannot Fix Land Compensation Under Section 26 of 2013 LA Act, Supreme Court Holds
A bench of Justices Sanjay Kumar and K. Vinod Chandran held that relying on one sale deed for a dissimilar land type violates Section 26(1)(b) of the 2013 LA Act, cutting compensation from ₹3,588 to ₹2,020 per square meter.
The Supreme Court has set aside a Bombay High Court order that restored an arbitral award granting Alfa Remidis Ltd. compensation of ₹3,588 per square meter for land acquired for the four-laning of National Highway No. 547-E. The Court held that the Arbitrator had committed a patent illegality by basing the market value on a single sale deed relating to a residential plot in an adjoining village, when the acquired land was being used for an industrial purpose. Applying Section 26(1)(a) of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, the Court fixed compensation at ₹2,020 per square meter — the Government rate in the Ready Reckoner for lands abutting the highway in the relevant zone — and directed that the ₹50,00,000 already withdrawn by Alfa Remidis Ltd. be adjusted against the balance due.
How the Dispute Reached the Supreme Court
Alfa Remidis Ltd. claimed ownership of 1,394 square meters in Survey No. 66 of Mouza Pardi (Rithi), Tahsil-Saoner, Nagpur District. A notification under Section 3A(1) of the National Highways Act, 1956 was issued on 9 May 2017 for acquisition of this land for widening NH No. 547-E.
The Deputy Collector, Land Acquisition (General), Nagpur, acting as the competent authority, determined compensation under Section 3G(1) of the NH Act by order dated 27 March 2018. He classified the land as fallow or dry crop land — an agricultural category — and awarded ₹161.63 per square meter, drawing on three sale deeds for agricultural land in Mouza Pardi (Rithi).
Alfa Remidis Ltd. disputed this classification. It filed an application under Section 3G(5) of the NH Act before the Arbitrator, the Additional Commissioner, Nagpur Division, registered as Arbitration Case No. 193/ARB/2019-20. The company argued that its land was being used for an industrial purpose — specifically, for production of paracetamol medicine — and produced documents in support. It also cited the Ready Reckoner, which set a Government rate of ₹2,020 per square meter for stamp duty on sale transactions involving highway-abutting lands of the same type, and placed reliance on a registered sale deed dated 29 March 2017 for a residential plot of 195.09 square meters in Mouza Saoner, a village near Mouza Pardi (Rithi), where the price was ₹3,588 per square meter.
By Award dated 22 November 2021, the Arbitrator accepted that the land was in non-agricultural use and adopted the rate from the 29 March 2017 sale deed, directing compensation at ₹3,588 per square meter.
NHAI and the Government of India challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996 before the District Judge-10, Nagpur. One of their grounds was that the Arbitrator had acted contrary to Section 26(1) of the 2013 LA Act. By judgment dated 11 September 2023, the District Judge agreed and set aside the award.
Alfa Remidis Ltd. then appealed under Section 37 of the Arbitration Act. By the impugned judgment dated 5 June 2025, the Bombay High Court, Nagpur Bench, restored the Award dated 22 November 2021. The High Court found that the documentary evidence confirmed the land was non-agricultural and that the Arbitrator had correctly applied the rate from the 29 March 2017 sale deed. It also noted that the Ready Reckoner rate of ₹2,020 per square meter had not been considered by the Arbitrator, but did not treat this as a ground to interfere with the restored award. NHAI then approached the Supreme Court by way of Special Leave Petition (C) No. 33773 of 2025.
Applicability of the 2013 LA Act to NH Act Acquisitions
Before addressing the merits, the Court recorded the legal framework. The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Removal of Difficulties) Order, 2015, notified with effect from 1 September 2015, clarified that the provisions of the 2013 LA Act relating to determination of compensation in accordance with the First Schedule apply to all acquisitions under enactments listed in the Fourth Schedule. The NH Act appears at Serial No. 6 of that Schedule.
The Court referred to its earlier decision in National Highways Authority of India v. P. Nagaraju alias Cheluvaiah and another, reported as (2022) 15 SCC 1, which had held that all aspects contained in Sections 26 to 28 of the 2013 LA Act for determination of compensation apply when fixing the quantum payable under the NH Act. There was, therefore, no dispute that Section 26 governed the present case.
