G.M., Oil &
Natural Gas Corporation Ltd. Vs. Rameshbhai Jivanbhai Patel & ANR 
INSC 1265 (31 July 2008)
Reportable IN THE
SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.5192 OF
2002 The General Manager, Oil & Natural Gas Corporation Ltd. ... Appellant
Rameshbhai Jivanbhai Patel & Anr. ... Respondents (With CA
Nos.5193,5194,5195,5196,5197 and 5198 of 2002)
R. V. Raveendran J.,
appeals by special leave are by the beneficiary of acquisition (ONGC), aggrieved
by the quantum of compensation awarded to the respondents.
extent of 13 Hectares 78 Are and 97 sq.m. in Ijapura Village, District Mehsana,
Gujarat, was acquired for one of ONGC installations, namely "Influent
pit-Santhal I', under preliminary 2 notification dated 15.9.1992 issued under
section 4(1) of the Land Acquisition Act, 1894 (`Act' for short) followed by
final notification dated 31.3.1993 under section 6 of the Act. The Special Land
Acquisition Officer, ONGC, passed an Award dated 16.11.1994 determining the
market price as Rs.2.10 per sq.m. The respondents - land owners, sought
reference to civil court claiming Rs.30 per sq.m.
the Reference Court, the respondents did not place any evidence by way of
contemporaneous sale transactions in the neighbourhood. But they placed
reliance on some awards passed by the said Court in other acquisition cases, in
particular, the following two awards:
15 - relating to acquisition of lands for ONGC, in the neighbouring Santhal
village under preliminary notification dated 6.1.1987, wherein compensation at
the rate of Rs.10 per sq.m was awarded.
16 - relating to acquisition of lands at Chalasana village at a distance of 4
Kms. from Ijapura village under preliminary notification dated 31.7.1986, wherein
compensation at the rate of Rs.10 per sq.m was awarded. The Land Acquisition
Officer did not choose to adduce any evidence nor produce the sale deeds
referred to in his award in support of the market value arrived at by him at
Rs.2.10 per sq. m.
Reference Court allowed the claim in part by Judgment and Award dated
7.10.1999. It determined the market value of the acquired lands at Rs.17.10 per
sq.m based on the said two awards - Ex. 15 relating to the neighbouring Santhal
village and Ex. 16 relating to Chalsana village. It found that under the said
awards Rs.10 per sq. m. has been awarded for acquisitions in the year 1986 and
1987. As the acquisition in the cases on hand was on 15.9.1992, it increased
the value cumulatively at the rate of 10% per annum and arrived at a value of
Rs.19.10 per sq.m by treating the gap between the relied-on-acquisitions and
the present acquisition as six and half years. Thereafter, it reduced Rs.2/-
per sq. m. therefrom for the distance factor (distance between Ijapura and the
other two villages) to arrive at the market value as Rs.17.10 per sq.m. The
Reference Court also awarded additional compensation under section 23(1A) and
solatium under section 23(2) of the Act. It awarded interest under section 28
of the Act at 9% PA for a period of one year from the date 4 of taking
possession and 15% per annum thereafter, on the actual compensation amount, and
not on the additional amount under section 23(1A) or the solatium under section
23(2) of the Act.
appellant challenged the said award of the Reference Court before the High
Court. The High Court dismissed the appeals holding that the determination of
the market value by the Reference Court did not call for interference.
appellant urged the following two contentions in support of the appeals against
the said judgment:
15 and Ex. 16 did not relate to the Ijapura village, but related to other
villages, namely neighbouring Santhal and far away Chalsana (at a distance of 4
kms). The market value of lands in those villages cannot furnish the basis for
determining the market value in regard to the acquired lands situated at
if Ex. 15 and 16 could validly be the basis for determining the market value of
lands at Ijapura, the Reference Court and High Court committed three errors in
calculating the increase: (a) in applying an annual increase at a high rate of
10% per annum; (b) in calculating the annual increase cumulatively instead of
at a flat rate;
(c) in calculating the increase for a period of six and half years instead of
for five years. The appellant submitted that even if Ex.15 was to be the basis,
having regard to the date of relied-on acquisition under Ex.15 (6.1.1987) and
date of present acquisition of the Ijapura lands (15.9.1992), the increase
ought to have been calculated for only five years; that the percentage of
increase should not have been more than a flat rate of 5% per annum; that
therefore, the increase ought to have been only Rs.2.50 for 5 years and the
market value of Santhal lands in 1992 would have been Rs.12.50 per sq.m. and
not Rs.19.10; and that if Rs.2/- was deducted for the distance factor, as was
done by the Reference Court, the market price would be only Rs.10.50 per sq. m.
and not Rs.17.10 per sq.m.
