There cannot be any hard and fast rule to fix the rate of escalation of prices for a particular period. It would depend on situation of land, nature of development, availability of demand etc. The escalation of prices would depend on whether the property is in urban, semi-urban or in rural areas. The speed at which the prices of the property will escalate in the intervening years, will vary from place to place and time to time. Thus there are several factors involved, but these cannot be left merely to the general perception of the Judge. For judicial determination parties must adduce evidence on record. Notably, the claimants have not adduced any evidence in this behalf. Thus if the escalation of prices is to be considered as a reason for enhancing the compensation then there S.H.HADAP 21/25 FA 751/2003 with FA 1392./2004 must be some material on record to guide the Court. Enhancing the compensation on the basis of escalation of prices, cannot be an arbitrary process and must be guided by prudence and availability of material on record
burden of proving inadequacy of compensation is on the claimants. In the case of Kiran Tondon v/s.Allahabad Development Authority, reported in 2004 10 SCC 745 in paragraph No.10, the Apex Court observed thus: "10. Before examining the merits of the contentions raised it will be useful to bear in mind the legal principle in the matter of determination of compensation. The Collector's award under Section 11 is nothing more than an offer of compensation made by the Government to the claimants whose property is acquired. The burden of proving that the amount of compensation awarded by the Collector is inadequate lies upon the claimant and he is in a position of plaintiff. The Court has to treat the reference as an original proceeding before it and determine the market value afresh on the basis of the material produced before it. The claimant is in the position of a plaintiff who has to show that the price offered for his land in the award is inadequate on the basis of the materials produced in the court. The material produced and proved by the other side will also be taken into account for this purpose.
2. The property under acquisition i.e. C.T.S.No.617 1B admeasures 9469.33 sq.mts and is situated at
Siddeshwar Peth, Solapur, within the limits of Solapur Municipal Corporation. The property was reserved for the purpose of Extension of Civil Hospital in the Development Plan of Solapur city, since the year 1978.
3. The said property was purchased by the claimants on 30.10.1988. As the property was reserved under the development plan, a notification under section 6 of the Land Acquisition Act read with section 126 (4) of the Maharashtra Regional and Town Planning Act 1966 dated 20.1.1994 was published on 17.2.1994. The land acquisition proceedings were duly completed and possession receipt of the acquired land was executed by S.H.HADAP 3/25 FA 751/2003 with FA 1392./2004 the authorities on 16.10.1996.
4. The Special Land Acquisition Officer (SLAO) Solapur initiated proceedings for determining the market value of the acquired property. Representatives of the SLAO and the City Survey officer inspected the area and found that there were residential buildings and commercial buildings around the acquired property, and a heavily trafficed road abutting it. The SLAO collected sale transactions of the lands which were situated within the radius of 5 kms around the acquired property for a period of five years prior to the material date i.e. 17.02.1994. The SLAO considered in all 18 sale instances for the period of five years before the material date. The SLAO however discarded majority of the sale instances since they were not comparable. The claimants sought compensation at the rate of Rs.4283.02 per sq.mtr. No evidence was however produced by the claimants. The SLAO also considered one particular sale instance which later on became subject of controversy was the sale deed between Yeshwant Cooperative Bank and Labour Federation dated 6.1.1994 (Exhibit 73) which fetched Rs.3228 per sq meter. The property therein admeasured 233.73 sq.meter. That sale was executed just prior to the material date. But the SLAO opined that the purchaser i.e.Labour Federation was very much in need of land and thus offered very high rate. He also found that the said sale transaction pertained to much smaller plot and it was not situated close to the S.H.HADAP 4/25 FA 751/2003 with FA 1392./2004 acquired property. The SLAO thus did not rely on the said sale instance. The SLAO then proceeded to consider the sale instance of the acquired land itself executed on 30.10.1988. The claimants had purchased it for Rs.7 lacs at the rate of Rs.77.58 per sq.metre. The SLAO found the sale of the acquired property to be a reliable indicator for arriving at the market value of the acquired property on the material date. The SLAO considered the fact that the sale deed of the acquired land was effected five years back and he accordingly added 12% to offset the escalation of prices. The SLAO by his award dated 04.09.1996 granted compensation of Rs.12,32,300/- at the rate of Rs.472/- per sq.meter.
5. Being dissatisfied with the compensation granted, the Claimants approached the District Court at Solapur with land acquisition Reference No.174 of 1996 claiming compensation at the rate of Rs.5000/- per sq.meter and thus for an additional compensation of Rs.4,23,86,190/-. The State Government opposed the claim by filing their say. The claimants examined Shaikh Mainuddin Shaikh Chand, one of the Claimants on their behalf. The Claimants also examined the valuer Dilip Motilal Shah who had prepared the report of the valuation of the property. The Claimants in support of their claim for additional compensation relied upon the sale deed executed on 6.1.1994 at Exhibit 73 and the report of the Valuer. The State examined the S.L.A.O. and relied upon the award passed by him.
S.H.HADAP 5/25 FA 751/2003 with FA 1392./2004
6. The District Judge considered both documentary and oral evidence produced on record. The District Court found it improbable that the claimants could not produce any comparable sale deed by themselves. The learned Judge opined that it was possible for the Claimants to collect comparable sale instances and they have failed to do so for the reasons best known to them. As far as the sale instance at Exhibit 73 upon which heavy reliance was placed by the claimants, the District judge found that it was not near the acquired property and the Claimants themselves have given contradictory evidence about the distance of the two properties. The District Judge did not attach much importance to the report of the Valuer. According to him the Valuer did not take pains to collect other sale instances and relied upon only Exh.73, a single transaction in respect of a very small plot having high value. The District Judge found that in the absence of any other reliable evidence the sale deed of the acquired property itself was the only guide to fix the market value of the acquired property. The learned District Judge having considered the sale of the acquired property as the base proceeded to fix compensation at the rate of Rs.662.75 per sq.meter considering the escalation of prices in preceding five years. Accordingly, the learned Judge partially enhanced the claim by his order dated 9th January, 2003 and directed the State Government to pay an additional compensation to the Claimants of Rs. 17,23,395/-, in addition to the solatium of Rs.5,17,019/- and component S.H.HADAP 6/25 FA 751/2003 with FA 1392./2004 of Rs.5,37,633/-, totalling to Rs.27,78,113/- payable along with interest at the rate of 9% for a period of one year and thereafter at the rate of 15% till its realization.
7. Aggrieved by the judgment and order , both the parties are before us in their respective Appeals.
8. We have heard Mr.Anand Patil learned Assistant Government Pleader for the Appellants and Dr.Ramdas Sabban for the Claimants. Advocate for the Claimants relied on the sale instance at Exhibit 73 to contend that it was the most comparable instance to determine the market value of the acquired property, though it was much smaller in size i.e.admeasuring 233.73 sq. meters as against 9469.33 sq.mtrs. He contended that the acquired property had F.S.I. of 1.33 and was situated in a commercial area having much better potential. He contended that therefore the factor of smallness of size of the property below Exh.73 was offset by other factors of the acquired property. According to him since there was nothing to doubt the genuineness of the sale deed at Exhibit 73 and that since the property under Exhibit 73 was sold at Rs.3228/-, the claim of Rs.5000/-was reasonable. He argued that there was no need to rely upon the sale instance of the acquired property executed in the year 1988, i.e.more than five years when the comparable sale instance in the form of Exhibit 73 executed just prior to the material date was available for consideration. Advocate for the claimants further submitted that the S.H.HADAP 7/25 FA 751/2003 with FA 1392./2004 District Court did not give proper weightage to the evidence and report of the Valuer. According to him, reliance by the District Court on stamp duty ready reckoner was not proper. Advocate for the Claimants cited several judgments of the Apex Court in support of his submissions that sale instance at Exhibit 73 should have been considered as base for determining market value of the acquired property. He primarily relied upon the cases reported in:-
(1) AIR 1976 SC 651, State of Madras V/s.A.M.Nanjan, (2) (2004) 1 SCC 467, Pannalal Ghosh & Others V/s Land Acquisition Collector & Ors.,
(3) (2005) 6 SCC 454, ONGC Ltd. V/s.Sendhabhai Vastram Patel & Ors.,
(4) 2006 (2) Mh.L.J.301, Special Land Acquisition Officer (Highways) V/s.Pratapsingh Shoorji Vallabhdas & Ors., (5) 2009 (6) Bom.C.R.354, Mahesh Dattatray Thirthkar V/s.State of Maharashtra,
(6) 2010 (4) Bom. C.R.645. Deputy Collector (L.A.) and L.A.O. & Anr.V/s.Joaquim Francis Fernandes & Ors.,
He particularly pressed in service the judgments laying down the proposition that comparable sales method is the best and most preferred method to arrive at the market price of an acquired property.
