UNIT 7 THE LAND ACQUISITION ACT (LAA), 1894: AWARD AND COMPENSATION

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1 UNIT 7 THE LAND ACQUISITION ACT (LAA), 1894: AWARD AND COMPENSATION Structure 7.0 Objectives 7.1 Introduction 7.2 Award by the Collector 7.3 Consequences of taking Possession Section 16 of the Act Changes Subsequent to the Collector taking Possession of the Land Withdrawal from Acquisition Section 48 of the Act 7.4 Compensation Matters to be taken into Account while Determining Compensation Section 23 of the Act Matters to be Excluded while Determining Compensation Section 24 of the LA Act 7.5 Let Us Sum Up 7.6 Cues to Check Your Progress 7.7 Glossary 7.8 References 7.0 OBJECTIVES After going through this Unit, you will be able to: describe how the Collector is to make the award; explain the consequences of the Collector s taking possession of the acquired land; and illustrate how compensation is determined under the LA Act. 7.1 INTRODUCTION We have learnt in Unit 6 of this Block about the steps that are taken by the Government to acquire land under the Land Acquisition Act of In the present Unit 7, we will discuss how the Collector is to make his/ her award. We will also discuss the consequences of the Collector s taking possession of the acquired land. Next, we will describe how compensation is determined, and finally focus on the payment of compensation. 7.2 AWARD BY THE COLLECTOR Once the District Collector has completed his/ her enquiry, the award must be made in respect of The true area of the land to be acquired The Collector has no power to take possession of land, which is different from that specified in the declaration. The compensation, which in the opinion of the Collector should be awarded for the land While assessing this matter the Collector is required by section 15 of the Act to take into consideration the grounds set out in section 23 of the Act and ignore those found in section 24 of the Act. These are discussed later. The Collector can take into account departmental reports and investigations besides utilising his/ her own opinion gained on inspection of the land. The division in a proportionate manner of the compensation awarded by him/ her among the persons who are known or believed to be interested in the land to be acquired. It is the duty of the Collector to enquire into the various interests of the claimants and determine what persons are entitled to receive compensation and in what proportion. Here is an example given in Box 7.1. Box 7.1: Example of Proportionate Division of Compensation by the Collector to the Interested Persons You have taken a loan of Rs. 50,000 from Mahadeo. As security you have given him the right to have your property (worth Rs. 75,000) sold if you fail to repay the loan in 5 years. Before you are able to repay the loan, proceedings for acquiring your land are commenced by the Government. In answer to the notices under section 9 of the Act you file your claim for compensation as owner of land. However, Mahadeo also files a claim for compensation on the grounds that this land is a security for his unpaid loans.

2 In such a situation the Collector is required to examine both claims, he/ she will call upon you to produce the title deeds to the land and upon Mahadeo to produce the deed of mortgage. He/ she may also call upon those witnesses who saw you sign the mortgage deed in case you refuse to acknowledge the signature on the deed as your own. Thereafter, if he/ she is satisfied that you have created a mortgage in favour of Mahadeo then he/ she will have to decide how the compensation to be awarded for your land is to be divided between Mahadeo and you. Prior Approval of Government to Award and the Period within which an Award should be made (Proviso to section 11(1) & section 11A of the LA Act) The Collector, before making his/ her award, must obtain the prior approval of the Government. The Government has the power to specify the cases in which the Collector need not obtain such approval (Proviso to section 11(1) of the Act). The Land Acquisition (Amendment) Act of 1984 inserted section 11 A of the Act, which requires the Collector to make his/ her award within 2 years from the date of publication of the declaration under section 6(1) of the Act. If no award is made within this period the entire proceedings for the acquisition will lapse. If the Government wishes to acquire such land it will have to start again from step one viz. the notice under section 4 of the Act. The declaration under section 6 of the Act must be made within a year of the notice under section 4 of the Act and the award must be made within 2 years from the date of publication of such declaration. Thus, not more than 3 years can elapse between the preliminary notice under section 4 (1) of the Act and the Collector s award under section 11 of the Act. Notice of Award-section 12(2) of the Act The Collector must give immediate notice of his award to those persons interested who are not present in person or through their representatives when his/ her award was made (section 12(2) of the LA Act). The award must be communicated to them in its entirety. No notice is necessary in the case of persons interested who were present at the time the award was announced. Check Your Progress 1 i) Describe the key aspects of making an award by the Collector. ii) What would happen if the Collector does not make his/ her award within 2 years from the date of publication of the declaration? 