Executive Engineer, Karnataka
Housing Board Vs. Land Acquisition Officer, Gadag & Ors.
WITH Civil Appeal
Nos. 53-54 of 2011 [@ SLP [C] Nos.27806-27807/2008],Civil Appeal Nos. 55-56 of
2011 [@ SLP [C] Nos.27808-27809/2008],Civil Appeal Nos. 57-58 of 2011 [@ SLP
[C] Nos.27810-27811/2008],Civil Appeal Nos. 59-60 of 2011 [@ SLP [C]
Nos.27812-27813/2008],Civil Appeal Nos. 61-62 of 2011 [@ SLP [C]
Nos.27815-27816/2008],Civil Appeal Nos. 63-64 of 2011 [@ SLP [C]
Nos.27817-27818/2008],Civil Appeal Nos. 71-72 of 2011 [@ SLP [C]
Nos.27819-27820/2008]; and Civil Appeal Nos. 73-74 of 2011 [@ SLP [C]
extent of 127 acres 26 gunt as of lands in Betegeri village with in the
municipal limits of Gadag-Betegeri Municipality, was acquired for Karnataka
Housing Board in pursuance of Preliminary Notification dated6.2.1992. The Land
Acquisition Officer, Gadag, made an award dated14.2.1997 awarding a
compensation of Rs.45,000/- per acre.
a reference being made at the instance of the land owners, the Reference Court,
by judgment and award dated 11.7.2003, determined the compensation for the
acquired lands as Rs.2,17,372/- per acre. For this purpose, the Reference Court
relied upon Exhibit P-2 which is a sale deed dated 30.7.1992 executed by the
Municipal Commissioner, Gadag-Betegeri Municipality in favour of one Manikamma
in regard to a plot measuring 329sq. meters which was sold for Rs.37,600/- in
an auction sale on 2.1.1989(which works out to Rs.114.29 per sq. m). The
Reference Court, therefore, arrived at the market value per acre as
Rs.4,62,494/-. It deducted 53%towards development (that is, towards areas to be
set apart for roads, drains and vacant spaces and towards cost of development)
and arrived at the market value as Rs.2,17,372/- per acre. The Reference Court
referred to the evidence showing that the plot covered by Ex. P-2 was across
the road from the acquired lands and was therefore a neigh bouring property.
aggrieved, the Appellant (Housing Board) filed appeals. The land owners filed
cross-objections. The High Court, by impugned judgment dated 30.1.2008,
dismissed the appeals of the appellant and allowed the cross-objections filed
by the land owners and increased the compensation toRs.4,42,000/- per acre.
Instead of Ex. P-2 relied upon by the Reference Court, the High Court relied
upon Ex. P-19 which related to another auction sale of a smaller plot measuring
150 sq.m. by the Gadag-Betegeri municipality on 20.11.1989, for a price of
Rs.24500/- (which works out to a price of Rs.163.33 per sq.m). On that basis
the High Court works out the market value per acre as Rs.6,60,977/-. The High
Court was of the view that the deduction/cut towards development factor should
be only 33% instead of53% adopted by the Reference Court. By deducting 33% from
Rs.6,60,977/-it arrived at the market value as Rs.4,42,875/- per acre which was
rounded off to Rs.442,000/- per acre, while awarding the compensation.
aggrieved, the Housing Board has filed these appeals by special leave. The
appellant have put forth the following contentions :
(i) Ex. P-19 relied
upon by the High Court did not relate to a neighbouring land whereas there was
specific evidence that the plot covered by Ex. P-2 was in regard to a nearby
land. Therefore, Ex. P-2 ought to have been preferred to Ex. P-19. Further as Ex.P-19
related to a very small plot it ought to have been ignored and the transaction
relating to the larger plot (Ex.P-2) should have been preferred.(ii) The High
Court ought to have maintained the cut towards cost of development as 53%
instead of applying a cut of 33%.(iii) Auction sales do not furnish a safe
guide for determination of market value and therefore, the High Court and
Reference Court ought not to be relied upon either Ex.P19 or ExP2 which relate
to auction sales.
may deal with the last submission first. The standard method of determination
of market value of any acquired land is by the value revaluating the land on
the date of valuation (publication of notification under section 4(1) of the
Land Acquisition Act, 1894 - `Act' for short)notification, 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
Thus, the market
value is determined with reference to the open market sale of comparable land
in the neighborhood, 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. A `willing seller' refers to a person who is not acting under any
pressure to sell the property, that is, where the sale is not a distress sale.
