Full Judgment Text
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PETITIONER:
LAND AQUISITION OFFICER
Vs.
RESPONDENT:
JASTI ROHINI
DATE OF JUDGMENT27/10/1994
BENCH:
RAMASWAMY, K.
BENCH:
RAMASWAMY, K.
VENKATACHALA N. (J)
CITATION:
1995 SCC (1) 717 JT 1995 (2) 339
1994 SCALE (5)75
ACT:
HEADNOTE:
JUDGMENT:
ORDER
1. Leave granted.
2. In disposal of the three appeals by this common
judgment, we shall refer to SLP (C) No. 12300 of 1994 as
first case and to SLP (C) Nos. 352829 of 1994 as second
case.
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3. Notification issued under Section 4(1) of the Land
Acquisition Act, 1894 in the first case was published on 16-
6-1983 for acquiring 9.47 acres near Eluru town of West
Godavari District of Andhra Pradesh to provide house sites
to the poor. Again, 14.10 acres of land was acquired in the
second case for the same purpose by publishing the
notification under Section 4(1) on 23-3-1985. The Land
Acquisition Officer awarded compensation under Section 11 at
Rs 40,000 per acre in both the cases. On reference, the
Subordinate Judge, Eluru, enhanced the market value in the
first case to Rs 105 per sq. yard by deducting 30% for
developmental charges out of Rs 150 per sq. yard fixed as
its value, with usual solatium and interest. In the second
case, he enhanced to Rs 70 per sq. yard as claimed by the
claimants therein. On appeal, the High Court, by the
impugned separate judgments dated 29-9-1993 enhanced the
market value to Rs 150 in respect of land in the second case
but he upheld in the first case the market value of the land
at Rs 150 per sq. yard granting the usual solatium and
interest. Thus, these appeals by special leave.
4. We have heard learned counsel on both sides and
considered the reasoning of the High Court and also of the
reference court vis-a-vis the evidence on record. Both the
courts committed manifest error of law. The main thrust of
the arguments for the claimants is that the award of the
Civil Court in Ex. A-3 marked in the second case relating
to notification dated 10-1-1977 acquiring 2.17 acres of land
in T.S. No. 135 of the nearby lands, the LAO had awarded at
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Rs 8.75 per sq. yd. and the reference court determined its
compensation at Rs 50 per sq. yd., which was upheld on
appeal by the High Court. The fixation of market value of
acquired lands as prevailing in 1983-85 at Rs 150 is not
high. Claimant also relied upon another award on reference
which is the subject-matter in the first case and yet
another award Ex. A- 12 in OP No. 6/85 which is pending in
appeal in the High Court apart from the sale deed Ex. A-10
relied on and accepted by the High Court in both the cases
and Exs. A- 16 and 17 in the first case.
5. The question, therefore, is what would be the market
value prevailing as on the respective dates of notification.
In the first case claimants have relied upon two sale deeds
Exs. A-16 and 17 sold on 2-2-1983 from the very same
acquired land and claimed to be on the basis of a layout
said to have been obtained from the competent authorities.
According to the claimants, it would work out at Rs 150 per
sq. yd. Since the claimants themselves had sold those lands
to others, they would reflect the market value of lands as
prevailing near about the date of acquisition and could be
of assistance to determine the compensation as on 1983. In
the other case, the claimants relied upon the very same
award as also sale deed Ex. A-10 in which the land sold is
120 sq. yds. for a sum of Rs 16,000 working out at Rs 133
per sq. yd. The reference court relied upon the basic
valuation register maintained by the municipalities on the
basis of the notification issued by the Government under
Section 47-A of the Stamp Act. In fact, the reference court
mainly relied upon that document and awarded compensation on
its basis.
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6. The admissibility and evidentiary value of the entries
in the basic value register was considered by this Court in
Jawajee Nagnatham v. Revenue Divisional Officer1. After an
elaborate consideration this Court held that the basic value
register is maintained only for fiscal purpose of collecting
stamp duty and registration charges. The market value
mentioned therein cannot form a foundation to determine the
compensation under Section 23(1) of the Act. It is settled
law that the market value should be determined on the
hypothesis of the price fetched in the bona fide sale by a
willing vendor who would agree to sell the lands to a
willing vendee of the acquired land or the land in the
neighbourhood possessed of similar features. The
notification under Section 47-A which is meant to be a guide
for collection of revenue cannot form the basis for
determination of market value of the land under Section
23(1) of the Act. The question of fixation of market value
is a paradox which lies at the heart of the law of
compulsory purchase of land. The paradox lies in the facts
that the market value concept is purely a phenomenon evolved
by the courts to fix the price of land arrived between the
hypothetical willing buyer and willing seller bargaining as
prudent persons without a medium (sic modicum) of
constraints or without any extraordinary circumstances. But
the condition of free market is the very opposite of the
condition of the compulsory purchase which is ex hypothesis
a situation of constraints. Therefore, to say, that for
compulsory purchase, compensation is to be assessed and
market value is to be determined in that state of affairs
has to be visualised in terms by its direct opposite. To
solve the riddle, courts have consistently evolved the
principle that the present value as on the date of the
compulsory acquisition comprised of all utility reached in a
competitive field as on the date of the notification and the
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price on which a prudent and willing vendor and a similar
purchaser would agree. The value of the land shall be taken
to be the amount that the land if sold in the open market by
a willing seller might be expected to realise from a willing
purchaser. A willing seller is a person who is a free agent
to offer his land for sale with all its existing advantages
and potentialities as on the date of the sale and willing
purchaser taking all factors into consideration would offer
to purchase the land as on the date of the sale. Future
suitability or adaptability of the land for any purpose
shall not be taken into account. The compensation must,
therefore, be determined by reference to the price which a
willing vendor might reasonably expect to obtain from a
willing purchaser as on the date of the notification
published under Section 4(1). The disinclination of the
seller to part with his land and the urgent necessity of the
vendee to purchase the land must, alike, be disregarded and
neither of them must be considered as acting under
compulsion.