9. On the other hand, the learned Assistant Government Pleader contended that before the SLAO the Claimants did not produce any evidence and as per settled law burden was on the claimants to show that they were entitled to enhanced compensation. He contended that even in the S.H.HADAP 8/25 FA 751/2003 with FA 1392./2004 reference proceedings the Claimants did not produce any comparable instance except relying upon Exhibit 73. The learned AGP argued that in the evidence the Claimants have stated virtually nothing about the comparability of the property under Exhibit 73 with the acquired property. The learned AGP contended that the District Judge thus was right in discarding the sale instance at Exh 73 and instead relying on the sale instance at Exhibit 68 i.e. of the acquired property. The learned Assistant Government Pleader however contended that though the District Judge was right in relying on the sale instance of the acquired property of the year 1988, the District Judge seriously erred in enhancing compensation to Rs.663 per sq.meter when the property was purchased at the rate of Rs.77.58 per sq.meter, on the ground of escalation of prices for the period of five years. According to the learned Assistant Government Pleader, at the best, the price rise of 15% with compound interest p.a., could have been granted which according to him comes to only to Rs.181. He relied upon the following cases: (1) (2004) 10 SCC 745, Kiran Tandon V/s.Allahabad Development Authority and Another,
(2) (2010) 10 SCC 492, Hirabai And Others V/s.Land Acquisition Officer- cum- Assistant Commissioner,
(3) (1996) 3 SCC 594, M.B.Gopala Krishna & Others V/s.Special Deputy Collector, Land Acquisition,
(4) (2011) 10 SCC 371, Goa Housing Board V/s.Rameshchandra Govind Pawaskar and Another,
S.H.HADAP 9/25 FA 751/2003 with FA 1392./2004 (5) (2008) 14 SCC 745, General Manager, ONGC Ltd. V/s.Rameshbhai Jivanbhai Patel and Another,
(6) AIR 1994 SC 1142, Parameshwari Devi V/s.Punjab State Electricity Board and Another.
10.From the narration of contentions above, it is clear that the controversy at hand mainly revolves around the sale Deed at Exhibit 73. If Exhibit 73 is not considered as a comparable sale instance then no fault can be found with the approach adopted by the learned District Judge in taking into consideration sale of the acquired property as a guide to arrive at the market value. The only question then will remain is to whether the the District Judge was right in enhancing the compensation on the ground of escalation of prices. If Exhibit 73 is found to be a comparable sale instance then it will lend strength to the arguments of the claimants that the compensation granted by the learned District Judge is grossly inadequate.
11.Both the parties have relied upon judgments of the Apex Court which indicate that the Court while determining the market value of the land is required to consider relevant matters. The Apex Court has emphasized that the Court should harmonize the application of legal principles with sound common sense approach while determining the market value.
12.The considerations which the Court should bear in mind while determining the market value of the property in acquisition proceedings has been succinctly set out by the Apex Court in the case of S.H.HADAP 10/25 FA 751/2003 with FA 1392./2004 CHIMANLAL HARGOVINDDAS VS SPL.L.A.O. Reported in
(1988) 3 Supreme Court Cases 751. The Apex Court has summarized as under:
"3. Before tackling the problem of valuation of the land under acquisition it is necessary to make some general observations. The compulsion to do so has arisen as the Trial Court has virtually treated the award rendered by the Land Acquisition Officer as a judgment under appeal and has evinced unawareness of the methodology for valuation to some extent. The true position therefore requires to be capsulized.
4. The following factors must be etched on the mental screen: (1) A reference under Section 18 of the Land Acquisition Act is not an appeal against the award and the Court cannot take into account the material relied upon by the Land Acquisition Officer in his Award unless the same material is produced and proved before the Court.
(2) So also the Award of the Land Acquisition Officer is not to be treated as a judgment of the trial Court open or exposed to challenge before the Court hearing the Reference. It is merely an offer made by the Land Acquisition Officer and the material utilised by him for making his valuation cannot be utilised by the Court unless produced and proved before it. It is not the function of the Court to suit in appeal against the Award, approve or disapprove its reasoning, or correct its error or affirm, modify or reverse the conclusion reached by the Land Acquisition Officer, as if it were an appellate Court.
(3) The Court has to treat the reference as an original proceeding before it and determine the market value afresh on the basis of the material produced before it.
(4) The claimant is in the position of a plaintiff who has to show that the price offered for his land in the award is inadequate on the basis of the materials produced in the Court. Of course the materials placed and proved by the other side can also be taken into account for this purpose.
(5) The market value of land under acquisition has to be S.H.HADAP 11/25 FA 751/2003 with FA 1392./2004 determined as on the crucial date of publication of the notification under Section 4 of the Land Acquisition Act(dates of Notifications under Sections. 6 and 9 are irrelevant).
(6) The determination has to be made standing on the date line of valuation (date of publication of notification under Section 4) as if the valuer is a hypothetical purchaser willing to purchase land from the open market and is prepared to pay a reasonable price as on that day. It has also to be assumed that the vendor is willing to sell the land at a reasonable price.
(7) In doing so by the instances method, the Court has to correlate the market value reflected in the most comparable instance which provides the index of market value.
(8) Only genuine instances have to be taken into account. (Some times instances are rigged up in anticipation of Acquisition of land).
(9) Even post notification instances can be taken into account (1) if they are very proximate, (2) genuine and (3) the acquisition itself has not motivated the purchaser to pay a higher price on account of the resultant improvement in development prospects. (10) The most comparable instances out of the genuine instances have to be identified on the following considerations: (i) proximity from time angle,
(ii)proximity from situation angle.
(11) Having identified the instances which provide the index of market value the price reflected therein may be taken as the norm and the market value of the land under acquisition may be deduced by making suitable adjustments for the plus and minus factors vis-a-vis land under acquisition by placing the two in juxtaposition.
(12) A balance-sheet of plus and minus factors may be drawn for this purpose and the relevant factors may be evaluated in terms of price variation as a prudent purchaser would do.
(13) The market value of the land under acquisition has thereafter to be deduced by loading the price reflected in the instance taken as norm for plus factors and unloading it for minus factors. S.H.HADAP 12/25 FA 751/2003 with FA 1392./2004 (14) The exercise indicated in Clauses (11) to (13) has to be undertaken in a common sense manner as a prudent man of the world of business would do. We may illustrate some such illustrative (not exhaustive) factors:
Plus Factors Minus Factors
1. smallness of Size 1. largeness of area
2. proximity to a road 2. situation in the interior at a distance from the road
3. frontage on a road 3. narrow strip of land with very small frontage
compared to death
4. nearness to developed area 4. lower level requiring the depressed portion to be
filled up
5. regular shape 5.remoteness from devel- oped locality
6.level vis a viz land 6. some special disadvant- ageous under acquisition.
disadvantageous factor
which would deter a
purchaser.