7.3 CONSEQUENCES OF TAKING POSSESSION SECTION 16 OF THE ACT Once the Collector has made his/ her award, he/ she can take possession of your land. In Karnataka, the fact that possession has been taken must be notified in the Official Gazette. This is the duty of the Deputy Commissioner. In other states this does not have to be gazetted. Though the Act requires the Collector to make payment of the compensation he/ she has awarded, it does not prescribe any specific time-limit within which he/ she must do so. It merely states that if he/ she fails to make such payment on or before taking possession of the land, he/ she becomes liable to pay interest on such amount. (section 34 of the Act) Therefore, in effect, the Collector can take possession of your land once he/ she has made his/ her award even if you have not received payment Changes Subsequent to the Collector taking Possession of the Land As a consequence of the Collector taking possession of land the following changes occur. The land vests absolutely in the govt. i.e. it becomes the property of the Government without any conditions or limitations. The ownership of the land passes to the Government. Such vesting is free from all encumbrances (section 16 of the Act). An encumbrance is a burden or charge upon the property such as a lease or an easement Withdrawal from Acquisition Section 48 of the Act Under section 48 of the Act, the right of the Government to withdraw from the acquisition of any land is recognised provided it has not taken possession of such land. On such withdrawal the Government has to pay

3 the person interested for any damage suffered and any costs incurred by him during the acquisition proceedings. After having read about the procedure, which ensues after the Collector has taken over the land, let us now learn in section 7.4 of the Unit about the provision of the Act related to awarding compensation to the affected persons. 7.4 COMPENSATION The Land Acquisition Act provides only for payment of cash compensation and that to only to those who have an interest in the land being acquired or in the compensation to be paid. The interest of those who form an integral part of the social and economic fabric of the village community like landless labourers and artisans are totally ignored. Nor is there any provision for resettlement or rehabilitation of those whose land has been compulsorily acquired under the Act. The only provision is for payment of reasonable expenses incurred by a person interested if he has to change his residence or place of business as a consequence of the acquisition (Section 23(1), fifthly of the Act). These are very grave shortcomings that need to be addressed. In sub-section and of the Unit, we discuss the matter to be considered and the matter to be excluded while determining compensation, respectively Matters to be taken into Account while Determining Compensation Section 23 of the Act Section 23 of the Land Acquisition Act of 1894 describes the aspects of compensation. It is a very long and detailed section. Here, we give you only the key aspects of the section. i) Market value The most important factor in deciding what compensation will be awarded for the acquired land is the market value of such land prevailing on the date of publication of the notice under section 4(1) of the Act, section 23 (1) first of the Act. Market value is the sum which one might reasonably expect to get if one s land is sold in the open market according to the prevailing rates. This implies that neither the buyer nor the seller is under pressure to buy or sell and one must keep in mind the situation, the locality and the nature of the land. Thus, if the land in question is agricultural, the fact whether it is well cultivated and fertile or neglected, or if it is swampy would be relevant. In addition, while valuing the land one must also keep in mind the uses to which it is reasonably capable of being put in the near future i.e. its potential. The actual and potential use of the land is relevant for assessing its market value. A relevant example is provided in Box 7.2 for the reader. Box 7.2: Example of Determining Actual and Potential Value of Land to be Acquired The Government decides to acquire Munisamy land for building a grain market. He is using his land primarily for agriculture but his land is also suitable for building purposes because of its excellent location near the Railway Station and several Government offices. Land in Munisamy locality is scarce. Sooner or later he would have decided to develop his land. In such circumstances, Munisamy will certainly not be content to sell his land for its value as agricultural land only. The possibility of its being used for building/ commercial purposes should also be taken into account and it should be valued accordingly. As the Act has fixed the date of publication of the notification under section 4(1) of the Act as the date of valuation, it ignores any increase in the value of such land subsequent to this date.

