Compensation under the 2013 Act: market value, solatium, apportionment and payment

1. Market value: section 26

The Collector adopts the highest of three figures:

• (a) the market value specified under the Indian Stamp Act, 1899 for registration of sale deeds or agreements to sell in the area (in Karnataka, the guidance value);
• (b) the average sale price for similar land in the nearest village or nearest vicinity; or
• (c) the consented amount agreed under section 2(2) for private company or PPP acquisitions.

The relevant date is the date of the section 11 preliminary notification. The Explanations control the average sale price:

• it is taken from sale deeds and agreements registered for similar land in the near village or vicinity during the three years immediately preceding the year of the proposed acquisition (Explanation 1);
• only the one-half of those transactions carrying the highest prices is used (Explanation 2);
• compensation paid in earlier acquisitions in the district is ignored (Explanation 3); and
• prices that in the Collector’s opinion do not reflect the real market may be discounted (Explanation 4).

Multiplier (section 26(2)). The market value so found is multiplied by the factor in the First Schedule: in urban areas the factor is one; in rural areas it ranges from one to two depending on the distance of the project from an urban area, as notified by the appropriate Government.

Floor price (section 26(3)). Where the market value cannot be found, because transactions are legally restricted in the area, or no sale deeds exist for three years, or no Stamp Act value has been fixed, the State specifies a floor price based on similar land in adjoining areas. The Requiring Body may offer its shares as part compensation, but not above 25 per cent of the value, and cannot compel an owner to take them. The Collector must revise and update market value before starting any acquisition. Land of minority educational institutions must be valued so as not to restrict their Article 30 right.

2. Compensation and its heads: sections 27 to 29

Section 27: the Collector calculates the total compensation by including all assets attached to the land. Section 28 lists the matters he must consider:

• firstly, market value under section 26 and the award amount under the First and Second Schedules;
• secondly, damage from taking standing crops and trees;
• thirdly, damage from severing the land from the owner’s other land;
• fourthly, damage from injurious affection of his other property, movable or immovable, or of his earnings;
• fifthly, reasonable expenses of a compelled change of residence or place of business;
• sixthly, bona fide diminution of profits between the section 19 declaration and possession; and
• seventhly, any other ground in the interest of equity, justice and benefit to the affected families.

Section 29: buildings and immovable assets are valued with the help of a competent engineer or specialist; trees and plants by experts in agriculture, forestry, horticulture or sericulture; standing crops by agricultural experts.

3. Solatium and the additional amount: section 30

• Solatium equal to 100 per cent of the compensation amount is added to arrive at the final award, in addition to compensation (section 30(1)). Under the 1894 Act it was 30 per cent.
• The Collector issues individual awards detailing what is payable (section 30(2)).
• An amount at 12 per cent a year on the market value is added for the period from the notification of the SIA study under section 4(2) to the date of the award or of possession, whichever is earlier (section 30(3)). Before the Authority, the period runs from the preliminary notification (section 69(2)).

Other enhancements: 75 per cent additional compensation in urgency cases (section 40(5)) and compensation equal to the full award for a second displacement (section 39).

Cost of acquisition (section 3(i)), a 6-mark question, is a wider total borne by the Requiring Body: compensation with solatium and any enhancement and interest; demurrage for damage to land and crops; cost of land and buildings for resettlement; infrastructure at the resettlement area; R&R costs; administrative costs; and the cost of the SIA study.

4. Apportionment: sections 75 and 76

Where several persons are interested (owner, mortgagee, tenant, co-owners) and they agree on apportionment, the particulars are specified in the award, which is conclusive between them (section 75). If a dispute arises on apportionment or on who is entitled, the Collector may refer it to the Authority (section 76). Section 23(c) already requires the award to apportion among all persons known or believed to be interested, whether they appeared or not, and a person aggrieved by the apportionment may seek a reference under section 64.

5. Payment and deposit: section 77

• On making the award, the Collector tenders payment and pays it by depositing it in the bank accounts of the persons entitled (section 77(1)).
• He deposits it with the Authority instead if the person entitled does not consent to receive it, if there is no one competent to alienate the land, or if there is a dispute about title or apportionment (section 77(2)).
• A person admitted to be interested may receive under protest as to the sufficiency of the amount. One who receives without protest cannot later seek a reference.
• A person who receives compensation remains liable to pay it over to whoever is lawfully entitled.

6. Investment and interest: sections 78 to 80

• Section 78: where deposited money belongs to land of a person with no power to alienate (a limited owner, a minor’s estate, a trust), the Authority orders it invested in other land held on the same title, or meanwhile in Government or approved securities, paying the income to the person entitled to possession. The costs are borne by the Collector.
• Section 79: other deposits may be invested on the application of a party so as to give the parties the same benefit as the land.
• Section 80: if compensation is not paid or deposited on or before possession, the Collector pays 9 per cent a year from possession until payment, and 15 per cent on any amount unpaid after one year from possession.

Compensation is exempt from income-tax and stamp duty (section 96).

7. Worked example

Two acres of rural land are acquired. The guidance value is ₹10 lakh an acre; the average of the top half of sale deeds is ₹12 lakh an acre; the notified rural factor is 1.5. A borewell and trees are valued at ₹6 lakh. The SIA was notified one year before the award.

• Market value: higher of ₹10 lakh and ₹12 lakh = ₹12 lakh × 2 acres = ₹24 lakh.
• After multiplier: ₹24 lakh × 1.5 = ₹36 lakh.
• Add assets: ₹36 lakh + ₹6 lakh = ₹42 lakh (compensation).
• Solatium at 100 per cent: ₹42 lakh. Sub-total ₹84 lakh.
• 12 per cent for one year on market value (₹24 lakh): ₹2.88 lakh.
• Award: ₹86.88 lakh, plus the separate R&R Award under section 31.

How this is examined

“Discuss the various elements to be considered in determining compensation” (June 2025) uses sections 1 to 3. “Explain the provisions relating to apportionment and payment of compensation” was an essay in January 2026 and August 2024: write sections 4 to 6, beginning with section 23(c). “Determination of market value” (June 2025, August 2024), “apportionment of compensation” (June 2025), “payment of compensation” (November 2022) and “cost of acquisition” (June 2025) are 6-mark short notes.