Natesam Pillai Vs. Spl. Tahsildar, Land Acqusition, Tiruchy  INSC 616 (11
IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 36
OF 2004 A. Natesam Pillai ... Appellant Versus Spl.
Land Acquisition, Tiruchy ... Respondent
Mukundakam Sharma, J.
This appeal is directed against the judgment and order dated
27.11.2002 passed by the Madras High Court whereby the High Court reversed the
order passed by the Reference Court by reducing the amount of compensation
granted by the Reference Court to the appellant from Rs. 17/- per sq. feet to
Rs. 9/- per sq. feet.
Before we deal with the contentions raised before us, brief facts
leading to the filing of the present appeal are required to be stated. For
providing house sites at Adi Dravidas, land measuring an extent of 3.90 acres
comprised in Survey No. 118/A in Palangudi Village was acquired by the
Government of Tamil Nadu by issuing a notification under Section 4(1) of the
Land Acquisition Act which was published on 3 23.9.1992. The Land Acquisition
Officer awarded a sum of Rs. 1.72 per sq. ft. for the acquired land. At the
instance of the aggrieved land owner, i.e. the appellant, reference was made
under Section 18 of the Land Acquisition Act before the Additional Sub Court,
Before the Reference Court, the appellant adduced documentary
evidence in the form of Sale Deeds Exs. A1 to A4 and examined two witnesses.
The Revenue also produced documents exhibited as Exs. B1 and B2, but no witness
was examined from the side of the Revenue. The Reference Court after
consideration and appreciation of the evidence adduced fixed the market value
of the acquired land at Rs. 17/- per sq. feet.
Being aggrieved by the said order, the State preferred an appeal
before the High Court. The question for consideration before the High Court was
whether the amount of compensation for the acquired land fixed by the Reference
Court i.e. Rs. 17/- per sq. feet is correct or not and whether the appeal filed
by the State for reducing the amount of compensation be allowed.
The High Court after consideration of the records came to the
conclusion that the amount of compensation i.e. Rs. 17/- per sq. feet is on the
higher side, and that the appropriate amount of compensation would be Rs. 9/-
per sq. feet and accordingly reversed the order passed by the Reference Court
with the aforesaid modification of the rate of compensation fixing the same at
Rs. 9/- per sq. ft.
The appellant, original owner of the land, has filed this appeal
praying for setting aside the order passed by the High Court and has prayed for
enhancement of the amount of compensation taking into consideration the
potential value of the land.
The learned counsel appearing for the appellant contended that the
High Court took notice of the market value of the acquired land only with
reference to the actual use. According to the appellant, the Court failed to
take notice of its value with reference to the better use to which it is
reasonably capable of being put to in the immediate or near future and thereby
failed to take into consideration future potentiality of the land and instead
based itself only on the realized 6 possibility and thus committed an error.
The learned counsel appearing for the respondent, on the other
hand, contended that the amount of compensation granted by the High Court is
appropriate, and does not deserve to be interfered with.
The Reference Court granted compensation at Rs. 17/- per sq. feet
after holding that the acquired land is a potential house site being located in
a very important locality and that the amount of compensation granted by the
Land Acquisition Officer, i.e., 1.72 per sq. ft. was totally an unjust and
The High Court, on the other hand, fixed the market value of 7 the
acquired land at Rs. 9/- per sq. ft. by setting aside the order passed by the
Reference Court. The High Court while coming to the aforesaid conclusion held
that Ex. A3 is a comparable sale transaction. Under Ex. A3, 1710 sq. ft. land
was sold for Rs. 20,000/- which would work out to Rs. 11/- per sq. ft.
Nonetheless, the High Court also pointed out the fact that the acquired land
has got higher potential value, as the acquired land is abutting the main road
and when compared with the land covered under Ex. A3, the acquired land is
surrounded by Schools, Shops, Panchayat Union Office etc.
considering the fact that the acquired land is a large tract of land wherein
while making development there would be loss of land due to both internal and
external development like roads, etc., 8 and that when compared with the land
of Ex. A3 which is a very small area of land, there has to be deduction in
value of the acquired land and so calculating the rate of compensation was
scaled down to Rs. 9/- per sq. ft.
