1 Neutral Citation No. ( 2026:HHC:10214-DB )

IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA

RFA No. 3 of 2012 with RFAs No. 622,

623 & 624 of 2011 with Cross

Objections No. 1000 to 1003 of 2012

Reserved on:12.03.2026

Decided on: 06.04.2026

1. RFA No. 03 of 2012 & Cross Objection No. 1003 of 2012:

Surinder Singh ....Appellant/Non-objector.

Versus

Collector Land Acquisition & another

…Respondents/Cross Objectors.

2. RFA No. 622 of 2011 & Cross Objection No. 1000 of

2012:

Biri Singh & another ....Appellants/Non-objectors.

Versus

Collector Land Acquisition & another

…Respondents/Cross Objectors.

3. RFA No. 623 of 2011 & Cross Objection No. 1001 of

2012:

Ravi Singh ....Appellant/Non-objector.

Versus

Collector Land Acquisition & another

…Respondents/Cross Objectors.

4. RFA No. 624 of 2011 & Cross Objection No. 1002 of

2012:

Geeta Devi & another ....Appellants/Non-objectors.

Versus

Collector Land Acquisition & another

…Respondents/Cross Objectors.

Coram:

The Hon’ble Mr. Justice Sushil Kukreja, Judge.

Whether approved for reporting?

1

Yes.

1 Whether reporters of Local Papers may be allowed to see the judgment?

2 Neutral Citation No. ( 2026:HHC:10214-DB )

_________________________________________________

For the appellant(s): Mr.V.S. Chauhan, Senior

Advocate, with Ms. Bhavani Negi,

Advocate, in RFA No. 03 of 2012

and Mr. Deepak Kaushal, Senior

Advocate, with Mr. Aditya

Chouhan and Mr. G.R. Palsra,

Advocates, in RFAs No. 622 to

624 of 2011.

For the respondent/State: Mr. B.N. Sharma, Mr. Manoj

Chauhan and Mr. Raj Negi,

Additional Advocates Genera, with

Mr. Ankush Thakur, Mr. Balvinder

Singh Ballu and Ms. Archna Negi,

Deputy Advocates General.

For the cross-objectors: Mr. Bhupinder Gupta, Senior

Advocate, with Mr. Ajeet Singh

Pal, Advocate, in all the Cross

Objections.

Sushil Kukreja, Judge.

Since all these appeals and cross objections are

the offshoots of award, dated 16.08.2011, passed by learned

Additional District Judge, Mandi, H.P. (hereinafter referred to as

“the learned Reference Court”), the same are taken up together

and being disposed of by a common judgment.

2. The instant appeals have been preferred by the

appellants, who were petitioners/claimants before the learned

Reference Court, under Section 96 of the Code of Civil

Procedure read with Section 54 of the Land Acquisition Act (for

short “the Act”) against award dated 16.08.2011, passed by

3 Neutral Citation No. ( 2026:HHC:10214-DB )

learned Reference Court, with a prayer that the appeals be

allowed by setting-aside the impugned award, passed in their

petitions and the market value of their acquired land be

assessed and declared as not less than Rs.35,000/- per biswa,

irrespective of the classification. On the other hand, Himachal

Pradesh Housing and Urban Development Authority

(respondent No. 2 before the learned Reference Court)

preferred cross objections in all the appeals under Section 41

Rule 22 CPC against the impugned award with a prayer that

the cross objection(s) be allowed and impugned award passed

by the learned Reference Court be suitably modified so as to

bring the same in conformity with the provisions of the Act.

3. The facts giving rise to the instant appeals and

cross objections are that Government of Himachal Pradesh

issued notification for acquisition of land measuring 37-16-01,

situated in Muhal Sanyard, Tehsil and District Mandi, H.P., and

the said notification was published in Rajpatra on 17.08.1999

and also in news-papers, i.e., Divya Himachal and Virpartap on

10.09.1999. Subsequently, notification under Sections 6 and 7

of the Act was issued on 26.07.2000 and the same was

published in Rajpatra on 07.08.2000 and also in two daily

newspapers, i.e., Dainik Virpartap and Ajit Samachar on

4 Neutral Citation No. ( 2026:HHC:10214-DB )

14.08.2000. Ultimately, the Land Acquisition Collector

determined the value of various types of land as under:

Classification of the land Rate per bigha

Barani bagicha phaldar Rs.4,05,280/-

Barani abal Rs.3,09,026/-

Barani doam Rs.2,53,300/-

Banjar kadeem Rs.75,990/-

Karater Rs.60,792/-

4. On the basis of the above valuation, the Land

Acquisition Collector awarded compensation of Rs.81,740/- for

forest trees and Rs.2,47,876/- for fruit trees. The total

compensation awarded to the petitioners/claimants was to the

extent of Rs.1,24,59,550/-.

