The Bombay High Court has clarified that unregistered agreements to sell, executed prior to the issuance of a land acquisition notification, are admissible as evidence to determine the market value of acquired land - provided they reflect genuine transactions and are not inflated by post-notification developments. This ruling reinforces the principle that market value must be assessed based on real, contemporaneous transactions, not speculative or post-notification sales.
Background & Facts
The Dispute
The appellant, Power Grid Corporation of India Ltd., sought to acquire agricultural land in village Shepwadi, Taluka Ambejogai, District Beed, for the establishment of a 400/220 k.v. sub-station. Land acquisition proceedings were initiated under the Land Acquisition Act, 1894, bearing reference No. LAQ/SR/20/06. The Land Acquisition Officer (LAO) determined compensation rates based on group-wise classifications: Rs.2,300/- per R for Group-I land, Rs.2,400/- per R for Group-II, Rs.2,500/- per R for Group-III, and Rs.2,600/- per R for Group-IV. Mango trees were compensated at Rs.14,185/- and Rs.17,791/- per tree. The claimants, comprising 15 landowners and their legal representatives, accepted the award under protest and filed references before the Civil Judge, Senior Division, Ambejogai.
Key Facts
- The land in question was classified as agricultural but was located on the outskirts of Ambejogai city, adjacent to developing infrastructure including a medical college, engineering college, RTO office, and district court.
- The LAO relied on 21 sale instances to determine market value but awarded rates significantly lower than those reflected in certain transactions.
- A key sale instance involved an unregistered agreement dated 17.06.2004 between Babu Namdeo Shep (seller) and Dinkar Kashinath Patil (buyer) for 1 acre of land at Rs.45,00,000/-. The sale deed was registered on 03.01.2007, after the acquisition notification.
- Another sale deed dated 07.09.2007 (Exhibit 48) showed a rate of Rs.1,50,000/- per R.
- A third sale deed (Exhibit 49) recorded the sale of 41 R of land for Rs.45,00,000/-, equating to approximately Rs.1,09,756/- per R.
- A separate sale of Gut No.347/03 (0.06 R) for Rs.9,00,000/- (Rs.1,50,00,000/- per R) and Gut No.171 (0.055 R) for Rs.31,91,000/- (Rs.58,01,818/- per R) were also cited by claimants.
- The valuer, Witness No.2, testified that prevailing rates in the area were around Rs.2,880/- per sq. ft., indicating non-agricultural valuation.
- The land had already been converted to non-agricultural use, and development activity was underway.
Procedural History
- 17.06.2004: Unregistered agreement executed for sale of 1 acre land at Rs.45,00,000/-
- 03.01.2007: Registered sale deed executed for the same land
- 2006: Land acquisition proceedings initiated (LAQ/SR/20/06)
- 15.12.2006: Valuer inspected the site
- 2012: Valuer’s evidence recorded
- 05.10.2024: Civil Judge, Senior Division, Ambejogai, awarded Rs.77,000/- per R as market value, along with statutory benefits
- 12.03.2026: First Appeal No. 203 of 2025 reserved for judgment
- 07.05.2026: Judgment pronounced by Division Bench of Bombay High Court
The Parties' Positions
For the Appellant (Power Grid Corporation)
- Argued that the Reference Court erred in relying on an unregistered agreement dated 17.06.2004, which was inadmissible under Section 92 of the Evidence Act.
- Contended that the Rs.45,00,000/- consideration included construction costs, not land alone.
- Cited General Manager, Oil and Natural Gas Corporation Ltd. v. Rameshbhai Jivanbhai Patel to argue that future transactions (post-notification) cannot be used to determine market value.
- Pointed out that in other references arising from the same acquisition, the rate awarded was Rs.5,000/- per R, making the Rs.77,000/- award irrational and excessive.
- Asserted that the valuer’s evidence was delayed and unreliable.
For the Respondents (Landowners)
- Argued that the LAO’s valuation was grossly inadequate and ignored multiple high-value sale instances.
- Relied on State of Maharashtra v. Hitesh Deoraj Gosar to contend that unregistered agreements can be considered if they reflect genuine market transactions.
- Highlighted that the 17.06.2004 agreement clearly stated the land was purchased for development, with no construction at the time.
- Cited Ram Kishan v. State of Haryana to show proximity to urban infrastructure justifies higher valuation.
- Emphasized that the land had already been converted to non-agricultural use, warranting per sq. ft. valuation.
- Invoked Section 49 of the Stamp Act to argue that unregistered documents may be admitted for collateral purposes.
Relief Sought
The appellant sought to set aside the award of Rs.77,000/- per R and reduce it to Rs.5,000/- per R. The respondents sought confirmation of the award and additional statutory benefits.
The Legal Issue
The central question was whether an unregistered agreement to sell, executed prior to the issuance of a land acquisition notification, can be admitted as evidence to determine the market value of acquired land under Section 23 of the Land Acquisition Act, 1894.
