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NON-REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 1247 OF 2007

Himmat Singh and others ....Appellants

versus

State of M.P. and another ....Respondents

J U D G M E N T

G.S. SINGHVI, J.

1. Feeling dissatisfied with the meagre enhancement granted by the learned  

Single Judge of the Madhya Pradesh High Court in the amount of compensation  

determined by II Additional District Judge, Shivpuri (hereinafter described as, ‘the  

Reference Court’), the appellants have filed this appeal.

2. By  notification  dated  28.5.1987  issued  under  Section  4(1)  of  the  Land  

Acquisition Act, 1894 (for short, ‘the Act’), which was published on 12.6.1987,  

the Government of Madhya Pradesh acquired the appellants’ land measuring 3.627  

hectares  comprised  in  Survey Nos.2,  10,  20,  22,  46,  48  and  166  of  Village  

Jagatpur, Tehsil Kolaras, District Shivpuri for construction of Broad Gauge Rail  

Line by the Central Railway. Another parcel of land measuring 0.951 hectares  

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comprised in Survey No.18, of which the appellants were the occupancy tenants,  

was also acquired by the same notification. The possession of the acquired land  

was taken on 30.11.1987. The Land Acquisition Officer passed an award dated  

26.8.1989 and held that for the land measuring 3.627 hectares, the appellants  are  

entitled to total compensation of Rs.16,419 with solatium of Rs.4,926 and interest  

amounting to Rs.985.  For the land comprised in Survey No.18, no compensation  

was  awarded  to  the appellants.  Instead,  compensation was  paid to  respondent  

Nos.3 and 4, namely, Jagdish Narayan s/o Mool Chand and Chandra Mohan s/o  

Ram Dayal, whose names were recorded in the revenue records.

3. The appellants did not feel satisfied and filed applications under Section 18  

of the Act for determination of the amount of compensation by the Court. They  

also filed an application under Section 30 of the Act and pleaded that respondent  

Nos.3  and  4  are  not  entitled  to  receive  any  compensation.   Thereupon,  the  

Collector made a reference to District Judge, Shivpuri.  The latter assigned the  

cases to the Reference Court.  The reference applications filed by the appellants  

were registered as Civil Miscellaneous Case No.3/1991 and 13/1998 respectively  

and the application filed under Section 30 was registered as Civil Miscellaneous  

Suit No.12/1998.

4. In Civil Miscellaneous Case No.3/1991, the appellants prayed for award of  

compensation at the rate of Rs.5 per square yard.  They pleaded that the acquired  

land has good development potential and the Land Acquisition Officer committed  

serious error by treating the same as agricultural land. The appellants also claimed  

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compensation of Rs.18 lacs by alleging that due to laying of railway line, their  

lands were  bifurcated and its  value was  considerably diminished.  They further  

alleged that the authorities of Central Railway had illegally taken possession of  

their land and the earth was dug out from an area measuring 6 hectares rendering  

the entire land unfit for cultivation.

5.  The respondents contested the claim petition and pleaded that the Land  

Acquisition Officer did not commit any illegality by fixing market value of the  

acquired land by relying upon the sale deeds relating to agricultural lands.

6. On the pleadings of the parties, the Reference Court framed the following  

issues:

“(i) Whether compensation determined by the Land Acquisition Officer  is insufficient and improper and contrary to the provisions of Section  23 of the Land Acquisition Act?

(ii) Whether the petitioners are entitled to higher compensation? If yes,  to what extent?

(iii) Relief and costs.”

7. In support of the claim, appellant No.1 - Himmat Singh examined himself as  

PW-1  and  produced  a  number  of  documents  including sale  deeds  marked  as  

Exhibits P1 to P12. He stated that on the date of acquisition, the land was fully  

developed for agricultural purposes; that there were several Government offices /  

establishments and residential premises near the acquired land. PW-1 further stated  

that there are metalled roads of the PWD on the North and South of the acquired  

land and that 90% of the Government offices of Kolaras Sub-Division are situated  

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at Jagatpur, which was on Agra-Mumbai National Highway.  Still further, PW-1  

stated that he and his brothers have a farmhouse known as ‘Sant Farm’ at Jagatpur.  

In the cross-examination, PW-1 admitted that the acquired land does not fall within  

Kolaras Municipality and that he had never sold his land prior to the disputed  

acquisition. PW-1 denied the suggestion that in the application filed by him, value  

of the land was shown as Rs.50,000 per hectare. The second witness examined by  

the appellants, namely, Rajender Kumar Srivastava stated that distance between  

the  Dak  Bungalow and  the  railway station  is  about  one  kilometer  and  Agra-

Bombay Road is at a distance of about one furlong from the Dak Bungalow. He  

also stated that water, electricity and scavenging facilities have been provided by  

Municipal Committee, Jagatpur.  In cross-examination, Shri Srivastava admitted  

that  Jagatpur  has  been divided into two parts,  one of  which comes under  the  

Municipal  Committee  and  the  other  is  in  the  village  and  that  the  Municipal  

Committee does not provide any facility to the area falling outside its jurisdiction.  

