Valuation for Land Acquisition

(Valuation with reference to THE RIGHT TO FAIR COMPENSATION AND TRANSPARENCY IN LAND ACQUISITION, REHABILITATION AND RESETTLEMENT ACT 2013 – “TRTFCAT in LARR Act 2013).

(Key Words: Land Data, LA R&R Act 2013 Brief, Comparison of LA Acts, Land Data, Definition of Affected families, Cost of Acquisition and Person Interested in Award, Pith and substance of the Act, Modal Activity Map, Institutional structure of LARR, LA Process, Time limit for Award, Award by the Collector, Valuation of Urban and Rural land, Final Award Format and judicial precedents are discussed).

Land acquisition refers to the process by which government forcibly acquires private property for public purpose without the concurrent of the land owner. The land owner is not a willing seller, therefore, compensation and the way in which compensation were payable, is to be fair and reasonable. TRTFCAT in LARR Act 2013 (The LARR Act) provides for land acquisition as well as rehabilitation and resettlement (R & R) and replaces the Land Acquisition Act 1894.  

The LA Act 2013 Brief: Compensation package - The appropriate Government shall constitute multi-member land pricing commission or authority to finalize cost of land acquisition/compensation State-wise/area-wise as determined under Section 30(1) read with Schedule I to the Act. The Second Schedule lists eleven (11) elements of Rehabilitation and Resettlement entitlements in addition to those provided in the First Schedule.

Third Schedule enumerates twenty five (25) infrastructural amenities to be provided for resettlement to the affected families. Fourth Schedule lists thirteen (13) Central legislations, which are sought to be exempted from the provisions of the Act.

No lower civil court, u/s 63 shall have jurisdiction to entertain any dispute relating to land acquisition in respect of which the collector or the authority is empowered and no injunction shall be granted by any court in respect of any such matter. If aggrieved by the Award of the Collector by person interested in compensation and any reference is made to Authority u/s 64 by the Collector, the final Award shall be in accordance with S. 69.

 Appeal to High Court: The appropriate Government or a Requiring Body or any person aggrieved by the Award passed by an Authority under section 69 may file an appeal to the High Court within sixty days from the date of Award; provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days as per S. 74. A period of six months is the time limit for disposal of case.

Retrospective operation: Where no award under the 1894 LA Act has been made, the new Act shall apply with regard to compensation in the following circumstances: where an award has been made but the affected individuals have not accepted compensation or have not yet given up possession, and the proceedings have been pending for 5 years or more and where a majority of individuals in an affected area have not received compensation, then the new law shall apply.

Comparison of LA Act 1894 and LARR 2013:

Land Data: India has about 16.7% of world’s population, 15% of livestock population, and 1.5% of forest and pasture land but only 2% of world’s geographical area. The per capita land availability of land has declined from 0.89 hectare in 1951 to 0.21 hectare in 1991. Rural population has grown by 1.49 times during the past five decades; however, during the same period, the urban population has grown by 3.58 times. Source: (Secretary, LR-Government of India, vide minutes of the workshop on country planning/National Land Use Policy published by Ministry of Land Resources, Government of India website).

The contribution of Agriculture and Allied Sector in the Gross Domestic Product (GDP) of India has been steadily declining over the years and has reached about 14 percent in 2011-12. However, it still remains principal source of livelihood for more than 50 percent of the nation’s population. India possesses only 11 percent of world’s arable land but it has to feed about 18 percent of world’s population.

(Source:

Agriculture Census 2010-11, Ministry of Agriculture, Government of India.: file:///D:/Agriculture%20Census%202010-11%20-%20Main%20Page.htm ).

According to National Sample Survey Organization (NSSO) data, 60 per cent of the country’s population has right over only 5 per cent of country’s land; whereas 10 per cent of the population has control over 55 per cent of the land. (Distribution of Ownership Holdings of Land, India (NSSO 2003-04). Therefore, Land is the most precious and scarce for production, for private enterprises, PPP (Public Private Partnership) enterprises or even public enterprises. (Land Data).

