Page 1 REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 2545-2546/2012

MAJ. GEN. KAPIL MEHRA & ORS. ..Appellants

Versus

UNION OF INDIA & ANR. ..Respondents

J U D G M E N T

R. BANUMATHI, J.

These appeals are directed against the impugned

Orders dated 24.12.2010 and 13.10.2011 passed by

Delhi High Court in L.A. Appeal No.149/2007 and C.M.

No.735/2011 in L.A. Appeal No.149/2007 respectively by

which High Court awarded compensation at the rate of

Rs.14,974/- per sq. yard for appellants’ land acquired by the

Delhi Development Authority (DDA) for development of Vasant

Page 2 2

Kunj Residential Scheme, Delhi along with interest and

proportionate costs.

2. Shorn of details of the previous notification in 1983

and the earlier rounds of litigation, background facts in a

nutshell are as follows: On 19.2.1997, a fresh notification was

issued by the Land and Building Department, Govt. of NCT of

Delhi under Sections 4 and 17 of the Land Acquisition Act,

1894 (the Act) proposing to acquire the land of the appellants

measuring 12 Bigha (12096 sq. yards) for development of

Vasant Kunj under the planned development scheme of Delhi.

Land Acquisition Collector (LAC) by award No. 2/98-99

dated 18.9.1998 assessed the market value of the land

@ Rs.2,05,642.07 paise per bigha (Rs.205/-per sq.yard),

adding additional interest @ 12% per annum on the market

value of land and the solatium @ 30% on the market value of

land and the compensation was fixed @ Rs.37,21,180.05 paise

per bigha.

3. Aggrieved by the award, the appellants filed

Reference Petition under Section 18 of the Act before the

Additional District Judge (LAC), Delhi. In the reference court,

Page 3 3

the appellants produced four documents Exs A7 to

A10-perpetual lease deeds of residential plots in Vasant Kunj,

executed between September 1995 to December 1996 at the

rates ranging from Rs.28,719/- to Rs.47,542/- per sq. yard.

The reference court held that the lease deeds of auction of a

developed plot by a public authority are not a proper guide for

determining the fair market value of the acquired lands and

reference court discarded the exemplars- Exs A7 to A10 lease

deeds and rejected the claim of the appellants for

enhancement of compensation.

4. Aggrieved by the decision of the reference court,

appellants filed Land Acquisition Appeal No.149/2007 before

High Court of Delhi. The High Court had taken average of the

exemplars- Exs A7 to A10 and deducted 40% from the average

price towards smallness of the area and further deducted one

third towards development of land and fixed the market value

of the land at Rs.14,974/- per sq. yard. High Court held that

the appellants shall be entitled to 30% solatium on the above

market value of the land under Section 23(2) of the Act and

12% of the additional amount under Section 23(1-A) of the

Page 4 4

Act. The High Court further ordered that in terms of Section

28 of the Act on the enhanced market value, the appellants

shall be paid interest @ 9% per annum from 19.2.1997 i.e.

date of notification under Section 4 of the Act till 18.2.1998

and thereafter @ 15% per annum till the date of deposit of

compensation. It was also held that interest shall also be paid

on solatium and additional amount. The appellants filed

application C.M. No.735/2011 in L.A. Appeal No.149/2007

before the High Court under Sections 152 and 153 read with

Section 151 C.P.C. to award Rs.48 lakhs which was paid as

court fees and also prayed for award of interest under Section

34 for the enhanced compensation. The application was

allowed in part by order dated 13.10.2011, granting

proportionate costs to the appellants over and above

Rs.20,000/- as awarded in High Court’s judgment dated

24.12.2010. Being aggrieved by the quantum of compensation

and award of proportionate cost, the appellants are before us.

5. First appellant- Maj. Gen. Kapil Mehra, party in

person, contended that correct reckoning of market value is

the highest price in any sale deed of comparable instance and

Page 5 5

the High Court was not justified in averaging the sale prices of

the four perpetual lease deeds, Exs A7 to A10 and the

approach of the High Court in averaging the sale prices of

exemplars is erroneous. He further contended that the

exemplars Exs A7 to A10 relied upon by the appellants are

perpetual lease deeds of residential plots in Vasant Kunj and

what was acquired was freehold lands of the appellants and

the price difference between the ‘leasehold’ and ‘freehold’ was

not kept in view by the High Court for ascertaining the correct

market value. It was submitted that deductions made for

development at one third i.e. 33

1/3

% and 40% for the

smallness of area of exemplars as compared to the largeness of

the acquired lands are very much on the higher side.

6. The judgment of the High Court was challenged by

DDA in Special Leave Petition (Civil) No.15272/2011 and the

same was dismissed by the Order dated 12.5.2011.

Mr. Amarendra Sharan, learned Senior Counsel appearing for

the respondents submitted that in the Special Leave Petition

(Civil) No.15272/2011, Maj. Gen. Kapil Mehra appeared in

person and the said special leave petition was dismissed by a

Page 6 6

speaking order and the said order merges with the High Court

order and the same is binding upon the appellant and in

separate appeals, the appellants cannot challenge the

adequacy of the compensation and the present appeals are not

maintainable. Reliance was placed upon the judgment of this

Court in Kunhayammed and Ors. vs. State of Kerala and Anr.