Another  witness  examined by the  appellants  was  Damodar  Prasad.   In  cross-

examination, he admitted that large number of Government offices of Kolaras come  

under the jurisdiction of the Municipal Committee and that a specific notification  

had been issued for inclusion of Sant Farm within the jurisdiction of the Municipal  

Committee. Rishabh Chand (PW-5) stated that he had sold land measuring 825 sq.  

ft. for Rs.9,000 and market value of that land is Rs.6,600 per hectare. In cross-

examination, PW-5 gave out that his land was not fit for agricultural purposes and  

that the same can be utilised for building construction.  

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8. On behalf of the respondents, seven witnesses were examined. Ram Niwas  

Sharma (DW-1) stated that Kolaras, Gayatri Colony and Sant Farm come within  

the jurisdiction of Kolaras Municipal Committee.  In cross-  examination, DW-1  

admitted  that  large  number  of  Government  offices  of  Kolaras  are  situated  in  

Village  Jagatpur.  Gaya  Prasad  (DW-3)  stated  that  Jagatpur  and  Kolaras  are  

abutting each other; that there were several Government offices, Court buildings  

and Advocates’ offices and that there were metalled roads on the North and South  

of the acquired land and a private colony has been constructed in the vicinity.  

Dharmender (DW-7) made general statement about the nature of the acquired land.

9. After  analysing  the  evidence  produced  before  it,  the  Reference  Court  

decided  the  matter  vide  judgment  dated  23.12.1999  and  held  that  the  Land  

Acquisition Officer committed an error by fixing market value on the assumption  

that the acquired land could be used only for agricultural purposes. In the opinion  

of the Reference Court, the determination made by the Land Acquisition Officer  

was unfair, arbitrary and contrary to the provisions of Section 23(1) of the Land  

Acquisition Act. The Reference Court then referred to the judgments of this Court  

in Chiman Lal v.  Special  Execution Officer,  Poona AIR 1988 SC 1652,  M/s.  

Printer House Pvt. Ltd. v. Siyedan AIR 1995 SC 1160, Shivamma v. Assistant  

Commissioner and Land Acquisition Officer AIR 1996 SC 2886 and held that only  

three sale deeds marked as Exhibits P7 to P9 can be taken into consideration for  

the purpose of determination of compensation. The Reference Court held that value  

of the acquired land cannot be less than Rs.3 per sq. ft. The Reference Court made  

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25%  deduction  towards  development  charges  and  25%  towards  cost  of  

development. In this manner, the rate of compensation was reduced from Rs.3 to  

Rs.1.5  per  sq.  ft.  The Reference Court made further deduction of 50% on the  

ground that the sale instances relied upon by the appellants were in respect of very  

small parcels of land as compared to the acquired land and held that the appellants  

are entitled to Rs.3,08,295 as market value for 3.627 hectares land, an additional  

amount at the rate of 12% per annum from 12.6.1987 to 30.11.1987, i.e., the date  

on which possession was taken along with interest at the rate of 9% for a period of  

one  year  from 1.12.1987  and  thereafter  at  the  rate  of  15%  per  annum.  The  

Reference Court also determined the shares of the private respondents.

10. By another judgment dated 11.8.2000, the Reference Court disposed of Civil  

Miscellaneous Suit No.12/1998, registered on the basis of application filed by the  

appellants under Section 30 of the Act and Civil Miscellaneous Suit No.13/1998  

registered on the basis of application filed under Section 18 of the Act in respect of  

land measuring 0.951 hectare comprised in Survey No.18.   

11. After considering the pleadings of the parties, the Reference Court framed  

the following issues:      

“(i) Whether compensation determined by the Land Acquisition Of- ficer, Shivpuri, is insufficient and improper and contrary to the provi- sions of Section 23 of the Land Acquisition Act? (ii) Whether the petitioners are entitled to higher compensation? If yes,  to what extent? (iii) Whether the application for reference made by the petitioners is  within limitation?

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(iv) Relief and Costs.

Additional Issue:

(v) Whether petitioners are in cultivatory possession of the acquired  lands and hence the owners of the lands under law and therefore en- titled to receive amount of compensation?”