4 ii) Standing crops and trees The value of such crops and trees as are on your land at the time when the notice under section 4(1) of the Act is published is to be included in the market value of the land (see Figure 7.1). As regards those crops and trees which have come into existence after such date and which are on the land at the time of the Collector s taking possession one will be compensated on the basis of the actual loss that one will suffer by being deprived of their harvest. In this case compensation will not be calculated on the basis of their market value (section 23(1) secondly of the Act). Figure 7.1 iii) Damage for severance (separation/division) from other lands Land which is owned and occupied as one property is often divided (severed) due to acquisition proceedings. It may suffer depreciation in value by reason of the fact that it can no longer be occupied and enjoyed as one holding. The owner/ occupier of such property is entitled to be compensated for such decrease in value of the unacquired land (section 23(1) thirdly of the Act). Such severance can happen if a new railway line cuts across one s land separating a considerable portion of the garden from the residence. The land which is not acquired will decrease in value because of such separation of the garden from the residence. One will be entitled to compensation for the portion of one s land acquired for making the railway track and also for the decrease in the value of the remaining portion that has not been acquired. iv) Injurious affection of other property, in any other manner or earnings A person interested is entitled to compensation for damage to his other property or earnings as a consequence of the taking of his land. One is entitled to compensation not only for the land that has been taken but also for any other damage (than the ones mentioned above) to one s other property or earning that one may have suffered as consequence of the acquisition proceedings. Such damage should have been sustained at the time of the Collector s taking possession of the land (section 23(1) fourthly of the Act). Look at the example given in Box 7.3 for better understanding of this aspect Box 7.3: Example of Compensation Entitled for Damage to Property A railway company acquired some land belonging to Lalbhai. The company proposed to make their railway tracks so close to a cotton mill belonging to him that there was danger of fire from the trains using the line and the building became less suitable for use as a cotton mill. It could therefore only be insured at an increased premium and there was a reduction in its sale value. Lalbhai was entitled to receive compensation under this head for such reduction in the value of his cotton mill. v) Expenses incurred in changing of residence or place of business in consequence of the acquisition If as a result of the acquisition of his land a person interested is compelled to change his place of residence or business, then the Collector/ Court is required to take into consideration the reasonable expenses incurred by him as a result of having to make such a change (Section 23(1) fifthly of the Act). vi) Damage resulting from reduction in profits of land A person interested is entitled to be compensated for any bonafide loss suffered by him as a result of the decrease in the profits of his land between the time the declaration under section 6 of the Act is published and the Collector takes possession. The decrease in the profits should be the result of the declaration. If as a result of the publication of the declaration under section 6 of the Act your tenant decides to vacate your

5 land or house, thus depriving you of rent that you would otherwise have earned, you will be entitled to compensation under this head for such loss of rent (Section 23(1) sixthly of the Act). Interest from the date of the notice under section 4(1) of the Act to the date of the Collector s award or possession Section 23(1-A) of the Act As we have seen there may be a maximum gap of three years between the date of publication of the notice under section 4(1) of the Act and the date of the Collector s award. Compensation however is paid on the basis of the market value prevailing on the date of the section 4 of the Act notification. In 1984, the Government realised that payment of compensation on this basis was unrealistic and unjust and therefore introduced an amendment (see Fernandes 1999). Since 1984 in addition to the market value of the land one is now entitled to receive interest at the rate of 12 per cent per annum of the market value awarded. This interest is payable for the period starting on and from the date of publication of the notice under section 4 of the Act in respect of the land in question, upto the date of the Collector s award or the date of taking possession of the land, whichever is earlier. (Section 23 (1-A) of the Act) Interest is payable only on the market value and not on any other sum that one may have been awarded under section 23(1) of the Act. In addition to the market value of one s land and interest at the rate of 12 per cent per annum on such market value one is also entitled to receive a sum, which is equivalent to 30 per cent of the market value awarded. This sum is in the nature of a consolation (i.e. solatium) for the compulsory acquisition of one s land under Section 23(2) of the Act. Such a solatium