(2000) 6 SCC 359 and S. Gangadhara Palo vs. Revenue

Divisional Officer and Anr., (2011) 4 SCC 602.

7. Without prejudice to the above contention,

Mr. Amarendra Sharan, learned Senior Counsel appearing for

the respondents submitted that the land acquired is 12 bigha

which is almost 12096 sq. yards which is thousand times

more than the area of the plots in Exs A7 to A10, that too, in

fully developed commercial area and the sale price of such a

small area cannot be taken as the value for arriving at the

market value of large extent of area. It was submitted that it

is not safe to rely upon the allotment rates/auction rates in

regard to the commercial plots formed by DDA in a developed

layout in determining the market value of the adjoining large

extent of undeveloped land. It was further submitted that in

Page 7 7

case of Delhi Development Authority or any statutory

authority, 40% of the land area is to be deducted for formation

of roads, drains, parks and common amenities and further

35% deduction ought to have been made towards the cost of

leveling the land, construction of sewerages, laying electricity

lines etc. Learned Senior Counsel submitted that deduction for

development ought to have been made at 70-75% and the High

Court was not justified in making nominal deduction of 33

1/3

%

of the area.

8. We have given our thoughtful consideration to the

submissions and perused the materials on record.

9. Before we proceed to consider the merits of the

matter, let us first examine the preliminary objections raised

by the respondents as to the maintainability of these appeals.

Of course, Special Leave Petition (Civil) No.15272/2011 filed

by DDA was dismissed on 12.5.2011 by a speaking order. It is

well settled that when a special leave petition is dismissed

with reasons, there is a merger of the judgment of the High

Court in the order of the Supreme Court. Dismissal of special

leave petition filed by DDA only means that this Court felt that

Page 8 8

the quantum of Rs.14,974/- per sq. yard fixed by the High

Court need not be further reduced. In the special leave

petition, though first appellant appeared and resisted the

same, the first appellant could not have advanced his

arguments seeking enhancement of compensation. Dismissal

of special leave petition has become final as against DDA.

When SLP filed by DDA was heard and disposed of by this

Court (vide Order dated 12.05.2011), the appellants were

pursuing their review petition before the High Court which

came to be dismissed on 13.10.2011. So far as the appellants

are concerned, the order was then res subjudice. Order of this

Court dismissing the special leave petition preferred by DDA,

in our view, is not an impediment to the appellants to pursue

their appeals and we proceed to consider merits of the rival

contentions.

10. Market Value: First question that emerges is what

would be the reasonable market value which the acquired

lands are capable of fetching. While fixing the market value of

the acquired land, the Land Acquisition Officer is required to

keep in mind the following factors:- (i) existing geographical

Page 9 9

situation of the land; (ii) existing use of the land; (iii) already

available advantages, like proximity to National or State

Highway or road and/or developed area and (iv) market value

of other land situated in the same locality/village/area or

adjacent or very near to the acquired land.

11. The standard method of determination of the

market value of any acquired land is by the valuer evaluating

the land on the date of valuation publication of notification

under Section 4(1) of the Act, acting as a hypothetical

purchaser willing to purchase the land in open market at the

prevailing price on that day, from a seller willing to sell such

land at a reasonable price. Thus, the market value is

determined with reference to the open market sale of

comparable land in the neighbourhood, by a willing seller to a

willing buyer, on or before the date of preliminary notification,

as that would give a fair indication of the market value.

12. In Viluben Jhalejar Contractor v. State of Gujarat

(2005) 4 SCC 789, this Court laid down the following

principles for determination of market value of the acquired

land: (SCC pp.796-97, paras 17-20)

Page 10 10

“17. Section 23 of the Act specifies the matters

required to be considered in determining the

compensation; the principal among which is the

determination of the market value of the land on the

date of the publication of the notification under sub-

section (1) of Section 4.

18.One of the principles for determination of the

amount of compensation for acquisition of land would

be the willingness of an informed buyer to offer the

price therefor. It is beyond any cavil that the price of

the land which a willing and informed buyer would

offer would be different in the cases where the owner is

in possession and enjoyment of the property and in

the cases where he is not.

19.Market value is ordinarily the price the property

may fetch in the open market if sold by a willing seller

unaffected by the special needs of a particular

purchase. Where definite material is not forthcoming

either in the shape of sales of similar lands in the

neighbourhood at or about the date of notification

under Section 4(1) or otherwise, other sale instances

as well as other evidences have to be considered.

20.The amount of compensation cannot be

ascertained with mathematical accuracy. A

comparable instance has to be identified having regard

to the proximity from time angle as well as proximity

from situation angle. For determining the market value

of the land under acquisition, suitable adjustment has

to be made having regard to various positive and

negative factors vis-à-vis the land under acquisition by

placing the two in juxtaposition.…..”

13. The courts adopt comparable sales method for

valuation of land while fixing the market value of the acquired

land. Comparable sales method of valuation is preferred rather

than methods of valuation of land such as capitalization of net

income method or expert opinion method, because it furnishes

Page 11 11

the evidence for determination of the market value of the

acquired land at which the willing purchaser would pay for the

acquired land if it had been sold in the open market at the

time of issuance of notification under Section 4 of the Act.