The  Reference  Court  took  cognizance  of  the  oral  and  documentary  evidence  

produced by the parties and held that being legal heirs of Sant Singh and farmers in  

occupation the appellants are owners of the lands. The Reference Court noted that  

at  the time of entering his  name in Panch Sala  Khasra  (Exhibit  P4),  Chandra  

Mohan (respondent No.4 therein) was only 5 years old and held that he could not  

be treated as farmer in occupation for the purpose of being treated as a person  

entitled  to  receive  the  amount  of  compensation.  The  Reference  Court  then  

considered  the  question  whether  the  compensation  awarded  by  the  Land  

Acquisition Officer was  insufficient and answered the same in affirmative.  For  

arriving at this conclusion, the Reference Court assigned the following reasons:

“Now what is to be seen is ‘Whether future potentiality of construction  of buildings existed in the lands acquired?’ Petitioners have examined  Himmat Singh (P.W.1) who has stated that the date on which the lands  were acquired,  it  was  fully developed for agricultural purposes  and  there  were  several  government  offices  e.g.  Tehsil,  S.D.O.  Office,  B.D.O. Office, Forest Department, Residence of Civil Judge, Sub-Jail,  Silk Industry Center,  Rest  House,  Hospitals  etc.,  near  the acquired  lands and all of the above are residential houses wherein Doctors and  Advocates are also living. Apart from this, there is a metalled road of  P.W.D. on the south of the lands towards Village Rai and on the north  there is a metalled road of P.W.D. going towards Village Mohara. On  the south there is an ancient temple on which a huge fair is celebrated  every year. More than 90% of the Government Offices of the Kolaras  Sub Division are situated in Jagatpur and Jagatpur is situated near the  Agra-Mumbai National Highway and a metalled road goes upto Sant  

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Farm from this Agra-Mumbai National Highway. These statements of  the witness have not been challenged during his cross examination.

Apart  from him, another  witness  of  the  petitioner  namely Rishabh  Chand (P.W.2) in his statement has stated that he is an Ex-M.L.A. and  Chairman of Kolaras. The entire development of Kolaras is presently  towards Jagatpur side. Sant Farm is only 1/2 Km. from the A.B. Road  and there are Quarters of Jail employees, Indira Colony and Residence  of the Judge, Quarters and houses of the Railway employees near the  farm. The entire development activities of Jagatpur is taking place to- wards Sant Farm. Patwari has also stated that Jagatpur and Kolaras are  abutting each other. There are several government offices, Advocates'  offices, Court buildings in Jagatpur. Residence of the Judge is adjoin- ing Sant Farm. College too is very near to it and there is a large habita- tion around Sant Farm. There is a road and habitation on the north of  Sant Farm and on the south there is a temple and several persons of  Kolaras are visiting this temple. On the south is a metalled road of  P.W.D. going towards village Rai and on the east of the Sant Farm  there are several government houses. A Private colony has been con- structed on Survey nos. 161 and 163. Hence it is clear from the above  that the acquired lands are close to the residential lands and bore po- tential of construction of buildings at the time of acquisition. In the cir- cumstances it is clear that the determination of compensation of these  lands by treating them as agricultural lands is unfair, arbitrary and in- sufficient and also contrary to the provisions of Section 23[1] of the  Land Acquisition Act. Resultantly, Issue no.l is hereby decided in af- firmative i.e. Yes.”

The Reference Court relied upon sale deeds Exhibits P7 to P9 and concluded that  

market value of the acquired land is Rs.3 per sq.  ft. The Reference Court then  

applied  various  deductions  and  held  that  the  appellants  are  entitled  to  

compensation of Rs.80,240/- for land measuring 1,69,805 sq.  ft. and by adding  

12% per annum from 12.6.1987 up to the date of taking lawful possession, i.e.,  

30.11.1987,  the appellants are entitled to Rs.4,493.  The Reference Court also  

awarded solatium at the rate of 30% of the market value in terms of Section 23(2)  

of the Act and declared that the appellants are entitled to total compensation of  

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Rs.1,08,904 with interest at the rate of 9% per annum for the first year and 15%  

per annum for the remaining period till the date of actual payment.  However, Civil  

Miscellaneous Suit No.13/1998 registered on the basis of reference made by the  

Collector under Section 18 was held to be barred by time.

12. The  appellants  and  Union  of  India  challenged  the  judgments  of  the  

Reference Court by filing appeals under Section 54 of the Act.  The learned Single  

Judge referred to the oral and documentary evidence produced by the parties and  

held that the Reference Court did not commit any error by holding that market  

value of the acquired land cannot be more than Rs.6 per sq. ft.  The learned Judge  

made various deductions and held that market value of the acquired land would be  

Re.1 per sq.ft.  The appeals were accordingly disposed of by declaring that the  

appellants are entitled to compensation for the land acquired vide notification dated  

28.5.1987 at the rate of Re.1 per sq. ft with other statutory benefits like solatium  

and interest.   

