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  REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 7258   OF 2011 [Arising out of S.L.P.(C)No.1578 of 2007]

Chakas        ....Appellant   

  Versus State of Punjab & Ors.           ....Respondents

                 W I T H C.A.No.7259/2011[Arising out of SLP(C) No.659 of 2007]; C.A.No.7260/2011[Arising out of SLP(C) No.5447 of 2007]; C.A.No.7261/2011[Arising out of SLP(C) No.3319 of 2007]; C.A.No.7262/2011[Arising out of SLP(C) No.4982 of 2007]; C.A.No.7263/2011[Arising out of SLP(C) No.8073 of 2007]; C.A.No.7264/2011[Arising out of SLP(C) No.8649 of 2007]; C.A.No.7265/2011[Arising out of SLP(C) No.8653 of 2007]; C.A.No.7266/2011[Arising out of SLP(C) No.9210 of 2007]; C.A.No.7267/2011[Arising out of SLP(C) No.12156 of 2007]; C.A.No.7268/2011[Arising out of SLP(C) No.12765 of 2007]; C.A.No.7269/2011[Arising out of SLP(C) No.14818 of 2007]; C.A.No.7270/2011[Arising out of SLP(C) No.7253 of 2007]; C.A.No.7272/2011[Arising out of SLP(C) No.14422 of 2007]; C.A.No.7271/2011[Arising out of SLP(C) No.14424 of 2007]; C.A.No.7273-7304/2011 [Arising out of SLP(C) No.1798-1829  of 2008]; C.A.No.7305/2011[Arising out of SLP(C) No.11844 of 2008]; C.A.No.7306-7315/2011 [Arising out of SLP(C) No.9426-9435  of 2008]; C.A.No.7316/2011[Arising out of SLP(C) No.21198 of 2008]; C.A.No.7317/2011[Arising out of SLP(C) No.5427 of 2009];

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A N D  C.A.No.7318-7322/2011 [Arising out of SLP(C) No.10838-10842

of 2010];

J U D G M E N T

Deepak Verma, J. 1.Leave granted. 2.Question as to what would be proper, adequate, just  

and reasonable compensation to be awarded to the  appellant for the land acquired by the respondent  State,  has  once  again  cropped  up  for  our  consideration in this and the connected appeals.

3.In this appeal, the land owner, whose land  has been  acquired by the State of Punjab is before us for  enhancement of compensation awarded to him by the  High Court and the beneficiary respondent No. 3 M/s.  Nahar  Industries  Infrastructure  Corporation  Ltd.  (hereinafter  shall  be  referred  to  as  'the  Corporation')  has  preferred  separate  appeals  for

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reduction  of  the  compensation  awarded  to  the  appellant by the High Court.  Since both set of  appeals arise out of the common judgment and order  pronounced by the learned Single Judge in Regular  First Appeal No. 1072 of 1999 in the High Court of  Punjab and Haryana at Chandigarh on 03.05.2006, they  have been heard analogously and are being disposed  of by this common judgment and order.

4.It may be noted that for the sake of brevity and  convenience, facts of appeal arising out of SLP(C)  No.1578 of 2007 have been taken into account.

5. Short  facts,  shorn  of  unnecessary  details  are  mentioned hereinbelow:    Respondent  No.  1  –  State  of  Punjab,  for  the  purposes of setting up of an Industrial Focal Point in  Tehsil Rajpura District Patiala issued a notification  on 13.11.1992 under Section 4 of the Land Acquisition  Act (hereinafter shall be referred to as 'the Act')  for  acquiring   550.03  acres  in  villages  Lalru,

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Jalalpur, Lehli, and Hassanpur of the aforesaid Tehsil  and District.  The public purpose mentioned in the  same was for Industrial Focal Point.  Subsequently, by  issuance of another notification under Section 6 of  the  Act,  on  08.04.1993,  the  aforesaid  land  was  declared to have been acquired.  Thereafter, the Land  Acquisition Collector started the process of computing  the amount of compensation to be awarded to the land  owners. The Land Acquisition Officer pronounced his  award on 12.9.1994 fixing different rates per acre for  the lands of four villages.  The appellant and other  land  owners  feeling  highly  dissatisfied  with  the  amount  of  compensation  so  assessed  by  the  Land  Acquisition  Officer,  preferred  references  under  Section 18 of the Act to the Civil Court at Patiala. 6. The  matter  was  accordingly  referred  to  the  Additional District Judge, Patiala for working out the  amount of compensation to be awarded to the appellant  and other such similarly situated appellants.  Both

