Page 1

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 2545-2546/2012

MAJ. GEN. KAPIL MEHRA & ORS.      ..Appellants  

Versus

UNION OF INDIA & ANR.   ..Respondents

J  U D G M E N T

R. BANUMATHI, J.

These  appeals  are  directed  against  the  impugned  

Orders  dated  24.12.2010  and  13.10.2011  passed  by  

Delhi  High  Court  in  L.A.  Appeal  No.149/2007  and  C.M.  

No.735/2011  in  L.A.  Appeal  No.149/2007  respectively  by  

which  High  Court  awarded  compensation  at  the  rate  of  

Rs.14,974/- per sq. yard for appellants’ land acquired by the  

Delhi Development Authority (DDA) for development of Vasant

Page 2

2

Kunj  Residential  Scheme,  Delhi  along  with  interest  and  

proportionate costs.

2. Shorn of details of the previous notification in 1983  

and  the  earlier  rounds  of  litigation,  background  facts  in  a  

nutshell are as follows: On 19.2.1997, a fresh notification was  

issued by the Land and Building Department, Govt. of NCT of  

Delhi under Sections 4 and 17 of the Land Acquisition Act,  

1894 (the Act) proposing to acquire the land of the appellants  

measuring  12  Bigha  (12096  sq.  yards)  for  development  of  

Vasant Kunj under the planned development scheme of Delhi.  

Land   Acquisition   Collector   (LAC)  by  award  No.  2/98-99  

dated  18.9.1998  assessed  the  market  value  of  the  land  

@  Rs.2,05,642.07  paise  per  bigha  (Rs.205/-per  sq.yard),  

adding  additional interest @ 12% per annum on the market  

value of  land and  the  solatium @ 30% on the market value of  

land and the compensation was fixed @ Rs.37,21,180.05 paise  

per bigha.

3. Aggrieved  by  the  award,  the  appellants  filed  

Reference  Petition  under  Section  18  of  the  Act  before  the  

Additional District Judge (LAC), Delhi.  In the reference court,

Page 3

3

the  appellants  produced  four  documents  Exs  A7  to  

A10-perpetual lease deeds of residential plots in Vasant Kunj,  

executed between September 1995 to December 1996 at the  

rates ranging from Rs.28,719/- to Rs.47,542/- per sq. yard.  

The reference court held that the lease deeds of auction of a  

developed plot by a public authority are not a proper guide for  

determining the fair market value of the acquired lands and  

reference court discarded the exemplars- Exs A7 to A10 lease  

deeds  and  rejected  the  claim  of  the  appellants  for  

enhancement of compensation.    

4. Aggrieved  by  the  decision  of  the  reference  court,  

appellants filed Land Acquisition Appeal No.149/2007 before  

High Court of Delhi.  The High Court had taken average of the  

exemplars- Exs A7 to A10 and deducted 40% from the average  

price towards smallness of the area and further deducted one  

third towards development of land and fixed the market value  

of the land at Rs.14,974/- per sq. yard.  High Court held that  

the appellants  shall be entitled to 30% solatium on the above  

market  value of the land under Section 23(2) of the Act and  

12% of  the additional  amount  under  Section 23(1-A)  of  the

Page 4

4

Act.  The  High Court  further ordered that  in terms of Section  

28 of the Act on the enhanced market value, the appellants  

shall  be paid interest @ 9% per annum from 19.2.1997 i.e.  

date of notification under Section 4 of the Act till 18.2.1998  

and thereafter @ 15% per annum till  the date of  deposit  of  

compensation.  It was also held that interest shall also be paid  

on  solatium  and  additional  amount.  The  appellants  filed  

application  C.M.  No.735/2011  in  L.A.  Appeal  No.149/2007  

before the High Court under Sections 152 and 153 read with  

Section 151 C.P.C. to award Rs.48 lakhs which was paid as  

court fees and also prayed for award of interest under Section  

34  for  the  enhanced  compensation.  The  application  was  

allowed  in  part  by  order  dated  13.10.2011,  granting  

proportionate  costs  to  the  appellants  over  and  above  

Rs.20,000/-  as  awarded  in  High  Court’s  judgment  dated  

24.12.2010.  Being aggrieved by the quantum of compensation  

and award of proportionate cost, the appellants are before us.