Whether reliance on
Ex.15 and 16 erroneous? 7. The fact that Santhal village adjoins Ijapura is not
The fact that Ex.15
related to the acquisition of lands in the neighbouring Santhal village, for
the benefit of the appellant - ONGC is also not disputed. The Reference Court
and the High Court have 6 recorded a concurrent finding of fact that having
regard to the proximity and similarity between the lands at Santhal covered by
Ex. and the acquired lands in Ijapura, the market value determined in regard to
the Santhal lands afforded a reasonable basis for determining the market value
of the acquired lands. We also find from the evidence of one of the claimants -
Laljibhai examined as CW1, that the boundaries of Santhal, Kasalpura and
Modipur villages are adjacent to the acquired lands; and that the lands of one
Ramanbhai Keshavlal of Santhal Village acquired on 6.1.1987 (subject matter of
Ex.15) and the acquired lands were in neighbouring areas divided only by three or
four agricultural fields. We also find that the Ex. 15 was also the basis for
determining the market value of lands which were the subject matter of another
acquisition for ONGC in Santhal and other villages under notification dated
31.7.1986; and that this Court affirmed the award of compensation at the rate
of Rs.10 per sq. m. in regard to such acquisition relying on Ex. 15 (vide in
ONGC Ltd. v. Sendhabhai Vastram Patel & Ors., 2005 (6) SCC 454). We are
therefore of the view that in the absence of any evidence relating to sale
transactions or acquisitions relating to the village of Ijapura itself, and
having regard to the evidence relating to proximity 7 of Santhal lands, Ex.15
offered a reasonable basis for determining the market value of the acquired lands
in Ijapura. In view of Ex.15 relating to neighbouring Santhal, Ex.16 relating
to Chalsana loses relevance.
What should be the
increase per annum?
contention of appellant is that even if Ex. P15 should be the basis, in the
absence of any specific evidence regarding increase in prices between 1987 and
1992, the annual increase could not be assumed to be 10% per year.
the other hand, the learned counsel for the respondents/claimants submitted
that the rate of escalation in market value at the relevant time was in the
range of 10% to 15% per annum.
He relied on the
decisions of this Court in Ranjit Singh v. Union Territory of Chandigarh [1992
(4) SCC 659], and Land Acquisition Officer and Revenue Divisional Officer v.
Ramanjulu & Ors. 2005 (9) SCC 594 wherein this Court had accepted an
escalation of ten per cent per annum, and the decision in Krishi Utpadan Mandi
Samiti Sahaswom v. Bipin Kumar 2004 (2) SCC 283 where this Court had 8
accepted an escalation of 15% per annum. He, therefore, submitted that
escalation at the rate of 10 per cent adopted by the Reference Court and
approved by the High Court is a reasonable and correct standard to be applied.
have examined the facts of the three decisions relied on by the respondents.
They all related to acquisitions of lands in urban or semi-urban areas. Ranjit
Singh related to acquisition for development of Sector 41 of Chandigarh.
Ramanjulu related to acquisition of the third phase of an existing and
established industrial estate in an urban area. Bipin Kumar related to an
acquisition of lands adjoining Badaun-Delhi Highway in an semi-urban area where
building construction activity was going on all around the acquired lands.
the increase in land prices depends on four factors - situation of the land,
nature of development in surrounding area, availability of land for development
in the area, and the demand for land in the area. In rural areas unless there
is any prospect of development in the vicinity, increase in prices would be
slow, steady and gradual, without any sudden spurts or jumps. On the other
hand, in urban or semi-urban areas, where the development is faster, where 9
the demand for land is high and where there is construction activity all
around, the escalation in market price is at a much higher rate, as compared to
rural areas. In some pockets in big cities, due to rapid development and high
demand for land, the escalations in prices have touched even 30% to 50% or more
per year, during the nineties.
