Sunday 14 September 2014

Guidelines for determining compensation under land acquisition Act


In Chimanlal
Hargovinddas vs. Special Land Acquisition Officer,
Poona and anr.4, this Court summed up the principle as
follows:-
“4. The following factors must be etched on
the mental screen:

(1988) 3 SCC 751
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. (Sometimes 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-à-vis land under

acquisition
by
juxtaposition.
placing
the
two
in
(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
1. smallness of
size
2. proximity to a
road
3. frontage on a
road
Minus factors
1. largeness of area
2. situation in the
interior
at
a
distance from the
road
3. narrow strip of
land with very small
frontage compared
to depth
4. nearness to 4. lower level
developed area requiring the
              depressed portion
             to be filled up
5. regular shape 5. remoteness
                from developed
               locality
              6. some special
             disadvantageous
            factor which
           would deter a
          purchaser
6. level vis-à-vis
land
under
acquisition
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.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION

UNION OF INDIA

VERSUS
RAJ KUMAR BAGHAL SINGH (DEAD)
TH. LRS. & ORS.


CIVIL APPEAL NO.7314-7365/2005
ADARSH KUMAR GOEL, J.
Dated;September 9, 2014


1. Leave granted in SLPs.
2. These appeals have been preferred against the
judgment of the Punjab & Haryana High Court in a group
of matters involving the issue of determination of
compensation for the land acquired by the appellant-
Union of India in two sets of acquisition.
2.
One of the notifications under Section 4 of the Land
Acquisition Act, 1894 (for short “the Act”), in question,
was issued on 14th March, 1989 to acquire 72.9375 acres
of land in villages Bir Kheri Gujran, District Patiala, for
development of military cantonment at Patiala in Punjab.
The Collector vide award dated 13th August, 1991,
assessed the market value of the acquired land at the
rate of Rs.2 lakh per acre.
The Reference Court
enhanced the amount of compensation to Rs.9,05000/-
per acre.
A learned Single Judge of the High Court
reduced the same to Rs.105.80 per square yard vide
order dated 1st April, 1999, which has been affirmed by
the Division Bench.
3.
In
the
other
set
of
acquisition,
covered
by
notification under Section 4 of the Act dated 16 th
September, 1988, for the land measuring 498.03, the

Collector vide award dated 27 th March, 1991, awarded
compensation at the rate of Rs.2 lakh per acre for the
land in villages Kheri Gujran and Bir Kheri Gujran and for
the land in villages Sher Majra, Haji Majra and Pasiana at
the rate of Rs.1,50,000/- per acre. The Reference Court
vide award
dated 6 th April, 1998 enhanced the
compensation to Rs.2,75,000/- per acre for the land in
villages Kheri Gujran and Bir Kheri Gujran. In respect of
land in the revenue estate of village Haji Majra, for the
land
upto
500
meters
on
Patiala
Sangrur
Road,
compensation was awarded at the same rate but for the
rest
of
the
land
compensation
Rs.2,33,750/- per acre.
was
awarded
at
For villages Pasiana and Sher
Majra, the rate awarded was the same as for village Haji
Majra. On further appeal, the learned Single Judge of the
High Court enhanced the amount of compensation to
Rs.4,48,159/- per acre which has been affirmed by the
Division Bench with slight modification by way of
enhancement.
4.
Thus, the Division Bench has upheld the view of the
learned Single Judge in reducing the compensation from
Rs.9,05,000/- per acre, fixed by the Reference Court, to
Rs.105.80 per square yard fixed by the learned Single

Judge in respect of the land covered by notification dated
14th March, 1989 and for the land covered under
notification
dated
16th
September,
1988,
the
compensation was marginally enhanced to Rs.4,54,662/-
per acre.
5.
Aggrieved by the judgment of the Division Bench,
the Union of India has preferred these appeals. However,
the land owners have accepted the compensation
awarded by the Division Bench.
6. We have heard learned counsel for the parties.
7. Learned counsel for the appellant-Union of India
submitted that enhancement of compensation beyond
the award of the Collector by the Reference Court and
the High Court was not justified as the sale transactions
relied upon by the land owners could not be the basis for
fixation of compensation.
The said instances were of
land nearer to the city which land, being better located,
had higher value. It is for this reason that in respect of
the land covered by notification dated 14 th March, 1989,
rate of compensation fixed by the Reference Court was
reduced by the High Court. Plea that for taking into small
instances cut of 60% should be applied was wrongly
disregarded.
Thus, methodology followed by the High

Court was not appropriate. Reliance has been placed on
law laid down in Basant Kumar and ors. vs. Union of
India and Ors.1, Smt. Indumati Chitaley vs. Union of
India and Anr.2 and Special Land Acquisition Officer
vs. Karigowda and Ors.3. It was further submitted that
the sale transactions Exp. P-21 and P-22 have been
wrongly relied upon ignoring the objection of the
appellant and on that basis the Division Bench erred in
enhancing the compensation to Rs.4,54,662/- per acre in
respect of the acquisition covered by notification dated
16th September, 1988.
8.
On the other hand, learned Counsel for the land
owners supported the view taken in the impugned
judgment. It was pointed out that the land was located
adjacent to the municipal limits near Golf Course and
residential area. Its distance was 3 kms. from Phagwara
Chowk.
The land had potential value for development
into residential and commercial area.
9.
We have considered the rival submissions. Before
considering the merits of the rival contentions, we
consider it appropriate to refer to the discussion on the
issue by the High Court which is as follows:-
1
(1996) 11 SCC 542
(1995) Suppl. 4 SCC 219
3
(2010) 5 SCC 708
2