What Section 26(1) Actually Requires
Section 26 of the 2013 LA Act is titled “Determination of market value of land by Collector.” Section 26(1) directs the Collector to adopt the higher of three options: (a) the market value specified in the Indian Stamp Act, 1899 for registration of sale deeds or agreements to sell in the area where the land is situated; (b) the average sale price for similar type of land in the nearest village or nearest vicinity area; or (c) the consented amount of compensation in cases of acquisition for private companies or public-private partnership projects.
Explanation 1 to Section 26(1) states that the average sale price under clause (b) must be determined by reference to sale deeds or agreements to sell registered for similar type of area in the near village or near vicinity during the three years immediately preceding the year of acquisition. Explanation 2 adds that, for this purpose, one-half of the total number of sale deeds or agreements to sell in which the highest sale price is mentioned must be taken into account. Explanation 3 excludes prices paid as compensation for earlier acquisitions in the district. Explanation 4 allows the Collector to discount any price that, in his opinion, does not reflect the actual prevailing market value.
Why the Arbitrator's Approach Was Legally Flawed
The Court found two distinct errors in the Arbitrator's reasoning, each independently fatal to the award.
First, the Arbitrator relied on a sale deed for a residential plot in an adjoining village to determine the market value of land that was admittedly being used for an industrial purpose. The Court held that residential land and industrial land are not of a “similar type” within the meaning of Section 26(1)(b) of the 2013 LA Act. The price in that sale deed could not, therefore, have been adopted.
Second, even if the land types had been comparable, the methodology prescribed by Explanations 1 and 2 to Section 26(1)(b) does not permit reliance on a single sale deed. The Court referred to Madhya Pradesh Road Development Corporation v. Vincent Daniel and others, reported as (2025) 7 SCC 798, where it had observed that the language of Section 26(1) implied that multiple deeds must be available for reference, since a singular deal may not supply adequate and reliable data.
The Court then turned to the question of patent illegality under Section 34(2A) of the Arbitration Act. That provision allows an arbitral award to be set aside if it is vitiated by patent illegality appearing on the face of it. The proviso to Section 34(2A) cautions that an award should not be set aside merely for erroneous application of law or by reappreciation of evidence. The Court held that the proviso's protection did not extend to the present award. The Arbitrator had not merely applied the law erroneously; he had completely ignored the directives of Section 26(1)(b) and its Explanations by adopting a sale exemplar for a totally dissimilar type of land and, at that, a single exemplar. That was contrary to the statutory mandate, not merely a debatable interpretation of it.
The Correct Rate and the Ready Reckoner
Having found that Section 26(1)(b) could not be applied on the facts, the Court turned to Section 26(1)(a), which directs the authority to adopt the market value specified under the Indian Stamp Act, 1899 for registration of sale deeds in the area where the acquired land is situated — in effect, the Ready Reckoner rate.
Alfa Remidis Ltd. had itself cited the Ready Reckoner before the Arbitrator, placing on record a Government rate of ₹2,020 per square meter for lands abutting the highway in Zone 4. The Court noted that Mouza Pardi (Rithi) is listed among the villages in Zone 4. The statutory provision that should have been applied was therefore Section 26(1)(a), and the applicable rate was ₹2,020 per square meter.
The Court held that Alfa Remidis Ltd. would be entitled to compensation for its 1,394 square meters at ₹2,020 per square meter, together with all consequential statutory benefits under the 2013 LA Act. The ₹50,00,000 already withdrawn by Alfa Remidis Ltd. pursuant to the Supreme Court's interim order dated 14 November 2025 was directed to be taken into account when disbursing the balance compensation.
Outcome
The Supreme Court allowed the civil appeal. The impugned judgment dated 5 June 2025 of the Bombay High Court, Nagpur Bench, in Arbitration Appeal No. 39 of 2023 was set aside. The Award dated 22 November 2021 granting compensation at ₹3,588 per square meter was not restored. Compensation was fixed at ₹2,020 per square meter for 1,394 square meters, with all consequential statutory benefits under the 2013 LA Act. The ₹50,00,000 already withdrawn by Alfa Remidis Ltd. is to be adjusted against the balance payable. Parties were directed to bear their own costs.