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CASE NO.:

Appeal (civil) 3148-3157 of 2000

PETITIONER:

Atma Singh (died) through LRs. & Ors

RESPONDENT:

State of Haryana & Anr

DATE OF JUDGMENT: 07/12/2007

BENCH:

G.P. Mathur & D.K. Jain

JUDGMENT:

J U D G M E N T

CIVIL APPEAL NOs. 3148-3157 OF 2000

G. P. MATHUR, J.

1. These appeals, by special leave, have been preferred against the

judgment and decree dated 4.1.1989 of High Court of Punjab and

Haryana at Chandigarh, by which 17 appeals preferred by claimant-

appellants (landowners) against the common judgment and award of

the Additional District Judge, Kurukshetra, dated 31.8.1985 had been

decided. The claimant-appellants had sought enhancement of the

amount of compensation for acquisition of their land.

2. A notification under Section 4 of the Land Acquisition Act

(hereinafter referred to as 'the Act') was issued for acquisition of 89

acres and 3 marlas of land for construction of a cooperative sugar

mill. The land was situate as one compact unit in four villages viz.

Kankar Shahbad, Chhapra, Jandheri and Jhambara and belonged to 17

families. In response to the notice issued by the Collector under

Section 9 of the Act, landowners filed objections claiming

compensation for their land which had been acquired. The Land

Acquisition Collector, after holding an enquiry, gave an award on

14.7.1983 under Section 11 of the Act. The Collector gave award on

the basis of quality of land, for which purpose he divided the acquired

land in seven categories and the market value was assessed at

Rs.6,000/- to Rs.35,000/- per acre for different types of lands. Feeling

aggrieved by the award of the Collector, the appellants herein

(landowners) sought reference to the Court under Section 18 of the

Act. The learned Additional District Judge awarded compensation at

a flat rate of Rs.43,000/- per acre by placing reliance on Ex. R-6 and

R-7, two instances of sale deeds of village Chhapra. After taking

average of these sale transactions, an addition of 25% was made for

fixing the market value of the land. Against the award made by the

learned Additional District Judge, the claimant-appellants

(landowners) preferred 17 appeals before the High Court. The High

Court after appraisal of evidence on record held that the market value

of the land acquired was Rs.1,20,000/- per acre. It further held that

the exemplars filed by the appellants were of small pieces of land and,

therefore, a deduction of 33% had to be made and accordingly the

market value of the land was assessed at Rs.80,000/- per acre.

Besides the market value, the appellants were also held entitled to

statutory sums under Section 23(1-A), 23(2) and 28 of the Act. The

State of Haryana had also filed appeals against the award of the

Additional District Judge, but the same were dismissed.

3. The appeals in this Court have only been filed by the

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landowners and the State of Haryana has not filed any appeal

challenging the judgment and decree of the High Court. We have

heard Shri M.L. Varma, learned Senior Advocate for the appellants

and Shri Rakesh Dwivedi, learned Senior Advocate for the Shahabad

Cooperative Sugar Mills Ltd., for whose benefit the land has been

acquired.

4. In order to determine the compensation which the tenure-

holders are entitled to get for their land which has been acquired, the

main question to be considered is what is the market value of the land.

Section 23(1) of the Act lays down what the Court has to take into

consideration while Section 24 lays down what the Court shall not

take into consideration and have to be neglected. The main object of

the enquiry before the Court is to determine the market value of the

land acquired. The expression 'market value' has been subject-matter

of consideration by this Court in several cases. The market value is

the price that a willing purchaser would pay to a willing seller for the

property having due regard to its existing condition with all its

existing advantages and its potential possibilities when led out in most

advantageous manner excluding any advantage due to carrying out of

the scheme for which the property is compulsorily acquired. In

considering market value disinclination of the vendor to part with his

land and the urgent necessity of the purchaser to buy should be

disregarded. The guiding star would be the conduct of hypothetical

willing vendor who would offer the land and a purchaser in normal

human conduct would be willing to buy as a prudent man in normal

market conditions but not an anxious dealing at arms length nor

facade of sale nor fictitious sale brought about in quick succession or

otherwise to inflate the market value. The determination of market

value is the prediction of an economic event viz., a price outcome of

hypothetical sale expressed in terms of probabilities. See Thakur

Kanta Prasad v. State of Bihar, AIR 1976 SC 2219; Prithvi Raj

Taneja v. State of M. P., AIR 1977 SC 1560; Administrator General

of West Bengal v. Collector, Varanasi, AIR 1988 SC 943 and Periyar

v. State of Kerala, AIR 1990 SC 2192.