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the  parties led evidence before the Reference Court.  On  the  basis  of  the  evidence  so  adduced  by  the  parties, the Reference Court was pleased to assess the  value of the entire acquired land in four villages at  a uniform rate and consequently held that the land  owners were entitled to receive compensation of Rs.  1.5 lakh per acre,  besides the individual claims made  by land owners with regard to super structure, trees  and other facilities  available in their respective  lands were also taken into consideration.  The land  owners  were  also  held  entitled  for  the  statutory  benefits as per the amended provisions of the Act. 7. Still  not  being  satisfied  with  the  amount  of  compensation  so  awarded  to  them,  the  land  owners  preferred appeals before the High Court under Section  54 of the Act, whereas the beneficiary respondent No.  3  herein  the  Corporation  also  preferred  appeals  purportedly, for reduction of the compensation awarded  to the appellant. The Learned Single Judge heard the

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matters  together  and  disposed  of  by  the  common  judgment  and  order,  which  is  being  impugned,  once  again by both sides on a variety of grounds.   8. We have accordingly heard Mr. L. Nageswara Rao,  Senior  Advocate  ably  assisted  by  M/s  Navin  Chawla,  Gaurav  Kaushik,  Tushar  Singh  praying  for  further  enhancement of compensation and Mr. Anil Grover, AAG,  Punjab  with  Mr.  Kuldip  Singh  and  Mr.  Neeraj  Kumar  Jain, Senior Advocate with Mr. Sanjay Singh Advocate  for the respondent Corporation at length and perused  the records. 9. Certain  dates  material  for  deciding  the  said  appeal are mentioned hereinbelow: 1 Notification under Section 4 of the  

Act Issued on 13.11.1992 For acquisition of 550.03 acres  

of land

2 Notification under Section 6 of the  Act

Issued on 08.04.1993

3 Award of Land Acquisition  Officer

Passed on 12.09.1994

4 Award of the Reference Court Dated 07.12.1998 Amount of compensation at  Rs.1.50 lakhs per acre

5 Judgment and order of the High  Court  

Pronounced on 03.05.2006 Fixing the rate of compensation  at Rs.2.75 lakhs per acre.

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10. Shri L. Nageswara Rao, Senior Advocate appearing  for the appellant contended before us that the High  Court committed a grave error in computation of the  base price on the strength of the average price worked  out from the sale deeds Exh. P.1, P.2, P.3, P.8, and  P.15  and  further  committed  another  grave  error  in  deducting amounts from the same.  According to him, in  the  process,  the  amount  of  compensation  awarded  is  much lower than what should have been awarded.  On the  other hand, learned counsel for respondent Mr. Anil  Grover, AAG, Punjab and Mr. Neeraj Kumar Jain, Senior  Advocate appearing for respondent No.3 submitted that  the appellant has only been able to prove the market  value of the land from the sale deed at Rs. 2.85 lacs  per acre.  He further contended that there was no  mistake  committed  by  the  Court  in  taking  out  the  average  price  for  working  out  the  amount  of  compensation to be awarded to the appellant.  

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11. Learned counsel for respondent No. 3 Mr. Neeraj  Kumar  Jain  strongly  contended  before  us  that  the  Corporation has preferred appeals for deduction of the  amount, primarily on the ground that more deductions  should have been made than what was allowed by the  High Court and in any event no case has been made out  for  further  enhancement  of  amount  of  compensation,  which is already exorbitant and higher. 12.  First  of  all,  we  would  like  to  deal  with  the  location and potentiality of the acquired land.  From  the evidence of P.W 31 Charanjit Singh, Patwari of  Halqa of all the four villages,  it is clearly made  out that all these villages are adjoining each other  and form a compact block.  He has further admitted  that more than 80 to 85 industries near and adjoining  the acquired land are already running and doing their  business  since  long.   The  area  acquired  has  been  reserved  for  industrial  purposes.   He  has  further  deposed that if the land had not been acquired, many

