Full Judgment Text
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CASE NO.:
Appeal (civil) 3148-3157 of 2000
PETITIONER:
Atma Singh (died) through LRs. & Ors
RESPONDENT:
State of Haryana & Anr
DATE OF JUDGMENT: 07/12/2007
BENCH:
G.P. Mathur & D.K. Jain
JUDGMENT:
J U D G M E N T
CIVIL APPEAL NOs. 3148-3157 OF 2000
G. P. MATHUR, J.
1. These appeals, by special leave, have been preferred against the
judgment and decree dated 4.1.1989 of High Court of Punjab and
Haryana at Chandigarh, by which 17 appeals preferred by claimant-
appellants (landowners) against the common judgment and award of
the Additional District Judge, Kurukshetra, dated 31.8.1985 had been
decided. The claimant-appellants had sought enhancement of the
amount of compensation for acquisition of their land.
2. A notification under Section 4 of the Land Acquisition Act
(hereinafter referred to as ’the Act’) was issued for acquisition of 89
acres and 3 marlas of land for construction of a cooperative sugar
mill. The land was situate as one compact unit in four villages viz.
Kankar Shahbad, Chhapra, Jandheri and Jhambara and belonged to 17
families. In response to the notice issued by the Collector under
Section 9 of the Act, landowners filed objections claiming
compensation for their land which had been acquired. The Land
Acquisition Collector, after holding an enquiry, gave an award on
14.7.1983 under Section 11 of the Act. The Collector gave award on
the basis of quality of land, for which purpose he divided the acquired
land in seven categories and the market value was assessed at
Rs.6,000/- to Rs.35,000/- per acre for different types of lands. Feeling
aggrieved by the award of the Collector, the appellants herein
(landowners) sought reference to the Court under Section 18 of the
Act. The learned Additional District Judge awarded compensation at
a flat rate of Rs.43,000/- per acre by placing reliance on Ex. R-6 and
R-7, two instances of sale deeds of village Chhapra. After taking
average of these sale transactions, an addition of 25% was made for
fixing the market value of the land. Against the award made by the
learned Additional District Judge, the claimant-appellants
(landowners) preferred 17 appeals before the High Court. The High
Court after appraisal of evidence on record held that the market value
of the land acquired was Rs.1,20,000/- per acre. It further held that
the exemplars filed by the appellants were of small pieces of land and,
therefore, a deduction of 33% had to be made and accordingly the
market value of the land was assessed at Rs.80,000/- per acre.
Besides the market value, the appellants were also held entitled to
statutory sums under Section 23(1-A), 23(2) and 28 of the Act. The
State of Haryana had also filed appeals against the award of the
Additional District Judge, but the same were dismissed.
3. The appeals in this Court have only been filed by the
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landowners and the State of Haryana has not filed any appeal
challenging the judgment and decree of the High Court. We have
heard Shri M.L. Varma, learned Senior Advocate for the appellants
and Shri Rakesh Dwivedi, learned Senior Advocate for the Shahabad
Cooperative Sugar Mills Ltd., for whose benefit the land has been
acquired.
4. In order to determine the compensation which the tenure-
holders are entitled to get for their land which has been acquired, the
main question to be considered is what is the market value of the land.
Section 23(1) of the Act lays down what the Court has to take into
consideration while Section 24 lays down what the Court shall not
take into consideration and have to be neglected. The main object of
the enquiry before the Court is to determine the market value of the
land acquired. The expression ’market value’ has been subject-matter
of consideration by this Court in several cases. The market value is
the price that a willing purchaser would pay to a willing seller for the
property having due regard to its existing condition with all its
existing advantages and its potential possibilities when led out in most
advantageous manner excluding any advantage due to carrying out of
the scheme for which the property is compulsorily acquired. In
considering market value disinclination of the vendor to part with his
land and the urgent necessity of the purchaser to buy should be
disregarded. The guiding star would be the conduct of hypothetical
willing vendor who would offer the land and a purchaser in normal
human conduct would be willing to buy as a prudent man in normal
market conditions but not an anxious dealing at arms length nor
facade of sale nor fictitious sale brought about in quick succession or
otherwise to inflate the market value. The determination of market
value is the prediction of an economic event viz., a price outcome of
hypothetical sale expressed in terms of probabilities. See Thakur
Kanta Prasad v. State of Bihar, AIR 1976 SC 2219; Prithvi Raj
Taneja v. State of M. P., AIR 1977 SC 1560; Administrator General
of West Bengal v. Collector, Varanasi, AIR 1988 SC 943 and Periyar
v. State of Kerala, AIR 1990 SC 2192.