7. special value for an owner of an
adjoining property to whom it may
have some very special advantage.
(15) The evaluation of these factors of course depends on the facts of each case. There cannot be any hard and fast or rigid rule. Common sense is the best and most reliable guide. For instance, take the factor regarding the size. A building plot of land say 500 to 1000 sq. yds cannot be compared with a large tract or block of land of say 1000 sq. yds or more. Firstly while a smaller plot is within the reach of many, a large block of land will have to be developed by preparing a lay out, carving out roads, leaving open space, plotting out smaller plots, waiting for purchasers (meanwhile the invested money will be blocked up) and the S.H.HADAP 13/25 FA 751/2003 with FA 1392./2004 hazards of an entrepreneur. The factor can be discounted by making a deduction by way of an allowance at an appropriate rate ranging approx. between 20% to 50% to account for land required to be set apart for carving out lands and plotting out small plots. The discounting will to some extent also depend on whether it is a rural area or urban area, whether building activity is picking up, and whether waiting period during which the capital of the entrepreneur would be looked up, will be longer or shorter and the attendant hazards.
(16) Every case must be dealt with on its own facts pattern bearing in mind all these factors as a prudent purchaser of land in which position the Judge must place himself.
(17) These are general guidelines to be applied with understanding informed with common sense."
13.Keeping the above mentioned guidelines in mind, we will deal with the evidence brought on record by the parties to determine the market value of the acquired property. As noted earlier, the controversy revolves around the sale deed at Exhibit 73. So we will take this aspect first. Firstly, admittedly the property at Exhibit 73 is much smaller in size. The acquired property admeasures 9023.00 sq.meters, while the property below Exhibit 73 admeasures 233.73 sq.meters i.e.around 5%. On the face of it, thus the property below Exhibit 73 and the acquired property cannot be called absolutely comparable. The comparison will have to be made by taking into consideration many balancing factors noted in the judgment above, for the purpose of arriving at the correct market value. It will have to be considered as to what is the location, topography, soil condition of the property at Exhibit 73 and how it compares to the S.H.HADAP 14/25 FA 751/2003 with FA 1392./2004 acquired property.
14. Question is on whom the burden lies to prove this. The position has been made amply clear by the Apex Court in several cases. The burden of proving inadequacy of compensation is on the claimants. In the case of Kiran Tondon v/s.Allahabad Development Authority, reported in 2004 10 SCC 745 in paragraph No.10, the Apex Court observed thus: "10. Before examining the merits of the contentions raised it will be useful to bear in mind the legal principle in the matter of determination of compensation. The Collector's award under Section 11 is nothing more than an offer of compensation made by the Government to the claimants whose property is acquired. The burden of proving that the amount of compensation awarded by the Collector is inadequate lies upon the claimant and he is in a position of plaintiff. The Court has to treat the reference as an original proceeding before it and determine the market value afresh on the basis of the material produced before it. The claimant is in the position of a plaintiff who has to show that the price offered for his land in the award is inadequate on the basis of the materials produced in the court. The material produced and proved by the other side will also be taken into account for this purpose." (emphasis supplied) In the case of Parmeshawari Devi V/s.Punjab State Electricity Board and Another reported in AIR 1994 SC 1142, in paragraph No.3, the Apex Court observed thus:
"3. It is well settled law that it is the duty of the claimant to prove the sale deeds by adducing evidence either of the vendor or vendee or attesting witness of passing of the consideration under the sale deed, to prove that the sale transactions are genuine transactions between the willing vendor and willing vendee; that the consideration had in fact been passed under the document duly registered, represent the prevailing market value; and also the lands under acquisition and the lands concerning the sale are similarly situated and possessed of same or similar nature, advantages etc. The burden is always on the claimant. In this case that attempt was not made. Therefore, the High Court is right in rejecting the sale deeds relied on by the appellant. Since the Court has got to find whether the lands are possessed of S.H.HADAP 15/25 FA 751/2003 with FA 1392./2004 potential value or any other advantageous features to determine the prevailing market value as on the date of the notification Under Section 4(1). When the similar lands situated very nearby i.e. 1500 sq. yards away from the lands acquired and has been awarded at Rs. 82,000/ - per acre, the market value of the acquired land need to be determined. Since the lands under acquisition are of the same nature and possessed of the same potentialities, the claimants in these appeals also are entitled to similar treatment and award of proper compensation. In this case the appellants were awarded Rs. 25,600/- per acre by the Civil Court. Therefore, the interference by the High Court in this behalf is clearly illegal. The appeals are accordingly allowed and award of the Civil Court is restored but under the circumstances without costs." (emphasis supplied)
15.Considering this position of law it needs to be determined whether the claimants have discharged the burden cast upon them to demonstrate that they are entitled to enhance a compensation on the basis of the sale instance at Exhibit 73. The claimants have examined Shaikh Mainuddin Shaikh Chand, one of the claimants, to depose on their behalf in this regard. He has stated in his evidence in respect of comparability of the lands in question as under:-
"We have produced the certified copy of the sale transactions along with the list Exh.18 at Sr.No.2. It is at Exh.73. The said sale deed is dated 6.1.1994. There is one tin shed in the property sold under the sale deed Exh.73. In our property there was also one tin shed. The sale deed Exh.73 relates to the site from Siddheshawar Peth at Solapur. The acquired property also is from Siddheshawar Peth. The site under sale deed Exh.73 has no commercial value. In the vicinity of the said site there are residential houses. In the vicinity of acquired property there are commercial complex. To the West of the acquired property there is Bank, xerox center and other shops in the complex. There are two lodges also. To the East of the acquired property I.D.Hospital. To the South of the acquired property there is a national High Way which pases from the City. To the North there is post office and one workshop. The F.S.I.allowed to property under the sale deed Exh.73 is 1 where as the F.S.I.in respect of acquired property was S.H.HADAP 16/25 FA 751/2003 with FA 1392./2004 1.33."
16.This is the evidence brought on record by the claimants in respect of the comparability of Exh.73 with the acquired property. It needs to be mentioned for the cost of repetition that the sale deed under Exhibit 73 was brought on record by the SLAO and not by the claimants. Apart from stating that there is tin shed in both the lands; both lands are from same locality and that the acquired property has higher FSI, there is nothing further deposed by the claimants as to demonstrate the comparability of the two properties. The learned AGP is right in contending that several other qualitative factors such as gradient of the property, topography, soil condition, proximity etc.will have to be brought on record by the claimants and they have failed to do so. We do not find that this evidence is adequate enough to conclude that the two properties are comparable in quality and that the claimants have discharged the burden regarding their claim for enhanced compensation based on Exh.73.
17. The District Judge discarded the sale instance below Exhibit 73 on one more ground i.e.the distance between the property below Exh.73 and the acquired property. Advocate for the claimants has argued before us that the claimants have established that the distance between the two properties is not very far and both the properties are in the same locality. The learned AGP disputes this position. The evidence produced by the S.H.HADAP 17/25 FA 751/2003 with FA 1392./2004 claimants regarding the distance between the two properties is not consistent. In the examination in chief, the claimants have not stated the distance between the two properties except for stating that they are from the same locality. In the cross examination of the claimants, suggestion is put to the claimants that the distance between the two properties is three kilometers, which has been denied by them. Thus in the evidence of the claimants, the distance between the property at Exh.73 and the acquired property has not been conclusively established. This is relevant since the State has disputed the assertion of the claimants that both the properties are in the vicinity of each other. In the evidence of the valuer examined by the claimants, he has asserted that the distance between the property at Exh.73 and the acquired property is 400 meters. In the award declared by the SLAO, the distance between the two properties is mentioned as 1.5 kms. Thus as stated earlier, the burden was on the claimants and it was for them to have brought on record the distance between both the properties to establish their claim for enhanced compensation based on Exh.73.
