Introduction:

In the appeal stemming from Manohar & Others v. State of Maharashtra & Others (2025 LiveLaw (SC) 746), the Supreme Court of India—collectively presided over by Chief Justice B.R. Gavai and Justice A.G. Masih—has dramatically enhanced the compensation awarded to landowners whose agricultural land was compulsorily acquired in the 1990s for industrial development. The apex court found that both the Reference Court and Bombay High Court erred in ignoring the highest bona fide sale exemplar without sufficient reasoning. By increasing the compensation from ₹32,000 to ₹58,320 per acre (an increase of 82%) and overturning earlier decisions, the Court reaffirmed the primacy of recent, genuine transactions in determining fair value under Section 23 of the Land Acquisition Act, 1894.

Arguments of the Appellants:

The petitioners—landowners whose agricultural lands in village Pungala, Maharashtra, were acquired in the mid‑1990s for the Jintur Industrial Area—challenged the compensation awarded by the Reference Court (₹32,000/acre) and upheld by the Bombay High Court. They argued that a bona fide sale dated March 31, 1990, at ₹72,900 per acre (proximate to the Section 4 notification issued July 19, 1990) constituted the most reliable indicator of market value. The petitioners maintained that their land lay in a prime location—adjacent to the Nashik‑Nirmal State Highway, only two kilometres from taluka headquarters Jintur, with proximity to market committees, dairy facilities, and a percolation tank—indicating clear non-agricultural potential. They submitted that both lower courts improperly ignored the highest bona fide exemplar without reasoned justification, thus undervaluing their property in violation of settled case law, including Mehrawal Khewaji Trust v. State of Punjab (2012), which mandates that when multiple comparable sales exist, the highest bona fide transaction should generally guide valuation.

Arguments of the Respondents (State / MIDC):

The State of Maharashtra and the Maharashtra Industrial Development Corporation (MIDC) defended the initial compensation decisions. They contended that the Reference Court’s chosen exemplars and average-based valuation were legitimate and that the highest sale instance offered by the petitioners should be disregarded because it was not representative of broader transactions. They asserted that the average price of multiple comparable land sales within a range closely aligned with the acquired property’s nature would yield a fair and equitable valuation. The respondents sought to justify the lower rate (₹32,000/acre) as reflective of market realities and protested that the petitioners had failed to substantiate extraordinary locational advantages or extraordinary valuation factors warranting the highest exemplar.

Court’s Judgment:

The Supreme Court thoroughly examined the historical sale exemplars and the factual circumstances surrounding the lands in question. It noted that the Reference Court and High Court had erred in both law and fact by failing to consider the March 31, 1990 sale (₹72,900/acre)—a bona fide transaction most proximate to the Section 4 notification date—and instead relied on averaging sale instances spanning April–May 1989 and later transactions well after notification. Underscoring established legal principles, the Court reiterated that Section 23 requires consideration of market value at the time of notification, including non‑agricultural potential, and that the highest bona fide sale transaction is ordinarily adopted unless land sales are tightly clustered within a narrow price range.

The bench analyzed the location: only 2 km from Jintur, near state highway, with access to facilities and water resources—factors underscoring the land’s development potential beyond agriculture. It emphasized that proximity, terrain, infrastructure, and timing of transactions made the March 1990 exemplar particularly relevant. The Court held that averaging should apply only where sales range narrowly; here, variability was wide, so selecting the highest bona fide exemplar was appropriate. Accordingly, the compensation award should be revised to ₹58,320 per acre—incorporating fair market reflection and statutory entitlement to full benefits.

The Court allowed the appeal, set aside both lower-court orders, and mandated the enhanced amount. It sensibly rejected the State’s averaging approach, affirmed the petitioners’ higher valuation, and reinforced legal standards governing acquisition compensation.