Sunday 25 August 2013

Transactions subsequent to acquisition should be ignored for determining market value of acquired lands



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

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. 

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
FIRST APPEAL NO.751 OF 2003
Digvijay Graharachana Mandal Solapur

vs
The State of Maharashtra & ors.

CORAM: A.M.KHANWILKAR &
N.M.JAMDAR, JJ

JUDGMENT PRONOUNCED ON:

10th April, 2012



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

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

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
property.
valuation of the
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.

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

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

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

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,

(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

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

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.

(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. some special disadvant-
              ageous under acquisition.
             disadvantageous
            factor
           which would deter a
          purchaser.
6.level vis a viz land
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

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

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

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

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

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

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

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

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

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

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

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

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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