Definition: U/s: 3(c) “Affected families”:

(i) A family whose land or other immovable property has been acquired,

(ii) a family which does not own any land but a member or members of such family may be agricultural laborers, tenants including any form of tenancy or holding  of usufruct right, share-croppers to artisans or who may be working in the affected area for three years prior to the acquisition of the land, whose primary source of livelihood stand affected by the acquisition of land,

(iii) the Scheduled Tribes and other traditional forest dwellers who have lost any of their forest rights recognized under the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006 due to acquisition of land,

(iv) family whose primary source of livelihood for three years prior to the acquisition of the land is dependent on forests or water bodies and includes gatherers of forest produce, hunters, fisher folk and boatmen and such livelihood is affected due to acquisition of land,

(v) a member of the family who has been assigned land by the State Government or the Central Government under any of its schemes and such land is under acquisition, and

(vi) a family residing on any land in the urban areas for preceding three years or more prior to the acquisition of the land or whose primary source of livelihood for three years prior to the acquisition of the land is affected by the acquisition of such land.

Section 3 (i): Cost of acquisition includes:

i) amount of compensation which includes solatium (i.e., extra compensation for the forcible nature of acquisition), any enhanced compensation ordered by the Land Acquisition and Rehabilitation and Resettlement Authority or the Court and interest payable thereon and any other amount determined as payable to the affected families by such Authority or Court;

ii) demurrage to be paid for damages caused lo the land and standing crops in the process of acquisition;

iii) cost of acquisition of land and building for settlement of displaced or adversely affected families

iv) cost of development of infrastructure and amenities at the resettlement areas.

Section 3 (u): “Market Value” means the value of land determined in accordance with Section 26.

Section 3 (x) is: “person interested in AWARD” means —

(i) all persons claiming an interest in compensation to be made on account of the acquisition of land under this Act;

(ii) Scheduled tribes and other traditional forest dwellers, who have lost any forest rights recognized under the Scheduled Tribes and Other Traditional Forest Dwellers Recognition of Forest Rights Act, 2006;

(iii) a person interested in an easement affecting the land;

(iv) persons having tenancy rights under the relevant State laws including share-croppers by whatever name they may be called; and

(v) any person whose primary source of livelihood is likely to be adversely affected.

Pith and substance of the Act: Application of the Act: S: 2 (1). The provisions of this Act relating to land acquisition, compensation, rehabilitation and resettlement, shall apply, when the appropriate Government acquires land for its own use, hold and control, including for Public Sector Undertakings and for public purpose, and shall include the following purposes, namely:-

U/s: 46. When private companies intends to purchase land through private negotiation, shall file an application to the Collector stating their  (a) intention to purchase, (b) purpose for which such purchase is being made, (c) particulars of lands to be purchased. It shall be the duty of the Collector to refer the matter to the Commissioner of R&R for the satisfaction of all relevant provisions under this Act related to rehabilitation and resettlement. Based upon the Rehabilitation and Resettlement Scheme approved by the Commissioner, the Collector shall pass individual awards covering Rehabilitation and Resettlement entitlements.  No land use change shall be permitted if R&R is not complied with in full.

U/s 2 (3) (a) & 46 (6), Original land owner specified date is 5/9/2011. lf any land has been purchased through private negotiations by a person other than specified person on or after the 5th day of September.2011, which is more than such limits as may be notified by the appropriate Government as per Section 46(1) and If the same land were acquired within three years from the date of commencement of this Act (01/01/2014), then, forty per cent of the compensation paid for such land acquired shall be shared with the original land owners. Any purchase of land by a person other than specified persons without complying with the provisions of Rehabilitation and Resettlement Scheme shall be void ab initio; provided that the appropriate government may provide for R & R provisions on sale and purchase of land in its state and shall fix the limits or ceiling for the said purpose. (Application of the Act).