is to be awarded in all cases of compulsory acquisition. The Collector/ Court have no choice in this regard. Prior to the Amendment Act of 1984 one would have been entitled to a solatium at the rate of 15 per cent of the market value. Check Your Progress 2 i) What are the consequences of the Collector s taking possession of one s land? ii) Which are the matters to be taken into account while deciding on compensation? Matters to be Excluded while Determining Compensation Section 24 of the LA Act Not only does the Act set out the factors, which should be taken into account while determining compensation but also those which are to be excluded while doing so. Let us consider these factors. i) Degree of urgency When the Government acquires land from someone, the degree of urgency, which has led to the acquisition will not be taken into consideration while assessing the value of the land. All that one is entitled to is its fair market value (section 24 first of the Act). ii) Disinclination to part with the land One s reluctance to part with the land does not affect the quantum of compensation to be fixed for it. Once the Government has decided that one s land is needed for a public purpose then its decision on this point is final and the wishes of the land holder are of no consequence (Section 24 secondly of the Act). iii) Damages without injury The Act provides that if as a consequence of the acquisition proceedings one suffers damage, one is not entitled to be compensated for such damage unless the damage is of such a nature that if it had been caused by a private person he would be liable in law, to compensate you (Section 24 thirdly of the Act). Box 7.4 provides an example on this point. Box 7.4: Example of Non-Payable Compensation for Damage to Property Rambhai s land is acquired for the purpose of opening a fruit and vegetable market and it so happens that he is already running such a market on some other land belonging to him at a distance of about half a mile from the land acquired. Now, his market is bound to face competition from the Government established market and there is bound to be a decrease in his profits. Under the law, he will not be able to claim compensation on this ground because, suppose he had sold his land to a Lakkhi who later decided to open a market on such land in competition with Rambhai, he would have no right to file a suit against Lakkibhai on this ground of loss of profits.

6 iv) Prospective damage One is not entitled to any additional compensation on the ground of any damage, which is likely to be caused to one s land by or in consequence of the use to which it will be put when it is acquired (Section 24 fourthly of the Act). Look at the example provided to you in Box 7.5. Box 7.5: Example of Non-Payable Compensation for Alternative use of Land One s land which was garden land is acquired for constructing night soil collection pits. One will get compensation for its value as garden land; one is not entitled to any further compensation on the ground that it will depreciate in value when used for building night soil collection pits. v) Prospective value of land due to acquisition As has been explained earlier, while determining the market value of land, which is being acquired, the Collector/Court must take into consideration not only the actual use being made of the land but also the probable use to which it could be put in the near future. For example, land, which might in the near future be used for building purpose cannot be valued as merely agricultural land. However suppose the Government acquires one s land for the purpose of putting it to a use to which under the existing law a private individual could not and consequently the value of one s land rises steeply, then one cannot claim additional compensation on this ground (Section 24 fifthly of the Act). A relevant example is provided in Box 7.6. Box 7.6: Example of Non-Payable Compensation for Increased Land Value after Acquisition Mudaliar is the owner of a huge plot of agricultural land. Under the existing law he cannot put this land to a non-agricultural use. The Government decides to acquire his land for the purpose of putting up a cement plant. This is not a probable use to which the land could have been put by either Mudaliar or any other private person in the foreseeable future. Therefore, this potential use will not be taken into consideration while determining its market value. Had such a law prohibiting nonagricultural usage not been in existence then its potential value for building/commercial purposes could have been taken into account. vi) Prospective increase in value of other land The Act provides that any increase in the value of one s other land as a result of the use to which the land acquired will be put should not be taken into consideration while determining compensation (Section 24 sixthly of the Act). A man has two neighbouring houses worth Rs.20,000/- each. One of these is being acquired under the Act. The purpose of the acquisition is the widening of the lane. There will be an increase in the value of the house which is not being acquired. It will be worth Rs.40,000/-. Does this mean that he should not get compensation for the house acquired? The answer is no. He is entitled to full compensation. The Government cannot argue that he has benefited from the acquisition as the value of the other house