14. While taking comparable sales method of valuation

of land for fixing the market value of the acquired land, there

are certain factors which are required to be satisfied and only

on fulfillment of those factors, the compensation can be

awarded according to the value of the land stated in the sale

deeds. In Karnataka Urban Water Supply and Drainage Board

and Ors. v. K.S. Gangadharappa & Anr., (2009) 11 SCC 164,

factors which merit consideration as comparable sales are,

interalia, laid down as under:-

“It can be broadly stated that the element of

speculation is reduced to 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.

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)

Page 12 12

These aspects have been highlighted in Ravinder Narain v.

Union of India (2003) 4 SCC 481.”

15. Appellants have produced Exs A7 to A10-four

perpetual lease deeds of residential plots in Pocket C of Vasant

Kunj Area between September 1995 to December 1996, the

details of which are as under:

Exh.Sale DatePlot

No.

Size

(Sq.Mtr.)

Sale Price

(Rs.)

Rate

(Rs. per

sq.yd.)

A-7 22.09.9559C 218 5,75,05,000/-28,719/-

A-8 02.02.96 5C 220 96,55,000/-36,695/-

A-9 02.02.96 8C 231 1,01,61,000/-36,779/-

A-1010.12.9613C 242 1,37,60,000/-47,542/-

16. Exs A7 to A10 are lease deeds of small plots

executed by DDA. Plots in the above lease deeds are in the

same vicinity of the acquired land and High Court had taken

the same as comparable sales. The size of the plots covered in

the exemplars are smaller. If there is a dissimilarity in regard

to the area, it is open to the court to make proper deduction

towards smallness of area. We find no error in the approach

of the High Court taking Exs A7 to A10 as comparable sales

for fixation of market value.

17. The High Court has taken average of sale price of

Exs A7 to A10 and deducted 40% towards smallness of the

Page 13 13

plot taken for comparison, further deducted one third towards

development. Though we may finally affirm the rate fixed by

the High Court, for the reasons stated infra we fix the market

value in accordance with the well settled principles laid down

by this Court.

18. Determination of Market Value on the basis of

average price paid under sale transactions: For ascertaining

the fair market value of the acquired land, High Court adopted

the ‘average method’ by averaging the sale price of Exs A-7 to

A-10 and calculated the rate at Rs.37,433.75 paise per sq.

yard. The appellants contend that when land is being

compulsorily taken away, the landholder is entitled to claim

the highest value which similar land in the locality is shown to

have fetched in a bonafide transaction and High Court was not

justified in averaging the sale prices of four perpetual lease

deeds. Appellants placed reliance upon the judgments of this

Court in M. Vijayalakshmamma Rao Bahadur vs. Collector

(1969) 1 MLJ SC 45 and State of Punjab and Anr. vs. Hans Raj

(D) by Lrs. And Ors., (1994) 5 SCC 734. In Hans Raj case

(supra) it was held as under:

Page 14 14

“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 bona fide 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 neighbourhood 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.”

19. Referring to Hans Raj’s case in Anjani Molu Dessai

vs. State of Goa And Anr., (2010) 13 SCC 710, this Court 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

bonafide 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 sales is on account of

undervaluation or other price depressing reasons.

Consequently, averaging cannot be resorted to. We

may refer to two decisions of this Court in this behalf.”

Page 15 15

20. Where the lands acquired are of different type and

different locations, averaging is not permissible. But where

there are several sales of similar lands, more or less, at the

same time, whose prices have marginal variation, averaging

thereof is permissible. For the purpose of fixation of fair and

reasonable market value of any type of land, abnormally high

value or abnormally low value sales should be carefully

discarded. If the number of sale deeds of the same locality

and the same period with short intervals are available, the

average price of the available number of sale deeds shall be

considered as a fair and reasonable market price. Ultimately,

it is in the interest of justice for the land losers to be awarded

fair compensation. All attempts should be taken to award fair

compensation to the extent possible on the basis of their

accessibility to different kinds of roads, locational advantages

etc. Four perpetual lease deeds A-7 to A-10 relied upon by

the appellants are of the same locality – Vasant Kunj

Residential Scheme and relate to the period ranging from

September 1995 to December 1996, but they are just prior to

Section 4(1) notification. In our view, the High Court was

Page 16 16

justified in taking the average of the said four exemplars and

approach adopted by the High Court in averaging the sale

prices of Exs A7 to A10 cannot be said to be perverse.

21.Freehold vis-a-vis Leasehold Price - Market Value:

Contention of the appellants is that Exs A7 to A10 relate to

long term perpetual leasehold deeds and what was acquired

was appellants’ freehold property and freehold property has

higher value than the leasehold plot and suitable addition

should have been made. The appellant contends that the

terms stipulated in perpetual leasehold are extremely stringent

and in such cases, no sale is permitted without the permission

of DDA and there are many other uncomfortable clauses in

the terms of the perpetual lease deeds and all these ‘stringent

conditions’ increase the gap between ‘freehold’ price and

‘leasehold’ price. It is submitted that market value of ‘freehold

property’ is much higher than the value of ‘leasehold property’

and this was not taken into consideration by the High Court.