MODAL Activity Map (Courtesy: 31st Report of Lok Sabha Secretariat dated May, 2012)

*** Panchayati raj institutions: District panchayat (DP), Intermediate panchayat (IP) and Village panchayat (VP).

The Institutional Structure of TRTFCAT in LARR Act 2013:

Land Acquisition Process: Where consent of people is involved, it shall be along with SIA Study.

S: 4(1) Preparation of Social Impact Assessment (SIA) Study by the appropriate Government. The Act mandates a SIA of every project which must be completed within a period of six months.  "SIA is being done to assess the nature of public interest involved, study of socio-economic impact upon the families residing the adjoining area of land acquired, extent of lands, public and private, houses, settlements and other common properties likely to be affected, study of social impact from the project and the nature and cost of addressing them etc. Reports prepared under the SIA are to be shared with concerned individuals in their local language along with a summary. S: 5 Whenever a Social Impact Assessment is required to be prepared under section 4, the appropriate Government shall ensure that a public hearing is held at the affected area, after giving adequate publicity about the date, time and venue for the public hearing, to ascertain the views of the affected families to be recorded and included in the Social Impact Assessment Report. S: 6 (1) The appropriate Government shall ensure that the SIA study report is prepared and published in the affected area, in such manner as may be prescribed, and uploaded on a website created especially for this purpose. (2) Wherever Environment Impact Assessment (EIA) is carried out, a copy of the Social Impact Assessment report shall be made available to the Impact Assessment Agency authorized by the Central Government to carry out environmental impact assessment. The SIA process for irrigation projects shall be waived, if EIA has been already conducted by Central Government Agency, S: 7 the appropriate Government shall ensure that the Social Impact Assessment report is evaluated by an independent multi-disciplinary expert group, as may be constituted by the appropriate government. The Experts Group can accept or reject the SIA Study with recorded reasons.S:8 Examination of report of the Collector and appraisal report of experts group on SIA study by the appropriate government, including determining a legitimate and bona fides public purpose. The Government concerned can override the appraisal report but only if they have sufficient reason that is recorded in writing; and u/s S: 8, the decision is made public.

S: 11 (1) is Publication of Preliminary Notification and powers of officers thereupon. After issuance of notice u/s 11.( 1), the Collector shall, before the issue of a declaration under section 19, undertake and complete the exercise of updating of land records as prescribed within a period of two months. As per S: 26(3) while determining the market value for award, the collector shall update and revise the land records before making compensation.

De novo SIA Report is mandated if PN u/s 11.1 is not issued within twelve months of appraisal report of Experts; As per S: 14. Hearing of objection shall be completed within sixty days from 11(1) PN. Administrator u/s 43 for R&R shall prepare R&R Scheme upon PN 11(1) and submit it to the Collector. Review with suggestion of R&R Scheme by the Collector is forwarded to the R&R Commissioner (Appointed u/s 44) for approval of the scheme. S: 19 (1) Publication of declaration & summary of RR under the hand and seal of a Secretary to the appropriate Government & (2) the Collector’s publication and (4) publication on the Gazette process completed. S.20 deals with Land are to be marked out, measured and planned including marking of specific areas.

S.21 deals with Notice to persons interested. S.22 deals with Power to require and enforce the making of statements as to names and interests and S.23 Enquiry and land acquisition award by the Collector and the compensation as determined under section 27 along with Rehabilitation and Resettlement award as determined under section 30 and which in his opinion should be allowed for the land. S: 38 Power to taking possession only “after ensuring that” the compensation and R&R responsibilities have been discharged.

Time Limit for award assuming no extension:

Payment of compensation within a period of three months for compensation and six months for monetary part of R & R entitlements listed in the Second Schedule from the date of award and the components of R & R package in the Second and Third Schedules that relate to infrastructural entitlements shall be provided within a period of eighteen months from the date of the award. In case of acquisition of land for irrigation or hydel project, being a public purpose, the rehabilitation and resettlement shall be completed six months prior to submergence of the lands proposed to be so acquired. Reference to Authority by the Collector u/s 64 (2) (b) within six weeks of the receipt of the notice from the Collector u/s 21 or within six months from the date of Collector’s AWARD whichever period shall first expire.