5. For ascertaining the market value of the land, the potentiality of
the acquired land should also be taken into consideration. Potentiality
means capacity or possibility for changing or developing into state of
actuality. It is well settled that market value of a property has to be
determined having due regard to its existing condition with all its
existing advantages and its potential possibility when led out in its
most advantageous manner. The question whether a land has potential
value or not, is primarily one of fact depending upon its condition,
situation, user to which it is put or is reasonably capable of being put
and proximity to residential, commercial or industrial areas or
institutions. The existing amenities like, water, electricity, possibility
of their further extension, whether near about Town is developing or
has prospect of development have to be taken into consideration. See
Collector Raigarh v. Hari Singh Thakur, AIR 1979 SC 472,
Raghubans Narain v. State of U.P., AIR 1969 SC 465 and
Administrator General, W. B. v. Collector Varanasi, AIR 1988 SC
943. It has been held in Kaushalya Devi v. L.A.O. Aurangabad, AIR
1984 SC 892 and Suresh Kumar v. T.I. Trust, AIR 1980 SC 1222 that
failing to consider potential value of the acquired land is an error of
principle.
6. As mentioned earlier, the learned Additional District Judge had
awarded compensation at a flat rate of Rs.43,000/- per acre by placing
reliance on Ex. R-6 and R-7, two instances of sale of village Chhapra.
After taking an average of these two sale transactions, an addition of
25% was made while fixing the market value of the land. The High
Court held that these two sale deeds were of 31.12.1980, while in the
instant case, the notification under Section 4 of the Act was published
much later on 9.2.1983. That apart, Ex.R-6 and R-7 were mutation
orders and the corresponding sale deeds had not been brought on the
record. In fact, the learned Additional District Judge, in the earlier
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part of the judgment, had himself discarded Ex. R-6 and R-7 as they
were mutation orders and were inadmissible in evidence. The High
Court, therefore, rightly held that no reliance could be placed upon
Ex.R-6 and R-7 for determining the market value of the land.
7. The claimant-appellants (landowners) had filed copies of four
sale deeds which are Exs.P-7, P-8, P-9 and P-10. In fact, Ex. P-7 is a
copy of a sale deed by which Laxman Singh bought some land in
village Chhapra on 28.7.1982, which itself became subject matter of
acquisition. Laxman Singh had deposed that he had bought the land
for construction of shops. All these four sale deeds related to sale
transactions prior to the issuance of the notification under Section 4 of
the Act on 9.2.1983. The High Court excluded Ex.P-8 from
consideration as it related to a very small piece of land measuring 19
marlas only. The average price of the three sale deeds viz. Ex. P-7, P-
9 and P-10 came to little more than Rs.1,20,000/- per acre. Apart
from these three sale deeds, no other exemplars were filed either by
the State of Haryana or by the landowners. The High Court accepted
the price exhibited by the aforesaid three sale transactions which came
to little more than Rs.1,20,000/- per acre. It thus recorded a finding
that the market value of the land was Rs.1,20,000/- per acre. In our
opinion, there being no other documentary evidence, the view taken
by the High Court that the market value of the land was Rs.1,20,000/-
per acre is perfectly correct and calls for no interference.
8. Shri Rakesh Dwivedi, learned senior counsel for the sugar mill
has submitted that the exemplars filed by the appellants were of very
small pieces of land and, therefore, they are not safe guide to
determine the market value of the land. It may be mentioned here that
while determining the market value, the potentiality of the land
acquired has also to be taken into consideration. The appellants have
led evidence to show that the acquired land had the potentiality to be
used for commercial, industrial and residential purposes. PW.1
Rakesh Kumar had prepared a site plan which showed that the
acquired land was adjacent to the abadi of Shahabad and abutted the
Shahabad-Ladwa Road. The site plan also shows that there existed
rice shellers, cold storage, shops, godowns, a college and houses etc.
on both sides of Shahabad-Ladwa Road. PW.2 Baldev Singh was
Patwari of village Chhapra in the year 1983. He deposed that all the
four villages viz. Kankar Shahbad, Chhapra, Jandheri and Jhambara
are adjacent to each other and the acquired land abutted the Shahabad-
Ladwa Road. He further deposed that the acquired land was 2
kilometer from G.T. Road and there were buildings, godowns, a
cinema hall, factories on both sides of the Shahabad-Ladwa Road.