has gone up. vii) Cost of improvements/disposal of land after notification Any expenditure that is incurred, or any improvements to the land that are made, commenced or effected after the date of publication of the notification under section 4(1) of the Act without the permission of the Collector will not be taken into account while determining compensation. (Section 24, seventhly of the Act) It may be necessary for one to effect improvements in order to keep the property in a proper state of repair. Therefore it has been provided that such improvements may be carried out with the permission of the Collector. Once the notice under section 4(1) of the Act has been published, no sale, mortgage or other disposal of the land, which is the subject matter of such notice can be made without the sanction of the Collector. If one enters into an agreement to buy such land without first obtaining the permission of the Collector, then one will not be considered as a person interested and will not be entitled to any compensation (Section 24 seventhly of the Act). viii) Increased value on account of illegal use Any increase in value of the land to be acquired due to its being put to a use, which is forbidden by the law, will be disregarded while assessing its market value e.g. the land in question was to be used for

7 agricultural purposes only but its owner erected a commercial building on it. He will not be entitled to compensation for such building (Section 24 eighthly of the Act). Payment of Compensation On making his award, the Collector is required to make a formal offer of payment of the compensation to the persons interested as per the terms of the award and to pay such amounts to them. Receipt of compensation under protest If one is a person whose interest in the land/ compensation has been recognised and admitted by the Collector one can receive payment and at the same time also contend that such amount is not adequate (First proviso to section 31(2) of the Act). This is called receiving compensation under protest (see Figure 7.2). One can then apply to the Collector for a reference under section 18 of the Act, so that the question of the sufficiency of the compensation can be determined by the Court (see Figure 7.3). Figure 7.2 Figure 7.3 Note: Unless one makes this protest one cannot make an application for a reference under section 18: section 31 (2), second proviso of the Act. Check Your Progress 3 i) Which are the matters that will not be considered for compensation? Why? ii) What does receiving compensation under protests mean? 7.5 LET US SUM UP Unit 7 has discussed how the Collector makes his/ her award and the consequences of the Collector taking possession of the acquired land. Next it has discussed what factors are to be taken into account while determining compensation. Lastly, the Unit has considered the factors to be excluded while determining compensation. 7.6 CUES TO CHECK YOUR PROGRESS Check Your Progress 1 i) The Collector firstly forms an opinion about the extent of the land to be acquired, the amount of compensation which should be given etc. He/ she also has to obtain the prior permission of the government before making his/ her award and the award has to be communicated to the concerned persons. ii) Section 11A of the Land Acquisition (Amendment) Act of 1984 states that the Collector has to make the awards within 2 years from the date of publication of the declaration of land acquisition. If this is not done, then the entire proceedings for the acquisition will lapse and the Government will have to start the whole process from the beginning. Check Your Progress 2 i) The right of ownership of the land belongs to the government without any conditions or limitations, free of any encumbrances after the Collector takes possession of the land. ii) The various aspects to be considered while deciding compensation are the damage resulting from reduction in profits of land, the calculation of interest on the land, value of standing crops and trees, damage for severance from other lands, expenses incurred in changing residence or place of business due to land acquisition and damage resulting from reduction in profits of land.

8 Check Your Progress 3 i) Compensation shall not be provided if any improvements or disposal of the land is done without the prior consent of the Collector, value of land is increased due to illegal use, there are damages without injury, there is a disinclination to part with the land and on the ground that any damage could be caused to the land by the use to which it would be put. ii) If a person interested receives compensation for his land which he states is inadequate according to the first proviso to section 31(2) of the Act, this is known as receiving compensation under protest. The person can apply to the Collector for a reference under section 18 of the Act so that the entire issue can be determined by the Court. 7.7 GLOSSARY Award : Monetary compensation given by the Collector to the persons interested in lieu of acquiring their land. Solatium : Compensation for loss, suffering or feelings of injury arising from the acquisition of land by the government. 7.8 REFERENCES Fernandes, Walter The Land Acquisition (Amendment) Bill 1998: An Introduction IN Walter Fernandes. The Land Acquisition (Amendment) Bill 1998: For Liberalisation or for the Poor. Indian Social Institute: New Delhi