Acquisition & Anr Vs. Smt. Jasti Rohini & Anr  INSC 553 (27 October 1994)
K. Ramaswamy, K. Venkatachala N. (J)
1995 SCC (1) 717 JT 1995 (2) 339 1994 SCALE (5)75
disposal of the three appeals by this common judgment, we shall refer to SLP(C)
No. 12300/94 as first case and to SLP(C) Nos.3528-29 as second case.
Notification issued under s.4(1) of the Land Acquisition Act, 1894 in the first
case was published on June 16, 1983 for acquiring 9.47 acres near Eluru town of
West Godavari Dist. of Andhra Pradesh to provide house sites to the poor. Again,
14. 1 0 acres of land was acquired in the second case for the same purpose by
publishing the Notification under s.4(1) on March 23, 1985. The Land Acquisition Officer awarded compensation under s.
11 at Rs.40,000/- per acre in both the cases. On reference, the Sub-ordinate
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 September 29, 1993 enhanced die 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.
have heard learned counsel on both sides and considered the reasoning or 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 Janu- 341 ary 10, 1977 acquiring 2.17 acres of
land in T.S. No.135 of the nearby lands, the LAO had awarded at 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 a 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.A12 in O.P. No.6/85 which is pending in
appeal in the High Court apart from the sale deed Ex.AIO relied on and accepted
by the High Court in both the cases and Ex.A16 and 17 in the first case.
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 Ex.A16 and 17 sold on February 2, 1983 from the very same acquired land
and claimed to be on the basis of a lay-out 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 lards as prevailing near about
the date of acqui- sition 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. IO in which the land sold is 120 sq. yd.
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 s.47-A of the
Stamp Act. In fact, the reference court mainly relied upon that document and
awarded compensation on its basis.
admissibility and evidentiary value of the entries in the Basic Value Register
was considered by this Court in Jawajee Nagnatham v. Revenue Divisional
Officer, Adilabad, A.P., 1994 (4) SCC 595. 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 u/s. 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 neighborhood possessed of similar features.
notification u/s.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
s.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 phenomena evolved by the
courts to fix the price of land arrived between the hypothical willing buyer
and willing seller bargaining as prudent persons without a medium 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 342 acquisition
comprised of all utility reached in a competitive field as on the date of the
notification and the 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
s.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.
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 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.
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 pan 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 ] and acquired etc. without
the sanction of the Collector or after s.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.
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 343 compensation. Its consideration should alone be
confined to the market value prevailing as on the date of the notification
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. yd. 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 solelyon
the' basis of Ex.A.
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.
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 s.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 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 O.P. 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.
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 abut 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.
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 Punjab, 1993 (4) SCC 245, 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 344 of
acquisition by other possible purchasers in the market conditions, prevailing
as on the date of the notification;
of constructed house or construction activity in other similar lands in the
locality for the purpose 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 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 con- sideration
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's case, 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.
the decision in Inder Singh & Ors. v. U.O.L, 1993 (3) SCC 240, 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 345 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 providing house sites to the poor,
there is 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 Sri Tata Rao for
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 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 s.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 March
15, 1985 and in the
second case on May 25,
12% additional compensation shall be paid to the claimants from the respective
dates of s.4(1) notification till the date of taking possession. The claimants
are entitled to solatium under s.23(2) at 30% and the interest under s.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.
The appeals are accordingly allowed. The award and decree of the reference
court under s.26 and the judgement and decree of the High Court under s.54 are
set aside. The claimants are entitiled to the aforesaid amounts. In the
circumstances, parties are directed to bear their own respective costs.