Therefore, there can be no manner of doubt that the acquired land had
the potentiality for being used for commercial, industrial and
residential purposes and there was fair possibility of increase in its
market value in the near future. Therefore, the fact that the exemplars
filed by the appellants were of the small pieces of land could not be a
ground to discard them specially when exemplars of large pieces of
land were not available. They could, therefore, be used as a safe guide
for determining the market value of the land.
9. Learned counsel for the appellants has seriously challenged the
finding of the High Court that the market value of the land determined
on the basis of the exemplars filed by the parties should be reduced by
one-third on account of the fact that the exemplars relied upon for
ascertaining the market value related to sale of small pieces of land.
According to Shri M.L. Verma, learned senior counsel for the
appellants, there is no uniform principle that if a large area has been
acquired and the exemplars are of small pieces of land, the market
value exhibited by the exemplars must necessarily be reduced by one-
third. Shri Verma has placed strong reliance on Bhagwathula
Samanna & Ors. v. Special Tehsildar & Land Acquisition Officer,
Visakhapatnam Municipality (1991) 4 SCC 506, wherein it was held
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as under :-
"In fixing the market value of a large property on
the basis of a sale transaction for smaller property,
generally a deduction is given taking into consideration
the expenses required for development of the larger tract
to make smaller plots within that area in order to
compare with the small plots dealt with under the sale
transaction. However, in applying this principle of
deduction it is necessary to consider all relevant facts. It
is not the extent of the area covered under the acquisition
which is the only relevant factor. If smaller area within
the large tract is already developed and situated in an
advantageous position suitable for building purposes and
have all amenities such as roads, drainage, electricity,
communications etc. then the principle of deduction
simply for the reason that it is part of the large tract
acquired, may not be justified.
In the present cases the lands covered by the
acquisition are located by the side of the National
Highway and the Southern Railway Staff Quarters with
the Town Planning Trust road on the north. The
neighbouring areas are already developed ones and
houses have been constructed, and the land has potential
value for being used as building sites. Having found that
the land is to be valued only as building sites and having
stated the advantageous position in which the land in
question lies though forming part of the larger area, the
High Court should not have applied the principles of
deduction. It is not in every case that such deduction is
to be allowed. Therefore, the High Court erred in
making a deduction of one third of the value of the
comparable sale and thus reducing the fair market value
of land from Rs. 10 per sq. yard to Rs.6.50 per sq. yard."
Shri Verma has also referred to Kasturi & Ors. v. State of
Haryana (2003) 1 SCC 354, wherein it was observed that in cases of
those land where there are certain advantages by virtue of the
developed area around, it may help in reducing the percentage of cut
to be applied, as the development charges required may be less on that
account. There may be various factual factors which may have to be
taken into consideration while applying the cut in payment of
compensation towards development charges, may be in some cases it
is more than 1/3rd and in some cases less than 1/3rd. Therefore, in this
case taking into consideration the potentiality of the acquired land for
construction of residential and commercial buildings, the deduction
made was only 20%.
10. Shri Rakesh Dwivedi, learned senior counsel for the sugar mill
has, on the other hand, strenuously urged that the evidence of market
value shown by sale of small plots is not a safe guide in valuing large
areas of land and the prices fetched for small plots cannot be directly
adopted in valuing large extent of land as has been acquired in the
present case. He has thus contended that a deduction of 30% had
rightly been made by the High Court on account of acquisition of a
large area. In support of his contention, Shri Dwivedi has placed
reliance upon several decisions of this Court. In order to appreciate
the principle laid down therein, it will be useful to refer to them in
some detail. In Administrator General of West Bengal v. Collector,
Varanasi, AIR 1988 SC 943, it was held as follows in para 6 of the
report:-
"The principle requires that prices fetched for small
developed plots cannot directly be adopted in valuing
large extents. However, if it is shown that the large extent
to be valued does admit of and is ripe for use for building
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purposes; that building lots that could be laid out on the
land would be good selling propositions and that
valuation on the basis of the method of a hypothetical lay
out could with justification be adopted, then in valuing
such small laid out sites the valuation indicated by sale of
comparable small sites in the area at or about the time of
the notification would be relevant. In such a case,
necessary deductions for the extent of land required for
the formation of roads and other civic amenities;
expenses of development of the sites by laying out roads,
drains, sewers, water and electricity lines, and the interest
on the outlays for the period of deferment of the
realisation of the prices; the profits on the venture etc. are
to be made."