Therefore, it falls upon us to determine whether the High Court
was correct and justified in scaling down the compensation to be given to the
effect, we must give due consideration to the Sale Deeds Exs. A1 to A4 placed
by the appellant, in order to determine the appropriate and just compensation
that must be given in pursuance of the instant land acquisition.
It is important to note that Ex. A1 and Ex. A4 are sale deeds
executed subsequent to the date of notification under Section 4(1) 9 and for
this reason, the High Court held these to be irrelevant for the purpose of
determining compensation. The first clause of Section 23 of the Act clearly
provides that the amount of compensation awarded for the land acquired is
required to be determined on the basis of market value of the land at the time
of publication of the notification under Section 4 of the Act. Therefore, it is
the duty of both of the Land Acquisition Officer as also of the Court to
determine the actual compensation payable for the land acquired by referring to
evidence regarding fair and just compensation near about the proximate date or
on the date itself of the publication of the notification under Section 4. At
times, in order to prove the actual, fair and just compensation for the land
acquired, sale deeds of the adjacent land 10 or nearabout adjacent land are
produced to indicate the trend of the value of the land within the near vicinity
of the acquired land. Such sale deeds are taken notice of generally when they
are prior in point of time to the date of notification, and any sale deed which
is post notification dated is generally ignored, unless evidence is led to show
that there was no increase in price despite such acquisition.
This Court in Administrator General of W.B. v. Collector,
Varanasi, reported at (1988) 2 SCC 150, has held:
subsequent transactions which are not proximate in point of time to the
acquisition can be taken into account for purposes of determining whether as on
the date of acquisition there was an upward trend in the prices of land in the
under certain circumstances where it is shown that the market was stable and
there were no fluctuations in the prices between the date of the preliminary
notification and the 11 date of such subsequent transaction, the transaction
could also be relied upon to ascertain the market value. This Court in State of
U.P. v. Jitendra Kumar, reported at (1982) 2 SCC 382 observed: (SCC p. 383,
para 3) "It is true that the sale deed Ex. 21 upon which the High Court
has relied is of a date three years later than the notification under Section 4
but no material was produced before the court to suggest that there was any
fluctuation in the market rate at Meerut from 1948 onwards till 1951 and if so
to what extent. In the absence of any material showing any fluctuation in the market
rate the High Court thought it fit to rely upon Ex. 21 under which the Housing
Society itself had purchased land in the neighbourhood of the land in dispute.
On the whole we are not satisfied that any error was committed by the High
Court in relying upon the sale deed Ex. 21."
principle could be appealed to only where there is evidence to the effect that
there was no upward surge in the prices in the interregnum. The burden of
establishing this would be squarely on the party relying on such subsequent
As a result of such acquisition, the market value of the adjacent
land would generally, and in most cases, go up and therefore, such post
notification transaction may not be a sound criterion to determine and assess
the value of the acquired land. In the present case, the appellant has also not
adduced any evidence to show that the market value of adjacent land has not
increased in the interregnum. The Reference Court and the High Court were
justified in rejecting these sale deeds from consideration. We must, therefore,
keep the aforesaid two sale deeds outside our consideration while assessing and
determining the just and fair compensation for the acquired land. Ex. A2 is
also a sale deed but the same also is not a safe guide as the price for the
land covered therein was later on 13 increased to make it in parity with the
government prescribed rate.
Consequently, it is to be seen if Ex. A3 may be relied upon in
determining the claim of the appellant. The High Court, while noting that Ex.
A3 does indeed represent a comparable sales transaction also held that since
the same concerns a very small area of land, it could be applicable to the
acquisition of a large tract of land as the one in question, once deduction as
necessary and required is given.