18.The SLAO had specifically stated in his award that the property below Exh.73 was purchased by Solapur District Labour Contract Society Federation from the Yashwant Sahakari Bank at much higher price, because the labour federation was in need of this land and thus offered this land at very high rate. There is no evidence by the claimants in this S.H.HADAP 18/25 FA 751/2003 with FA 1392./2004 regard.
19.The property under Exh.73 is a much smaller plot. Thus on the face of it, it is not comparable with the acquired property unless it is established by the claimants otherwise. Once that fact is established by the claimants only then further question of making deductions/additions in respect of the size can be made. We are in agreement with the contentions of the learned AGP that the claimants have failed to discharge their burden at the initial stage itself i.e.of showing that the property at Exh.73 is comparable to the acquired property. Thus, no further reliance can be placed on the said sale deed. This is coupled with the fact that the claimants have not produced any evidence at all and it is rightly observed by the District Court that in such a busy locality, it is improbable that there will not be any other comparable sale instances available. We thus agree with the conclusion of the District Judge that the sale instance at Exh.73 cannot be taken as a sure guide to fix the market value of the acquired property.
20.As far as Valuer's report is concerned, the Valuer also has solely relied upon Exh.73 to base his conclusions in the report. The District Judge has expressed reservations about the report. According to him, it is not possible that the Valuer could not get any other comparable sale instance from the vicinity which is a busy locality. If Exh.73 is not held to be comparable sale instance then not much importance can be attached to S.H.HADAP 19/25 FA 751/2003 with FA 1392./2004 the Valuer's report.
21.In these circumstances, the District Judge relied on the sale of the acquired property executed in the year 1988 i.e.more than five years before the relevant date. When the claimants did not produce any comparable sale deed on record, the only sale deed pressed in service by the claimants was not found comparable, the valuer's evidence did not inspire confidence, the learned Judge had no other option, but to take the sale deed of the acquired land itself into consideration for fixing the market value of the acquired land. We have not been shown any judgment or statutory provision that the sale deed pertaining to the acquired property albeit five years back, in these circumstances also cannot be taken into consideration. Thus we find that the reliance of the District Judge on the sale deed of the acquired property cannot be termed as incorrect in law and on facts, as argued by the Advocates for the claimants.
22. The next question would then arise is whether the District Judge was right in enhancing the compensation on the ground of escalation of prices. In the present case the claimants purchased property in October 1988 for R.7 lakhs @ Rs.77.58 per sq. meter. The notification under section 126(4) of the MRTP Act was published on 28.01.1994. Thus there was gap of five years and three months between these two dates. The learned Judge, after considering the escalation of prices, came to the S.H.HADAP 20/25 FA 751/2003 with FA 1392./2004 conclusion that during the intervening period, the price of the acquired property would have gone up from Rs.77.58 per sq.meter to Rs.662.75 per sq.meter. By rounding off this figure, the learned Judge accordingly increased the market value of the acquired property to Rs.663 per sq.meter. The learned AGP vehemently contended that this approach by the District Judge is perverse. The learned AGP has relied upon the judgment of the Apex Court in the case of Oil and Natural Gas Corporation Limited reported in (2008) 14 SC 745. Relying on this judgment, the learned AGP contended that in the absence of any specific evidence regarding increase in the prices, the enhancement at the rate of 15% p.a., would have been proper.
23.There cannot be any hard and fast rule to fix the rate of escalation of prices for a particular period. It would depend on situation of land, nature of development, availability of demand etc. The escalation of prices would depend on whether the property is in urban, semi-urban or in rural areas. The speed at which the prices of the property will escalate in the intervening years, will vary from place to place and time to time. Thus there are several factors involved, but these cannot be left merely to the general perception of the Judge. For judicial determination parties must adduce evidence on record. Notably, the claimants have not adduced any evidence in this behalf. Thus if the escalation of prices is to be considered as a reason for enhancing the compensation then there S.H.HADAP 21/25 FA 751/2003 with FA 1392./2004 must be some material on record to guide the Court. Enhancing the compensation on the basis of escalation of prices, cannot be an arbitrary process and must be guided by prudence and availability of material on record. In the present case, we do not find that any such material was available to the District Judge. The learned Judge has straightway increased the value from 77.58 to Rs.663. We do not find any reason in the judgment how this transition is arrived at. There is clear absence of material on record as to what was the escalation in prices in Solapur city during that period.
24.That there will be some escalation of prices in the intervening years cannot be denied. The question is, how the Court will determine it when the parties do not produce any material on record. That guideline has been indicated by the Apex Court in the case of General Manager, ONGC Ltd. V/s. Rameshbhai Jivanbhai Patel and Another, (2008) 14 SCC 745. In Paragraphs 10, 11, 13 and 14 the Apex Court has observed as under:-
10. We 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.
11. Primarily, 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 S.H.HADAP 22/25 FA 751/2003 with FA 1392./2004 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 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. (emphasis supplied)
12. ................................................
13. Much more unsafe is the recent trend to determine the market value of acquired lands with reference to future sale transactions or 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 S.H.HADAP 23/25 FA 751/2003 with FA 1392./2004 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 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.
14. In 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% per annum over the 1987 price under Ex.15, would be sufficient and appropriate to arrive at the market value of acquired lands.
25.Thus, considering the above guideline, and the fact that the property is situated in urban area, one can safely assume that the escalation of prices to the tune of 15%, in the absence of any evidence on record, is reasonable. The learned AGP has demonstrated before us that if 15% rise including the compound interest is taken from the year 1988 on the sum of Rs.80/- (rounded of), then by the year 1994, the figure would have been Rs.181/-. He contends that if the escalation of prices is to be considered as a factor for increasing the compensation of the acquired S.H.HADAP 24/25 FA 751/2003 with FA 1392./2004 property, it can be only to the extent of 15% p.a., which, as noted above, would come to Rs.181/- per sq.meter. However, the State cannot now go behind the offer made by SLAO. The learned AGP also fairly accepts this legal position and that even though as per his submission, the learned Judge should have fixed the market value of the property at Rs. 181/- per sq.meter, he cannot resile from the offer given by the SLAO of Rs.472/- per sq.meter.
26.Thus we find that the conclusion of the District Judge that the property below Exh.73 was not comparable with the acquired property, is correct. The reliance placed by the District Judge on the sale deed of the acquired property of October 1988, in the absence of any other reliable evidence, is also correct. We, however, find that that the approach taken by the District Judge in enhancing the compensation of the property to Rs.663/- per sq.meter, on the ground of escalation of prices, is not legal and proper.
27.We accordingly hold that the first appeal bearing No.1392 of 2004 filed by the State deserves to be allowed and is accordingly allowed. The judgment and order dated 9th January, 2003 passed by the 3rd Additional District Judge, Solapur in the Land Acquisition Reference No.174 of 1996 to the extent it enhances the market rate of the property to Rs.663/- per sq.meter is quashed and set aside and the rate awarded by the SLAO @ Rs.472/- per sq.meter is restored. The compensation to be granted to S.H.HADAP 25/25 FA 751/2003 with FA 1392./2004 the claimants, will have to be reworked accordingly. We retain the grant of solatium, component and interest, however the amount due under these heads will have to be recalculated as per the rate fixed by us, as above. Appeal filed by the claimants bearing No.751 of 2003 is dismissed. Decree be drawn up accordingly. We make it clear that the claimants will be obliged to reimburse the excess amount withdrawn by them on the basis of the order of the District Court alongwith interest thereon at the rate of 12% p.a.from the date of withdrawal of such surplus amount till the same is redeposited or realised, whichever is earlier.
(N.M.JAMDAR, J.) ( A.M.KHANWILKAR,J.)