7. The reasonable method to determine the market value of
the acquired land is on the evidence of transactions of bona
fide sales of acquired land, but not on evidence of sales of
such land got up having had knowledge of the proposed
acquisition, the former would furnish reasonable basis to
determine
1 (1994) 4 SCC 595
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the compensation. In its absence, bona fide sales but not
manipulated sales of the lands in the neighbourhood
possessed of same or similar quality and having the same or
similar advantages would give an unerring assurance to the
court to determine just and proper compensation. Such sales
must not only be proved but also be bona fide transactions
etc. These factors must be established as a fact by
examining either the vendor or the vendee. Marking of
certified copies of sale deeds are not proof of either the
contents or the circumstances in which it came to be
executed. Bona fide sale or series of sales of small pieces
of land do not furnish the sole basis to determine market
value. Bona fide sales may furnish evidence of the market
conditions for consideration. Fixation of market value on
the basis of the basic valuation register is, therefore,
illegal and unsustainable.
8. Section 24 of the Act puts an embargo on the court that
it shall not take into consideration the degree of urgency
for the acquisition; disinclination of the person interested
to part with possession of the acquired land; any increase
in the value of the land acquired likely to accrue from the
use to which it will be put when acquired; any increase to
the value of the other land of the person interested likely
to accrue from the use to which the land acquired will be
put to; any layout or improvements on or disposal of the
land acquired etc. without the sanction of the Collector or
after Section 4(1) notification was published, special
suitability or adaptability of the land for any purpose or
any increase in the value of the land on account of its
being put to any use which is forbidden of law are opposed
to public policy. Therefore, in determining the market
value and fixation of the compensation, the court should be
alive to these factors and keep them at the back of the mind
and should not be influenced by the future or later
development in the locality or neighbourhood and should not
get influenced by the prevailing situation as on the date of
the determination of the compensation. Its consideration
should alone be confined to the market value prevailing as
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on the date of the notification under Section 4(1).
9. The question then is whether the High Court is right to
determine market value on the basis of Ex. A-10; reference
awards and potential values as house sites. It is seen that
in the first case 9.49 acres of land was acquired and in the
second case 14. 1 0 acres of land was acquired. For an
acquisition of such vast area, reliance of small extents of
land of 120 sq. yds. does not furnish any satisfactory basis
for fixation of the market value. Ex. A-10 is of a small
extent and its value at Rs 133 per sq. yd. offers no
assistance. The High Court, therefore, was clearly in error
in determining, the market value solely on the basis of Ex.
A-10 marked in the second case to determine the market value
at enhanced rate of Rs 150. It is at the height of the
illegality. The same document was marked in the first case.
Ex. A-16 and Ex. A-17 no doubt relate to the lands under
acquisition in the first case. It would be obvious that the
proposal for acquisition would take long time for its taking
final shape culminating in the issuance and publication of
the notification under Section 4(1). The proposed
acquisition would be invariably within the knowledge of the
owners of the land. It is apparent from the dates of sale
that
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they were not bona fide sales between a willing vendor to a
willing vendee and price shown in the sale deeds were
inflated to boost up the market condition for determination
of compensation. Ex. A-3, the award and decree of the
civil court of 1977 acquisition wherein compensation at Rs
50 was fixed is also based on the got up sales. These
factors were not critically examined either by the reference
court or the High Court. So these sales also do not assist
the claimants. Equally Ex. A-12 in OP No. 56 of 1985 is
also based on the basic value register and its foundation is
knocked of at its bottom by the decision of this Court. For
the said reasons determination of compensation is vitiated
by application of wrong principles of law.
10. When we exclude these documents from consideration, we
do not have any other evidence except the fact that the
lands are situated near Eluru Municipality within the master
plan prepared for the municipal town. The finding recorded
by the LAO in the award was that there is no upward trend in
the prices. The High Court also accepted the finding of the
reference court that the lands are interior though abutting
the main road. It was also found that there are no
developmental activities in the neighbourhood as on the date
of notification, the LAO, therefore, treated these lands as
agricultural lands. In our view, he is right in treating
these lands correctly as agricultural lands.