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factories would have sprung up in the acquired land.  The  details  of  the  industries  which  are  already  running in vicinity have been given vividly by him.  It  is  also  not  in  dispute  that  the  said  land  is  situated on the Ambala-Chandigarh Highway.   13. The evidence of other government officials, who  had appeared before the Reference Court, reflects that  the land acquired have great Industrial potential as  more than 80-85 big industries have already set up  their factories in the close vicinity to the acquired  land. They have admitted that the acquired land is  situated on the main Ambala-Chandigarh Highway.  From  the evidence adduced by respondent Nos. 1 and 2, it  cannot be disputed that it was a valuable land for the  land owners and it had great potential.  Obviously, in  1992, the market value of the same, at the time of  issuance of notification under Section 4 of the Act,  would be much more than what has been awarded to them  vide the impugned judgment.

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14. However,  the  question  which  still  remains  for  consideration is, on what basis, should the amount of  compensation is to be worked out.  The appellant to  prove his case with regard to market value of the land  had  produced  many  sale  deeds  but  only  relevant  following  five  sale  deeds  are  taken  into  consideration:   Exhibit No. Dated of sale deed Price paid Price per acre

P.1 16.08.1990 1,20,000 3,02,157

P.2 16.08.1990 1,50,000 3,51,219

P.3 16.08.1990 1,50,000 3,51,219

P.8 20.04.1993 17,34,000 4,08,000

P.15 04.06.1990 9,75,000 2,99,041

15.  The appellant had also examined the vendors of  the aforesaid sale deeds to show the genuineness and  correctness of the same.  The most appropriate sale  deed  touching  the  issuance  of  notification  under  Section 4 is Exh. P.8.  The base price of the land per  acre according to this comes to Rs. 4,08,000/-.  The  total area of the land so purchased was 20 Bighas and  8  biswas.  Before  execution  of  the  sale  deed,  an

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Agreement  to  Sell  dated  30.10.1992  (Exh.  P.45)  was  executed between the vendor and vendee.  As required  under the law, permission was sought from the Income  Tax Department which granted a Clearance Certificate  Exh. P.44.  16. It is also pertinent to mention here that the land  so  sold  covered  under  (Exh.P.8)  sale  deed  neither  belonged to any of the land owners nor they had any  interest whatsoever in the said deed.  Thus, it can  safely be assumed that it was a genuine and bona-fide  transaction between two parties, who had nothing to do  with the acquisition of land of the appellant. It was  not executed for the purposes of creating evidence as  Agreement  to  sell  (Exh.  P.45)  is  dated  30.11.1992,  before the issuance of Notification under Section 4 of  the Act.  On the said date, it could not have been  imagined  that  the  adjoining  land  is  going  to  be  acquired shortly.  The said land is almost abutting  the  acquired  land.   It  is  also  manifest  that  the

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Agreement  dated  13.10.1992  is  very  close  to  the  notification issued on 13.11.1992 under Section 4 of  Act.  The whole transaction executed under the Sale  deed Exh. P.8 fully proves and establishes the case of  the appellant. As per this sale deed, the base price  of the land would come to Rs. 4,08,000/- per acre.  According to us, the correct base price would be Rs.  4,08,000/- per acre. 17. It  is  profitable  to  refer  to  the  following  judgment of this Court on this issue.  (1969) 1 MLJ  (SC) 45  Shri Rani M. Vijayalakshmamma Rao Bahadur Vs.  Collector  of  Madras.  Relevant  para  2  is  reproduced  hereinbelow:

“It seems to us that there is substance in  the  first  contention  of  Mr.  Ram  Reddy.  After all when land is being compulsorily  taken away from a person he is entitled to  say that he should be given the highest  value which similar land in the locality  is shown to have fetched in a bona fide  transaction entered into between a willing  purchaser and a willing seller near about  the time of the acquisition.  It is not  disputed that the transaction represented