13. Shri U. U. Lalit, learned senior counsel for the appellants argued that the  

Reference Court and the High Court committed serious error by excluding various  

sale instances only on the ground that the contents thereof were not proved by  

examining the  buyer  and  the  seller.  Shri  Lalit  invited the  Court’s  attention to  

Section 51-A of the Act and the judgments in Land Acquisition Officer and Mandal  

Revenue Officer v. V. Narasaiah (2001) 3 SCC 530, Cement Corporation of India  

v. Purya (2004) 8 SCC 270 and Deputy Collector, Land Acquisition, Gujarat and  

another v. Madhubai Gobarbhai and another (2009) 15 SCC 125 and argued that  

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the view expressed by the Reference Court and approved by the learned Single  

Judge of the High Court on the admissibility and relevance of the copies of the  

registered sale deeds is liable to be overturned.  Shri Lalit further argued that the  

Reference Court and the High Court committed serious error by not taking into  

consideration the highest value reflected in the sale deeds Exhibits P4 and P5 for  

the purpose of determination of compensation.  In support of this argument, Shri  

Lalit relied upon the judgments in Rao Bahadur, Collector of Madras 1969 1 MLJ  

45, State of Punjab v. Hansraj (1994) 5 SCC 734, Anjani Molu Dessai v. State of  

Goa  (2010)  13 SCC 710,  Mehrawal Khewaji Trust  (Registered),  Faridkot  and  

others v. State of Punjab and others (2012) 5 SCC 432. Shri Lalit then argued that  

the deductions made by the Reference Court and approved by the High Court are  

clearly impermissible because the land had been acquired for construction of Broad  

Gauge Rail Line and not for carving out a lay out for residential,  industrial or  

commercial purpose which necessarily involves construction of road and providing  

of basic amenities like electricity, water and sewerage and large area is required to  

be left out as open spaces.  Shri Lalit also referred to documents produced by the  

appellants showing damage to their land and argued that the Reference Court and  

the  High  Court  committed  serious  error  by  not  awarding  compensation  for  

severance caused due to construction of railway line and damage caused due to  

digging.  In the end, Shri Lalit relied upon the judgments of this Court in Sunder v.  

Union of India (2001) 7 SCC 211 and R. Saragapani v. Special Tahsildar, Karur –  

Dindigul Broadguage Line (2011) 14 SCC 177 and argued that the appellants are  

entitled to interest on solatium.

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14. Shri R. K. Khanna, learned Additional Solicitor General appearing for the  

Union of India supported the impugned judgment and argued that the appellants are  

not entitled to further enhancement in the compensation determined by the High  

Court. Shri Khanna argued that the sale instances produced by the appellants were  

in respect of very small parcels of land and the same could not supply basis for  

fixing market value of big chunks of land measuring 3.627 hectares  and 0.951  

hectare.  He further argued that the deductions made by the Reference Court and  

the High Court in lieu of the cost of development and other charges are legally  

correct and the High Court did not commit any error by fixing market value of the  

acquired land for the purpose of determination of the compensation payable to the  

appellants.

15. In support of his arguments, Shri Khanna relied upon the judgments in  Land  

Acquiring Body,  Ahmedabad  v.  Ramprasad  H.  Maharaj  (2007)  15  SCC  593,  

Mahesh Dattatray Thirthkar v. State of Maharashtra (2009) 11 SCC 141, Sabhia  

Mohammad Yusuf Abdul Hamid Mulla (dead) by Lrs. and others v. Special Land  

Acquisition Officer  and others  (2012)  7  SCC 595,  Bhagwathula Samanna and  

others  v.  Special  Tahsildar  and  Land  Acquisition  Officer,  Visakhapatnam  

Municipality, Visakhapatnam (1991) 4 SCC 506,  V. Hanumantha Reddy (dead)  

by Lrs. v. Land Acquisition officer and Mandal R. Officer (2003) 12 SCC 642,  

Valliyammal and  another  v.  Special  Tahsildar  (Land Acquisition)  and  another  

(2011) 8 SCC 91 and K. S. Shivdevamma v. Assistant Collector AIR  1996 SC  

2886.   

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16. Before considering the respective arguments, we may notice the principles  

laid down by this Court for determination of market value of the acquired land.  In  

Shaji Kuriakose v. Indian Oil Corpn. Ltd. (2001) 7 SCC 650, this Court held:  

“It is no doubt true that courts adopt comparable sales method of valu- ation of land while fixing the market value of the acquired land. While  fixing the market value of the acquired land, comparable sales method  of valuation is preferred than other methods of valuation of land such  as capitalisation of net income method or expert opinion method. Com- parable sales method of valuation is preferred because it furnishes the  evidence for determination of the market value of the acquired land at  which a willing purchaser would pay for the acquired land if it had  been sold in the open market at the time of issue of notification under  Section 4 of the Act. However, comparable sales method of valuation  of land for fixing the market value of the acquired land is not always  conclusive. There are certain factors which are required to be fulfilled  and on fulfilment of those factors the compensation can be awarded,  according to the value of the land reflected in the sales. The factors laid  down inter alia are: (1) the sale must be a genuine transaction, (2) that  the sale deed must have been executed at the time proximate to the  date of issue of notification under Section 4 of the Act, (3) that the land  covered by the sale must be in the vicinity of the acquired land, (4) that  the land covered by the sales must be similar to the acquired land, and  (5) that the size of plot of the land covered by the sales be comparable  to the land acquired. If all these factors are satisfied, then there is no  reason why the sale value of the land covered by the sales be not given  for the acquired land. However, if there is a dissimilarity in regard to  locality, shape, site or nature of land between land covered by sales  and land acquired, it is open to the court to proportionately reduce the  compensation for acquired land than what is reflected in the sales de- pending upon the disadvantages attached with the acquired land.”