5. The petitioners/claimants feeling aggrieved filed

present reference petitions under Section 18 of the Act before

the learned Reference Court below for enhancement of the

compensation and the learned Reference Court, after

considering all the material, passed the impugned award, dated

16.08.2011, whereby the petitioners/claimants were held

entitled for enhanced compensation at the rate of Rs.12,741/-

per biswa qua the acquired land alongwith solatium, additional

amount of compensation and interest etc..

5 Neutral Citation No. ( 2026:HHC:10214-DB )

6. The petitioners/claimants still feeling dissatisfied,

preferred the instant appeals with a prayer that the appeals be

allowed by modifying the impugned award, passed in their

petitions and the market value of their acquired land be

assessed as not less than Rs.35,000/- per biswa, irrespective

of the classification. Conversely, cross-objector, i.e., H.P.

Housing & Urban Development Authority, preferred cross-

objections in all the appeals with a prayer that the cross

objection(s) be allowed and impugned award passed by the

learned Reference Court be suitably modified so as to bring the

same in conformity with the provisions of the Act.

7. The learned Senior Counsel for the appellants

contended that the impugned award is wrong, illegal and

against the material placed and proved on record and the

learned Reference Court gravely erred in assessing the market

value @ Rs.19,111/- per biswa as the market value of the

acquired land was not less than Rs.35,000/- per biswa. They

further contended that the learned Reference Court had also

erred in deducting 33⅓ from the market value of the land, thus,

arising at payable price of Rs.12,741/- per biswa. They also

contended that the learned Reference Court had grossly

6 Neutral Citation No. ( 2026:HHC:10214-DB )

misread and mis-appreciated the oral as well as documentary

evidence on record and cogent evidence was ignored.

8. Conversely, learned Senior Counsel for the cross-

objector(s) contended that the impugned award suffers from

legal infirmities. He contended that the learned Reference

Court also gravely erred in law in directing the payment of

interest from the date of award, i.e., 26.07.2002, whereas

interest, as per the provisions of the Act, was payable from the

date of taking of possession. The possession was taken over

by respondent No. 2/cross-objector on 09.12.2002, thus the

interest was payable w.e.f. 09.12.2002 under Section 34 of the

Act and not from 26.07.2002, i.e., the date of award.

9. I have heard the learner Senior Counsel for the

appellants, learned Additional Advocate General for the

respondent No. 1/State, learned Senior Counsel for respondent

No. 2/cross-objector(s) and carefully examined the entire

records.

10. As per the settled principle of law, compensation for

the land acquired has to be determined at market value. 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

7 Neutral Citation No. ( 2026:HHC:10214-DB )

when led out in most advantageous manner excluding any

advantage due to carrying out of the scheme for which the

property is compulsorily acquired. The determination of market

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

outcome of hypothetical sale expressed in terms of

probabilities. 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.

11. In Mehta Ravindrarai Ajitrai (deceased) through

his heirs & LRs & others v. State of Gujarat (1989) 4 SCC

250, the Hon’ble Supreme Court held that the market value of a

property for the purpose of Section 23 of the Act is the price at

which the property changes hands from a willing seller to a

willing purchaser, but not too anxious a buyer, dealing at arms

length. The relevant portion of the aforesaid judgment reads as

under:

“4. ……….The market value of a piece of property for purpose

of Section 23 of the Land Acquisition Act is stated to be

the price at which the property changes hands from a

willing seller to a willing, but not too anxious a buyer,

dealing at arms length. Prices fetched for similar lands

with similar advantages and potentialities under bona fide

transactions of sale at or about the time of the preliminary

notification are the usual and, indeed the best, evidences

of market value.”

8 Neutral Citation No. ( 2026:HHC:10214-DB )

12. In Atma Singh (Dead) through LRs & others vs.

State of Haryana & another, (2008) 2 Supreme Court Cases

568, the Hon’ble Supreme Court held that 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 conditions

with all its existing advantages and its potential possibilities

when led out in most advantages 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 question whether a land has potential value

or not, is primarily one of the facts 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. The relevant portion of

the aforesaid judgment reads as under:

“4. ……The expression “market value” has been the

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

9 Neutral Citation No. ( 2026:HHC:10214-DB )

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 purchaser in normal

human conduct would be willing to buy as a

prudent man in normal market conditions but

not an anxious dealing at arm’s length nor

façade of sale nor fictitious sale brought about

in quick succession or otherwise to inflate the

market value………….

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………….”

13. For ascertaining market value of the acquired land,

the Court can no doubt rely upon such sale transactions, which

would offer a reasonable basis to fix the price, for which

purpose, a sale transaction relating to a smaller parcel of land

can be considered for the purpose of assessing the market

value in respect of a large tract of land, after making appropriate

deductions such as for development of land, for providing space

10 Neutral Citation No. ( 2026:HHC:10214-DB )

for roads, sewers, drains, expenses involved in formation of a

layout, lump- sum payments, as well as for the waiting period

required for selling the sites that would be formed and other

expenses involved therein, but before doing so, the evidentiary

value of such a sale deed is required to be carefully scrutinized.