In Rishi Pal Singh and Others vs. Meerut Development Authority and
Anr. reported in (2006) 3 SCC 205 this Court while dealing with the issue
relating to a large tract of land held as follows:- 14 "5.......With
respect to the first reason, that is, exemplars of small plots have been taken
into consideration by the Reference Court, in the first instance our attention
was invited to some judgments of this Court to urge that there is no absolute
bar to exemplars of small plots being considered provided adequate discount is
given in this behalf. Thus there is no bar in law to exemplars of small plots
appropriate case, specially when other relevant or material evidence is not
available, such exemplars can be considered after making adequate discount.
This is a case in which appropriate exemplars are not available. The Reference
Court has made adequate discount for taking the exemplars of small plots into
Furthermore, in Administrator General of W.B. v. Collector,
Varanasi (cited hereinabove), this Court has held:
is trite proposition that prices fetched for small plots cannot form safe bases
for valuation of large tracts of land as the two are not comparable properties.
The principle that evidence of market value of sales of small, developed plots
is 15 not a safe guide in valuing large extents of land has to be understood in
its proper perspective. 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 not admit of and is ripe
for use for building purposes; that building lots that could be laid out on the
land would be good selling propositions and that valuation on the basis of the
method of 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 civil amenities; expenses of
development of the sites by laying out roads, drains, sewers, water and
electricity lines, and the interest on the outlays for the period of deferment
of the realisation of the price; the profits on the venture etc. are to be
The small area of land measuring 1710 sq. ft. was sold for Rs.
20,000/- as per Ex. A3 dated 15.7.92 which works out to a 16 value of Rs. 11/-
per sq. ft. A comparison of the two plots, namely, land in Ex. A3 and the
acquired land shows that they are not identical. While the land in Ex. A3 may
not be an excellent guide it is still a better guide than any other document exhibited
on record. The same could be used as a relevant yardstick to assess the just
and reasonable compensation in the present case.
We find from the counter affidavit filed by the respondent-State
that the said land covered by the Ex. A3 is located out of the Municipal
Corporation limit of Trichy, whereas the acquired land is located within the
Municipal Corporation limit of Trichy. Consequently, it cannot be disputed that
the acquired land, being in the heart of the city and having excellent prospects
of being used as residential site, definitely has an edge regarding 17 the
potential value over the land covered by Ex. A3.
This building potentiality of acquired land must also be taken
into consideration while determining compensation. In P. Ram Reddy v. Land
Acquisition Officer, Hyderabad Urban Development Authority reported at (1995) 2
SCC 305, this Court held as follows: - "8. Building potentiality of
acquired land.-- Market value of land acquired under the LA Act is the main
component of the amount of compensation awardable for such land under Section
23(1) of the LA Act. The market value of such land must relate to the last of
the dates of publication of notification or giving of public notice of
substance of such notification according to Section 4(1) of the LA Act. Such
market value of the acquired land cannot only be its value with reference to
the actual use to which it was put on the relevant date envisaged under Section
4(1) of the LA Act, but ought to be its value with reference to the better use
to which it is reasonably capable of being put in the immediate or 18 near
future. Possibility of the acquired land put to certain use on the date
envisaged under Section 4(1) of the LA Act, of becoming available for better
use in the immediate or near future, is regarded as its potentiality. It is for
this reason that the market value of the acquired land when has to be
determined with reference to the date envisaged under Section 4(1) of the LA
Act, the same has to be done not merely with reference to the use to which it
was put on such date, but also on the possibility of it becoming available in
the immediate or near future for better use, i.e., on its potentiality. When
the acquired land has the potentiality of being used for building purposes in
the immediate or near future it is such potentiality which is regarded as
building potentiality of the acquired land. Therefore, if the acquired land has
the building potentiality, its value, like the value of any other potentiality
of the land should necessarily be taken into account for determining the market
value of such land. Therefore, when a land with building potentiality is
acquired, the price which its willing seller could reasonably expect to obtain
from its willing purchaser with reference to the date envisaged under Section
4(1) of the LA Act, ought to necessarily include that portion of the price of
the land attributable to its building potentiality. Such price of the acquired
land then becomes its market value envisaged 19 under Section 23(1) of the LA
Act. If that be the market value of the acquired land with building
potentiality, which acquired land could be regarded to have a building
potentiality and how the market value of such acquired land with such building
potentiality requires to be measured or determined are matters which remain for
our consideration now."
