The Karnataka High Court has clarified that compensation for land acquired under the National Highways Act cannot be standardized across adjoining villages merely on the basis of proximity. The judgment reinforces that market value must be determined by local transaction data and statutory guidance values, rejecting the notion of automatic parity between neighboring areas.
Background & Facts
The Dispute
The appellants, landowners from Doddasiddavvanahalli Village in Chitradurga Taluk, challenged the compensation awarded for their agricultural lands acquired for the widening of National Highway No. 48. They contended that the compensation of ₹247.11 per sq. mtr. was disproportionately low compared to ₹617.76 per sq. mtr. awarded for similar lands in the adjacent village of Madakaripura, despite both villages being served by the same highway project.
Procedural History
The case progressed through the following stages:
- 2016: Final notification issued under Section 3D(1) of the National Highways Act, 1956
- 2017: Special Land Acquisition Officer (SLAO) issued a common award fixing compensation at ₹247.11 per sq. mtr. based on 88 sale transactions and guidance values
- 2019: Appellants filed arbitration applications under Section 3G(5) of the NH Act seeking enhancement
- 2022: Arbitral Tribunal dismissed applications, upholding SLAO’s methodology
- 2024: District Court rejected Section 34 petitions to set aside the arbitral awards
- 2026: Appeals filed under Section 37(1)(c) of the Arbitration and Conciliation Act, 1996 before the Karnataka High Court
Relief Sought
The appellants sought to set aside the arbitral awards and direct the payment of compensation at the rate applicable to Madakaripura Village, arguing that the disparity violated Article 14 of the Constitution and the principles of fair compensation under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.
The Legal Issue
The central question was whether compensation for land acquired under the National Highways Act must be equalized across adjoining villages when market conditions, guidance values, and proximity to urban centers differ significantly.
Arguments Presented
For the Appellant
The appellants relied on Krishnakumar v. State of Haryana to argue that differential compensation for similarly situated landowners in geographically proximate areas constitutes arbitrariness and violates Article 14. They contended that the SLAO’s exclusion of higher-value transactions in Doddasiddavvanahalli was arbitrary and that the guidance value of ₹10 lakh per acre was outdated. They further asserted that the purchase deed dated 08.10.2015 should have been given greater weight as a reliable market indicator.
For the Respondent
The State contended that the SLAO followed a transparent, data-driven methodology, examining 88 sale transactions and applying the statutory guidance value, which was higher than the average transaction value. The multiplication factor of 2 was correctly applied due to the 7.5 km distance from Chitradurga city, while Madakaripura’s lower factor of 1.5 reflected its closer proximity and higher baseline market value. The Arbitral Tribunal’s findings were factual and not patently illegal.
The Court's Analysis
The Court examined the methodology employed by the SLAO and the Arbitral Tribunal, emphasizing that compensation under the NH Act must be rooted in local market realities, not artificial parity. The SLAO had analyzed 92 sale transactions, excluding four outliers due to small plot size and inflated prices, and relied on 44 higher-value transactions to compute an average. When this average (₹3,03,332 per acre) fell below the statutory guidance value of ₹10 lakh per acre, the higher guidance value was applied - a practice explicitly permitted under the 2013 Act.
"The Arbitral Tribunal correctly held that the value of lands in Madakaripura village could not be imported to determine the value of lands in Doddasiddavvanahalli village."
The Court distinguished Krishnakumar v. State of Haryana, noting that in that case, the differential compensation lacked any rational basis in transactional data. Here, the disparity arose from objectively verifiable differences: Madakaripura’s guidance value was ₹25 lakh per acre, its average transaction value was higher, and its proximity to the city justified a lower multiplication factor. The Court held that equal treatment does not require identical compensation where land characteristics and market conditions differ.
The Court also affirmed that the exclusion of the 14.07.2015 sale deed was justified under the SLAO’s own criteria for outlier transactions, and that the 08.10.2015 deed had already been incorporated into the average. No patent illegality or procedural flaw was found in the arbitral award.
The Verdict
The appellants lost. The Court held that compensation under the National Highways Act must be determined by local market data and statutory guidance values, not by reference to rates in neighboring villages with different economic profiles. The arbitral awards were upheld, and all appeals were dismissed.
What This Means For Similar Cases
Market Value Is Local, Not Regional
- Practitioners must now focus on local sale transactions and official guidance values within the same revenue village or contiguous revenue blocks
- Arguments based on compensation in nearby villages will fail unless the land is demonstrably identical in use, location, and market context
- Evidence must include at least 40-50 verified transactions from the same revenue village to establish a reliable average
Guidance Value Overrides Transaction Average
- When the statutory guidance value exceeds the average of verified transactions, guidance value prevails - this is not discretionary but mandatory under the 2013 Act
- Challengers must prove the guidance value is outdated or misapplied, not merely that neighboring areas have higher rates
- Authorities may not be compelled to raise compensation merely because adjacent areas received more
Arbitral Tribunals Have Wide Discretion in Evidence Appreciation
- Exclusion of outlier transactions (e.g., small plots, unusually high prices) is valid if documented and consistent
- Courts will not interfere with arbitral findings on evidentiary weight unless there is patent illegality or perversity
- Petitioners under Section 34 must demonstrate procedural bias or mathematical error, not mere disagreement with valuation