As held in the case of Land Acquisition Officer vs. Nookala

Rajamallu reported as (2003) 12 SCC 334, in order to adopt

the price reflected in the sale deed, the following conditions are

required to be met:

"9. It can be broadly stated that the element of

speculation is reduced to a minimum if the

underlying principles of fixation of market value

with reference to comparable sales are made:

(i) when sale is within a reasonable time of

the date of notification under Section

4(1);

(ii) it should be a bona fide transaction;

(iii) it should be of the land acquired or of the

land adjacent to the land acquired; and

(iv) it should possess similar advantages

10. It is only when these factors are present,

it can merit a consideration as a

comparable case (see Special Land

Acquisition Officer v. T. Adinarayan Setty

AIR 1959 SC 429)."

14. In Union of India vs. Pramod Gupta (dead) by

LRs & others, 2005 (12) SCC 1, the Hon’ble Supreme Court

held that the best method, as is well-known, would be the

amount which a willing purchaser would pay to the owner of the

land. In the absence of any direct evidence, the Court,

however, may take recourse to various other known methods.

11 Neutral Citation No. ( 2026:HHC:10214-DB )

Evidence admissible therefor inter alia would be the sale

deeds, judgments and awards passed in respect of acquisitions

of lands made in the same village and/or neighboring villages.

Such a judgment/award in the absence of any other evidence

like deed of sale, report of the expert and other relevant

evidence would have only evidentiary value. The relevant

portion of the aforesaid judgment reads as under:

“24. While determining the amount of compensation

payable in respect of the lands acquired by the

State, the market value therefor indisputably has to

be ascertained. There exist different modes therefor.

25. The best method, as is well known, would be the

amount which a willing purchaser would pay to the

owner of the land. In absence of any direct

evidence, the court, however, may take recourse to

various other known methods. Evidences

admissible therefor inter alia would be judgments

and awards passed in respect of acquisitions of

lands made in the same village and/or neighboring

villages. Such a judgment and award, in the

absence of any other evidence like the deed of sale,

report of the expert and other relevant evidence

would have only evidentiary value.”

15. In the instant case, the petitioners/claimants as well

as the respondents have produced on record various sale

deeds, details whereof are as under:

Sr.

No.

Sale deed Dated Khasra No. Area in

bigha

Price Price per

biswa

1. Ex.PW-

2/A

26/12/1998 687/15/3/1,

158/2/1

0-5-4

bigha

Rs.156000/- Rs.30000/-

2. Ex.PW-

3/A

24/12/1999 48 0-0-15

bigha

Rs.33000/- Rs.44,000/-

3. Ex.PW-

5/A

23/10/2000 780/73 0-3-0

bigha

Rs.89,000/- Rs.29,667/-

4. Ex.PA 23/10/2000 814/743/161 0-4-0

bigha

Rs.135000/- Rs.33750/-

5. Ex.PB 28/08/2000 136/1 0-5-10

bigha

Rs.175000/- Rs.31818/-

6. Ex.PC 31/03/2000 724/355,

726/356,

0-2-0

bigha

Rs.52000/- Rs.26000/-

12 Neutral Citation No. ( 2026:HHC:10214-DB )

660/342

7. Ex.PD 15/02/1999 73 0-2-0

bigha

Rs.50000/- Rs.25000/-

8. Ex.RW-

2/A

10/12/1998 744/161,

747/162

0-10-11

bigha

Rs.40000/- Rs.3791/-

9. Ex.R1 12/08/1999 658/334 0-4-10

bigha

Rs.66000/- Rs.15000/-

10. Ex.R2 22/07/1999 814/743/161 0-4-0

bigha

Rs.60000/- Rs.15000/-

11. Ex.R3 15/02/1999 73 0-4-0

bigha

Rs.60000/- Rs.15000/-

12. Ex.R4 01/01/1999 73 0-4-0

bigha

Rs.60000/- Rs.15000/-

13. Ex.R5 11/11/1998 45 & 49 0-0-13

bigha

Rs.4000/- Rs.6185/-

16. The perusal of the sale deeds Ex.PW-5/A, PA, PB

and PC relied upon by the petitioners clearly shows that these

were executed in the year 2000 and sale deed, Ex. PW-3/A,

was executed on 24.12.1999. Admittedly, notification under

Section 4 of the Act was published in Rajpatra on 17.08.1999.

Since the aforesaid sale deeds have been executed after the

issuance of notification, therefore, the same cannot be taken

into consideration for ascertaining the market value of the

acquired land.