22. In M.B. Gopala Krishna & Ors. vs. Special Deputy

Collector, Land Acquisition, (1996) 3 SCC 594, as relied upon

by the appellants, it was held as under:-

Page 17 17

“It is further contended by Shri Mudgal that value of

the land does not get pegged down on account of the land

being in occupation of a tenant and the circumstances in

this behalf taken into account by the High Court, is

irrelevant. We find no force in the contention. A freehold

land and one burdened with encumbrances do make a big

difference in attracting willing buyers. A freehold land

normally commands higher compensation while the land

burdened with encumbrances secures lesser price. The fact

of a tenant in occupation would be an encumbrance and no

willing purchaser would willingly offer the same price as

would be offered for a freehold land. Under those

circumstances, the High Court would be right in its

conclusion that the land burdened with encumbrances

takes lesser price than the freehold land. The encumbrances

would operate as a disabling factor to peg down the price

when we compare the same with freehold land.”

The above observations were made in the aforesaid decision

while upholding the compensation that was payable to the

landlord without reference to the tenant’s rights. The above

principle will apply only where a property subject to

encumbrances is to be sold to a private purchaser or is

acquired subject to the tenancy.

23. ‘Freehold land’ and ‘leasehold land’ are conceptually

different. If a property subject to a lease and in the possession

of a lessee is offered for sale by the owner to a prospective

private purchaser, the purchaser being aware that on

purchase he will get only title and not possession and that the

sale in his favour will be subject to encumbrance namely, the

lease, he will offer a price taking note of the encumbrances.

Page 18 18

Naturally, such a price would be less than the price of a

property without any encumbrance. But when a land is

acquired free from encumbrances, the market value of the

same will certainly be higher.

24. Exs A7 to A10 are the perpetual lease deeds relating

to the period from September 1995 to December 1996 and to

get the perpetual lease deeds converted as freehold, the holder

of perpetual leasehold has to pay further amount to DDA.

Having regard to the period of Exs A7 to A10 and the date of

issuance of Section 4 notification dated 19.2.1997, in our

view, addition of 20% is to be added for arriving at the value

of ‘freehold’ property. Adding 20% to Rs.37,433.75 per sq.

yard which comes to Rs.7,486.75, the value is calculated at

Rs.44,920.50 rounded off to Rs. 44,921/- per sq. yard.

25. Deduction Towards Competitive Bidding: Exs A7 to

A10 exemplars are perpetual lease deeds of commercial plots

auctioned in Vasant Kunj area. Learned senior counsel for the

respondents contended that this auctioned commercial site

can never be equated to the value of large extent of

agricultural land like the land acquired in the present case

Page 19 19

and those plots auctioned are developed plots on which the

Government had spent a considerable amount. It is

contended that the auction prices of commercial plots in

exemplars are not true index of a fair market value of the land

at the relevant time because elements of speculation and

unfair competition in such auctions and suitable deduction

ought to have been made for competitive bidding.

26. While considering the competition involved in

auction sales of commercial/residential plots and observing

that the element of competition in auction sales make them

unsafe guides for determining the market value of the

acquired lands, in Executive Engineer, Karnataka Housing

Board v. Land Acquisition Officer, Gadag And Ors., (2011) 2

SCC 246 paras 6 & 7, this Court held as under:-

“6. But auction-sales stand on a different footing.

When purchasers start bidding for a property in an auction,

an element of competition enters into the auction. Human

ego, and desire to do better and excel over other competitors,

leads to competitive bidding, each trying to outbid the

others. Thus in a well advertised open auction-sale, where a

large number of bidders participate, there is always a

tendency for the price of the auctioned property to go up

considerably. On the other hand, where the auction-sale is

by banks or financial institutions, courts etc. to recover

dues, there is an element of distress, a cloud regarding title,

and a chance of litigation, which have the effect of

dampening the enthusiasm of bidders and making them

cautious, thereby depressing the price. There is therefore

Page 20 20

every likelihood of auction price being either higher or lower

than the real market price, depending upon the nature of

sale. As a result, courts are wary of relying upon auction-

sale transactions when other regular traditional sale

transactions are available while determining the market

value of the acquired land. This Court in Raj Kumar v.

Haryana State (2007) 7 SCC 609 observed that the element

of competition in auction-sales makes them unsafe guides

for determining the market value.

7. But where an open auction-sale is the only

comparable sale transaction available (on account of

proximity in situation and proximity in time to the acquired

land), the court may have to, with caution, rely upon the

price disclosed by such auction-sales, by providing an

appropriate deduction or cut to offset the competitive hike

in value. In this case, the Reference Court and the High

Court, after referring to the evidence relating to other sale

transactions, found them to be inapplicable as they related

to far away properties. Therefore we are left with only the

auction-sale transactions. On the facts and circumstances,

we are of the view that a deduction or cut of 20% in the

auction price disclosed by the relied upon auction

transaction towards the factor of “competitive price hike”

would enable us to arrive at the fair market price.”

(Underlining added)

27. The above principle was reiterated in Raj Kumar

And Ors. v. Haryana State And Ors., (2007) 7 SCC 609 where

in para 16, this Court has held as under:-

“16. All the relevant aspects have been taken into

consideration and we do not find any error in principle

committed by the High Court justifying our interference in

appeal. An argument was raised that the prices of lands

fetched in auction had been ignored on the basis that prices

fetched in auction-sales cannot form the basis. It was

submitted that there was no general rule that such prices

cannot be adopted. On considering the relevant facts

disclosed, it cannot be said that the High Court has

committed any error in discarding those auction-sales while

determining the compensation payable. The element of

competition in auction-sales does not make them safe

Page 21 21

guides. Similarly, the argument that when a compact piece

of land is acquired there cannot be adoption of separate

rates, cannot be accepted in the light of the decision of this

Court in Union of India vs. Mangatu Ram (1997) 6 SCC 59.

