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PETITIONER:

BHAGAWATHULLA SAMANNA AND ORS.

Vs.

RESPONDENT:

SPECIAL TAHSILDAR AND LAND ACQUISITION OFFICERVISAKHAPATNAM

DATE OF JUDGMENT18/09/1991

BENCH:

FATHIMA BEEVI, M. (J)

BENCH:

FATHIMA BEEVI, M. (J)

KASLIWAL, N.M. (J)

CITATION:

1992 AIR 2298 1991 SCR Supl. (1) 172

1991 SCC (4) 506 JT 1991 (4) 56

1991 SCALE (2)613

ACT:

Land Acquisition Act, 1894:

Section 24--Compensation--Award of--Expenses required

for development of the land---Deduction of one-third value

thereof--Whether and when justified.

HEADNOTE:

The appellants' lands were acquired under the Land

Acquisition Act. The appellants claimed land value at the

rate of Rs. 10 per sq. yard, but the Land Acquisition Offi-

cer awarded compensation at the rate of Rs.0.88 per sq.

yard. On a reference the Sub-Judge determined the market

value at Rs. 11 per sq. yard on the basis of certain com-

parable transactions, but granted the compensation at the

rate of Rs. I0 as the appellants themselves had claimed only

at that rate. On an appeal preferred by the Respondent-

State, the High Court determined the market value of the

lands at the rate of Rs. 6.50 per sq. yard and reduced the

total compensation, following the decision of this Court in

Tribeni Devi v. Collector, Ranchi, AIR 1972 SC 141 that a

deduction of 1/3 of the value is to be made when large

extent of land is acquired under housing scheme.

Aggrieved by the High Court's decision, the appellants

preferred the present appeals, contending that the High

Court had erroneously applied the principle laid down in

Tribeni Devi's case without properly appreciating the

nature of the land in question and the purpose for which it

had been acquired. It was further contended that there was

no justification for making any deduction since the land in

question was fully developed and eminently suitable for

being used as house sites. Even in respect of the land

acquired for the purpose of formation of the road, it was

argued, the High Court wrongly proceeded on the basis that

expenses have to be incurred for development.

On behalf of the Respondents, it was contended that the

appellants' lands form part of large tract acquired for the

purpose of construction of

173

houses, that the other transaction based .on which compensa-

tion was decided by the Sub-Judge, related to small plots of

land which were fully developed and while comparing the

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transactions, it was necessary to take into account the

development that is required to be made for bringing the

acquired land suitable for the purpose of construction and

that 1/3 of the value was rightly deducted.

Allowing the appeals, this Court,

HELD 1. The principle of deduction in the laud value

covered by the comparable sale is adopted in order to arrive

at the market value of the acquired land. In applying the

principle it is necessary to consider all relevant facts.

It is not the extent of the area covered under the acquisi-

tion, the only relevant factor. Even in the vast area there

may be land which is fully developed having all amenities

and situated in an advantageous position. If smaller area

within the large tract is already developed and suitable for

building purposes and have in its vicinity 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. [177-D].

Tribeni Devi v. Collector, Ranchi, AIR 1972 SC 1417,

distinguished.

Kaushalya Devi v. Land Acquisition Officer, [1984] 2 SCR

900; Administrator General of West Bengal v. Collector,

Varanasi, AIR 1988 SC 943; Special Tahsildar, Land Acquisi-

tion, Vishakapatnam v. Smt, A. Mangala Gown, 1991 (2) Scale

301, relied on.

2 In the instant case, the lands involved are of even

level and fit for construction without the necessity for

levelling or reclamation. Having found that the land is to

be valued only as building sites and 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. [177 F-H]

3. The proposition that large area of land cannot

possibly fetch a price at the same rate at which small plots

are sold is not absolute proposition and in given circum-

stances it would be permissible to take into account the

price fetched by the small plots of land. If the larger

tract of land because of advantageous position is capable of

being used for the purpose for which the smaller plots are

used and is also situated in a

174

developed area with little or no requirement of further

development, the principle of deduction of the value for

purpose of comparison is not warranted. With regard to the

nature of the plots involved in these two cases, it has been

satisfactorily shown on the evidence on record that the land

has facilities of road and other amenities and is adjacent

to a developed colony and in such circumstances it is possi-

ble to utilise the entire area in question as house sites.