This Court in Hasanali Khanbhai & Sons v. State of Gujarat
reported in (1995) 5 SCC 422 also held that:- "3. .......But it is settled
law by series of judgments of this Court that the court is not like an umpire
but is required to determine the correct market value after taking all the
relevant circumstances, evinces active participation in adduction of evidence;
calls to his aid his judicial experience; evaluate the relevant facts from the
evidence on record applying correct principles of law which would be just and
proper for the land under acquisition. It is its constitutional, statutory and
social duty. The court should eschew aside feats of imagination but occupy the armchair
of a prudent, willing but not too anxious, purchaser and always ask the
question as to what are the prevailing conditions and whether a willing
purchaser would as a prudent man in the normal market conditions offer to
purchase the acquired land at the rates 20 mentioned in the sale deeds. After
due evaluation taking all relevant and germane facts into consideration, the
Court must answer as to what would be the just and fair market value......
Therefore, it is clear from the aforementioned decisions of this
Court that the potentiality of the acquired land, in so far as it relates to
the use to which it is reasonably capable of being put in the immediate or near
future, must be given due consideration. The present acquired land has all the
potentiality to be used as building sites, even in the immediate future, as it
is located at a place in and around which building activity has already
evidence on record also clearly indicates that acquired land is abutting the
main road. The acquired land is also surrounded by 21 schools, Panchayat union
office, shops and residential building in all three sides. The High Court also
found, as a matter of fact, that the area where the acquired land is situated
is fit for construction of houses. On an overall consideration and appreciation
of the records, we feel that the deduction due to the small size of the
exemplar land can easily be set off with the corresponding increase in price of
the acquired land when compared with the land in Ex. A3 from the point of view
of potential value.
Although it is true that the land covered by Ex. A3 is a small
tract of land and therefore cannot be compared in size with the large area of
land acquired under the present notification, it is to 22 be concluded that the
land in question would definitely fetch a higher price than what is fixed by
the High Court. A prospective purchaser would only be too willing to pay for
the acquired land having immediate potentiality of being used as a residential
site in a prime locale at almost the same, if not, higher price than the land
covered by Ex. A3 which is located outside the Municipality area.
We are in agreement with the conclusion of the High Court that the
acquisition of a large tract of land merits a discount in compensation.
However, in the present circumstance, it is significant to note that the
compensation granted by the High Court does not match the potentiality of the
land, even after the discount has been taken into consideration. Even on giving
a 23 discount in respect of the acquired land being a large tract as compared
to the small portion of land sold under Ex. A3, according to us, the rate of
Rs. 11/- would be adequate and just compensation for the same.
In our considered opinion, by scaling down the rate of
compensation to Rs. 9/- from Rs. 11/- per sq. ft., the High Court denied just
and reasonable compensation to appellant, thereby resulting in a miscarriage of
We, therefore, hold that the appellant shall be entitled to
compensation at Rs. 11/- per sq. ft. for the acquired land which we consider to
be just and fair. Needless to say that the State shall also be liable to pay
additional compensation and solatium on the 24 amount enhanced and fixed in
terms of this order including payment of interest in terms of the rate of
interest awarded by the Reference Court. The appeal stands allowed to the
aforesaid extent without any costs.
......................................J. [Dr. Mukundakam Sharma]
......................................J. [Anil R. Dave]
August 11, 2010.