17. In Viluben Jhalejar Contractor v.  State of Gujarat (2005) 4 SCC 789,  this  

Court elaborately considered the matter and culled out the following principles:  

“One of the principles for determination of the amount of compensation  for acquisition of land would be the willingness of an informed buyer to  offer the price therefor. It is beyond any cavil that the price of the land  which a willing and informed buyer would offer would be different in  

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the cases where the owner is in possession and enjoyment of the prop- erty and in the cases where he is not.

Market value is ordinarily the price the property may fetch in the open  market if sold by a willing seller unaffected by the special needs of a  particular purchase. Where definite material is not forthcoming either in  the shape of sales of similar lands in the neighbourhood at or about the  date  of  notification under  Section 4(1)  or  otherwise,  other  sale  in- stances as well as other evidences have to be considered.

The amount of compensation cannot be ascertained with mathematical  accuracy. A comparable instance has to be identified having regard to  the proximity from time angle as well as proximity from situation angle.  For determining the market value of the land under acquisition, suitable  adjustment has to be made having regard to various positive and negat- ive factors vis-à-vis the land under acquisition by placing the two in  juxtaposition. The positive and negative factors are as under:

Positive factors   Negative factors

(i) smallness of size   (i) largeness of area

(ii) proximity to a road   (ii) situation in the interior at a     distance from the road

(iii) frontage on a road   (iii) narrow strip of land with very     small frontage compared to depth

(iv) nearness to developed area   (iv) lower level requiring the    depressed portion to be filled up

(v) regular shape  (v) remoteness from developed      locality

(vi) level vis-à-vis land under (vi) some special disadvantageous ac- quisition             factors which would deter a  

 purchaser

(vii) special value for an owner of  an adjoining property to whom it  may have some very special advantage

Whereas a smaller plot may be within the reach of many, a large block  of land will have to be developed preparing a layout plan, carving out  

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roads, leaving open spaces, plotting out smaller plots, waiting for pur- chasers and the hazards of an entrepreneur. Such development charges  may range between 20% and 50% of the total price.”

18. In Atma Singh v. State of Haryana (2008) 2 SCC 568, the Court held:  

“In order to determine the compensation which the tenure-holders are  entitled to get for their land which has been acquired, the main question  to be considered is what is the market value of the land. Section 23(1)  of the Act lays down what the court has to take into consideration  while Section 24 lays down what the court shall not take into consider- ation and have to be neglected. The main object of the enquiry before  the court is to determine the market value of the land acquired. The ex- pression ‘market value’ has been the subject-matter of consideration by  this Court in several cases. The market value is the price that a willing  purchaser would pay to a willing seller for the property having due re- gard to its existing condition with all its existing advantages and its po- tential possibilities when led out in most advantageous manner exclud- ing any advantage due to carrying out of the scheme for which the  property is compulsorily acquired. In considering market value disin- clination of the vendor to part with his land and the urgent necessity of  the purchaser to buy should be disregarded. The guiding star would be  the conduct of hypothetical willing vendor who would offer the land  and a purchaser in normal human conduct would be willing to buy as a  prudent man in normal market conditions but not an anxious dealing at  arm’s length nor facade  of sale  nor fictitious sale  brought about in  quick succession or otherwise to inflate the market value. The determ- ination of market value is the prediction of an economic event viz. a  price outcome of hypothetical sale expressed in terms of probabilities.  See Kamta Prasad Singh v. State of Bihar (1976) 3 SCC 772,  Prithvi  Raj Taneja v. State of M.P. (1977) 1 SCC 684, Administrator General  of W.B. v. Collector (1988) 2 SCC 150 and Periyar Pareekanni Rub- bers Ltd. v. State of Kerala (1991) 4 SCC 195.

For ascertaining the market value of the land, the potentiality of the ac- quired land should also be taken into consideration. Potentiality means  capacity or possibility for changing or developing into state of actual- ity. It is well settled that market value of a property has to be determ- ined having due regard to its existing condition with all its existing ad- vantages and its potential possibility when led out in its most advant- ageous manner. The question whether a land has potential value or not,  is primarily one of fact depending upon its condition, situation, user to  which it is put or is reasonably capable of being put and proximity to  residential, commercial or industrial areas or institutions. The existing  

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amenities like water, electricity, possibility of their further extension,  whether near about a town is developing or has prospect of develop- ment have to be taken into consideration. See  Collector v.  Dr. Har- isingh Thakur (1979) 1 SCC 236,  Raghubans Narain Singh v.  U.P.  Govt. AIR 1967 SC 465 and  Administrator General of W.B. v.  Col- lector (1988) 2 SCC 150. It has been held in Kausalya Devi Bogra v.  Land Acquisition Officer  (1984)  2  SCC 324 and  Suresh  Kumar v.  Town Improvement Trust (1989) 2 SCC 329 that failing to consider  potential value of the acquired land is an error of principle.”