5. For ascertaining the market value of the land, the potentiality of

the acquired land should also be taken into consideration. Potentiality

means capacity or possibility for changing or developing into state of

actuality. It is well settled that market value of a property has to be

determined having due regard to its existing condition with all its

existing advantages and its potential possibility when led out in its

most advantageous manner. The question whether a land has potential

value or not, is primarily one of fact depending upon its condition,

situation, user to which it is put or is reasonably capable of being put

and proximity to residential, commercial or industrial areas or

institutions. The existing amenities like, water, electricity, possibility

of their further extension, whether near about Town is developing or

has prospect of development have to be taken into consideration. See

Collector Raigarh v. Hari Singh Thakur, AIR 1979 SC 472,

Raghubans Narain v. State of U.P., AIR 1969 SC 465 and

Administrator General, W. B. v. Collector Varanasi, AIR 1988 SC

943. It has been held in Kaushalya Devi v. L.A.O. Aurangabad, AIR

1984 SC 892 and Suresh Kumar v. T.I. Trust, AIR 1980 SC 1222 that

failing to consider potential value of the acquired land is an error of

principle.

6. As mentioned earlier, the learned Additional District Judge had

awarded compensation at a flat rate of Rs.43,000/- per acre by placing

reliance on Ex. R-6 and R-7, two instances of sale of village Chhapra.

After taking an average of these two sale transactions, an addition of

25% was made while fixing the market value of the land. The High

Court held that these two sale deeds were of 31.12.1980, while in the

instant case, the notification under Section 4 of the Act was published

much later on 9.2.1983. That apart, Ex.R-6 and R-7 were mutation

orders and the corresponding sale deeds had not been brought on the

record. In fact, the learned Additional District Judge, in the earlier

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part of the judgment, had himself discarded Ex. R-6 and R-7 as they

were mutation orders and were inadmissible in evidence. The High

Court, therefore, rightly held that no reliance could be placed upon

Ex.R-6 and R-7 for determining the market value of the land.

7. The claimant-appellants (landowners) had filed copies of four

sale deeds which are Exs.P-7, P-8, P-9 and P-10. In fact, Ex. P-7 is a

copy of a sale deed by which Laxman Singh bought some land in

village Chhapra on 28.7.1982, which itself became subject matter of

acquisition. Laxman Singh had deposed that he had bought the land

for construction of shops. All these four sale deeds related to sale

transactions prior to the issuance of the notification under Section 4 of

the Act on 9.2.1983. The High Court excluded Ex.P-8 from

consideration as it related to a very small piece of land measuring 19

marlas only. The average price of the three sale deeds viz. Ex. P-7, P-

9 and P-10 came to little more than Rs.1,20,000/- per acre. Apart

from these three sale deeds, no other exemplars were filed either by

the State of Haryana or by the landowners. The High Court accepted

the price exhibited by the aforesaid three sale transactions which came

to little more than Rs.1,20,000/- per acre. It thus recorded a finding

that the market value of the land was Rs.1,20,000/- per acre. In our

opinion, there being no other documentary evidence, the view taken

by the High Court that the market value of the land was Rs.1,20,000/-

per acre is perfectly correct and calls for no interference.

8. Shri Rakesh Dwivedi, learned senior counsel for the sugar mill

has submitted that the exemplars filed by the appellants were of very

small pieces of land and, therefore, they are not safe guide to

determine the market value of the land. It may be mentioned here that

while determining the market value, the potentiality of the land

acquired has also to be taken into consideration. The appellants have

led evidence to show that the acquired land had the potentiality to be

used for commercial, industrial and residential purposes. PW.1

Rakesh Kumar had prepared a site plan which showed that the

acquired land was adjacent to the abadi of Shahabad and abutted the

Shahabad-Ladwa Road. The site plan also shows that there existed

rice shellers, cold storage, shops, godowns, a college and houses etc.

on both sides of Shahabad-Ladwa Road. PW.2 Baldev Singh was

Patwari of village Chhapra in the year 1983. He deposed that all the

four villages viz. Kankar Shahbad, Chhapra, Jandheri and Jhambara

are adjacent to each other and the acquired land abutted the Shahabad-

Ladwa Road. He further deposed that the acquired land was 2

kilometer from G.T. Road and there were buildings, godowns, a

cinema hall, factories on both sides of the Shahabad-Ladwa Road.