17. The respondents have relied upon sale deed, Ex.

RW-2/A, executed on 10.12.1998, however, RW-2 Shri Amar

Singh, who was examined to prove the aforesaid sale deed,

admitted that the land under the aforesaid sale deed was

located at a distance of about 500 meters from the acquired

land and there was no approach to his land, as such, sale

deed, Ex. RW-2/A, also cannot be taken into consideration, as

13 Neutral Citation No. ( 2026:HHC:10214-DB )

the position and location of the acquired land are different. The

respondents have also produced on record sale deeds, Ex.R1,

which was executed on 12.08.1999 for Rs.14,667/- per biswa,

Ex.R2, executed on 22.07.1999 for Rs.15,000/- per biswa,

Ex.R3, executed on 15.02.1999 for Rs.15,000/- per biswa, Ex.

R4, executed on 01.01.1999 for Rs.15,000/- per biswa and

Ex.R5, executed on 11.11.1998 for Rs.6185/- per biswa,

whereas, the petitioners/claimants have produced sale deed,

Ex. PD, which was executed on 15.02.1999, for Rs.25,000/-

per biswa, and sale deed, Ex. PW-2/A, which was executed on

26.12.1998, for Rs.30,000/- per biswa. All these sale deeds

have been executed prior to the issuance of notification issued

under Section 4 of the Act.

18. It was contended by the learned Senior Counsel for

the appellants that the learned Reference court had committed

an error in taking into consideration the average value of the

different sale transactions. It is a settled law that where there

are various sale deeds, then highest of the sale exemplars has

to be taken into consideration and not by averaging of different

types of sale transactions. In State of Punjab & another vs.

Hans Raj (dead) by LRs Sohan Singh & others, (1994) 5

SCC 734, the Hon’ble Supreme Court has held as under:

14 Neutral Citation No. ( 2026:HHC:10214-DB )

“4. Having given our anxious consideration to the

respective contentions, we are of the considered view

that the learned Single Judge of the High Court

committed a grave error in working out average price

paid under the sale transactions to determine the

market value of the acquired land on that basis. As the

method of averaging the prices fetched by sales of

different lands of different kinds at different times, for

fixing the market value of the acquired land, if followed,

could bring about a figure of price which may not at all

be regarded as the price to be fetched by sale of

acquired land. One should not have, ordinarily recourse

to such method. … … … … …”

19. In Anjani Molu Dessai vs. State of Goa &

another, (2010) 13 SCC 710, the Hon’ble Supreme Court has

held as under:

“20. The legal position is that even where there are several

exemplars with reference to similar lands, usually the

highest of the exemplars, which is a bona fide

transaction, will be considered. Where however there

are several sales of similar lands whose prices range in

a narrow bandwidth, the average thereof can be taken,

as representing the market price. But where the values

disclosed in respect of two sales are markedly different,

it can only lead to an inference that they are with

reference to dissimilar lands or that the lower value sale

is on account of under-valuation or other price

depressing reasons. Consequently averaging cannot be

resorted to. We may refer to two decisions of this Court

in this behalf.

21. In M. Vijayalakshmamma Rao Bahadur v. Collector,

(1969) 1 MLJ 45 (SC), a three-Judge Bench of this Court

observed that the proper method for evaluation of

market value is by taking the highest of the exemplars

and not by averaging of different types of sale

transactions. This Court held:

“It seems to us that there is substance in the first

contention of Mr. Ram Reddy. After all, when the

land is being compulsorily taken away from a

person, he is entitled to say that he should be

given the highest value which similar land in the

locality is shown to have fetched in a bona fide

transaction entered into between a willing

purchaser and a willing seller near

about the time of the acquisition. It is not disputed

that the transaction represented by Exhibit R-19

was a few months prior to the notification under

section 4, that it was a bona fide transaction and

that it was entered into between a willing

purchaser and a willing seller. The land comprised

in the sale deed is 11grounds and was sold at

Rs.1,961 per ground. The land covered by Exhibit-

27 was also sold before the

15 Neutral Citation No. ( 2026:HHC:10214-DB )

notification, but after the land comprised in

ExhibitR-19 was sold. It is true that this land was

sold atRs.1,096/- per ground. This, however, is

apparently because of two circumstances. One is

that betterment levy at Rs.500 per ground had to

be paid by the vendee and the other that the land

comprised in it is very much more extensive, that

is about 93 grounds or so.Whatever that may be, it

seems to us to be only fairthat where sale deed,

pertaining to different

transactions are relied on behalf of the

Government, that representing the highest value

should be preferred to the rest unless there are

strong circumstances justifying a different course.

In any case we see no reason why an average of

two sale deeds should have been taken in this

case.”

22. In State of Punjab v. Hans Raj, (1994) 5 SCC 734, this

Court held:

“4. Having given our anxious consideration

to the respective contentions, we are of the

considered view that the learned single Judge of

the High Court committed a grave error in working

out average price paid under the sale transactions

to determine the market value of the acquired land

on that basis. As the method of averaging the

prices fetched by sales of different lands of

different kinds at different times, for fixing the

market value of the acquired land, if followed,

could bring about a figure of price which may not

at all be regarded as the price to be fetched by

sale of acquired land. One should not have,

ordinarily recourse to such method. It is well

settled that genuine and bonafide sale

transactions in respect of the land under

acquisition or in its absence the bona fide sale

transactions proximate to the point of acquisition

of the lands situated in the neighborhood of the

acquired lands possessing similar value or utility

taken place between a willing vendee and the

willing vendor which could be expected to reflect

the true value, as agreed between reasonable

prudent persons acting in the normal

market conditions are the real basis to determine

the market value.”