That case related to acquisition of lands in the vicinity of the

present properties. The ratio of that decision also supports

the distinction made by the Awarding Officer and the High

Court in the matter of fixing the land value for the lands in

Satrod Khurd and Satrod Khas.”

28. The general rule that the sale prices of the

comparable sales should be relied upon for calculating the

market value will not apply when the sale transactions relied

upon are auction sales. As per the decision in Karnataka

Housing Board’s case (2011) 2 SCC 246, in our view, 20%

deduction is to be made for competitive bidding. Deducting

20% i.e. Rs.8,984/- from Rs.44,921/-, balance arrived at

Rs.35,937/- per sq. yard is fixed as the value for the acquired

land.

29. Deduction Towards the Development: The High

Court has deducted 40% from the average price to equalize the

factor of the market value of a small plot of land as compared

to large area of land acquired and the figure works out to

Rs.22,460.25. High Court has also deducted one third

towards development cost and determined the market value of

the acquired land at Rs.14,974/- per sq. yard.

Page 22 22

30. Appellants contend that the rate of deduction as

applied by the High Court was highly excessive as the

acquired lands are situated in the area already developed and

have all potential for development. It is submitted that the

Court repeatedly held that in assessing the compensation

payable in respect of lands which had the potential for

housing or commercial purposes, normally 20% of the

assessed value of the land is deducted, depending on the

nature of the land, its location, extent of expenditure involved

for development and the land required for roads and other

civic amenities etc. and while so, thumb rule of 33

1/3

% or

one third cut on development cost cannot be used in a

situation when the exact development cost has been

established through evidence. The appellants rely upon the

documents issued by Executive Engineer (Annexure P-5) to

contend that the cost of development of Vasant Kunj is only

Rs.330/- per Sq. Yard.

31. Mr. Amarendra Sharan, learned Senior Counsel

appearing for the respondents contended that in forming a lay

out by Delhi Development Authority or any statutory

Page 23 23

authority, 40% of the land area is to be deducted for formation

of roads, drains, parks and other civic amenities and further

35% is to be deducted towards development cost for forming

the lay out, levelling the road, construction of drainage and

erection of electricity lines etc. It was submitted that deduction

for development on both the components worked out to 70-

75% and the High Court was not justified in making standard

deduction of one third. It was further submitted that if a

suitable deduction is made, the compensation awarded by the

High Court seems to be excessive and prayer for suitable

reduction of the award is made.

32. While making one third deduction towards

development cost, the learned single Judge did not keep in

view the two essential components of deduction for

development. Deduction for development consists of two

components:- firstly, appropriate deduction to be made

towards the area required to be utilized for roads, drains and

common facilities like parks etc.; secondly, further deduction

to be made towards the cost of development, that is cost of

levelling the land, cost of laying roads and drains, erection of

Page 24 24

electrical poles and water lines etc. For deduction of

development towards land and development charges, the

nature of development, conditions and nature of the land, the

land required to be set apart under the Building Rules for

roads, sewerage, electricity, parks, water supply etc. and other

relevant circumstances involved are required to be

considered.

33. In Haryana State Agricultural Market Board And

Anr. vs. Krishan Kumar And Ors., (2011) 15 SCC 297, it was

held as under:

“10. It is now well settled that if the value of small

developed plots should be the basis, appropriate deductions

will have to be made therefrom towards the area to be used

for roads, drains, and common facilities like park, open

space, etc. Thereafter, further deduction will have to be

made towards the cost of development, that is, the cost of

leveling the land, cost of laying roads and drains, and the

cost of drawing electrical, water and sewer lines.”

34. Consistent view taken by this Court is that one

third deduction is made towards the area to be used for roads,

drains, and other facilities, subject to certain variations

depending upon its nature, location, extent and development

around the area. Further, appropriate deduction needs to be

made for development cost, laying roads, erection of electricity

Page 25 25

lines depending upon the location of the acquired land and the

development that has taken place around the area.

35. Reiterating the rule of one third deduction towards

development, in Sabhia Mohammed Yusuf Abdul Hamid Mulla

(Dead) by Lrs. and Ors. vs. Special Land Acquisition Officer

and Ors., (2012) 7 SCC 595, this Court in paragraph 19 held

as under:-

“19. In fixing the market value of the acquired land,

which is undeveloped or underdeveloped, the courts have

generally approved deduction of 1/3

rd

of the market value

towards development cost except when no development is

required to be made for implementation of the public

purpose for which land in acquired. In Kasturi vs. State of

Haryana (2003) 1 SCC 354) the Court held: (SCC pp. 359-

60, para 7)