Arguments Presented
For the Appellant
The appellant contended that unregistered agreements are inadmissible under Section 92 of the Evidence Act, which bars oral evidence to contradict, vary, add to, or subtract from the terms of a written document. It argued that the Rs.45,00,000/- consideration in the 17.06.2004 agreement included construction costs, as evidenced by the subsequent registered sale deed dated 03.01.2007, which explicitly mentioned construction. The appellant relied on General Manager, ONGC v. Rameshbhai Patel to assert that post-notification transactions cannot be used to determine market value, and that the Reference Court’s reliance on a single, inflated transaction was arbitrary. It further argued that the valuer’s delayed testimony (recorded in 2012 for a 2006 inspection) lacked credibility.
For the Respondent
The respondents countered that the 17.06.2004 agreement was executed before the notification and clearly stated the land was purchased for development, with no construction at the time. They relied on State of Maharashtra v. Hitesh Deoraj Gosar, where the Bombay High Court held that unregistered agreements may be considered if they reflect genuine market transactions and are not tainted by fraud or collusion. They also cited Ram Kishan v. State of Haryana to demonstrate that proximity to urban infrastructure and existing development activity justify higher compensation. The respondents emphasized that the LAO had ignored multiple high-value transactions, including sales at Rs.1,50,000/- per R and Rs.1,09,756/- per R, and that the Reference Court’s award was conservative in light of these.
The Court's Analysis
The Court undertook a detailed review of the evidentiary and legal framework governing market value determination under Section 23 of the Land Acquisition Act, 1894. It emphasized that market value must be assessed based on the most relevant, contemporaneous, and genuine transactions occurring in the vicinity and before the notification date.
"Merely because the agreements in question were unregistered that would not be a factor to disregard the piece of evidence in its entirety."
The Court relied on its own judgment in State of Maharashtra v. Hitesh Deoraj Gosar, which held that unregistered agreements may be admitted for collateral purposes under Section 49 of the Indian Stamp Act, particularly when they reflect the true market conditions at the time of acquisition. The Court further cited S. Kaladevi v. State of Andhra Pradesh to affirm that registration of an agreement to sell is not mandatory under the law, and its absence does not render it inadmissible.
The Court rejected the appellant’s argument that the Rs.45,00,000/- consideration included construction. It noted that the 17.06.2004 agreement explicitly stated the land was being purchased for development, and the registered sale deed dated 03.01.2007, which mentioned construction, was executed after the notification and thus could not be used to retroactively alter the nature of the prior transaction.
The Court also acknowledged the relevance of Ram Kishan v. State of Haryana, recognizing that land near urban centers with educational, medical, and administrative infrastructure warrants higher valuation. It accepted the valuer’s testimony that prevailing rates were Rs.2,880/- per sq. ft., indicating non-agricultural use.
However, the Court found that the award of Rs.77,000/- per R did not account for the fact that the land was purchased for development, which inherently requires setting aside portions for roads, open spaces, and infrastructure. Citing Chimanlal Hargovinddas v. Special Land Acquisition Officer, the Court held that where land is acquired for development, a reasonable deduction must be made for such non-saleable portions. It concluded that 25% of the land area must be excluded from valuation to reflect the proportion reserved for public amenities.
Thus, while upholding the admissibility of the unregistered agreement and the overall methodology of the Reference Court, the Court modified the compensation rate by deducting 25% from Rs.77,000/-, resulting in a revised rate of Rs.57,750/- per R.
The Verdict
The appellant’s appeal was partly allowed. The Court modified the compensation rate from Rs.77,000/- per R to Rs.57,750/- per R, deducting 25% to account for land reserved for roads and open spaces. The award of compensation for mango trees remained unchanged. The respondents are entitled to withdraw the enhanced amount if deposited in the Court’s office; otherwise, the appellant must pay the revised amount within six months. Accrued interest shall be paid on the enhanced compensation from the date of possession. All pending civil applications are dismissed as infructuous.
What This Means For Similar Cases
Unregistered Agreements Are Admissible for Market Value
- Practitioners may now rely on unregistered sale agreements executed prior to notification as valid evidence of market value, provided they are genuine, contemporaneous, and not collusive.
- The burden shifts to the acquiring authority to prove fraud or inflation in such agreements.
- Section 92 of the Evidence Act does not bar the use of unregistered agreements for collateral purposes under Section 49 of the Stamp Act.
Proximity to Urban Infrastructure Justifies Higher Valuation
- Land near educational institutions, hospitals, courts, and municipal infrastructure qualifies for non-agricultural valuation even if technically outside city limits.
- Per sq. ft. valuation is appropriate where land has been de facto converted to non-agricultural use.
- Valuers must consider actual development patterns, not just official land use classifications.
Development Reserves Must Be Accounted For in Compensation
- When land is acquired for infrastructure or development projects, a standard deduction of 20-30% may be applied to reflect land reserved for roads, drainage, and public amenities.
- This deduction must be applied uniformly and transparently, with clear reasoning in the award.
- Failure to make such deductions may result in overcompensation, while excessive deductions may violate the principle of just compensation.
