One sale deed is not enough: Supreme court on the methodology for determining compensation under section 26 of the 2013 LA Act

Case: Project Director, National Highways Authority of India v. Alfa Remidis Ltd. and Ors.

Citation:2026 INSC 480

Supreme Court Clarifies Compensation Methodology Under Section 26 of the 2013 LA Act: One Sale Deed is Insufficient.

Background

Alfa Remidis Ltd. owned 1,394 square meters of land in Survey No. 66 of Mouza Pardi (Rithi), Tahsil Saoner, Nagpur District. The land was acquired for the four-laning of National Highway No. 547-E pursuant to a notification dated May 9, 2017 issued under Section 3A(1) of the National Highways Act, 1956. The Deputy Collector, Land Acquisition, Nagpur, by order dated March 27, 2018, classified the land as fallow or dry crop agricultural land and awarded compensation at Rs. 161.63 per square meter, based on three sale deeds relating to agricultural land in the same village. Before the Arbitrator

Alfa Remidis challenged this determination under Section 3G(5) of the National Highways Act before the Arbitrator, the Additional Commissioner, Nagpur Division. It contended that its land had been wrongly treated as agricultural land, as it was in fact being used for production of paracetamol medicine, making it industrial land. In support of the correct valuation, it placed reliance on two figures: first, the Ready Reckoner rate of Rs. 2,020 per square meter, being the Government's stamp duty rate for lands abutting the highway in the relevant zone; and second, a registered sale deed dated March 29, 2017 for a residential plot of 195.09 square meters in Mouza Saoner, a nearby village, showing a price of Rs. 3,588 per square meter.

The Arbitrator accepted that the land was in non-agricultural use. However, instead of applying the Ready Reckoner rate, the Arbitrator adopted the rate from the single sale deed of March 29, 2017 and directed payment of compensation at Rs. 3,588 per square meter.

Before the District Court and the High Court

NHAI and the Government of India challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996 before the District Judge, Nagpur, contending that the Arbitrator had acted in contravention of Section 26(1) of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. The District Judge agreed and set aside the award.

On appeal under Section 37 of the Arbitration Act, the Bombay High Court reversed the District Judge and restored the award. The High Court found that Alfa Remidis's land was correctly identified as non-agricultural and that the Arbitrator had rightly adopted the rate from the sale deed of a non-agricultural plot in the nearby village. The High Court noted that the Ready Reckoner rate had not been considered by the Arbitrator but did not disturb the award on that account. NHAI approached the Supreme Court. What the Supreme Court Held

The Supreme Court allowed the appeal, set aside the High Court's order, and fixed compensation at Rs. 2,020 per square meter. The Court's reasoning turned on a close reading of Section 26(1) of the 2013 LA Act and its applicability to compensation under the National Highways Act.

First, the Court confirmed that the provisions of the 2013 LA Act, including Sections 26 to 28 on determination of compensation, apply to land acquisitions under the National Highways Act. This was settled by the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Removal of Difficulties) Order, 2015, which took effect from September 1, 2015, and the Court's earlier decision in National Highways Authority of India v. P. Nagaraju alias Cheluvaiah.

Second, the Court set out the structure of Section 26(1), which requires the Collector to adopt the higher of three options: the market value specified in the Indian Stamp Act for registration of sale deeds in the area where the land is situated (clause a); the average sale price for similar type of land in the nearest village or vicinity (clause b); or the consented amount of compensation in the case of private company or public private partnership acquisitions (clause c, not relevant here).

Third, the Court held that the Arbitrator had erred on two distinct counts under clause (b). The land being acquired was industrial land, while the sale deed relied upon was of a residential plot. The two were not of a similar type, and a sale deed of a dissimilar type of land could not be used under Section 26(1)(b). Furthermore, the methodology prescribed under Explanations 1 and 2 to Section 26 for calculating the average sale price requires multiple sale deeds to be considered. Reliance on a single sale deed is impermissible. In this respect, the Court referred to its earlier decision in Madhya Pradesh Road Development Corporation v. Vincent Daniel and Others, where it had held that the language of Section 26(1) implies the availability of multiple deeds, as a single transaction does not supply adequate or reliable data.

Fourth, the Court found that since the Ready Reckoner rate of Rs. 2,020 per square meter was available and Mouza Pardi (Rithi) fell within Zone 4 where that rate applied, the correct provision to be applied was Section 26(1)(a), which operates on the basis of the stamp duty value. This was the figure cited by Alfa Remidis itself before the Arbitrator.

The Court also addressed the question of patent illegality under Section 34(2A) of the Arbitration Act. It held that while the proviso to Section 34(2A) protects arbitral awards from being set aside merely for erroneous application of law or reappreciation of evidence, that protection does not extend to an award where the Arbitrator has completely disregarded the mandatory directives of a statutory provision and its explanations. The present case was one such instance. Direction of the Court

The Court directed that Alfa Remidis would be entitled to compensation for its 1,394 square meters at Rs. 2,020 per square meter, along with all consequential statutory benefits under the 2013 LA Act. The sum of Rs. 50,00,000 already withdrawn by Alfa Remidis pursuant to the interim order of November 14, 2025 was to be taken into account while computing the balance payable. Parties were directed to bear their own costs.