23. Therefore, we are of the view that the averaging of

the prices under the two Sale Deeds was not justified.

The Sale Deed dated 31.1.1990 ought to have been

excluded for the reasons stated above. That means

compensation for the acquired lands had to be fixed

only with reference to the Sale Deed dated30.8.1989

relied upon by the Land Acquisition Collector which will

be Rs.57.50 per sq.m. As the said market value has been

fixed with reference to comparable bharad land with

fruit trees, the question of again separately awarding

any compensation for the trees situated in the acquired

land does not arise.”

16 Neutral Citation No. ( 2026:HHC:10214-DB )

20. In the case on hand,since sale deed, Ex. PW-2/A,

is the highest of the exemplars, therefore, in view of the

aforesaid judgments, the sale deed, Ex. PW-2/A has to be

taken into consideration for determining the market value of the

land under acquisition. As observed earlier, sale deed, Ex.

PW-2/A, executed 26.12.1998 is for Rs.30,000/- per biswa and

the land situated therein is comprised of Khasra No.

687/15/3/1, 158/2/1, measuring 0-5-4 bigha.

21. The learned Senior Counsel for the cross-objector

contended that since sale deed, Ex. PW-2/A, pertains to a

small piece of land, therefore, some amount of compensation

has to be deducted out of the amount of compensation payable

for the acquired land towards the development charges.

22. It is settled position of law that normally deduction

is to be applied on account of carrying out development

activities like providing roads or civic amenities such as

electricity, water, etc. when the land has been acquired for

construction of residential, commercial or institutional projects.

In Lal Chand v. Union of India, 2009 15 SCC 769 , the

Supreme Court indicated that percentage of deduction for

development to be made for arriving at market value of large

17 Neutral Citation No. ( 2026:HHC:10214-DB )

tracts of undeveloped agricultural land with potential for

development can vary between 20 and 75 per cent of the price

of developed plots and observed:

"14. The 'deduction for development' consists of two

components. The first is with reference to the area

required to be utilized for developmental works and

the second is the cost of the development works.

For example, if a residential layout is formed by DDA

or similar statutory authority, it may utilize around

40% of the land area in the layout, for roads, drains,

parks, playgrounds and civic amenities (community

facilities), etc.

15. The development authority will also incur

considerable expenditure for development of

undeveloped land into a developed layout, which

includes the cost of leveling the land, cost of

providing roads, underground drainage and sewage

facilities, laying water lines, electricity lines and

developing parks and civil amenities, which would

be about 35% of the value of the developed plot. The

two factors taken together would be the “deduction

for development” and can account for as much as

75% of the cost of the developed plot.

16. On the other hand, if the residential plot is in an

unauthorized private residential layout, the

percentage of “deduction for development” may be

far less. This is because in an unauthorized layout,

usually no land will be set apart for parks,

playgrounds and community facilities. Even if any

land is set apart, it is likely to be minimal. The roads

and drains will also be narrower, just adequate for

movement of vehicles. The amount spent on

development work would also be comparatively less

and minimal. Thus the deduction on account of the

two factors in respect of plots in unauthorized

layouts, would be only about 20% plus 20% in all

40% as against 75% in regard to DDA plots.

17. The “deduction for development” with reference to

prices of plots in authorized private residential

layouts may range between 50% to 65% depending

upon the standards and quality of the layout.

18. The position with reference t industrial layouts will

be different. As the industrial plots will be large (say

of the size of one or two acres or more as contrasted

with the size of residential plots measuring 100 sq m

to 20 sq m), and as there will be very limited civic

amenities and no playgrounds, the area to be set

apart for development (for roads, parks, playgrounds

and civic amenities) will be far less; and the cost to

be incurred for development will also be marginally

less, with the result the deduction to be made from

the cost of an industrial plot may range only

18 Neutral Citation No. ( 2026:HHC:10214-DB )

between 45% to 55% as contrasted from 65% to 75%

for residential plots.

19. If the acquired land is in a semi-developed urban

area, and not an undeveloped rural area, then the

deduction for development may be as much less,

that is, as little as 25% to 40%, as some basic

infrastructure will already be available. (note the

percentages mentioned above are tentative

standards and subject to proof to the contrary.)

20. Therefore the deduction for the 'development factor'

to be made with reference to the price of a small plot

in a developed layout, to arrive at the cost of

undeveloped land, will be for more than the

deduction with reference to the price of a small plot

in an unauthorized private layout or an industrial

layout. It is also well known that the development

cost incurred by statutory agencies is much higher

than the cost incurred by private developers, having

regard to higher overheads and expenditure."