U/s 69 (1) in determining the amount of compensation to be awarded for land acquired including the Rehabilitation and Resettlement entitlements, the Authority shall take into consideration whether the Collector has followed the parameters set out under section 26 to section 30 and the provisions under the Second Schedule (The R&R entitlements). (2) In addition to the market value of the land, as above provided, the Authority shall in every case award an amount calculated at the rate of twelve percent per annum on such market value for the period from 4(2) SIA study publication to the date of award of the Collector or the date of taking possession of the land, whichever is earlier. (3) In addition to the market value of the land as above provided, the Authority shall in every case award a solatium of one hundred per cent. over the total compensation amount.

S: 9/40 Urgency Clause can be invoked after Section 19 declaration or the expiry of 30 days from section 21 Notice. It provides special powers to the appropriate Government to acquire land in urgency cases for the purposes of defence of India or national security or for any emergency arising out of natural calamities.  Compensation payable shall be as per section 30 (1) and the First Schedule of the Act Say “MV” plus 75% of “MV”, out of which 80% shall be payable prior to taking possession. Any one or many provisions from chapter II to VI are exempted.  I.e. SIA to Food Security, R & R: Local administration shall make available temporary camp accommodation to the families whose house has been acquired till total compensation is paid or 90 days whichever is earlier.

S: 81 Temporary Occupation: The government may temporarily occupy and use any piece of waste or arable land for a public purpose when difference as to compensation exists. This occupation may be for a period of not more than three years. The compensation of such land may be decided mutually by the owner of the land and the Collector. Any disagreement on matters relating to compensation or the condition of the land on being returned shall be referred to the Land Acquisition and R&R Authority.

Section: 10. Food Security:

(a) The collector has to make sure that no other unutilized land is available before he moves to acquire farm land. 

(b)  Restrictions/threshold on limit of irrigated multi-crop land and net sown area per district or state available for acquisition is left to the discretion of state governments.

(c) If acquired, the state government has to cultivate an equivalent area of land elsewhere as agricultural land. If they cannot do this, then they must deposit an amount equivalent to its value in an account to be used for the purposes of enhancing food security.

S.101. When any land or part thereof, acquired under this Act remains unutilized for a period of five years from the date of taking over the possession, the same shall be returned to the original land owner or the Land Bank as per decision taken by state government.

S.102. Whenever the ownership of any land acquired under this Act is transferred to any third party, and then 40 percent of the appreciated value will be shared with the original owner. This benefit to only the first time the land is sold after acquisition.

S. 104. The appropriate Government has option to lease also. The application procedures of this option is expected in the guidelines to the Act.

Award by the Collector: Determination of market value of land by collector u/s 26: The higher of (a) the market value specified in Indian Stamp Act, 1899 for the registration of sale deeds or agreements to sell as the case may be, in the area where the land is situated; or (b) the average sale price for similar  type of land situated in the nearest village or nearest vicinity (The market value shall be determined by the Collector based on one-half of the total number of sale deeds or the agreements to sell recorded in preceding 3 years where highest sale price have been mentioned); (c) consented amount of compensation as agreed upon in case of acquisition for PPP or private companies projects as defined in section 2(2).

Section 29 (1) The Collector in determining the market value of the building and other immovable property or assets attached to the land or building which are to be acquired, use the services of a competent engineer or any other specialist in the relevant field, as may be considered necessary by him.(2) The Collector for the purpose of determining the value of trees and plants attached to the land acquired, use the services of experienced persons in the field of agriculture, forestry, horticulture, sericulture, or any other field, as may be considered necessary by him. (3) The Collector for the purpose of assessing the value of the standing crops damaged during the process of land acquisition may utilize the services of experienced persons in the field of agriculture as considered necessary by him.

S. 30 (1) In addition to the market value of the land as above provided, the collector shall in every case award a solatium (i.e., extra compensation for the forcible nature of acquisition)  of one hundred per cent over the total compensation amount.