In respect of the land acquired for the road, the same

advantages are available and it did not require any further

development. [178-B,C).

JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 1221 &

1222 of 1977.

From the Judgment dated 20.1.1976 of the Andhra Pradesh

High Court in Appeal Nos. 758 and 632 of 1975.

Mrs. Shyamala Pappu and Ms. Indira Sawhney for the Appel-

lants.

T.V.S.N. Chari for the Respondent.

The Judgment of the Court was delivered by

FATHIMA BEEVI, J. The appellants arc aggrieved that the

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High Court by the common judgment dated 20.1.1976 in two

cases had substantially reduced on erroneous grounds the

enhanced compensation allowed by the Subordinate Judge on

reference under Section 18 of the Land Acquisition Act (for

short the Act).

Civil Appeal No. 1222 of 1977 relates to acquisition of

Ac. 8.33 cents of land in Survey No. 2/1 of Dondaparthi

village in pursuance to Notification under Section 4(1) of

the Act published on 7.7.1966 for construction of quarters

for the staff of Porl Trust.

Civil Appeal No. 1221 of 1977 relates to acquisition of

Ac.1.68 cents of land in Survey No. 2/2A of the same village

in pursuance to the Notification published on 1.8.1968 for

the purpose of formation of the national highway diversion

road.

The appellants claimed land value at the rate of Rs. 10

per sq. yard since the Land Acquisition Officer awarded only

0.88 paise per sq. yard. The learned Subordinate Judge

determined the market value of the land at the rate of Rs.

11 per sq- yard accepting as basis the value of land under

the transactions evidenced by Exhibits A-1 to A-4, but

granted the compensa-

175

tion at the rate of Rs. 10 per sq. yard as the claimants

themselves had claimed compensation at the rate of Rs. 10

per sq. yard. The State preferred appeal against the said

judgment of the 'Subordinate Judge to the High Court of

Andhra Pradesh. The High Court accepted Exhibits A-I to A-4

as reflecting the value of land in the neighbourhood. It

however following the decision of this Court in Tribeni Devi

v. Collector, Ranchi, AIR 1972 SC 1417, that a deduction of

1/3 of the value is to be made when large extent of land is

acquired under housing scheme, determined the market value

of the appellants land at the rate of Rs. 6.50 paise per sq.

yard and accordingly reduced the total compensation allowed

by the Subordinate Judge.

The learned counsel for the appellants contended before

us that the High Court had erroneously applied the principle

laid down in Tribeni Devi's case (supra) without properly

appreciating the nature of the land in question and the

purpose for which it had been acquired. It was submitted

that the land in question was fully developed and eminently

suitable for being used as house sites and, therefore,

there was no justification for making any deduction. It is

also pointed out that even in respect of the land acquired

for the purpose of formation of the road, the High Court

wrongly proceeded on the basis that expenses have to be

incurred for development and thus in awarding the compensa-

tion, the High Court wrongly applied principles of deduction

of 1/3 of the value. The learned counsel has taken us

through the relevant evidence and maintained that the

learned Subordinate Judge had reduced the land value to Rs.

10 per sq. yard though the market value was higher at Rs. 11

per sq. yard only because the appellants had themselves

limited the claim to Rs. 10 per sq. yard

The learned counsel for the respondent maintained that

the appellants' land forms part of large tract acquired for

the purpose of construction of houses, that the sale deed

Exhibits A-1 to A-4 relate to small plots which are fully

developed and when the transaction is compared, it is neces-

sary to take into account the development that is required

to be made for bringing the acquired land suitable for the

purpose of construction and that the High Court was right in

making the deduction of 1/3 of the value in the facts and

circumstances of the case.

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In awarding compensation in acquisition proceedings, the

Court has necessarily to determine the market value of the

land as on the date of the relevant Notification. It is

useful to consider the value paid for similar land at the

material time under genuine transactions. The market value

envisages the price which a willing purchaser may pay under

bona fide trans-

176

fer to a willing seller. The land value can differ depending

upon the extent and nature of the land sold. A fully de-

veloped small plot in an important locality may fetch a

higher value than a larger area in an undeveloped condition

and situated in a remote locality. By comparing the price

shown in the transactions all variables have to be taken

into consideration. The transaction in regard to smaller

property cannot, therefore, be taken as a real basis for

fixing the compensation for larger tracts of property. In

fixing the market value of a large property on the basis of

a sale transaction for smaller property, generally a deduc-

tion is given taking into consideration the expenses re-

quired 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. This principle

has been stated by this Court in Tribeni Devi's case

(supra).