A willing seller is a person who knowing the advantages and disadvantages of his
property, sells the property after ascertaining the prevailing market prices at
the fair and reasonable value. Similarly, a willing purchaser refers to a person
who is not under any pressure or compulsion to purchase the property, and who,
having the choice of different properties, voluntarily decides to buy a
particular property by assessing its advantages and disadvantages and the
prevailing market value thereof. Of course, unless there are indications to
hold otherwise, all sale transactions under registered sale deeds will be
assumed to be normal sales by willing sellers to willing purchasers. Where
however there is evidence or indications that the sale was not at prevailing fair
it has to be ignored.
But auction sales’ and 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 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
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.
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 off-set the
competitive-hike in value. In this case, the Reference Court and 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.
is clear evidence that the plot sold under Ex. P-2 was very near to the
acquired lands whereas there is no such specific evidence in regard to the
proximity of the plot sold under Ex.P19, though that plot was also in the vicinity.
Further, though both Ex. P2 and P19 relate to developed plots, Ex.P19 relates
to a comparatively small plot of 150 sq.m. whereas Ex. P2 refers to a larger
plot of 329 sq. m. Having regard to the proximity of location and the size, we
are of the view that the Reference Court was justified in relying upon the sale
transaction under Ex. P2 and the High Court was not justified in ignoring Ex.
P2 and relying upon the transaction under Ex. P19. We may also note that the
general rule that the highest of the comparable sales should be relied upon
will not apply, where the sale transactions relied upon are auction sales, for
the reasons mentioned in para (6) above.
There is yet another
important reason for ignoring the said auction sale for determining the market
value of the acquired lands. In regard to acquisition of nearby lands within
the Gadag-Betegeri municipal limits for the Karnataka Power Transmission
Corporation in pursuance of a preliminary notification dated 15.9.1994 this
court determined the compensation as Rs.426,670/- per acre(Executive Engineer (Electrical),
Karnataka Power Transmission Corporation Ltd. Vs. Assistant Commissioner &
LAO, Gadag - CANos.1768-1775 of 2010 decided on 11.2.2010). That land abutted
the Sambarpur Road and was also near to the bus stand, market and educational institutions.
That land was equally well-situated, if not better situated than the acquired
lands. When this court has determined a market value of Rs.426,670/- in regard
to a acquisition more than two and a half years later, that is 15.9.1994, the
determination of higher compensation of Rs.4,42,875/-as on 6.2.1992 based on
Ex. P19, is unsustainable.
may now consider what should be the proper compensation with reference to Ex.
P2. The sale price disclosed by the said auction sale on 2.1.1989 is Rs.37600
for 329 sq.m. On that basis the value of one acre of land works out to
Rs.4,62,494. We have already held that a deduction of20% has to be made to
off-set the impact of competitive-hike involved in the auction sale. On such
deduction of 20%, the market value per acre as on2.1.1989 would be Rs.3,69,995.
The relevant date for determination of compensation in this case is 6.2.1992
and there is a gap of three years for which appropriate appreciation has to be
provided for. Having regard to the fact that the acquired lands were within the
municipal limits with considerable development potential, adopting a cumulative
increase of 10% per annum for three years, would enable us to arrive at the
market value as on 6.2.1992. By applying such increase, the market value as on
6.2.1992 will be Rs.4,92,460/- per acre.
shows that the acquired lands were situated within the municipal limits, though
on the outskirts of Gadag-Betegeri within a distance of one kilometer from
Gadag Railway Station and the bus stand; and that there were several
residential colonies and colleges in the surrounding areas. Therefore though
the lands were agricultural, they could be classified as lands having urban
development potential. Having regard to the partial access to infrastructural
facilities, we are of the view that a deduction of 40% towards cost of
development would meet the ends of justice. On the facts and circumstances, the
cut of 53% applied by the Reference Court is too high and the cut of 33%
applied by the High Court is low. On applying a cut of 40%, the rate per acre
for the acquired land as on6.2.1992 would be Rs.2,95,476/- (rounded off to
we allow these appeals in part and reduce the compensation awarded from
Rs.4,42,875/- to Rs.295,500/- per acre. The respondents will be entitled to all
statutory benefits as already awarded.
(R V Raveendran)
(A K Patnaik)