“In the present case, situation is
altogether different. While deciding issue
regarding cut, referred to above, argument
of counsel for the Union of India that cut
imposed is required to be enhanced is also
liable to be rejected. In view of situation
the land under acquisition, as referred to
above, cut imposed to the extent of 20%
was perfectly justified.
Counsel for the
Union of India has tried to support his
argument by citing various judgments but
no benefit of those judgments can be
extended to Union of India because at the
time when matter was argued before
Additional District Judge, no serious dispute
was raised by Union of India regarding
potential
value
of
the land
under
acquisition. No evidence was led to show
that the land acquired had no potential for
developing it into residential or commercial
area. Argument to impose higher cut was
rightly rejected by the learned Single Judge,
after taking note of evidence on record.
Argument of counsel for the Union of
India that since the land was situated at a
distance of 1 to 1-1/2 kms of municipal
limits, as such, higher cut be imposed, is
not justified, in view of evidence on record.
It had come in evidence that the land under
acquisition was situated next to the
municipal limits and was situated very near
to golf course. In view of this, no case is
made out for further cut as prayed for.
In the present case, learned Single Judge
has rightly placed reliance to award
compensation upon sale instance Ex. P-21
and
Ex.P-22.
While
determining
compensation, reliance has also been
placed on statements PW 4, P27, PW10. It
had come on record that land subject
matter of sale instance, referred to above,
was situated within a distance of 20 killas or
less from the land under acquisition. Sale
deed Ex. P23 was rightly ignored as it
pertained to constructed house and there
was no evidence on record to show that
what was the value of land underneath the

constructed portion of the house. Under
these circumstances, this Court is of the
opinion that award of compensation @
Rs.105.80 paisa per square yard to the
claimants by the learned Single Judge was
perfectly justified.”
10.
It is well settled in determining compensation for
acquired land, price paid in a bona fide transaction of
sale by a willing seller to a willing buyer is adopted
subject to such transaction being adjacent to acquired
land, proximate to the date of acquisition and possessing
similar advantages.
Of course, there are other well
known methods of valuation like opinion of experts and
yield method.
In absence of any evidence of a similar
transaction, it is permissible to take into account
transaction
of
nearest
land
around
the
date
of
notification under Section 4 of the Act by making a
suitable allowance. There can be no fixed criteria as to
what would be the suitable addition or subtraction from
the value of the relied upon transaction. In Chimanlal
Hargovinddas vs. Special Land Acquisition Officer,
Poona and anr.4, this Court summed up the principle as
follows:-
“4. The following factors must be etched on
the mental screen:
(1)
(2)
4
................
................
(1988) 3 SCC 751

(3)
(4)
................
................
(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. (Sometimes 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-à-vis land under

acquisition
by
juxtaposition.
placing
the
two
in
(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
1. smallness of
size
2. proximity to a
road
3. frontage on a
road
Minus factors
1. largeness of area
2. situation in the
interior
at
a
distance from the
road
3. narrow strip of
land with very small
frontage compared
to depth
4. nearness to 4. lower level
developed area requiring the
              depressed portion
             to be filled up
5. regular shape 5. remoteness
                from developed
               locality
              6. some special
             disadvantageous
            factor which
           would deter a
          purchaser
6. level vis-à-vis
land
under
acquisition
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 10,000 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 approximately between 20 per cent
to 50 per cent 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 locked up, will be
longer or shorter and the attendant hazards.
(16) Every case must be dealt with on
its own fact 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.”

Again in Viluben Jhalejar Contractor (D) by LRs. vs.
State of Gujarat 5, it was observed:-
“24. The purpose for which acquisition is made
is also a relevant factor for determining the
market value. In Basavva v. Spl. Land
Acquisition Officer, (1996) 6 SCC 640,
deduction to the extent of 65% was made
towards development charges.
25. In Bhagwathula Samanna, (1991) 4 SCC
506, it has been held: (SCC pp. 510-11, para
11)
“11. The principle of deduction in the land
value covered by the comparable sale is thus
adopted in order to arrive at the market value
of the acquired land. In applying the principle it
is necessary to consider all relevant facts. It is
not the extent of the area covered under the
acquisition which is the only relevant factor.
Even in the vast area there may be land which
is fully developed having all amenities and
situated in an advantageous position. If smaller
area within the large tract is already developed
and suitable for building purposes and have in
its
vicinity
roads,
drainage,
electricity,
communications, etc. then the principle of
deduction simply for the reason that it is part
of the large tract acquired, may not be
justified.”
26. In L. Kamalamma, (1998) 2 SCC 385, this
Court held: (SCC p. 387, para 6)
“Ext. B-30 is a sale deed dated 9-8-1976, the
transaction having taken place prior to eight
months from the issue of the preliminary
notification for acquisition of land in the
present case. Having found that the piece of
land referred in Ext. B-30 is situated very close
to the lands that are acquired under the
notification in question the Reference Court
and the High Court relied upon the said
5
(2005) 4 SCC 789