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burden of proving inadequacy of compensation is on the claimants. In the case of Kiran Tondon v/s.Allahabad Development Authority, reported in 2004 10 SCC 745 in paragraph No.10, the Apex Court observed thus: "10. Before examining the merits of the contentions raised it will be useful to bear in mind the legal principle in the matter of determination of compensation. The Collector's award under Section 11 is nothing more than an offer of compensation made by the Government to the claimants whose property is acquired. The burden of proving that the amount of compensation awarded by the Collector is inadequate lies upon the claimant and he is in a position of plaintiff. The Court has to treat the reference as an original proceeding before it and determine the market value afresh on the basis of the material produced before it. The claimant is in the position of a plaintiff who has to show that the price offered for his land in the award is inadequate on the basis of the materials produced in the court. The material produced and proved by the other side will also be taken into account for this purpose.
Bombay High Court
Digvijay Graharachana Mandal ... vs The State Of Maharashtra & Ors on 10 April, 2012
Bench: A.M. Khanwilkar, N.M. Jamdar
1. These two Appeals arising from the Land Acquisition proceedings, challenge the Judgment and order passed by the Additional District Judge,Solapur in L.A.R.No.176 of 1996 dated 9th January, 2003. The First Appeal No.751 of 2003 is filed by the claimants challenging the judgment and the order on the ground that the compensation granted is inadequate, while the First Appeal No.1392 of 2004 is filed by the State of Maharashtra challenging the judgment and award on the ground that the compensation granted is excessive. Since the issues raised in both these appeals are connected, they are disposed of by this common judgment.2. The property under acquisition i.e. C.T.S.No.617 1B admeasures 9469.33 sq.mts and is situated at
Siddeshwar Peth, Solapur, within the limits of Solapur Municipal Corporation. The property was reserved for the purpose of Extension of Civil Hospital in the Development Plan of Solapur city, since the year 1978.
3. The said property was purchased by the claimants on 30.10.1988. As the property was reserved under the development plan, a notification under section 6 of the Land Acquisition Act read with section 126 (4) of the Maharashtra Regional and Town Planning Act 1966 dated 20.1.1994 was published on 17.2.1994. The land acquisition proceedings were duly completed and possession receipt of the acquired land was executed by S.H.HADAP 3/25 FA 751/2003 with FA 1392./2004 the authorities on 16.10.1996.
4. The Special Land Acquisition Officer (SLAO) Solapur initiated proceedings for determining the market value of the acquired property. Representatives of the SLAO and the City Survey officer inspected the area and found that there were residential buildings and commercial buildings around the acquired property, and a heavily trafficed road abutting it. The SLAO collected sale transactions of the lands which were situated within the radius of 5 kms around the acquired property for a period of five years prior to the material date i.e. 17.02.1994. The SLAO considered in all 18 sale instances for the period of five years before the material date. The SLAO however discarded majority of the sale instances since they were not comparable. The claimants sought compensation at the rate of Rs.4283.02 per sq.mtr. No evidence was however produced by the claimants. The SLAO also considered one particular sale instance which later on became subject of controversy was the sale deed between Yeshwant Cooperative Bank and Labour Federation dated 6.1.1994 (Exhibit 73) which fetched Rs.3228 per sq meter. The property therein admeasured 233.73 sq.meter. That sale was executed just prior to the material date. But the SLAO opined that the purchaser i.e.Labour Federation was very much in need of land and thus offered very high rate. He also found that the said sale transaction pertained to much smaller plot and it was not situated close to the S.H.HADAP 4/25 FA 751/2003 with FA 1392./2004 acquired property. The SLAO thus did not rely on the said sale instance. The SLAO then proceeded to consider the sale instance of the acquired land itself executed on 30.10.1988. The claimants had purchased it for Rs.7 lacs at the rate of Rs.77.58 per sq.metre. The SLAO found the sale of the acquired property to be a reliable indicator for arriving at the market value of the acquired property on the material date. The SLAO considered the fact that the sale deed of the acquired land was effected five years back and he accordingly added 12% to offset the escalation of prices. The SLAO by his award dated 04.09.1996 granted compensation of Rs.12,32,300/- at the rate of Rs.472/- per sq.meter.
5. Being dissatisfied with the compensation granted, the Claimants approached the District Court at Solapur with land acquisition Reference No.174 of 1996 claiming compensation at the rate of Rs.5000/- per sq.meter and thus for an additional compensation of Rs.4,23,86,190/-. The State Government opposed the claim by filing their say. The claimants examined Shaikh Mainuddin Shaikh Chand, one of the Claimants on their behalf. The Claimants also examined the valuer Dilip Motilal Shah who had prepared the report of the valuation of the property. The Claimants in support of their claim for additional compensation relied upon the sale deed executed on 6.1.1994 at Exhibit 73 and the report of the Valuer. The State examined the S.L.A.O. and relied upon the award passed by him.
S.H.HADAP 5/25 FA 751/2003 with FA 1392./2004
6. The District Judge considered both documentary and oral evidence produced on record. The District Court found it improbable that the claimants could not produce any comparable sale deed by themselves. The learned Judge opined that it was possible for the Claimants to collect comparable sale instances and they have failed to do so for the reasons best known to them. As far as the sale instance at Exhibit 73 upon which heavy reliance was placed by the claimants, the District judge found that it was not near the acquired property and the Claimants themselves have given contradictory evidence about the distance of the two properties. The District Judge did not attach much importance to the report of the Valuer. According to him the Valuer did not take pains to collect other sale instances and relied upon only Exh.73, a single transaction in respect of a very small plot having high value. The District Judge found that in the absence of any other reliable evidence the sale deed of the acquired property itself was the only guide to fix the market value of the acquired property. The learned District Judge having considered the sale of the acquired property as the base proceeded to fix compensation at the rate of Rs.662.75 per sq.meter considering the escalation of prices in preceding five years. Accordingly, the learned Judge partially enhanced the claim by his order dated 9th January, 2003 and directed the State Government to pay an additional compensation to the Claimants of Rs. 17,23,395/-, in addition to the solatium of Rs.5,17,019/- and component S.H.HADAP 6/25 FA 751/2003 with FA 1392./2004 of Rs.5,37,633/-, totalling to Rs.27,78,113/- payable along with interest at the rate of 9% for a period of one year and thereafter at the rate of 15% till its realization.
7. Aggrieved by the judgment and order , both the parties are before us in their respective Appeals.
8. We have heard Mr.Anand Patil learned Assistant Government Pleader for the Appellants and Dr.Ramdas Sabban for the Claimants. Advocate for the Claimants relied on the sale instance at Exhibit 73 to contend that it was the most comparable instance to determine the market value of the acquired property, though it was much smaller in size i.e.admeasuring 233.73 sq. meters as against 9469.33 sq.mtrs. He contended that the acquired property had F.S.I. of 1.33 and was situated in a commercial area having much better potential. He contended that therefore the factor of smallness of size of the property below Exh.73 was offset by other factors of the acquired property. According to him since there was nothing to doubt the genuineness of the sale deed at Exhibit 73 and that since the property under Exhibit 73 was sold at Rs.3228/-, the claim of Rs.5000/-was reasonable. He argued that there was no need to rely upon the sale instance of the acquired property executed in the year 1988, i.e.more than five years when the comparable sale instance in the form of Exhibit 73 executed just prior to the material date was available for consideration. Advocate for the claimants further submitted that the S.H.HADAP 7/25 FA 751/2003 with FA 1392./2004 District Court did not give proper weightage to the evidence and report of the Valuer. According to him, reliance by the District Court on stamp duty ready reckoner was not proper. Advocate for the Claimants cited several judgments of the Apex Court in support of his submissions that sale instance at Exhibit 73 should have been considered as base for determining market value of the acquired property. He primarily relied upon the cases reported in:-
(1) AIR 1976 SC 651, State of Madras V/s.A.M.Nanjan, (2) (2004) 1 SCC 467, Pannalal Ghosh & Others V/s Land Acquisition Collector & Ors.,
(3) (2005) 6 SCC 454, ONGC Ltd. V/s.Sendhabhai Vastram Patel & Ors.,
(4) 2006 (2) Mh.L.J.301, Special Land Acquisition Officer (Highways) V/s.Pratapsingh Shoorji Vallabhdas & Ors., (5) 2009 (6) Bom.C.R.354, Mahesh Dattatray Thirthkar V/s.State of Maharashtra,
(6) 2010 (4) Bom. C.R.645. Deputy Collector (L.A.) and L.A.O. & Anr.V/s.Joaquim Francis Fernandes & Ors.,
He particularly pressed in service the judgments laying down the proposition that comparable sales method is the best and most preferred method to arrive at the market price of an acquired property.