On the other extreme,
in remote rural areas where there was no chance of any development and hardly
any buyers, the prices stagnated for years or rose marginally at a nominal rate
of 1% or 2% per annum. There is thus a significant difference in increases in
market value of lands in urban/semi-urban areas and increases in market value
of lands in the rural areas. Therefore if the increase in market value in
urban/semi-urban areas is about 10% to 15% per annum, the corresponding
increases in rural areas would at best be only around half of it, that is about
5% to 7.5% per annum. This rule of thumb refers to the general trend in the
nineties, to be adopted in the absence of clear and specific evidence relating
to increase in prices. Where there are special reasons for applying a higher
rate of increase, or any specific evidence relating to the actual increase in
prices, then the increase to be applied would depend upon the same.
recourse is taken to the mode of determining the market value by providing
appropriate escalation over the proved market value of nearby lands in previous
years (as evidenced by sale transactions or acquisition), where there is no
evidence of any contemporaneous sale transactions or acquisitions of comparable
lands in the neighbourhood. The said method is reasonably safe where the
relied-on-sale transactions/acquisitions precedes the subject acquisition by
only a few years, that is upto four to five years.
Beyond that it may be
unsafe, even if it relates to a neighbouring land. What may be a reliable standard
if the gap is only a few years, may become unsafe and unreliable standard where
the gap is larger.
For example, for
determining the market value of a land acquired in 1992, adopting the annual
increase method with reference to a sale or acquisition in 1970 or 1980 may
have many pitfalls. This is because, over the course of years, the `rate' of
annual increase may itself undergo drastic change apart from the likelihood of
occurrence of varying periods of stagnation in prices or sudden spurts in prices
affecting the very standard of increase.
more unsafe is the recent trend to determine the market value of acquired lands
with reference to future sale transactions or 1 1 acquisitions. To illustrate,
if the market value of a land acquired in 1992 has to be determined and if
there are no sale transactions/acquisitions of 1991 or 1992 (prior to the date
of preliminary notification), the statistics relating to sales/acquisitions in
future, say of the years 1994-95 or 1995-96 are taken as the base price and the
market value in 1992 is worked back by making deductions at the rate of 10% to
15% per annum. How far is this safe? One of the fundamental principles of
valuation is that the transactions subsequent to the acquisition should be
ignored for determining the market value of acquired lands, as the very
acquisition and the consequential development would accelerate the overall
development of the surrounding areas resulting in a sudden or steep spurt in
the prices. Let us illustrate. Let us assume there was no development activity
in a particular area. The appreciation in market price in such area would be
slow and minimal. But if some lands in that area are acquired for a
residential/commercial/industrial layout, there will be all round development and
improvement in the infrastructure/ amenities/facilities in the next one or two
years, as a result of which the surrounding lands will become more valuable.
Even if there is no actual improvement in infrastructure, the potential and
possibility of 1 2 improvement on account of the proposed
residential/commercial/ industrial layout will result in a higher rate of
escalation in prices. As a result, if the annual increase in market value was
around 10% per annum before the acquisition, the annual increase of market
value of lands in the areas neighbouring the acquired land, will become much
more, say 20% to 30%, or even more on account of the development/proposed
development. Therefore, if the percentage to be added with reference to
previous acquisitions/sale transactions is 10% per annum, the percentage to be
deducted to arrive at a market value with reference to future acquisitions/sale
transactions should not be 10% per annum, but much more. The percentage of
standard increase becomes unreliable. Courts should therefore avoid
determination of market value with reference to subsequent/future transactions.
Even if it becomes inevitable, there should be greater caution in applying the
prices fetched for transactions in future. Be that as it may.
this case, the acquisition was in a rural area. There was no evidence of any
out-of-ordinary developments or increases in prices in the area. We are of the
view that providing an escalation of 7.5% 1 3 per annum over the 1987 price
under Ex.15, would be sufficient and appropriate to arrive at the market value
of acquired lands.
Whether the increase
should be at a cumulative rate or a flat rate?
increase in market value is calculated with reference to the market value
during the immediate preceding year. When market value is sought to be
ascertained with reference to a transaction which took place some years before
the acquisition, the method adopted is to calculate the year to year increase.