Valuation as per First Schedule: The land value (Say “P”) thus calculated shall be multiplied by a factor 1 for urban area and regarding rural area, the Act only provides the baseline for compensation and has devised a sliding scale which allows state Governments to fix the multiplier from 1 to 2 when moved from urban to rural area. The precise slabs shall be left to respective state governments. Market value of land “MVL” thus calculated is added with assets attached to land say “B”. Market value of acquired property “MVAP” is MVL + B.  Add a solatium Say “S” of 100% of MVAP. The Award is MVAP+S and the Second Schedule elements of rehabilitation and resettlement entitlements for all the affected families (Both land owners and families whose livelihood is primarily dependent on land acquired) in addition to those provided in the First Schedule.

Valuation: URBAN AREA:

Rural AREA:

(Please note: The land value in rural area is not like urban area; the above is only for illustration).

Parameters are to be considered by the collector in determination of award (Final Award Format):

S. 28. In determining the amount of compensation to be awarded for land acquired under this Act, the collector shall take into consideration—

The date of valuation is section 11 notification; provided that any price paid as compensation for land acquired under the provisions of this Act on an earlier occasion in the district shall not be taken into consideration and any price paid which in the opinion of the Collector is not indicative of actual prevailing market value may be discounted for the purposes of calculating market value.

(PLUS) The Second Schedule:

Section:75. When there are several persons interested, if such persons agree in the apportionment of the compensation, the particulars of such apportionment shall be specified in the award, and as between such persons the award shall be conclusive evidence of the correctness of the apportionment.

Section: 76. When the amount of compensation has been settled, if any dispute arises as to the apportionment of the same or any part thereof, or as to the persons to whom the same or any part thereof is payable, the Collector may refer such disputes to the Authority.

S. 30. (3) In addition to the market value of the land, as above provided, the collector shall in every case award an amount calculated at the rate of twelve percent per annum on such market value for the period from 4(2) SIA study publication to the date of award of the Collector or the date of taking possession of the land, whichever is earlier. S: 80 deals with pending compensation: Within one year of collector taking possession at the rate of 9% per annum, after one year at the rate of 15% per annum interest payable on pending compensation.

Judicial precedents (Supreme Court of India):

I. Larger agri-use land vis-à-vis smaller residential plot: In Haridwar Development Authority vs. Raghubir Singh and Others (2010)11 SCC 581.  In the said case,  this Court held as follows: “When the value of a large extent of agricultural   land  has  to  be  determined  with reference  to  the   price   fetched   by   sale   of   a   small   residential   plot,   it   is   necessary   to  make   an   appropriate   deduction towards the development cost, to arrive   at  the  value of  the  large    tract  of  land.  The   deduction towards development cost may vary from   20% to 75% depending upon various factors.   Even   if   the   acquired   lands   have   situational   advantages,   the   minimum   deduction   from   the   market   value   of   a   small   residential plot,   to   arrive   at   the   market   value   of   a   larger   agricultural land, in the usual course, will be   in the range of 20% to 25%.   In this case,   the   Collector   has   himself   adopted   a   25%   deduction   which   has   been   affirmed   by   the   Reference   Court   and   the   High   Court.     We,     therefore,   do   not   propose to alter it.” Therefore, it is clear that mere reliance made by a Court on sale deeds of smaller residential area for determination   of   market   value   of   larger   agricultural area,  the   same   will   not render   the   determination illegal   until   and   unless   it   is   shown   that   the determination was not proper.

http://www.lawweb.in/2013/09/court-must-take-judicial-notice-of-fact.html#sthash.S57sCDRM.dpuf 

See more at:

http://www.lawweb.in/2013/09/appreciation-of-evidence-regarding.html#sthash.NHYMkZ6l.dpuf