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by Ex Rule 19  was a few months prior to  the notification under Section 4, that it  was a bona fide transaction  and that it  was  entered  into  between  a  willing  purchaser and a willing seller.  The land  comprised in the sale deed is 11 grounds  and was sold at Rs. 1951 per ground.  The  land  covered  by  Rule  27  was  also  sold  before the notification but after the land  comprised in Ex. Rule 19 was sold.  It is  true that this land was sold at Rs. 1096  per ground.  This, however, is apparently  because of two circumstances.  One is that  betterment levy at Rs.500/- per ground had  to be paid by the vendee and the other  that the land comprised in it is very much  more extensive, that is about 93 grounds  or so.  Whatever that may be, it seems to  us to be only fair that where sale deeds  pertaining  to  different  transactions  are  relied on behalf of the Government, that  representing the highest value should be  preferred  to  the  rest  unless  there  are  strong  circumstances  justifying  a  different course. In any case we see no  reason why an average of two sale deeds  should have been taken in this case.”

18.  The said judgment has been  considered by this  Court reported in (2008) 14 SCC 745  General Manager,  Oil and Natural Gas Corporation Ltd. Vs. Rameshbhai  

Jivanbhai Patel and Anr.  wherein the Division Bench

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has considered this aspect of the matter succinctly in  para 13, 14 and 15 reproduced hereinbelow:

13) 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.    14) 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

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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 thump 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.  15)Normally, recourse is taken to the mode  

of  determining  the  market  value  by  providing  appropriate  escalation  over  the proved market value of nearby lands  in previous years (as evidenced by sale  transactions  or  acquisitions),  where  there  is  no  evidence  of  any  contemporaneous  sale  transactions  or  acquisitions of comparable lands in the  neighbourhood.   The  said  method  is  reasonably safe where the relied-on sale  transactions/acquisitions  precede  the  subject acquisition by only a few years,  that  is,  up  to  four  to  five  years.  Beyond that it may be unsafe, even if it  relates  to  a  neighbouring  land.   What  may be a reliable standard if the gap is  of only a few years, may become unsafe  and unreliable standard where the gap is  larger.   For  example,  for  determining  the market value of a land acquired in  1992,  adopting  the  annual  increase  method  with  reference  to  a  sale  or  acquisition  in  1970  or  1980  may  have  many  pitfalls.   This  is  because,  over

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the  course  of  years,  the  “rate”  of  annual  increase  may  itself  undergo  drastic change apart from the likelihood  of  occurrence  of  varying  periods  of  stagnation in prices or sudden spurts in  prices  affecting  the  very  standard  of  increase.”

19. The Reference Court committed a grave error in  deducting 50% of the value assessed by him, towards  development  charges  and  further  reduced  the  said  amount  for  the  reasons  not  assigned  by  him.   The  learned Single Judge vide the impugned judgment has  enhanced the amount of compensation but committed an  error in fixing the base price as 2,75,000/- per acre  for  the  acquired  land,  applying  the  doctrine  of  reasonable cut  to the average price worked out by him  at Rs.3,42,527/- per acre.  We do not approve of the  reasonings adopted either by the reference Court or by  the High Court.  How much amount is to be deducted  from the base price would depend on various factors.  20. As mentioned hereinabove, in the case in hand the  bulk of the land that is almost 525 acres has been

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given to respondent No.3, the Corporation for setting  up its own industry and other infrastructure thereon.  Thus,  the  lands  likely  to  be  used  towards  roads,  sewage and other such facilities would be minimum as  most  of  the  vacant  land  would  be  utilised  by  respondent No. 3 for its own benefits.  21.   Needless to say, once the industry is set up, it  would  be  for  the  financial  benefit  and  gain  of  respondent No.3 year after year.  Thus, looking to the  matter from all angles, respondent No. 3 – Corporation  would be a great beneficiary at the cost of depriving  the appellant - land owner of his sole livelihood of  agriculture. 22. Therefore, it is neither desirable nor proper to  deduct more than 10% of the amount in the base price  fixed by us at Rs. 4,08,000/-. We accordingly do so.   23.  The question with regard to the deduction to be  made  also  stands  settled  by  this  Court  in  Atma Singh (dead) through Lrs. and Ors. Vs. State of

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Haryana and Another. (2008) 2 SCC 568. The relevant  portion   thereof  are reproduced herein below:

“14)The  reasons  given  for  the  principle  that price fetched for small pots cannot  form  safe  basis  for  valuation  of  large  tracts  of  land,  according  to  cases  referred  to  above,  are  that  substantial  area is used for development of sites like  laying  out  roads,  drains,  sewers,  water  and  electricity  lines  and  other  civic  amenities. Expenses are also incurred  in  providing  these  basic  amenities.   That  apart  it  takes  considerable  period  in  carving  out  the  roads  making  sewers  and  drains  and  waiting  for  the  purchasers.  Meanwhile the invested money is blocked up  and  the  return  on  the  investment  flows  after a considerable period of time.  In  order  to  make  up  for  the  area  of  land  which is used in providing civic amenities  and  the  waiting  period  during  which  the  capital of the entrepreneur gets locked up  a  deduction  from  20%  onward,  depending  upon the facts of each case, is made. 15) The  question  to  be  considered  is  whether in the present case those factors  exist which warrant a deduction by way of  allowance from the price exhibited by the  exemplars of small plots which have been  filed by the parties.  The land has not  been  acquired  for  a  housing  colony  or  government office or an institution.  The  land has been acquired for setting up a  sugar factory.  The factory would produce  goods  worth  many  crores  in  a  year.   A

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sugar factory apart from producing sugar  also produces many by-products in the same  process.   One  of  the  by-products  is  molasses,  which  is  produced  in  huge  quantity.  Earlier, it had no utility and  its  disposal  used  to  be  a  big  problem.  But now molasses is used for production of  alcohol  and  ethanol  which  yield  lot  of  revenue.   Another  by-product  begasse  is  now use for generation of power and press  mud is utilized in manure.   Therefore,  the  profit  from  a  sugar  factory  is  substantial. Moreover, it is not confined  to one year but will accrue every year so  long  as  the  factory  runs.   A  housing  board  does  not  run  on  business  lines.  Once  plots  are  carved  out  after  acquisition  of  land  and  are  sold  to  public, there is no scope or earning any  money in future.  An industry established  on  acquired  land,  if  run  efficiently,  earns  money  or  makes  profit  every  year.  The return from the land acquired for the  purpose of housing colony, or offices, or  institution  cannot  even  remotely  be  compared   with  the  land  which  has  been  acquired for the purpose of setting up a  factory  or  industry.   After  all  the  factory cannot be set up without land and  if such land is giving substantial return,  there is no justification for making any  deduction from the price exhibited by the  exemplars even if they are of small plots.  It is possible that a part of the acquired  land  might  be  used  for  construction  of  residential colony for the staff working  in the factory.   Nevertheless, where the

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remaining  part  of  the  acquired  land  is  contributing  to  production  of  goods  yielding  good  profit,  it  would  not  be  proper to make a deduction in the price of  land shown by the exemplars of small plots  as the reasons for doing so assigned in  various  decisions  of  this  court  are  not  applicable  in  the  case  under  consideration.”

24. In the light of the aforesaid contention and  taking cue from the settled position of law decided by  this Court in the aforesaid matters, we are of the  firm opinion that the base price has to be fixed @ Rs.  4,08,000/- per acre.  Keeping in mind that more than  525  acres  has  been  given  to  respondent  No.  3  –  Corporation, which in turn has set up its factory, a  deduction  of  10%  on  the  aforesaid  amount  would  be  reasonable.   Needless to say on the aforesaid amount,  the appellant would be entitled for statutory benefits  as mandated under the amended provisions of the Act.  This appeal and the connected appeals filed by land  owners are hereby allowed and the appeals filed by  respondent No.3 are dismissed.

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25. The  Reference  Court  is  hereby  directed  to  recalculate the amount of compensation to be awarded  to the appellants and all such other land owners whose  lands have been acquired in the light of the direction  as contained hereinabove and to pay them the remainder  amount within a period of 2 months from the date of  communication of this order. 26. For the foregoing reasons, this and the connected  appeals preferred by land owners are hereby allowed  and those filed by the Corporation are dismissed with  costs  throughout.   Counsel's  fee  quantified  at  Rs.  10,000/- in each Appeal.

.........................J.   [DALVEER BHANDARI]

      .........................J.   [DEEPAK VERMA]

New Delhi August 24, 2011

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