“7… It is well settled that in respect of agricultural

land or undeveloped land which has potential value

for housing or commercial purposes, normally 1/3

rd

amount of compensation has to be deducted out of

the amount of compensation payable on the

acquired land subject to certain variations depending

on its nature, location, extent of expenditure involved

for development and the area required for road and

other civic amenities to develop the land so as to

make the plots for residential or commercial

purposes. A land may be plain or uneven, the soil of

the land may be soft or hard bearing on the

foundation for the purpose of making construction;

may be the land is situated in the midst of a

developed area all around but that land may have a

hillock or may be low-lying or may be having deep

ditches. So the amount of expenses that may be

incurred in developing the area also varies. A

claimant who claims that his land is fully developed

and nothing more is required to be done for

developmental purposes, must show on the basis of

evidence that it is such a land and it is so located. In

Page 26 26

the absence of such evidence, merely saying that the

area adjoining his land is a developed area, is not

enough, particularly when the extent of the acquired

land is large and even if a small portion of the land is

abutting the main road in the developed area, does not

give the land the character or a developed area. In

84 acres of land acquired even if one portion on one

sides abuts the main road, the remaining large area

where planned development is required, needs laying

of internal roads, drainage, sewer, water, electricity

lines, providing civic amenities, etc. However, in cases

of some 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

developmental 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

developmental charges, may be in some cases it is

more than 1/3

rd

and in some cases less than 1/3

rd

. It

must be remembered that there is difference between a

developed area and an area having potential value,

which is yet to be developed. The fact that an area is

developed or adjacent to a developed area will not

ipso facto make every land situated in the area also

developed to be valued as a building site or plot,

particularly when vast tracts are acquired, as in this

case, for development purpose.” (emphasis supplied)

The rule of 1/3

rd

deduction was reiterated in Tejumal

Bhojwani v. State of U.P. ((2003)10 SCC 525, V. Hanumantha

Reddy v. Land Acquisition Officer, (2003) 12 SCC 642, H.P.

Housing Board v. Bharat S. Negi (2004) 2 SCC 184 and

Kiran Tandon v. Allahabad Development Authority. (2004)10

SCC 745”

36. While determining the market value of the acquired

land, normally one third deduction i.e. 33

1/3

% towards

development charges is allowed. One third deduction towards

development was allowed in Special Tehsildar, L.A.

Vishakapatnam vs. Smt.A. Mangala Gowri, (1991) 4 SCC 218;

Page 27 27

Gulzara Singh & Ors. vs. State of Punjab & Ors., (1993) 4 SCC

245; Santosh Kumari & Ors. vs. State of Haryana, (1996) 10

SCC 631; Revenue Divisional Officer-cum-LAO vs. Shaik Azam

Saheb etc., (2009) 4 SCC 395; A.P. Housing Board vs. K.

Manohar Reddy, (2010)12 SCC 707; Ashrafi & Ors. vs. State

of Haryana & Ors., (2013) 5 SCC 527 and Kashmir Singh vs.

State of Haryana & Ors., (2014) 2 SCC 165.

37. Depending on nature and location of the acquired

land, extent of land required to be set apart and expenses

involved for development, 30% to 50% deduction towards

development was allowed in Haryana State Agricultural Market

Board and Anr. vs. Krishan Kumar and Ors. (2011) 15 SCC

297; Deputy Director Land Acquisition vs. Malla Atchinaidua

And Ors. AIR 2007 SC 740; Mummidi Apparao (Dead by LR) vs.

Nagarjuna Fertilizers & Chemical Ltd., AIR 2009 SC 1506; and

Lal Chand vs. Union of India and Anr. (2009) 15 SCC 769.

38. In few other cases, deduction of more than 50% was

upheld. In the facts and circumstances of the case in

Basavva (Smt.) And Ors. v. Spl. Land Acquisition Officer And

Ors., (1996) 9 SCC 640, this Court upheld the

Page 28 28

deduction of 65%. In Kanta Devi & Ors. vs. State of Haryana

And Anr., (2008) 15 SCC 201, deduction of 60% towards

development charges was held to be legal. This Court in Subh

Ram & Ors. vs. State of Haryana & Anr., (2010) 1 SCC 444,

held that deduction of 67% amount was not improper.

Similarly, in Chandrasekhar (dead) by L.Rs. and Ors. vs. LAO

& Anr., (2012) 1 SCC 390, deduction of 70% was upheld.

39. We have referred to various decisions of this Court

on deduction towards development to stress upon the point

that deduction towards development depends upon the nature

and location of the acquired land. The deduction includes

components of land required to be set apart under the

building rules for roads, sewage, electricity, parks and other

common facilities and also deduction towards development

charges like laying of roads, construction of sewerage.

40. Rule of one third deduction towards development

appears to be the general rule. But so far as Delhi

Development Authority is concerned, or similar statutory

authorities, where well planned layouts are put in place,

larger land area may be utilized for forming layout, roads,

Page 29 29

parks and other common amenities. Percentage of deduction

for development of land to be made in DDA or similar

statutory authorities with reference to various types of layout

was succinctly considered by this Court in Lal Chand vs.

Union of India & Anr. (2009) 15 SCC 769 and observing that

the deduction towards the development range from 20% to

75% of the price of the plots, in paras 13 to 22, this Court held

as under:-

“13. The percentage of “deduction for development” to

be made to arrive at the market value of large tracts of

undeveloped agricultural land (with potential for

development), with reference to the sale price of small

developed plots, varies between 20% to 75% of the price of

such developed plots, the percentage depending upon the

nature of development of the layout in which the exemplar

plots are situated.