Therefore, there can be no manner of doubt that the acquired land had

the potentiality for being used for commercial, industrial and

residential purposes and there was fair possibility of increase in its

market value in the near future. Therefore, the fact that the exemplars

filed by the appellants were of the small pieces of land could not be a

ground to discard them specially when exemplars of large pieces of

land were not available. They could, therefore, be used as a safe guide

for determining the market value of the land.

9. Learned counsel for the appellants has seriously challenged the

finding of the High Court that the market value of the land determined

on the basis of the exemplars filed by the parties should be reduced by

one-third on account of the fact that the exemplars relied upon for

ascertaining the market value related to sale of small pieces of land.

According to Shri M.L. Verma, learned senior counsel for the

appellants, there is no uniform principle that if a large area has been

acquired and the exemplars are of small pieces of land, the market

value exhibited by the exemplars must necessarily be reduced by one-

third. Shri Verma has placed strong reliance on Bhagwathula

Samanna & Ors. v. Special Tehsildar & Land Acquisition Officer,

Visakhapatnam Municipality (1991) 4 SCC 506, wherein it was held

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as under :-

"In fixing the market value of a large property on

the basis of a sale transaction for smaller property,

generally a deduction is given taking into consideration

the expenses required for development of the larger tract

to make smaller plots within that area in order to

compare with the small plots dealt with under the sale

transaction. However, in applying this principle of

deduction it is necessary to consider all relevant facts. It

is not the extent of the area covered under the acquisition

which is the only relevant factor. If smaller area within

the large tract is already developed and situated in an

advantageous position suitable for building purposes and

have all amenities such as roads, drainage, electricity,

communications etc. then the principle of deduction

simply for the reason that it is part of the large tract

acquired, may not be justified.

In the present cases the lands covered by the

acquisition are located by the side of the National

Highway and the Southern Railway Staff Quarters with

the Town Planning Trust road on the north. The

neighbouring areas are already developed ones and

houses have been constructed, and the land has potential

value for being used as building sites. Having found that

the land is to be valued only as building sites and having

stated the advantageous position in which the land in

question lies though forming part of the larger area, the

High Court should not have applied the principles of

deduction. It is not in every case that such deduction is

to be allowed. Therefore, the High Court erred in

making a deduction of one third of the value of the

comparable sale and thus reducing the fair market value

of land from Rs. 10 per sq. yard to Rs.6.50 per sq. yard."

Shri Verma has also referred to Kasturi & Ors. v. State of

Haryana (2003) 1 SCC 354, wherein it was observed that in cases of

those land where there are certain advantages by virtue of the

developed area around, it may help in reducing the percentage of cut

to be applied, as the development charges required may be less on that

account. There may be various factual factors which may have to be

taken into consideration while applying the cut in payment of

compensation towards development charges, may be in some cases it

is more than 1/3rd and in some cases less than 1/3rd. Therefore, in this

case taking into consideration the potentiality of the acquired land for

construction of residential and commercial buildings, the deduction

made was only 20%.

10. Shri Rakesh Dwivedi, learned senior counsel for the sugar mill

has, on the other hand, strenuously urged that the evidence of market

value shown by sale of small plots is not a safe guide in valuing large

areas of land and the prices fetched for small plots cannot be directly

adopted in valuing large extent of land as has been acquired in the

present case. He has thus contended that a deduction of 30% had

rightly been made by the High Court on account of acquisition of a

large area. In support of his contention, Shri Dwivedi has placed

reliance upon several decisions of this Court. In order to appreciate

the principle laid down therein, it will be useful to refer to them in

some detail. In Administrator General of West Bengal v. Collector,

Varanasi, AIR 1988 SC 943, it was held as follows in para 6 of the

report:-

"The principle requires that prices fetched for small

developed plots cannot directly be adopted in valuing

large extents. However, if it is shown that the large extent

to be valued does admit of and is ripe for use for building

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purposes; that building lots that could be laid out on the

land would be good selling propositions and that

valuation on the basis of the method of a hypothetical lay

out could with justification be adopted, then in valuing

such small laid out sites the valuation indicated by sale of

comparable small sites in the area at or about the time of

the notification would be relevant. In such a case,

necessary deductions for the extent of land required for

the formation of roads and other civic amenities;

expenses of development of the sites by laying out roads,

drains, sewers, water and electricity lines, and the interest

on the outlays for the period of deferment of the

realisation of the prices; the profits on the venture etc. are

to be made."