11. In Chimanlal v. Special Land Acquisition Officer, AIR 1988 SC
1652 it was held as follows in para 4 (15) of the reports.
"Firstly while a smaller plot is within the
reach of many, a large block of land will have to
be developed by preparing a lay out, carving out
roads, leaving open space, plotting out smaller
plots, waiting for purchasers (meanwhile the
invested money will be blocked up) and the
hazards of an entrepreneur. The factor can be
discounted by making a deduction by way of an
allowance at an appropriate rate ranging approx,
between 20% to 50% to account for land required
to be set apart for carving out lands and plotting
out small plots. The discounting will to some
extent also depend on whether it is a rural area or
urban area, whether building activity is picking up,
and whether waiting period during which the
capital of the entrepreneur would be locked up,
will be longer or shorter and the attendant
hazards"."
12. Shri Dwivedi has also referred to Basant Kumar & Ors. v.
Union of India & Ors. (1996) 11 SCC 542, K. Vasundara Devi v.
Revenue Divisional Officer (LAO) (1995) 5 SCC 426, H.P. Housing
Board v. Bharat S. Negi & Ors. (2004) 2 SCC 184. In the first cited
case land was acquired for planned development of Delhi and in the
other two cases for Housing Boards and a deduction of 33% was
applied.
13. The reasons given for the principle that price fetched for small
plots cannot form safe basis for valuation of large tracks of land,
according to cases referred to above, are that substantial area is used
for development of sites like laying out roads, drains, sewers, water
and electricity lines and other civic amenities. Expenses are also
incurred in providing these basic amenities. That apart it takes
considerable period in carving out the roads making sewers and drains
and waiting for the purchasers. Meanwhile the invested money is
blocked up and the return on the investment flows after a considerable
period of time. In order to make up for the area of land which is used
in providing civic amenities and the waiting period during which the
capital of the entrepreneur gets locked up a deduction from 20%
onward, depending upon the facts of each case, is made.
14. The question to be considered is whether in the present case
those factors exist which warrant a deduction by way of allowance
from the price exhibited by the exemplars of small plots which have
been filed by the parties. The land has not been acquired for a
Housing Colony or Government Office or an Institution. The land has
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been acquired for setting up a sugar factory. The factory would
produce goods worth many crores in a year. A sugar factory apart
from producing sugar also produces many by-product in the same
process. One of the by-products is molasses, which is produced in
huge quantity. Earlier, it had no utility and its disposal used to be a big
problem. But now molasses is used for production of alcohol and
ethanol which yield lot of revenue. Another by-product begasse is
now used for generation of power and press mud is utilized in manure.
Therefore, the profit from a sugar factory is substantial. Moreover, it
is not confined to one year but will accrue every year so long as the
factory runs. A housing board does not run on business lines. Once
plots are carved out after acquisition of land and are sold to public,
there is no scope for earning any money in future. An industry
established on acquired land, if run efficiently, earns money or makes
profit every year. The return from the land acquired for the purpose
of Housing Colony, or Offices, or Institution cannot even remotely be
compared with the land which has been acquired for the purpose of
setting up a factory or industry. After all the factory cannot be set up
without land and if such land is giving substantial return, there is no
justification for making any deduction from the price exhibited by the
exemplars even if they are of small plots. It is possible that a part of
the acquired land might be used for construction of residential colony
for the staff working in the factory. Nevertheless where the remaining
part of the acquired land is contributing to production of goods
yielding good profit, it would not be proper to make a deduction in the
price of land shown by the exemplars of small plots as the reasons for
doing so assigned in various decisions of this Court are not applicable
in the case under consideration.
15. Having regard to the entire facts and circumstances of the case,
we are of the opinion that a deduction of 10% from the market value
of the land, which has been arrived at by the High Court would meet
the ends of justice. Therefore, the market value of the acquired land
for the purpose of payment of compensation to the land owners has to
be assessed at Rs.1,08,000/- per acre.
16. In the result, the appeals are partly allowed. The claimant-
appellants will be entitled to compensation at the rate of Rs.1,08,000/-
per acre. Besides the above amount, they will also be entitled to the
statutory sum in accordance with Section 23(1-A) and solatium at the
rate of 30% on the market value of the land in accordance with
Section 23(2) of the Act. They will also be entitled to interest as
provided in Section 28 of the Act. The appellants will be entitled to
their costs.