19. We shall now deal with the question whether the Reference Court was leg-

ally entitled to  discard  the sale  deeds  Exhibits P1 to  P6 and P10 to  P12 and  

whether the market value could have been determined only on the basis of Exhibits  

P7 to P9 and also whether the learned Single Judge of the High Court was right in  

relying upon Exhibits P1 and P7 to P9 for recording a finding that the Reference  

Court had correctly treated market value of the acquired land as Rs.6 per sq. ft. for  

the purpose of determining the amount of compensation.

20. Admittedly, the appellants had produced as many as 12 sale deeds, the de-

tails of which (as contained in the written note filed by learned counsel for the ap-

pellants on 27.11.2013) are given below:

“Exhibit  No.

Date Area Total  consideration

Rate

P1 10.07.1986 2000 Sqft 6000/- Rs.3.00/- P2 13.10.1992 1168 Sqft 47,000/- Rs.40.02/- P3 25.02.1986 600 Sqft 5000/- Rs.8.33/- P4 10.02.1984 112 Sqft 2000/- Rs.17.86/- P5 24.08.1984 112 Sqft 2000/- Rs. 17.86/- P6 19.01.1987 1200 Sqft 9600/- Rs.8.00/- P7 08.07.1986 1980 Sqft 16,000/- Rs.8.08/- P8 13.08.1986 1980 Sqft 16,000/- Rs.8.08/- P9 08.08.1986 825 Sqft 6,600/- Rs.8.00/-

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sale instances are produced by the parties, referred to the earlier judgments in M.  

Vijayalakshmamma Rao Bahadur v. Collector (1969) 1 MLJ 45, State of Punjab v.  

Hans Raj (1994) 5 SCC 734 and held:

“The legal position is that even where there are several exemplars  with reference to similar lands, usually the highest of the exem- plars, which is a bona fide transaction, will be considered. Where  however  there  are  several  sales  of  similar lands  whose  prices  range in a narrow bandwidth, the average thereof can be taken, as  representing the market price. But where the values disclosed in  respect of two sales are markedly different, it can only lead to an  inference that they are with reference to dissimilar lands or that  the lower value sale is on account of undervaluation or other price  depressing reasons. Consequently, averaging cannot be resorted  to.”

23. In  Mehrawal Khewaji Trust (Registered),  Faridkot and others v. State of  

Punjab and others (supra), another two Judge Bench re-stated the law in the fol-

lowing words:

“It is clear that when there are several exemplars with reference  to similar lands, it is the general rule that the highest of the ex- emplars, if it is satisfied that it is a bona fide transaction, has to  be considered and accepted. When the land is being compulsor- ily taken away from a person, he is entitled to 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. In our  view, it seems to be only fair that where sale deeds pertaining to  different transactions are relied on behalf of the Government, the  transaction representing the highest value should be preferred to  the rest unless there are strong circumstances justifying a differ- ent course. It is not desirable to take an average of various sale  deeds placed before the authority/court for fixing fair compensa- tion.”

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24. The same view was reiterated in Chindha Fakira Patil v. The Special Land  

Acquisition officer, Jalgaon 2011 (12) SCALE 321.

25. It was neither the pleaded case of the respondents nor any evidence was pro-

duced by them before the Reference Court to prove that the sale transactions Ex-

hibits P4 and P5 were not genuine or that the vendor and vendee had colluded to  

inflate value of the land with oblique motive. It is also not the case of the respon-

dents that the lands specified in other exhibits was sold at the rate of Rs.8.33,  

Rs.8.08 or Rs.8 per sq. ft. with ulterior motive to get higher compensation in the  

subsequent acquisitions.  Therefore, we can safely rely upon Exhibits P4 and P5  

for determining the amount of compensation.  Even if those sale deeds are kept  

aside, one can rely upon Exhibits P3, P7 and P8 for recording a finding that market  

value of the acquired land cannot be less than anything between Rs.8 and Rs.8.33  

per sq. ft. If the rule of averaging is applied, then market value of the acquired land  

would be anything between Rs.9 and Rs.10 per sq. ft.  

26. The next issue which merits consideration is whether the  Reference Court  

and the High Court had correctly made deductions in the name of development  

charges/cost of development.  The Reference Court made three-tier deduction.  In  

the first place, 25% was deducted in the name of leaving out portions of the ac-

quired land for the purpose of laying roads, drains, sewer line, parks, electricity  

line etc.  Thereafter, 25% deduction was made towards expenses for development  

work.  Finally, 50% deduction was made because of smallness of the plots sold  

vide Exhibits P1 to P12.  The learned Single Judge of the High Court approved the  

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deduction and determined market value of the acquired land at the rate of Re.1 per  

sq. ft.