9. On the other hand, the learned Assistant Government Pleader contended that before the SLAO the Claimants did not produce any evidence and as per settled law burden was on the claimants to show that they were entitled to enhanced compensation. He contended that even in the S.H.HADAP 8/25 FA 751/2003 with FA 1392./2004 reference proceedings the Claimants did not produce any comparable instance except relying upon Exhibit 73. The learned AGP argued that in the evidence the Claimants have stated virtually nothing about the comparability of the property under Exhibit 73 with the acquired property. The learned AGP contended that the District Judge thus was right in discarding the sale instance at Exh 73 and instead relying on the sale instance at Exhibit 68 i.e. of the acquired property. The learned Assistant Government Pleader however contended that though the District Judge was right in relying on the sale instance of the acquired property of the year 1988, the District Judge seriously erred in enhancing compensation to Rs.663 per sq.meter when the property was purchased at the rate of Rs.77.58 per sq.meter, on the ground of escalation of prices for the period of five years. According to the learned Assistant Government Pleader, at the best, the price rise of 15% with compound interest p.a., could have been granted which according to him comes to only to Rs.181. He relied upon the following cases: (1) (2004) 10 SCC 745, Kiran Tandon V/s.Allahabad Development Authority and Another,
(2) (2010) 10 SCC 492, Hirabai And Others V/s.Land Acquisition Officer- cum- Assistant Commissioner,
(3) (1996) 3 SCC 594, M.B.Gopala Krishna & Others V/s.Special Deputy Collector, Land Acquisition,
(4) (2011) 10 SCC 371, Goa Housing Board V/s.Rameshchandra Govind Pawaskar and Another,
S.H.HADAP 9/25 FA 751/2003 with FA 1392./2004 (5) (2008) 14 SCC 745, General Manager, ONGC Ltd. V/s.Rameshbhai Jivanbhai Patel and Another,
(6) AIR 1994 SC 1142, Parameshwari Devi V/s.Punjab State Electricity Board and Another.
10.From the narration of contentions above, it is clear that the controversy at hand mainly revolves around the sale Deed at Exhibit 73. If Exhibit 73 is not considered as a comparable sale instance then no fault can be found with the approach adopted by the learned District Judge in taking into consideration sale of the acquired property as a guide to arrive at the market value. The only question then will remain is to whether the the District Judge was right in enhancing the compensation on the ground of escalation of prices. If Exhibit 73 is found to be a comparable sale instance then it will lend strength to the arguments of the claimants that the compensation granted by the learned District Judge is grossly inadequate.
11.Both the parties have relied upon judgments of the Apex Court which indicate that the Court while determining the market value of the land is required to consider relevant matters. The Apex Court has emphasized that the Court should harmonize the application of legal principles with sound common sense approach while determining the market value.
12.The considerations which the Court should bear in mind while determining the market value of the property in acquisition proceedings has been succinctly set out by the Apex Court in the case of S.H.HADAP 10/25 FA 751/2003 with FA 1392./2004 CHIMANLAL HARGOVINDDAS VS SPL.L.A.O. Reported in
(1988) 3 Supreme Court Cases 751. The Apex Court has summarized as under:
"3. Before tackling the problem of valuation of the land under acquisition it is necessary to make some general observations. The compulsion to do so has arisen as the Trial Court has virtually treated the award rendered by the Land Acquisition Officer as a judgment under appeal and has evinced unawareness of the methodology for valuation to some extent. The true position therefore requires to be capsulized.
4. The following factors must be etched on the mental screen: (1) A reference under Section 18 of the Land Acquisition Act is not an appeal against the award and the Court cannot take into account the material relied upon by the Land Acquisition Officer in his Award unless the same material is produced and proved before the Court.
(2) So also the Award of the Land Acquisition Officer is not to be treated as a judgment of the trial Court open or exposed to challenge before the Court hearing the Reference. It is merely an offer made by the Land Acquisition Officer and the material utilised by him for making his valuation cannot be utilised by the Court unless produced and proved before it. It is not the function of the Court to suit in appeal against the Award, approve or disapprove its reasoning, or correct its error or affirm, modify or reverse the conclusion reached by the Land Acquisition Officer, as if it were an appellate Court.
(3) The Court has to treat the reference as an original proceeding before it and determine the market value afresh on the basis of the material produced before it.
(4) The claimant is in the position of a plaintiff who has to show that the price offered for his land in the award is inadequate on the basis of the materials produced in the Court. Of course the materials placed and proved by the other side can also be taken into account for this purpose.
(5) The market value of land under acquisition has to be S.H.HADAP 11/25 FA 751/2003 with FA 1392./2004 determined as on the crucial date of publication of the notification under Section 4 of the Land Acquisition Act(dates of Notifications under Sections. 6 and 9 are irrelevant).
(6) The determination has to be made standing on the date line of valuation (date of publication of notification under Section 4) as if the valuer is a hypothetical purchaser willing to purchase land from the open market and is prepared to pay a reasonable price as on that day. It has also to be assumed that the vendor is willing to sell the land at a reasonable price.
(7) In doing so by the instances method, the Court has to correlate the market value reflected in the most comparable instance which provides the index of market value.
(8) Only genuine instances have to be taken into account. (Some times instances are rigged up in anticipation of Acquisition of land).
(9) Even post notification instances can be taken into account (1) if they are very proximate, (2) genuine and (3) the acquisition itself has not motivated the purchaser to pay a higher price on account of the resultant improvement in development prospects. (10) The most comparable instances out of the genuine instances have to be identified on the following considerations: (i) proximity from time angle,
(ii)proximity from situation angle.
(11) Having identified the instances which provide the index of market value the price reflected therein may be taken as the norm and the market value of the land under acquisition may be deduced by making suitable adjustments for the plus and minus factors vis-a-vis land under acquisition by placing the two in juxtaposition.
(12) A balance-sheet of plus and minus factors may be drawn for this purpose and the relevant factors may be evaluated in terms of price variation as a prudent purchaser would do.
(13) The market value of the land under acquisition has thereafter to be deduced by loading the price reflected in the instance taken as norm for plus factors and unloading it for minus factors. S.H.HADAP 12/25 FA 751/2003 with FA 1392./2004 (14) The exercise indicated in Clauses (11) to (13) has to be undertaken in a common sense manner as a prudent man of the world of business would do. We may illustrate some such illustrative (not exhaustive) factors:
Plus Factors Minus Factors
1. smallness of Size 1. largeness of area
2. proximity to a road 2. situation in the interior at a distance from the road
3. frontage on a road 3. narrow strip of land with very small frontage
compared to death
4. nearness to developed area 4. lower level requiring the depressed portion to be
filled up
5. regular shape 5.remoteness from devel- oped locality
6.level vis a viz land 6. some special disadvant- ageous under acquisition.
disadvantageous factor
which would deter a
purchaser.