11. Shri Tata Rao, the learned Senior Counsel for the
claimants in the second case placed reliance on the judgment
of this Court reported in Gulzara Singh v. State of Punjab2
and contended that this Court had accepted the potential
value as a basis to determine the market value, and
accordingly, he contended that the lands being situated
within the municipal limits, have potential value and that
therefore, market value should be determined on that basis.
We find no force in the contention. In fixing the market
value on the basis of its potentiality for use for building
purposes, it must be established by evidence aliunde that
the potential purpose must exist as on the date of
acquisition by other possible purchasers in the market
conditions, prevailing as on the date of the notification.
Existence of constructed house or construction activity in
other similar lands in the locality for the purpose
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contended for or of purchase for such purposes as on the
date of proposed acquisition prima facie indicates that
there is demand for and the possibility of the immediate
user of the land and it is a reasonable possibility to infer
that the acquired lands also are possessed of potential
value. Therefore, the existence of a demand for and a
market at the time of acquisition for potential use must be
established as a fact from reliable and acceptable evidence
to show that if the acquired land has been thrown into the
market, others would have bought it for the special purposes
or for building activity which would show the demand for and
a market to purchase the land possessed of potential value
for the purpose of building activity at that time. On proof
thereof the land must not be valued as though it has already
been built up but the possibility to use for building
purpose existing as on the date of the notification must be
taken into consideration. The
2 (1993) 4 SCC 245
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question whether the land has potential value as a building
site or not is primarily one of fact depending upon diverse
factors as to its conditions, the use to which it is put or
is reasonably capable of being put and its suitability for
building purpose. Its proximity to residential, commercial
or industrial area, existence of educational, cultural,
industrial or commercial institutions, existence of
amenities like water, electricity, drainage and the
possibility of future extension in that area, the existence
of or prospects of development schemes, the existence or
absence of building activities towards the acquired land or
in the neighbourhood thereof are the relevant facts to be
taken into consideration in evaluating the market value on
the basis of potential use of the land. It is true that an
element of guess, in an estimate, would have a play in
determining the market value. But the present value alone
falls to be determined and feats of imagination should not
run riot or travel beyond its manifest limits nor be an
arbitrary or whim of the court in determining the
compensation or the fixation of the market value. The
existing conditions, the demand for the land in the
neighbourhood and other related and relevant facts should be
taken into consideration in determining the compensation on
the basis of potential value of the land. In Gulzara Singh
case2, it was found that the sale deed Ex. A-9 was a
genuine sale deed between a willing vendor and a willing
vendee and it furnished the basis for determination of the
market value. It was also found that the land was situated
in the developing area and accordingly this Court took those
factors into consideration, and had fixed the market value
on the basis of potential value on existing conditions.
12. Equally the decision in Inder Singh v. Union of India3
renders little assistance. In that case also, it was found
that abadi land fetched Rs 33,600 per acre and they had
potential value for development, such as for building houses
etc. as in the immediate neighbourhood the lands were
developed for industrial purpose. Taking those factors,
this Court had determined the market value of abadi lands at
Rs 42,000 and of other barani lands at Rs 38,000. In view
of the nature of lands in that case, this Court had
determined the market value at the rates mentioned therein
after recording the finding that the land possessed of
potential value. In the appeals on hand, if the sale deeds
are excluded from consideration, there is no other evidence
to consider that the lands are possessed of potential value
for building purposes. Though the acquisition was for
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providing house sites to the poor, there have been no
building activities in the neighbourhood, there is no rise
in the market condition and since the lands are admittedly
agricultural lands as on that date, the fixation of the
market value as agricultural lands is just and fair, instead
of remanding the case as contended for by Shri Tata Rao for
further evidence.
13. In the first case the notification was of the year 1983
and in the second case it was of the year 1985. Taking
these factors into consideration, we find that the market
value for the lands covered in the first case could be
3 (1993) 3 SCC 240
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determined at Rs 65,000 per acre and for the lands in the
second case the market value could be determined at Rs
80,000 per acre. The claimants are entitled to 12%
additional compensation under Section 23(1-A) from the date
of notification till date of taking possession till date of
deposit into court. In the first case possession was taken
on 15-3-1985 and in the second case on 25-5-1985.
Therefore, 12% additional compensation shall be paid to the
claimants from the respective dates of Section 4(1)
notification till the date of taking possession. The
claimants are entitled to solatium under Section 23(2) at
30% and the interest under Section 28 at 9% on the enhanced
compensation from the date of the taking possession for one
year and 15% after the expiry of one year till date of
deposit into the court.
14.The appeals are accordingly allowed. The award and
decree of the reference court under Section 26 and the
judgment and decree of the High Court under Section 54 are
set aside. The claimants are entitled to the aforesaid
amounts. In the circumstances, parties are directed to bear
their own respective costs.
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