23. In the case of Trishala Jain & another vs. State of

Uttaranchal & another, reported in (2011) 6 SCC 47, the

Hon’ble Supreme Court held that deduction on account of

expenses of development of the sites could vary from 10% to

86.33% depending on the nature of the land, its situation, the

purpose and stage of development. Their lordships further held

that the cases where the acquired land itself is fully developed

and has all essential amenities, before acquisition, for the

purpose for which it is acquired requiring no additional

expenditure for its development, falls under the purview of

cases of `no deduction'. It has been held as follows:

"41. The cases where the acquired land itself is fully

developed and has all essential amenities, before

acquisition, for the purpose for which it is acquired

requiring no additional expenditure for its development,

falls under the purview of cases of `no deduction'.

Furthermore, where the evidence led by the parties is of

such instances where the compensation paid is

comparable, i.e. exemplar lands have all the features

19 Neutral Citation No. ( 2026:HHC:10214-DB )

comparable to the proposed acquired land, including

that of size, is another category of cases where

principle of `no deduction' may be applied. These may

be of the cases where least or no deduction could be

made. Such cases are exceptional and/or rare as

normally the lands which are proposed to be acquired

for development purposes would be agricultural lands

and/or semi or haphazardly developed lands at the time

of issuance of notification under Section 4(1) of the Act,

which is the relevant time to be rt taken into

consideration for all purposes and intents for

determining the market value of the land in question.

44. It is thus evident from the above enunciated principle

that the acquired land has to be more or less developed

land as its developed surrounding areas, with all

amenities and facilities and is fit to be used for the

purpose for which it is acquired without any further

expenditure, before such land could be considered for

no deduction. Similarly the sale instances even of

smaller plots could be considered for determining the

market value of a larger chunk of land with some

deduction unless, there was comparability in potential,

utilization, amenities and infrastructure with hardly any

distinction. On such principles each case would have to

be considered on its own merits.

45. This Court, depending on the facts and circumstances of

each given case, has taken the view that deduction on

account of expenses of development of the sites could

vary from 10% to 86.33% depending on the nature of the

land, its situation, the purpose and stage of

development. Reference can be made to the cases of

K.S. Shivadevamma v. Assistant Commissioner and

Land Acquisition Officer [(1996) 2 SCC 62], Ram Piari v.

Land Acquisition Collector, Solan [(1996) 8 SCC 338],

Chimanlal Hargovinddas v. Special Land Acquisition

Officer, Poona [(1988) 3 SCC 751], Hasanali Walim

Chand (Dead) by L` v. State of Maharashtra [(1998) 2

SCC 388]."

24. Hon'ble Supreme Court in the case of Union of

India vs. Raj Kumar Baghal Singh & ors., reported in (2014)

10 SCC 422, has held that deduction towards development

costs depends on individual fact situations and in this case their

lordships have upheld deduction of 20%. It has been held as

follows:

20 Neutral Citation No. ( 2026:HHC:10214-DB )

"9. We have considered the rival submissions. Before

considering the merits of the rival contentions, we

consider it appropriate to refer to the discussion on the

issue by the High Court which is as follows:- "In the

present case, situation is altogether different. While

deciding issue regarding cut, referred to above,

argument of counsel for the Union of India that cut

imposed is required to be enhanced is also liable to be

rejected. In view of situation the land under acquisition,

as referred to above, cut imposed to the extent of 20%

was perfectly justified. Counsel for the Union of India

has tried to support his argument by citing various

judgments but no benefit of those judgments can be

extended to Union of India because at the time when

matter was argued before Additional District Judge, no

serious dispute was raised by Union of India regarding

potential value of the land under acquisition. No

evidence was led to show that the land acquired had no

potential for developing it into residential or

commercial area. Argument to impose higher cut was

rightly rejected by the learned Single Judge, after taking

note of evidence on record.

Argument of the counsel for the Union of India that

since the land was situated at a distance of 1 to 1-1/2

kms of municipal limits, as such, higher cut be

imposed, is not justified, in view of evidence on record.

It had come in evidence that the land under acquisition

was situated next to the municipal limits and was

situated very near to golf course. In view of this, no

case is made out for further cut as prayed for.”

25. In the instant case, it has come on record that the

acquired land is quite adjacent to muhal Tarna, i.e., a thickly

populated residential colony which is quite adjacent to Mandi

town and it has great potential value. From the statements of

PW-2,PW-4,PW-5 andPW-6, it has become clear that the

acquired land is situated adjacent to the Mandi town and all

facilities, viz., road, water, sewerage and electricity were

already there. It has also come on record that some of the

petitioners have developed the plots by leveling it after

spending considerable amount. Therefore, least expenditure

was required on account of development charges and other

21 Neutral Citation No. ( 2026:HHC:10214-DB )

possible expenditures. Hence, having regard to the entire facts

and circumstances of the case, this Court is of the opinion that

a deduction of 20% from the market value of the land will be

appropriate by way of development charges to meet the ends

of justice. Since sale deed, Ex. PW-2/A, is for Rs.30,000/- per

biswa, therefore, after deducting 20% of the amount, the

market value of the acquired land, for the of purpose of

payment of compensation to the landowners,comes to

Rs.24,000/- per biswa.