27. The approach adopted by the Reference Court and the High Court in making  

deductions towards the cost of development / development charges from the mar-

ket value determined on the basis of the sale deeds produced by the appellants was  

clearly wrong. The respondents had not even suggested that the development en-

visaged by the Reference Court, i.e., laying of roads, drains, sewer lines, parks,  

electricity lines etc. or any other development work was required to be undertaken  

for laying the Railway line.  Therefore,  25% deduction made by the Reference  

Court and approved by the High Court under two different heads is legally unsus-

tainable.

28.    In Nelson Fernandes and others v. Special Land Acquisition Officer, South  

Goa and others (2007) 9 SCC 447, this Court considered the question whether any  

deduction could be made towards development cost where the land is acquired for  

laying railway line and answered the same in negative.  In that case, the appellant  

had challenged the judgments of the Reference Court and the Division Bench of the  

High Court fixing market value of the acquired land and contended that no deduc-

tion could be made because the land had been acquired for laying railway line.  

This Court reversed the judgments of the Reference Court and the High Court and  

observed:

“29. Both the Special Land Acquisition Officer,  the District  Judge  and of the High Court have failed to notice that the purpose of acquisi-

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tion is for Railways and that the purpose is a relevant factor to be taken  into consideration for fixing the compensation. In this context, we may  usefully refer the judgment of this Court in Viluben Jhalejar Contractor  v. State of Gujarat. This Court held that the purpose for which the land  is acquired must also be taken into consideration in fixing the market  value and the deduction of development charges. In the above case, the  lands were acquired because they were submerged under water of a  dam. Owners claimed compensation of Rs 40 per sq ft. LAO awarded  compensation ranging from Rs 35 to Rs 60 per sq m. Reference Court  fixed the market value of the land at Rs 200 per sq m and after deduc- tion of development charges, determined the compensation @ Rs 134  per sq m. In arriving at the compensation, Reference Court placed reli- ance on the comparative sale of a piece of land measuring 46.30 sq m  @ Rs 270 per sq m. On appeal, the High Court awarded compensation  of Rs 180 per sq m in respect of large plots and Rs 200 per sq m in re- spect of smaller plots. On further appeal, this Court held that since the  lands were acquired for being submerged in water of dam and had no  potential value and the sale instance relied was a small plot measuring  46.30 sq m whereas the acquisition in the present case was in respect  of large area, interest of justice would be subserved by awarding com- pensation of Rs 160 per sq m in respect of larger plots and Rs 175 per  sq m for smaller plots. In Basavva v. Spl. Land Acquisition Officer this  Court held that the purpose for which acquisition is made is also a rel- evant factor for determining the market value.

30. We are not, however, oblivious of the fact that normally 1/3rd  deduction of further amount of compensation has been directed in some  cases. However, the purpose for which the land is acquired must also  be taken into consideration. In the instant case, the land was acquired  for the construction of new BG line for the Konkan Railways. This  Court in Hasanali Khanbhai & Sons v. State of Gujarat and Land Ac- quisition Officer v.  Nookala Rajamallu had noticed that where lands  are acquired for specific purposes, deduction by way of development  charges is permissible. In the instant case, acquisition is for laying a  railway line. Therefore, the question of development thereof would not  arise. Therefore, the order passed by the High Court is liable to be set  aside and in view of the availability of basic civic amenities such as  school, bank, police station, water supply, electricity, highway, trans- port,  post,  petrol pump, industry, telecommunication and other busi- nesses,  the claim of compensation should reasonably be fixed @ Rs  250 per sq m with the deduction of 20%. The appellant shall be entitled  to all other statutory benefits such as solatium, interest, etc. etc. The  appellants also will be entitled to compensation for the trees standing  

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on the said land in a sum of Rs.59,192 as fixed. IA No. 1 of 2006 for  substitution is ordered as prayed for.”

29. In C.R. Nagaraja Shetty v. Special Land Acquisition Officer and Estate Offi-

cer and another (2009) 11 SCC 75, the Court referred to the judgment in Nelson  

Fernandes and others v. Special Land Acquisition Officer, South Goa and others  

(supra) and observed:

“15. The learned counsel appearing on behalf of the respondents was  also unable to point out any such evidence regarding the proposed de- velopment. We cannot ignore the fact that the land is acquired only for  the widening of the national highway. There would, therefore, be no  question of any such development or any costs therefor.

16. In Nelson Fernandes v. Land Acquisition Officer this Court has dis- cussed the question of development charges. That was a case where  the acquisition was for laying a railway line. This Court found that the  land under acquisition was situated in an area which was adjacent to  the land already acquired for the same purpose i.e. for laying a railway  line. In para 29, the Court observed that the Land Acquisition Officer,  the District Judge and the High Court had failed to notice that the pur- pose of acquisition was for the Railways and that the purpose is a rel- evant factor to be taken into consideration for fixing the compensation.