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 ands 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.

Page 30 30

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 to 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 200 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 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 far 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.

Page 31 31

21.Even among the layouts formed by DDA, the

percentage of land utilized for roads, civic amenities, parks

and playgrounds may vary with reference to the nature of

layout-whether it is residential , residential-cum-commercial

or industrial; and even among residential layouts, the

percentage will differ having regard to the size of the plots,

width of the roads, extent of community facilities, parks and

playgrounds provided.

22.Some of the layouts formed by the statutory

development authorities may have large areas earmarked for

water/sewage treatment plants, water tanks, electrical

substations, etc. in addition to the usual areas earmarked

for roads, drains, parks playgrounds and community/civic

amenities. The purpose of the aforesaid examples is only to

show that the “deduction for development” factor is a

variable percentage and the range of percentage itself being

very wide from 20% to 75%.”

Lal Chand’s case deals with acquisition of lands by DDA under

the Rohini Residential Housing Scheme where 40% deduction

was made towards the land area to be utilized for laying down

of roads, drains etc. Further deduction of 35% of the value of

the developed plot towards cost of levelling the land, cost of

providing roads, underground drainage, laying down water

lines, electricity lines was made.

41. In the instant case, having regard to the extent of

the land acquired and the development in and around Vasant

Kunj area, in our view, it is appropriate to make 35%

deduction towards utilization of the land area in the layout for

roads, drains, parks, playgrounds and civic amenities. So far

Page 32 32

as the expenditure for development of the large extent of land

into a developed area by construction of proper roads,

underground drainage, sewerage and erection of electricity

lines, it is appropriate to make further deduction of 25%,

though 35% of the value was deducted in Lal Chand case

(supra) towards development charges. Two components taken

together, the total deduction to be made would be 60%.

60% of Rs.35,937/- works out to Rs.21,562/- and deducting

the same, the value of the land would be Rs.14,375/- per sq.

yard. What was awarded by the High Court was Rs.14,974/-

per sq. yard. Since the SLP (Civil) No.15272/2011 filed by

DDA was dismissed by this Court on 12.5.2011 and the sale

has become final as against the appellants, we are not inclined

to further reduce the value of the acquired land from

Rs.14,974/- per sq. yard as determined by the High Court and

the compensation awarded by the High Court at Rs.14974/-

per sq. yard is maintained.

42. INTEREST: Contention of the appellants is that on the

enhanced compensation, the mandatory interest under

Section 34 of the Act has not been awarded to them. Placing

Page 33 33

reliance upon Commissioner of Income Tax, Faridabad vs.

Ghanshyam (HUF), (2009) 8 SCC 412, it is contended that the

impugned judgment is silent on granting statutory interest

under Section 34 of the Land Acquisition Act and the

appellants pray for award of interest on the enhanced

compensation. The appellants filed C.M. No.735/2011 before

the High Court seeking review for payment of interest which

according to the appellants was omitted to be included and the

said application was dismissed by the High Court.

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

Page 34 34

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.

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

Page 35 35

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

Page 36 36

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 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 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).”

47. In the scheme of the Act, considering the different

stages at which interest is payable on the compensation

amount/enhanced compensation, the Constitution Bench of

this Court in Gurpreet Singh’s case further held as under:-

“32.In the scheme of the Act, it is seen that

the award of compensation is at different stages. The

first stage occurs when the award is passed.

Obviously, the award takes in all the amounts

contemplated by Section 23(1), Section 23(1-A),

Section 23(2) and the interest contemplated by Section

34 of the Act. The whole of that amount is paid or

deposited by the Collector in terms of Section 31 of the

Act. At this stage, no shortfall in deposit is

contemplated, since the Collector has to pay or deposit

the amount awarded by him. If a shortfall is pointed

out, it may have to be made up at that stage and the

Page 37 37

principle of appropriation may apply, though it is

difficult to contemplate a partial deposit at that stage.

On the deposit by the Collector under Section 31 of the

Act, the first stage comes to an end subject to the right

of the claimant to notice of the deposit and withdrawal

or acceptance of the amount with or without protest.

33.The second stage occurs on a reference under

Section 18 of the Act. When the Reference Court

awards enhanced compensation, it has necessarily to

take note of the enhanced amounts payable under

Section 23(1), Section 23(1-A), Section 23(2) and

interest on the enhanced amount as provided in

Section 28 of the Act and costs in terms of Section 27.

The Collector has the duty to deposit these amounts

pursuant to the deemed decree thus passed. This has

nothing to do with the earlier deposit made or to be

made under and after the award. If the deposit made,

falls short of the enhancement decreed, there can arise

the question of appropriation at that stage, in relation

to the amount enhanced on the reference.

34.The third stage occurs, when in appeal, the High

Court enhances the compensation as indicated

already. That enhanced compensation would also

bear interest on the enhanced portion of the

compensation, when Section 28 is applied. The

enhanced amount thus calculated will have to be

deposited in addition to the amount awarded by the

Reference Court if it had not already been deposited.

35.The fourth stage may be when the Supreme

Court enhances the compensation and at that stage

too, the same rule would apply.”