7. special value for an owner of an
adjoining property to whom it may
have some very special advantage.
(15) The evaluation of these factors of course depends on the facts of each case. There cannot be any hard and fast or rigid rule. Common sense is the best and most reliable guide. For instance, take the factor regarding the size. A building plot of land say 500 to 1000 sq. yds cannot be compared with a large tract or block of land of say 1000 sq. yds or more. Firstly while a smaller plot is within the reach of many, a large block of land will have to be developed by preparing a lay out, carving out roads, leaving open space, plotting out smaller plots, waiting for purchasers (meanwhile the invested money will be blocked up) and the S.H.HADAP 13/25 FA 751/2003 with FA 1392./2004 hazards of an entrepreneur. The factor can be discounted by making a deduction by way of an allowance at an appropriate rate ranging approx. between 20% to 50% to account for land required to be set apart for carving out lands and plotting out small plots. The discounting will to some extent also depend on whether it is a rural area or urban area, whether building activity is picking up, and whether waiting period during which the capital of the entrepreneur would be looked up, will be longer or shorter and the attendant hazards.
(16) Every case must be dealt with on its own facts pattern bearing in mind all these factors as a prudent purchaser of land in which position the Judge must place himself.
(17) These are general guidelines to be applied with understanding informed with common sense."
13.Keeping the above mentioned guidelines in mind, we will deal with the evidence brought on record by the parties to determine the market value of the acquired property. As noted earlier, the controversy revolves around the sale deed at Exhibit 73. So we will take this aspect first. Firstly, admittedly the property at Exhibit 73 is much smaller in size. The acquired property admeasures 9023.00 sq.meters, while the property below Exhibit 73 admeasures 233.73 sq.meters i.e.around 5%. On the face of it, thus the property below Exhibit 73 and the acquired property cannot be called absolutely comparable. The comparison will have to be made by taking into consideration many balancing factors noted in the judgment above, for the purpose of arriving at the correct market value. It will have to be considered as to what is the location, topography, soil condition of the property at Exhibit 73 and how it compares to the S.H.HADAP 14/25 FA 751/2003 with FA 1392./2004 acquired property.
14. Question is on whom the burden lies to prove this. The position has been made amply clear by the Apex Court in several cases. The burden of proving inadequacy of compensation is on the claimants. In the case of Kiran Tondon v/s.Allahabad Development Authority, reported in 2004 10 SCC 745 in paragraph No.10, the Apex Court observed thus: "10. Before examining the merits of the contentions raised it will be useful to bear in mind the legal principle in the matter of determination of compensation. The Collector's award under Section 11 is nothing more than an offer of compensation made by the Government to the claimants whose property is acquired. The burden of proving that the amount of compensation awarded by the Collector is inadequate lies upon the claimant and he is in a position of plaintiff. The Court has to treat the reference as an original proceeding before it and determine the market value afresh on the basis of the material produced before it. The claimant is in the position of a plaintiff who has to show that the price offered for his land in the award is inadequate on the basis of the materials produced in the court. The material produced and proved by the other side will also be taken into account for this purpose." (emphasis supplied) In the case of Parmeshawari Devi V/s.Punjab State Electricity Board and Another reported in AIR 1994 SC 1142, in paragraph No.3, the Apex Court observed thus:
"3. It is well settled law that it is the duty of the claimant to prove the sale deeds by adducing evidence either of the vendor or vendee or attesting witness of passing of the consideration under the sale deed, to prove that the sale transactions are genuine transactions between the willing vendor and willing vendee; that the consideration had in fact been passed under the document duly registered, represent the prevailing market value; and also the lands under acquisition and the lands concerning the sale are similarly situated and possessed of same or similar nature, advantages etc. The burden is always on the claimant. In this case that attempt was not made. Therefore, the High Court is right in rejecting the sale deeds relied on by the appellant. Since the Court has got to find whether the lands are possessed of S.H.HADAP 15/25 FA 751/2003 with FA 1392./2004 potential value or any other advantageous features to determine the prevailing market value as on the date of the notification Under Section 4(1). When the similar lands situated very nearby i.e. 1500 sq. yards away from the lands acquired and has been awarded at Rs. 82,000/ - per acre, the market value of the acquired land need to be determined. Since the lands under acquisition are of the same nature and possessed of the same potentialities, the claimants in these appeals also are entitled to similar treatment and award of proper compensation. In this case the appellants were awarded Rs. 25,600/- per acre by the Civil Court. Therefore, the interference by the High Court in this behalf is clearly illegal. The appeals are accordingly allowed and award of the Civil Court is restored but under the circumstances without costs." (emphasis supplied)
15.Considering this position of law it needs to be determined whether the claimants have discharged the burden cast upon them to demonstrate that they are entitled to enhance a compensation on the basis of the sale instance at Exhibit 73. The claimants have examined Shaikh Mainuddin Shaikh Chand, one of the claimants, to depose on their behalf in this regard. He has stated in his evidence in respect of comparability of the lands in question as under:-
"We have produced the certified copy of the sale transactions along with the list Exh.18 at Sr.No.2. It is at Exh.73. The said sale deed is dated 6.1.1994. There is one tin shed in the property sold under the sale deed Exh.73. In our property there was also one tin shed. The sale deed Exh.73 relates to the site from Siddheshawar Peth at Solapur. The acquired property also is from Siddheshawar Peth. The site under sale deed Exh.73 has no commercial value. In the vicinity of the said site there are residential houses. In the vicinity of acquired property there are commercial complex. To the West of the acquired property there is Bank, xerox center and other shops in the complex. There are two lodges also. To the East of the acquired property I.D.Hospital. To the South of the acquired property there is a national High Way which pases from the City. To the North there is post office and one workshop. The F.S.I.allowed to property under the sale deed Exh.73 is 1 where as the F.S.I.in respect of acquired property was S.H.HADAP 16/25 FA 751/2003 with FA 1392./2004 1.33."
16.This is the evidence brought on record by the claimants in respect of the comparability of Exh.73 with the acquired property. It needs to be mentioned for the cost of repetition that the sale deed under Exhibit 73 was brought on record by the SLAO and not by the claimants. Apart from stating that there is tin shed in both the lands; both lands are from same locality and that the acquired property has higher FSI, there is nothing further deposed by the claimants as to demonstrate the comparability of the two properties. The learned AGP is right in contending that several other qualitative factors such as gradient of the property, topography, soil condition, proximity etc.will have to be brought on record by the claimants and they have failed to do so. We do not find that this evidence is adequate enough to conclude that the two properties are comparable in quality and that the claimants have discharged the burden regarding their claim for enhanced compensation based on Exh.73.
17. The District Judge discarded the sale instance below Exhibit 73 on one more ground i.e.the distance between the property below Exh.73 and the acquired property. Advocate for the claimants has argued before us that the claimants have established that the distance between the two properties is not very far and both the properties are in the same locality. The learned AGP disputes this position. The evidence produced by the S.H.HADAP 17/25 FA 751/2003 with FA 1392./2004 claimants regarding the distance between the two properties is not consistent. In the examination in chief, the claimants have not stated the distance between the two properties except for stating that they are from the same locality. In the cross examination of the claimants, suggestion is put to the claimants that the distance between the two properties is three kilometers, which has been denied by them. Thus in the evidence of the claimants, the distance between the property at Exh.73 and the acquired property has not been conclusively established. This is relevant since the State has disputed the assertion of the claimants that both the properties are in the vicinity of each other. In the evidence of the valuer examined by the claimants, he has asserted that the distance between the property at Exh.73 and the acquired property is 400 meters. In the award declared by the SLAO, the distance between the two properties is mentioned as 1.5 kms. Thus as stated earlier, the burden was on the claimants and it was for them to have brought on record the distance between both the properties to establish their claim for enhanced compensation based on Exh.73.