26. In H.P. Housing Board vs. Ram Lal & others

alongwith connected matter, 2003 (3) Shimla Law Cases

64, it has been held that when the land is being developed for a

housing colony, classification completely loses its significance.

The relevant portion of the aforesaid judgment is extracted

hereunder for ready reference:

“27. When the land is being developed for a housing colony,

as in the present case, classification completely looses

significance. Reason being that it has to be developed

as a single unit i.e. for housing colony. Similarly

allowing higher price for land near the road and for the

one which is at a distance from the road also does not

provide any reasonable, muchless rational basis to

allow less price for the area. Reason being that a

person may be interested to reside near the road side in

a developed colony for so many reasons. Whereas

another, may like to live in the vicinity which is away

from the road to avoid hustle and bustle of being near

the roadside and for many other reasons. In these

circumstances it cannot be said that location of the

land and its distance from the road is good criteria

and/or for that matter classification for the assessment

of compensation. In my view entire land under

acquisition should have been assessed at Rs.200 per

22 Neutral Citation No. ( 2026:HHC:10214-DB )

sq. meter irrespective of its classification and/or

distance from the road.”

27. In the instant case also, admittedly, the land has

been acquired for the purpose of residential colony, therefore,

in the present case also, the classification loses its significance.

Hence the appellants are entitled for compensation at the

market value of the acquired land@Rs.24,000/- per biswa

irrespective of its classification.

28. The contention of the learned Senior Counsel for

the cross-objector that the learned Reference Court erred in

law in directing the payment of interest from the date of award,

whereas the interest, as per the provisions of the Act was

payable from the date of taking of possession, is not devoid of

any force. The perusal of the material available on record

reveals that the possession was taken over by respondent No.

2/cross-objector on 09.12.2002, whereas the award was

passed by the learned Land Acquisition Collector on

26.07.2002.

29. At this stage, it would be relevant to reproduce Section

34 of the Act, which reads as under:

“34. Payment of interest.- When the amount of such

compensation is not paid or deposited on or before

taking possession of the land, the Collector shall pay

the amount awarded with interest thereon at the rate of

[nine per centum] per annum from the time of so taking

possession until it shall have been so paid or

deposited:

23 Neutral Citation No. ( 2026:HHC:10214-DB )

[Provided that if such compensation or any part

thereof is not paid or deposited within a period of

one year from the date on which possession is

taken, interest at the rate of fifteen per centum per

annum shall be payable from the date of expiry of

the said period of one year on the amount of

compensation or part thereof which has not been

paid or deposited before the date of such

expiry.]”

30. In Major General Kapil Mehra & others vs. Union

of India & another, (2015)2 SCC 262 the Hon’ble Apex Court

held that Section 34 of the Act fastens liability on the Collector

to pay interest on the amount of compensation to be worked

out in accordance with provisions of Section 23(1) and the sub-

section thereof, at the rate of 9% per annum from the date of

taking possession until the amount is paid or deposited. The

relevant portion of the aforesaid judgment readsas under:

“43. Land Acquisition Act, 1894, provides for payment

of interest to the claimants either under Section 34 or

under Section 28 of the Act. Section 34 of the Act

fastens liability on the Collector to pay interest on the

amount of compensation to be worked out in

accordance with provisions of Section 23(1) and the

sub-section thereof, at the rate of 9% per annum from

the date of taking possession until the amount is paid

or deposited. As per proviso to Section 34, if the

compensation amount or any part thereof is not paid or

deposited within a period of one year from the date of

taking over possession, interest shall be payable at the

rate of 15% per annum from the date of expiry of the

said period of one year on the amount of compensation

or part thereof which has not been paid or deposited

before the date of such expiry.

44. Section 28 empowers the courts, if it was enhancing

the compensation awarded by the Collector, to award

interest on the sum in excess of what the Collector had

awarded as compensation. Both in terms of Section 34

and Section 28, interest at 9% per annum is payable for

the first year of taking possession and 15% per annum

thereafter, if the amount of compensation was not paid

or deposited within a period of one year or deposited

thereafter.