II. Increase in land Price in   the   absence   of   other   acceptable evidence: General   Manager, Oil   and   Natural   Gas   Corporation Limited vs. Rameshbhai Jilvanbhai Patel and   Another reported   in (2008)   14   SCC   745,   the Hon’ble Supreme   Court observed   that   in   the   absence   of   other   acceptable evidence, a cumulative increase of   10 to 15 per cent is permissible with reference to acquisitions in 1990.  In the decades preceding 1990s, the quantum of increase was considered to be less than 10 per cent per annum. This Court in Sardar Joginder Singh vs. State of   Uttar Pradesh and Another (2008) 17 SCC 133,   noticed that the said case related to acquisition in the year 1979   and   relying     upon the award related to an acquisition of 1969 observed that the general increase between 1969 to 79 can be taken to be around 8 to 10 percent per annum.

III. Allotment rates of plots adopted by Development Authorities like DDA cannot form basis for award of compensation for acquisition of undeveloped lands. Supreme Court of India in Lal Chand vs Union of India & Anr. On 12 August, 2009. -

See more at:

http://www.lawweb.in/2013/09/allotment-rates-of-plots-adopted-by.html#sthash.CnXgdJEv.dpuf

IV. Court cannot grant enhanced compensation to claimant if he fails to adduce evidence that compensation granted by collector is inadequate. Supreme Court of India in Ramanlal Deochand Shah vs. State of Maharashtra & Anr on 5 July, 2013.

See more at:

hhttp://www.lawweb.in/2013/09/court-can-not-grant-enhanced.html#sthash.aLLiNqxR.dpuf

V. standing crops, etc. evidence is essential - Appreciation of evidence regarding standing crop in land acquisition Case. IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION REPORTABLE CIVIL APPEAL NO.5311 OF 2012 (arising out of SLP(C) No.34284 of 2011) -

See more at:

http://www.lawweb.in/2013/09/appreciation-of-evidence-regarding.html#sthash.W34IjVgG.dpuf.

The state governments are given freehand in deciding the restriction and threshold on multi-crop land acquisition, and the ceiling on private purchase for public use and the process of obtaining people’s consent for PPP and Private purchase projects. The return of unutilized land after five years to the original owner if any, is left to the concerned specified person’s (the appropriate government) decision subject to satisfy conditions u/s 109 (1). The State governments are empowered to enact any law under this act with only higher compensation and R&R entitlements.

State governments are empowered to enact any law under this act with only higher compensation and R&R entitlements.

Rules to be framed exclusively by the State governments:

(1) Limits on the acquisition of multi-crop land as required under section 10(2) of the Act.p>

(2) Limits on the acquisition of agricultural land as required under section 10(4) of the Act.

(3) Thresholds for private purchase upon the crossing of which the purchasing party shall have to carry out such rehabilitation and resettlement activities as are stated under section 46 of the Act

(4) The multiplier to be used for the calculation of compensation in rural areas and listed in Schedule I of the Act.

Past history of land acquisition is dismal. “Land acquisition for Special Economic Zones (SEZ) has given rise to widespread protest in various parts of the country. Large tracts of land are being acquired across the country for this purpose. Already, questions have been raised on two counts. One is the loss of revenue in the form of taxes and the other is the effect on agricultural production.

An official database of persons displaced / affected by projects is not available. However, some unofficial studies, particularly by Dr. Walter Fernandes, peg this figure at around 60 million for the period from 1947 to 2004, involving 25 million hectares (ha). which includes 7 million ha. of forest and 6 million ha. of other Common Property Resources (CPR). Whereas the tribals constitute 8.08% of country‘s population, they are 40% of the total displaced/affected persons by the projects. Similarly at least 20% of the displaced /affected are Dalits and another 20% are OBCs. The resettlement record is also very dismal. Only a third of the displaced persons of planned development have been resettled”. (D. Bandyopathaya Committee Report, Para! 1:12:3).

The Act when compared with LA Act 1894 has an addition of R & R packages and addressing the phenomenal of Fair Compensation and Transparency; the time will test the strength of it.

Disclaimer: Utmost care is taken while compiling this article. This can be read in conjunction with the Act and the expected Rules and Guidelines.