In Kaushalya Devi v. Land Acquisition Officer, [1984] 2

SCR 900, this Court observed at pages 912-913 as under:

"When large tracts are acquired, the transac-

tion in respect of small properties do not

offer a proper

guideline ........................In certain

other cases this Court indicated that for

determining the market value of a large

property on the basis of a sale transaction

for smaller property a deduction should be

given."

We shall also refer to the observations of this Court in

Administrator General of West Bengal v. Collector, Varanasi,

AIR 1988 SC 943: --

"The principle that evidence of market value

of sales of small, developed plots is not a

safe guide in valuing large extents of land

has to be understood in its proper perspec-

tive. 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 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 valua-

tion 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 price; the

profits on the venture etc. are to be made."

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177

This Court has in a recent decision in Special Tahsil-

dar Land Acquisition, Vishakapatnam v. Smt. A. Mangala

Gowri, 1991(2) Scale 301, following Tribeni Devi's case

pointed out as under:-

"It is to be noted that in building Regula-

tions setting apart the lands for development

of roads, drainage and other amenities like

electricity etc. are condition precedent to

approve lay out for building colonies. There-

fore, based upon the .situation of the land

and the need for development the deduction

shall be made. Where acquired land is in the

midst of already developed land with amenities

of roads, drainage, electricity etc. then

deduction of 1/3 would not be justified. In

the rural areas housing schemes relating to

weaker sections deduction of 1/4 may be justi-

fied."

The principle of deduction in the land value covered by

the comparable sale is thus adopted in order to arrive at

the market value of the acquired land. In applying the

principle it is necessary to consider all relevant facts. It

is not the extent of the area covered under the acquisition,

the only relevant factor. Even in the vast area there may be

land which is fully developed having all amenities and

situated in an advantageous position. lf smaller area within

the large tract is already developed and suitable for build-

ing purposes and have in its vicinity 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.

The national highway runs very near to the proposed

Port-trust colony. The lands acquired already for the South

Eastern Railway Staff Quarters lie to the southern side of

the land under acquisition. The town planning trust road

runs on the northern side of the land under acquisition. The

colony is in the fast developing part of the municipal town.

The plot of Ac. 1.68 cents in Survey No. 2/2A acquired for

the formation of the diversion road is adjacent to

built-in-area. The land involved in these cases is of even

level and fit for construction without the necessity for

levelling or reclamation. The High Court has itself conclud-

ed on the evidence that 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 de-

veloped 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 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 deduc-

tion. It is not in every case that such deduction is to be

allowed. Where the acquired land is in the

178

midst of already developed land with amenities of roads,

electricity etc., the deduction in the value of the compara-

ble land is not warranted.

The proposition that large area of land cannot possibly

fetch a price at the same rate at which small plots are sold

is not absolute proposition and in given circumstances it

would be permissible to take into account the price fetched

by the small plots of land. If the larger tract of land

because of advantageous position is capable of being used

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for the purpose for which the smaller plots are used and is

also situated in a developed area with little or no require-

ment of further development, the principle of deduction of

the value for purpose of comparison is not warranted. With

regard to the nature of the plots involved in these two

cases, it has been satisfactorily shown on the evidence on

record that the land has facilities of road and other ameni-

ties and is adjacent to a developed colony and in such

circumstances it is possible to utilise the entire area in

question as house sites. In respect of the land acquired for

the road, the same advantages are available and it did not

require any further development. We are, therefore, of the

view that the High Court has erred in applying the principle

of deduction; and reducing the fair market value of land

from Rs. 10 per sq. yard to Rs. 6.50 paise per sq. yard. In

our opinion, no such deduction is justified in the facts and

circumstances of these cases. The appellants, therefore,

succeed.

In the result, the appeals are allowed and the respond-

ent is directed to pay the compensation as determined by the

learned Subordinate Judge with interest and solatium in

accordance with law. In the circumstances of the case, we

make no order as to costs.

G.N. Appeals allowed.

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