document and, in our view, rightly. Further
when no sales of comparable land were
available where large chunks of land had been
sold, even land transactions in respect of
smaller extent of land could be taken note of
as indicating the price that it may fetch in
respect of large tracts of land by making
appropriate
deductions
such
as
for
development of the land by providing enough
space for roads, sewers, drains, expenses
involved in formation of a layout, lump sum
payment as also the waiting period required for
selling the sites that would be formed.”
27. In Administrator General of W.B. v.
Collector, (1988) 2 SCC 150, deduction to the
extent of 53% was allowed.
28. In K.S. Shivadevamma v. Asstt. Commr.
and Land Acquisition Officer, (1996) 2 SCC 62,
it was held: (SCC p. 65, para 10)
“10. It is then contended that 53% is not
automatic but depends upon the nature of the
development and the stage of development.
We are inclined to agree with the learned
counsel that the extent of deduction depends
upon development need in each case. Under
the Building Rules 53% of land is required to be
left out. This Court has laid as a general rule
that for laying the roads and other amenities
33-1/3% is required to be deducted. Where the
development has already taken place,
appropriate deduction needs to be made. In
this case, we do not find any development had
taken place as on that date. When we are
determining compensation under Section
23(1), as on the date of notification under
Section 4(1), we have to consider the situation
of the land development, if already made, and
other relevant facts as on that date. No doubt,
the land possessed potential value, but no
development had taken place as on the date.
In view of the obligation on the part of the
owner to hand over the land to the City
Improvement Trust for roads and for other
amenities and his requirement to expend

money for laying the roads, water supply
mains, electricity etc., the deduction of 53%
and further deduction towards development
charges @ 33-1/3%, as ordered by the High
Court, was not illegal.”
29. In Hasanali Khanbhai & Sons v. State of
Gujarat (1995) 5 SCC 422 and Land Acquisition
Officer v. Nookala Rajamallu, (2003) 12 SCC
334 : (2003) 10 Scale 307, it has been noticed
that where lands are acquired for specific
purposes deduction by way of development
charges is permissible.
30. We are not, however, oblivious of the fact
that normally one-third deduction of further
amount of compensation has been directed in
some cases. (See Kasturi v. State of Haryana,
(2003) 1 SCC 354, Tejumal Bhojwani v. State of
U.P., (2003) 10 SCC 525, V. Hanumantha
Reddy v. Land Acquisition Officer & Mandal R.
Officer, (2003) 12 SCC 642, H.P. Housing Board
v. Bharat S. Negi, (2004) 2 SCC 184 and Kiran
Tandon v. Allahabad Development Authority,
(2004) 10 SCC 745.)
31. In Registrar, University of Agricultural
Sciences5 whereupon Mr Ranjit Kumar placed
strong reliance, the Court noticed that if the
acquisition is made for agricultural purpose,
question of development thereof would not
arise; but if the sale instance was in respect of
a small piece of land whereas the acquisition is
for a large piece of land, although development
cost may not be deducted, there has to be
deduction for largeness of the land and also for
the fact that these are agricultural lands. In
that view of the matter, deduction at the rate
of 33% made by the High Court was upheld. It
may not, therefore, be correct to contend, as
has been submitted by Mr. Ranjit Kumar, that
there cannot be different deductions, one for
the largeness of the land and another for
development costs.”

11.
As regards the judgments relied upon by the
appellant, the same are distinguishable.
In Indumati
Chitaley case (supra), it was noticed that the land in
question was agricultural land which could not be valued
at par with the value of the non-agricultural land as was
sought to be claimed on behalf of the appellant. In the
said case, unlike the present case, there was no finding
that
the
land
had
immediate
potential
for
residential/commercial use. In Basant Kumar case
(supra), it was observed that while considering an
instance of developed land as the basis for determining
the value of the agricultural land, one third of the value
has to be deducted towards providing amenities like
roads, parks, electricity, sewage etc.
We have already
noted the law laid down by this Court that extent of cut
depends on individual fact situations.
case
(supra),
it
was
observed
that
In Karigowda
the
existing
potentiality alone has to be taken into consideration
while determining the compensation. Remote beneficial
factors cannot be made the basis for determining the
compensation. It was further observed that comparable
sales method is a preferred method over the other
methods for determining the compensation. There is no

dispute with these propositions but in the facts and
circumstances of the case, we are unable to hold that the
view taken by the High Court is vitiated by any error of
principle propounded in the relied upon judgment or
otherwise.
12.
We, thus, do not find any ground to interfere with
the impugned judgment.
13.
The appeals are dismissed with no order as to
costs.
......................................J.
[ V. GOPALA GOWDA ]
NEW DELHI
September 9, 2014
.......................................J.
[ ADARSH KUMAR GOEL ]

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