24 Neutral Citation No. ( 2026:HHC:10214-DB )

45. Award of interest under Section 34 is mandatory in

as much the word used in the Section is ‘shall’. The

scheme of the Act and the express provisions thereof

establish that the interest payable under Section 34 is

statutory. The claim for interest under Section 28 of the

Act proceeds on the basis that due compensation not

having been paid, the claimant should be allowed

interest on the enhanced compensation amount. The

award of interest under Section 28 is discretionary

power vested in the Court and it has to be exercised in

a judicious manner and not arbitrarily. The use of the

word “may” in Section 28 does not confer any arbitrary

discretion on the Court to disallow interest for no valid

or proper reasons. Normally, Court awards interest if it

enhances the compensation in excess of the amount

awarded by the Collector, unless there are exceptional

circumstances.

46. A Constitution Bench of this Court in Gurpreet

Singh vs. Union of India, (2006) 8 SCC 457, considering

the scope of Section 34 and Section 28 of the Act, has

held as under:-

“44. Section 34 of the Act fastens liability on the

Collector to pay interest on the amount of

compensation determined under Section 23(1)

with interest from the date of taking possession

till date of payment or deposit into the court to

which reference under Section 18 would be made.

On determination of the excess amount of

compensation, Section 28 empowers the court, if

it was enhancing the compensation awarded by

the Collector, to award interest on the sum in

excess of what the Collector had awarded as

compensation. The award of the court may also

direct the Collector to pay interest on such

excess or part thereof from the date on which he

took possession of the land to the date of

payment of such excess into court at the rates

specified thereunder. The Court stated: [Prem

Nath Kapur vs. National Fertilizers Corporation of

India Ltd., (1996) 2 SCC 71, SCC p. 77, para 10] “In

other words, Sections 34 and 28 fasten the

liability on the State to pay interest on the amount

of compensation or on excess compensation

under Section 28 from the date of the award and

decree but the liability to pay interest on the

excess amount of compensation determined by

the Court relates back to the date of taking

possession of the land to the date of the payment

of such excess ‘into the court’.”

45. The Court concluded: (Prem Nath Kapur case,

SCC p. 78, para 12) “12. It is clear from the

scheme of the Act and the express language used

in Sections 23(1) and (2), 34 and 28 and now

Section 23(1-A) of the Act that each component is

a distinct and separate one. When compensation

is determined under Section 23(1), its

quantification, though made at different levels,

the liability to pay interest thereon arises from the

25 Neutral Citation No. ( 2026:HHC:10214-DB )

date on which the quantification was so made

but, as stated earlier, it relates back to the date of

taking possession of the land till the date of

deposit of interest on such excess compensation

into the court. … The liability to pay interest is

only on the excess amount of [pic] compensation

determined under Section 23(1) and not on the

amount already determined by the Land

Acquisition Officer under Section 11 and paid to

the party or deposited into the court or

determined under Section 26 or Section 54 and

deposited into the court or on solatium under

Section 23(2) and additional amount under

Section 23(1-A).”

31. Thus, in view of the aforesaid judgment of the

Hon’ble Supreme Court, Section 34 of the Act fastens liability

on the Collector to pay interest on the amount of compensation

from the date of taking of possession till the date of the

payment or deposit of the amount and not from the date of the

award. In the case on hand, admittedly the possession was

taken over by respondent No. 2/cross-objector on 09.12.2002

whereas the award was passed by the Land Acquisition

Collector on 26.07.2002 as such the interest was payable w.e.f.

09.12.2002 under Section 34 of the Act and not from

26.07.2002, i.e., the date of award. Therefore, interest @ 9%

per annum on the market value assessed shall be awarded

from the date of taking of possession for one year and

thereafter @ 15% per annum till the date of payment/deposit of

the amount of compensation in accordance with Section 34 of

the Act.

26 Neutral Citation No. ( 2026:HHC:10214-DB )

32. Hence, in view of what has been discussed

hereinabove, the impugned award is modified to the extent that

the petitioners shall be held entitled to enhanced compensation

@ Rs.24,000/- per biswa in respect of the acquired land,

irrespective of its classification. In addition, the petitioners are

also entitled for following reliefs:

(i) Solatium @ 30% on the market value of

the land assessed, as mentioned above;

(ii) additional compensation @ 12% per

annum under Section 23(1-A) of the Act

w.e.f. 10.09.1999, i.e., the date of

publication of notification till the date of

the award of the Collector, i.e.,

26.07.2002; &

(iii) interest under Section 28 of the Act on

the market value assessed under sub-

section(1) of Section 23 of the Act, the

additional compensation worked out

under sub-section (1-A) of Section 23 of

the Act, plus, solatium awarded under

sub-section 23 of the Act, @ 9% per

annum on the market value assessed

from the date of taking over of

possession by respondent No. 2/cross-

objector, i.e., 09.12.2002, for one year

and thereafter @ 15% per annum till the

date of payment/deposit of the amount of

27 Neutral Citation No. ( 2026:HHC:10214-DB )

compensation in accordance with Section

34 of the Act.

33. In view of the aforesaid discussion, the appeals as

well as the cross-objections are disposed of.

Pending application(s), if any, shall also stand(s)

disposed of.

( Sushil Kukreja )

Judge

6

th

April, 2026

(virender)