18.The SLAO had specifically stated in his award that the property below Exh.73 was purchased by Solapur District Labour Contract Society Federation from the Yashwant Sahakari Bank at much higher price, because the labour federation was in need of this land and thus offered this land at very high rate. There is no evidence by the claimants in this S.H.HADAP 18/25 FA 751/2003 with FA 1392./2004 regard.
19.The property under Exh.73 is a much smaller plot. Thus on the face of it, it is not comparable with the acquired property unless it is established by the claimants otherwise. Once that fact is established by the claimants only then further question of making deductions/additions in respect of the size can be made. We are in agreement with the contentions of the learned AGP that the claimants have failed to discharge their burden at the initial stage itself i.e.of showing that the property at Exh.73 is comparable to the acquired property. Thus, no further reliance can be placed on the said sale deed. This is coupled with the fact that the claimants have not produced any evidence at all and it is rightly observed by the District Court that in such a busy locality, it is improbable that there will not be any other comparable sale instances available. We thus agree with the conclusion of the District Judge that the sale instance at Exh.73 cannot be taken as a sure guide to fix the market value of the acquired property.
20.As far as Valuer's report is concerned, the Valuer also has solely relied upon Exh.73 to base his conclusions in the report. The District Judge has expressed reservations about the report. According to him, it is not possible that the Valuer could not get any other comparable sale instance from the vicinity which is a busy locality. If Exh.73 is not held to be comparable sale instance then not much importance can be attached to S.H.HADAP 19/25 FA 751/2003 with FA 1392./2004 the Valuer's report.
21.In these circumstances, the District Judge relied on the sale of the acquired property executed in the year 1988 i.e.more than five years before the relevant date. When the claimants did not produce any comparable sale deed on record, the only sale deed pressed in service by the claimants was not found comparable, the valuer's evidence did not inspire confidence, the learned Judge had no other option, but to take the sale deed of the acquired land itself into consideration for fixing the market value of the acquired land. We have not been shown any judgment or statutory provision that the sale deed pertaining to the acquired property albeit five years back, in these circumstances also cannot be taken into consideration. Thus we find that the reliance of the District Judge on the sale deed of the acquired property cannot be termed as incorrect in law and on facts, as argued by the Advocates for the claimants.
22. The next question would then arise is whether the District Judge was right in enhancing the compensation on the ground of escalation of prices. In the present case the claimants purchased property in October 1988 for R.7 lakhs @ Rs.77.58 per sq. meter. The notification under section 126(4) of the MRTP Act was published on 28.01.1994. Thus there was gap of five years and three months between these two dates. The learned Judge, after considering the escalation of prices, came to the S.H.HADAP 20/25 FA 751/2003 with FA 1392./2004 conclusion that during the intervening period, the price of the acquired property would have gone up from Rs.77.58 per sq.meter to Rs.662.75 per sq.meter. By rounding off this figure, the learned Judge accordingly increased the market value of the acquired property to Rs.663 per sq.meter. The learned AGP vehemently contended that this approach by the District Judge is perverse. The learned AGP has relied upon the judgment of the Apex Court in the case of Oil and Natural Gas Corporation Limited reported in (2008) 14 SC 745. Relying on this judgment, the learned AGP contended that in the absence of any specific evidence regarding increase in the prices, the enhancement at the rate of 15% p.a., would have been proper.
23.There cannot be any hard and fast rule to fix the rate of escalation of prices for a particular period. It would depend on situation of land, nature of development, availability of demand etc. The escalation of prices would depend on whether the property is in urban, semi-urban or in rural areas. The speed at which the prices of the property will escalate in the intervening years, will vary from place to place and time to time. Thus there are several factors involved, but these cannot be left merely to the general perception of the Judge. For judicial determination parties must adduce evidence on record. Notably, the claimants have not adduced any evidence in this behalf. Thus if the escalation of prices is to be considered as a reason for enhancing the compensation then there S.H.HADAP 21/25 FA 751/2003 with FA 1392./2004 must be some material on record to guide the Court. Enhancing the compensation on the basis of escalation of prices, cannot be an arbitrary process and must be guided by prudence and availability of material on record. In the present case, we do not find that any such material was available to the District Judge. The learned Judge has straightway increased the value from 77.58 to Rs.663. We do not find any reason in the judgment how this transition is arrived at. There is clear absence of material on record as to what was the escalation in prices in Solapur city during that period.
24.That there will be some escalation of prices in the intervening years cannot be denied. The question is, how the Court will determine it when the parties do not produce any material on record. That guideline has been indicated by the Apex Court in the case of General Manager, ONGC Ltd. V/s. Rameshbhai Jivanbhai Patel and Another, (2008) 14 SCC 745. In Paragraphs 10, 11, 13 and 14 the Apex Court has observed as under:-
10. We 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.
11. Primarily, 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 S.H.HADAP 22/25 FA 751/2003 with FA 1392./2004 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 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. (emphasis supplied)
12. ................................................
13. Much more unsafe is the recent trend to determine the market value of acquired lands with reference to future sale transactions or 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 S.H.HADAP 23/25 FA 751/2003 with FA 1392./2004 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 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.
14. In 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% per annum over the 1987 price under Ex.15, would be sufficient and appropriate to arrive at the market value of acquired lands.
25.Thus, considering the above guideline, and the fact that the property is situated in urban area, one can safely assume that the escalation of prices to the tune of 15%, in the absence of any evidence on record, is reasonable. The learned AGP has demonstrated before us that if 15% rise including the compound interest is taken from the year 1988 on the sum of Rs.80/- (rounded of), then by the year 1994, the figure would have been Rs.181/-. He contends that if the escalation of prices is to be considered as a factor for increasing the compensation of the acquired S.H.HADAP 24/25 FA 751/2003 with FA 1392./2004 property, it can be only to the extent of 15% p.a., which, as noted above, would come to Rs.181/- per sq.meter. However, the State cannot now go behind the offer made by SLAO. The learned AGP also fairly accepts this legal position and that even though as per his submission, the learned Judge should have fixed the market value of the property at Rs. 181/- per sq.meter, he cannot resile from the offer given by the SLAO of Rs.472/- per sq.meter.
26.Thus we find that the conclusion of the District Judge that the property below Exh.73 was not comparable with the acquired property, is correct. The reliance placed by the District Judge on the sale deed of the acquired property of October 1988, in the absence of any other reliable evidence, is also correct. We, however, find that that the approach taken by the District Judge in enhancing the compensation of the property to Rs.663/- per sq.meter, on the ground of escalation of prices, is not legal and proper.
27.We accordingly hold that the first appeal bearing No.1392 of 2004 filed by the State deserves to be allowed and is accordingly allowed. The judgment and order dated 9th January, 2003 passed by the 3rd Additional District Judge, Solapur in the Land Acquisition Reference No.174 of 1996 to the extent it enhances the market rate of the property to Rs.663/- per sq.meter is quashed and set aside and the rate awarded by the SLAO @ Rs.472/- per sq.meter is restored. The compensation to be granted to S.H.HADAP 25/25 FA 751/2003 with FA 1392./2004 the claimants, will have to be reworked accordingly. We retain the grant of solatium, component and interest, however the amount due under these heads will have to be recalculated as per the rate fixed by us, as above. Appeal filed by the claimants bearing No.751 of 2003 is dismissed. Decree be drawn up accordingly. We make it clear that the claimants will be obliged to reimburse the excess amount withdrawn by them on the basis of the order of the District Court alongwith interest thereon at the rate of 12% p.a.from the date of withdrawal of such surplus amount till the same is redeposited or realised, whichever is earlier.
(N.M.JAMDAR, J.) ( A.M.KHANWILKAR,J.)
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