As the percentage of increase is always with reference to the previous year's
market value, the appropriate method is to calculate the increase cumulatively
and not applying a flat rate. The difference between the two methods is shown
by the following illustration (with reference to a 10% increase over a basic
price of Rs.10/- per sq.m):
Year By flat rate
increase method By cumulative increase method 1987 10.00 10.00 (Base Year) 1988
10 + 1= 11.00 10.00 + 1.00 = 11.00 1989 11 + 1= 12.00 11.00 + 1.10= 12.10 1990
12 + 1= 13.00 12.10 + 1.21= 13.31 1991 13 + 1= 14.00 13.31 + 1.33 = 14.64 1992
14 + 1= 15.00 14.64 + 1.46 = 16.10 1 4
may also point out that application of a flat rate will lead to anomalous
results. This may be demonstrated with further reference to the above
illustration. In regard to the sale transaction in 1987, where the price was
Rs.10 per sq.m, if the annual increase to be applied is a flat rate of 10%, the
increase will be Rs.1 per annum during each of the five years 1988, 1989, 1990,
1991 and 1992. If the price increase is to be determined with reference to sale
transaction of the year 1989 when the price was Rs.12 per sq.m, the flat rate
increase will be Rs.1.20 per annum, for the years 1990, 1991 and 1992. If the
price increase is determined with reference to a sale transaction of the year
1990 when the price was Rs.13 per sq.m, then the flat rate increase will be
Rs.1.30 per annum for the years 1991 and 1992. It will thus be seen that even
if the percentage of increase is constant, the application of a flat rate leads
to different amounts being added depending upon the market value in the base
year. On the other hand, the cumulative rate method will lead to consistency
and more realistic results. Whether the base price is Rs.10/- or Rs.12/10 or
Rs.13/31, the increase will lead to the same result. The logical, practical and
appropriate method is therefore to apply the increase cumulatively and not at a
For what period, the
increase should be calculated?
reference court has stated that the gap between 6.1.1987 (the date of
transaction covered by Ex.P15) and 15.9.1992 (the date of acquisition under
consideration) was six and half years. It therefore calculated the increase for
six and half years. This is obviously erroneous. The actual gap is five years
and eight months and not six and half years. However, for the purpose of
calculation, we have to exclude the year of the relied-upon transaction, which
is the base year. If the year of relied-upon transaction in 1987, the increase
is applied not from 1987 itself but only from the next year which is 1988. If
the rate was Rs.10 per sq.m. in 1987, and the cumulative rate of increase is
7.5% per year, the price will be Rs.10.75 in 1988, Rs.11.56 in 1989, Rs.12.42
in 1990, Rs.13.35 in 1991 and Rs.14.35 in 1992. Thus the calculation of
increase is only for five years and not for six and half years.
What should be the
market value of the acquired land? 1 6
applying a cumulative rate of escalation of 7.5% over the market price of Rs.10
per sq.m in 1987, we find that the market value in the year 1992 was Rs.14.35.
The Reference Court and High Court had deducted Rs.2/- towards distance factor.
As the lands are similarly situated and are in adjoining villages, it will be
sufficient to deduct Rs.1.35 per sq.m. instead of Rs.2/-. We accordingly
determine the market value as Rs.13/- per sq. m. Interest :
to the decision of the High Court, a Constitution Bench of this Court in Sunder
v. Union of India [2001 (7) SCC 211], held that the `amount awarded' for the
purpose of interest will include not only the market value but also the
additional amount under section 23(1A) and solatium under section 23(2) of the
Act. In Patel Joitaram Kalidas & Ors. V. Special Land Acquisition Officer
and Anr. LAO 2007 (2) SCC 341, this Court held that the calculation of interest
on the additional amount under section 23(1A) and 23(2) is automatic and
consequential, even in the absence of any specific appeal by the claimants in
respect of non-grant of such interest. At all events, as we are reducing the
compensation from Rs.17.10 to Rs.13 1 7 per sq. meter, the claimants are
entitled to support and sustain the award for the higher amount as per the
decision of reference court and High Court on other factors.
accordingly allow these appeals in part and make the following modification to
the award made by the Reference Court confirmed by the High Court: The
claimants/respondents will be entitled to compensation at the rate of Rs.13/-
per sq. m. with additional amount under section 23(1A) and solatium under
section 23(2) as awarded. The respondents-claimants will be entitled to
interest at the rates awarded by the reference court (9% per annum for one year
and 15 per cent per annum thereafter) on the total compensation amount
including additional amount under section 23 (1A) and solatium under section
23(2). Parties to bear their respective costs.
(R. V. Raveendran)
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