48. By going through the judgment of reference court as

well as the High Court, we find that the appellants were

awarded interest in terms of Section 34 and Section 28 of the

Act. Section 4(1) notification was issued on 19.02.1997. The

reference court has not enhanced the compensation amount;

Page 38 38

but has only confirmed the award passed by the Collector.

However, while dismissing the reference, reference court held

that the appellant shall be entitled to get interest in terms of

the provisions of the Act for the period from 19.02.1997 till

the date of payment, meaning thereby that the statutory

interest in terms of Section 34 of the Act is payable.

49. When the High Court enhanced the compensation,

the High Court held that the appellants shall be paid interest

in terms of Section 28 of the Act. On the enhanced

compensation, High Court ordered payment of interest at the

rate of 9% from 19.02.1997 to 18.2.1998 and thereafter at the

rate of 15% per annum till the date of payment. The relevant

portion of the judgment of the High Court reads as under:-

“On the enhanced market value, the appellant

shall be paid interest under Section 28 of the Act @ 9%

per annum from 19.02.1997, the date of issuance of

Section 4 notification for the first year ending on

18.02.1998 and thereafter, @ 15% per annum till the

date of tender of compensation. Interest shall also be

paid on the solatium and the additional amount in

view of the judgment of the Supreme Court in the case

of Sunder Vs. UOI reported as 93(2001) DLT 569 (SC).”

Since the statutory interest under Section 34 and also the

interest in terms of Section 28 of Act had been awarded to the

Page 39 39

appellants, we find no merit in the grievance of the appellants

as to the payment of interest.

50.COSTS: By its judgment dated 24.12.2010, the High

Court enhanced the compensation at the rate of Rs.14,974/-

per sq. yard, but the High Court had then awarded only

costs of Rs.20,000/-. Thereafter, the appellants filed C.M.

No. 735/2011, interalia, contending that they ought to have

been awarded entire costs at the rate of Rs. 50,000/- per sq.

yard, enhanced compensation as claimed by the claimants.

Appellants also claimed that the entire court fees of Rs.48

lakhs affixed on the memo of appeal be included in the costs.

High Court rejected the plea of the appellants for inclusion of

the entire court fees and costs at the rate of enhanced

compensation for the acquired land at Rs.50,000/- per sq.

yard as claimed by the appellants. But the High Court

modified its order by awarding proportionate costs in favour of

the appellants over and above the sum of Rs.20,000/-.

51. The appellant, party-in-person, contended that they

have paid court fees of Rs.48 lakhs and High Court ignored

the mandatory provisions of law in awarding costs and that

Page 40 40

court fees is an integral part of costs. It was submitted that

the impugned order dated 13.10.2011 awarding “grant of

proportionate costs” is not in accordance with well settled

principle of law. Appellants further contended that being

partly successful before the High Court, they cannot be

deprived of their claim of entire court fees and the costs.

52. The learned Senior Counsel for respondents

submitted that as per the well settled principle, the High Court

has awarded proportionate costs and there is no improper

exercise of discretion warranting interference by this Court.

53. Section 27 of the Act deals with costs. Section 27

reads as under:

“27.Costs:- (1)Every such award shall also

state the amount of costs incurred in the proceedings

under this Part, and by what persons and in what

proportions they are to be paid.

(2)When the award of the Collector is not

upheld, the costs shall ordinarily be paid by the

Collector, unless the court shall be of opinion that the

claim of the applicant was so extravagant or that he

was so negligent in putting his case before the

Collector that some deduction from his costs should

be made or that he should pay a part of the Collector’s

costs.”

54. The language of Section 27(1) is clear and very wide

and it gives power to the courts to order costs to be paid by

what persons and in what proportions they are to be paid. In

Page 41 41

making order for costs under Section 27(1), the court may

have regard to the provisions of Section 35 C.P.C. Analysing

sub-section (2) of Section 27, it appears to consist of three

parts, viz., (i) When the award of the Collector is not upheld,

the costs shall ordinarily be paid by the collector as directed

by the Court; (ii) the court is not bound to do so in every case.

If the court forms opinion that the claim of the claimant is

extravagant or that he was so negligent in putting his case

before the Collector, then the court may make a different order

as regards costs and (iii) the court may in such cases direct,

that some deduction be made from the costs of the claimant or

that he should pay a part of the Collector’s costs.

55. Ordinarily, when a litigant succeeds in part and

fails in part, the equitable order made is that he should receive

proportionate costs. When considering the appellants’ claim

in C.M. No. 735 of 2011, in exercise of its discretion, the High

Court rightly awarded proportionate costs and accordingly

directed payment of such proportionate costs of over and

above Rs.20,000/- as originally ordered. Merely because the

appellants claimed compensation at the rate of Rs.50,000/-

Page 42 42

per sq.yard, the respondents cannot be saddled with the

liability of paying the entire costs and the court fees paid by

the appellants. There is no improper exercise of discretion by

the High Court in awarding proportionate costs and we find no

merit in the claim of the appellants claiming full costs.

56. We may incidentally refer to the statement of

learned Senior Counsel for the respondents that compensation

amount of about Rs.40 crores has already been paid to the

appellants.

57. We, therefore, do not find any merit in these appeals

and the appeals are dismissed accordingly. Parties are to bear

their respective costs.

………………………… ..J

(T.S. Thakur)

………………………… ..J

(R. Banumathi)

New Delhi;

October 17, 2014