17. The Court in  Nelson Fernandes relied on  Viluben Jhalejar Con- tractor v. State of Gujarat where it was held that:  

“29. … the purpose for which the land is acquired must also be  taken into consideration in fixing the market value and the de- duction of development charges.”

Further, in para 30, the Court specifically referred to the deduction for  the development charges and observed:  

“30. We are not, however, oblivious of the fact that normally  1/3rd deduction of further amount of compensation has been dir- ected in some cases. However, the purpose for which the land is  acquired must also be taken into consideration. In the instant  case, the land was acquired for the construction of new BG line  

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for the Konkan Railways. … In the instant case, acquisition is  for laying a railway line. Therefore, the question of development  thereof would not arise.”

The Court made a reference to two other cases viz. Hasanali Khanbhai  & Sons v.  State of Gujarat  and  Land Acquisition Officer v.  Nookala  Rajamallu where the deduction by way of development charges was  held permissible.

18. The situation is no different in the present case. All that the acquir- ing body has to achieve is to widen the national highway. There is no  further question of any development. We again, even at the cost of re- petition, reiterate that no evidence was shown before us in support of  the plea of the proposed development.  We,  therefore,  hold that  the  High Court has erred in directing the deduction on account of the de- velopmental charges at the rate of Rs 25 per square foot out of the  ordered compensation at  the rate of Rs 75 per square foot.  We set  aside the judgment to that extent.”

30. However, keeping in view the smallness of the plots which were sold by Ex-

hibits P1, P3 to P8, P11 and P12, we would approve the deduction of 50% for the  

purpose of determining compensation payable for 3.627 hectares comprised in Sur-

vey Nos.2,  10, 20,  22, 46, 48 and 106 and 0.951 hectare comprised in Survey  

No.18.

31. The issue which remains to be considered relates to the amount of compen-

sation payable to the appellants. For this purpose, we shall make calculation by  

adopting the following modes:

i) If sale deeds Exhibits P4 and P5 are relied upon and 50% deduction is  

made on account of smallness of the land sold by these exhibits, the  

amount of compensation would come to Rs.8.93 per sq. ft., and

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ii) If sale deeds Exhibits P3, P6 to P9 and P11 are taken into considera-

tion and 50% deduction is made due to smallness of the plots, the ap-

pellants would be entitled to compensation at the rate of Rs.4.04 per  

sq. ft.

32. However,  keeping in view the proposition laid down in M.  Vijayalaksh-

mamma Rao Bahadur v. Collector (supra), State of Punjab v. Hans Raj (supra),  

Anjani Molu Dessai v. State of Goa (supra) and Mehrawal Khewaji Trust (Regis-

tered), Faridkot and others v. State of Punjab and others (supra), we would adopt  

the first mode and hold that the appellants are entitled to compensation at the rate  

of Rs.8.93 per sq. ft.   

33. We may have ordained payment of compensation to the appellants at the rate  

of 8.93 per sq. ft. (rounded off to Rs.9 per sq. ft.), but having regard to the fact that  

in the claim filed before the Reference Court, they had limited their claim to Rs.5  

per sq. ft. and no application was filed either before the High Court or this Court  

for payment of higher compensation, we would restrict the enhancement to Rs.5  

per sq.ft.

34. We agree with Shri Lalit that in view of the law laid down in Sunder v.  

Union of India (2001) 7 SCC 211, Chimanlal Kuberdas Modi v. Gujarat Industrial  

Development Corporation (2010) 10 SCC 635, Nadirsha Shapurji Patel v. Collec-

tor and LAO (2010) 13 SCC 234, R. Saragapani v. Special Tahsildar, Karur –  

Dindigul Broadguage Line (2011) 14 SCC 177 and Bharat Heavy Electricals Lim-

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ited v. R.S. Avtar Singh and Company (2013) 1 SCC 243, the appellants are enti-

tled to interest on solatium.  

35. So far as the appellants’ plea for award of damages caused on account of re-

moval of fencing of Sant Farm, loss of earning due to damage to crops/farming op-

eration and destruction of well existing on the land is concerned, we do not con-

sider it necessary to deal with the same because the issue is being dealt with in  

C.A. No.1248 of 2007.

36. In the result, the appeal is allowed, the impugned judgment and the award of  

the Reference Court are set aside and it is declared that the appellants are entitled  

to compensation at the rate of Rs.5 per sq.ft. with other statutory benefits.  They  

shall also be entitled to interest on the element of solatium.   

37. The respondents are directed to pay the amount of enhanced compensation  

and other statutory benefits including solatium and interest to the appellants within  

a period of six months from today.

............................................... J.

(G.S. SINGHVI)

...............................................J. (SHIVA KIRTI SINGH)

...............................................J. (C. NAGAPPAN)

New Delhi;

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November 29, 2013.  

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