11. In Chimanlal v. Special Land Acquisition Officer, AIR 1988 SC

1652 it was held as follows in para 4 (15) of the reports.

"Firstly while a smaller plot is within the

reach of many, a large block of land will have to

be developed by preparing a lay out, carving out

roads, leaving open space, plotting out smaller

plots, waiting for purchasers (meanwhile the

invested money will be blocked up) and the

hazards of an entrepreneur. The factor can be

discounted by making a deduction by way of an

allowance at an appropriate rate ranging approx,

between 20% to 50% to account for land required

to be set apart for carving out lands and plotting

out small plots. The discounting will to some

extent also depend on whether it is a rural area or

urban area, whether building activity is picking up,

and whether waiting period during which the

capital of the entrepreneur would be locked up,

will be longer or shorter and the attendant

hazards"."

12. Shri Dwivedi has also referred to Basant Kumar & Ors. v.

Union of India & Ors. (1996) 11 SCC 542, K. Vasundara Devi v.

Revenue Divisional Officer (LAO) (1995) 5 SCC 426, H.P. Housing

Board v. Bharat S. Negi & Ors. (2004) 2 SCC 184. In the first cited

case land was acquired for planned development of Delhi and in the

other two cases for Housing Boards and a deduction of 33% was

applied.

13. The reasons given for the principle that price fetched for small

plots cannot form safe basis for valuation of large tracks of land,

according to cases referred to above, are that substantial area is used

for development of sites like laying out roads, drains, sewers, water

and electricity lines and other civic amenities. Expenses are also

incurred in providing these basic amenities. That apart it takes

considerable period in carving out the roads making sewers and drains

and waiting for the purchasers. Meanwhile the invested money is

blocked up and the return on the investment flows after a considerable

period of time. In order to make up for the area of land which is used

in providing civic amenities and the waiting period during which the

capital of the entrepreneur gets locked up a deduction from 20%

onward, depending upon the facts of each case, is made.

14. The question to be considered is whether in the present case

those factors exist which warrant a deduction by way of allowance

from the price exhibited by the exemplars of small plots which have

been filed by the parties. The land has not been acquired for a

Housing Colony or Government Office or an Institution. The land has

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been acquired for setting up a sugar factory. The factory would

produce goods worth many crores in a year. A sugar factory apart

from producing sugar also produces many by-product in the same

process. One of the by-products is molasses, which is produced in

huge quantity. Earlier, it had no utility and its disposal used to be a big

problem. But now molasses is used for production of alcohol and

ethanol which yield lot of revenue. Another by-product begasse is

now used for generation of power and press mud is utilized in manure.

Therefore, the profit from a sugar factory is substantial. Moreover, it

is not confined to one year but will accrue every year so long as the

factory runs. A housing board does not run on business lines. Once

plots are carved out after acquisition of land and are sold to public,

there is no scope for earning any money in future. An industry

established on acquired land, if run efficiently, earns money or makes

profit every year. The return from the land acquired for the purpose

of Housing Colony, or Offices, or Institution cannot even remotely be

compared with the land which has been acquired for the purpose of

setting up a factory or industry. After all the factory cannot be set up

without land and if such land is giving substantial return, there is no

justification for making any deduction from the price exhibited by the

exemplars even if they are of small plots. It is possible that a part of

the acquired land might be used for construction of residential colony

for the staff working in the factory. Nevertheless where the remaining

part of the acquired land is contributing to production of goods

yielding good profit, it would not be proper to make a deduction in the

price of land shown by the exemplars of small plots as the reasons for

doing so assigned in various decisions of this Court are not applicable

in the case under consideration.

15. Having regard to the entire facts and circumstances of the case,

we are of the opinion that a deduction of 10% from the market value

of the land, which has been arrived at by the High Court would meet

the ends of justice. Therefore, the market value of the acquired land

for the purpose of payment of compensation to the land owners has to

be assessed at Rs.1,08,000/- per acre.

16. In the result, the appeals are partly allowed. The claimant-

appellants will be entitled to compensation at the rate of Rs.1,08,000/-

per acre. Besides the above amount, they will also be entitled to the

statutory sum in accordance with Section 23(1-A) and solatium at the

rate of 30% on the market value of the land in accordance with

Section 23(2) of the Act. They will also be entitled to interest as

provided in Section 28 of the Act. The appellants will be entitled to

their costs.