5. First  appellant-  Maj.  Gen.  Kapil  Mehra,  party  in  

person, contended that correct reckoning of market value is  

the highest price in any sale deed of comparable instance and

Page 5

5

the High Court was not justified in averaging the sale prices of  

the  four  perpetual  lease  deeds,  Exs  A7  to  A10  and  the  

approach of  the  High Court  in  averaging  the  sale  prices  of  

exemplars  is  erroneous.  He  further  contended  that  the  

exemplars Exs A7 to A10 relied upon by the appellants are  

perpetual lease deeds of residential plots in Vasant Kunj and  

what was acquired was freehold lands of the appellants and  

the price difference  between the ‘leasehold’ and ‘freehold’  was  

not kept in view by the High Court  for ascertaining the correct  

market  value.  It  was  submitted  that  deductions  made  for  

development  at  one  third  i.e.  331/3%  and  40%  for  the  

smallness of area of exemplars as compared to the largeness of  

the acquired lands are very much on the higher side.    

6. The judgment of the High Court was challenged by  

DDA in Special Leave Petition (Civil) No.15272/2011 and the  

same  was  dismissed  by  the  Order  dated  12.5.2011.  

Mr. Amarendra Sharan, learned Senior Counsel appearing for  

the respondents submitted that in the Special Leave Petition  

(Civil)  No.15272/2011,  Maj.  Gen.  Kapil  Mehra  appeared  in  

person and the said special leave petition was dismissed by a

Page 6

6

speaking order and the said order merges with the High Court  

order  and  the  same  is  binding  upon  the  appellant  and  in  

separate  appeals,  the  appellants  cannot  challenge  the  

adequacy of the compensation and the present appeals are not  

maintainable.  Reliance was placed upon the judgment of this  

Court in Kunhayammed and Ors. vs. State of Kerala and Anr.  

(2000)  6  SCC  359  and  S.  Gangadhara Palo vs.  Revenue  

Divisional Officer and Anr., (2011) 4 SCC 602.

7. Without  prejudice  to  the  above  contention,  

Mr. Amarendra Sharan, learned Senior Counsel appearing for  

the respondents submitted that the land acquired is 12 bigha  

which is  almost  12096 sq.  yards  which is  thousand times  

more than the area of the  plots in Exs A7 to A10,  that too,  in  

fully developed commercial  area and the sale price of such a  

small area cannot  be taken as the value  for  arriving at  the  

market value of  large  extent of area.  It was submitted that it  

is not safe to rely upon the allotment rates/auction rates in  

regard to the commercial plots formed by DDA in a developed  

layout in determining the market value of the adjoining large  

extent of undeveloped land.  It was further submitted that in

Page 7

7

case  of  Delhi  Development  Authority  or  any  statutory  

authority, 40% of the land area is to be deducted for formation  

of  roads, drains, parks and common amenities and further  

35% deduction ought to have been  made towards the cost of  

leveling the land, construction of sewerages, laying electricity  

lines etc. Learned Senior Counsel submitted that deduction for  

development ought to have been made at 70-75% and the High  

Court was not justified in making nominal deduction of 331/3%  

of the area.     

8. We have given our thoughtful consideration to the  

submissions and perused the materials on record.     

9. Before  we  proceed  to  consider  the  merits  of  the  

matter, let us first examine the preliminary objections raised  

by the respondents as to the maintainability of these appeals.  

Of course, Special Leave Petition (Civil)  No.15272/2011 filed  

by DDA was dismissed on 12.5.2011 by a speaking order.  It is  

well  settled  that  when a  special  leave  petition  is  dismissed  

with reasons, there is a merger of the judgment of the High  

Court in the order of the Supreme Court.  Dismissal of special  

leave petition filed by DDA only means that this Court felt that

Page 8

8

the quantum of Rs.14,974/-  per sq. yard  fixed by the High  

Court   need  not  be  further  reduced.  In  the  special  leave  

petition,  though  first  appellant  appeared  and  resisted  the  

same,  the  first  appellant  could  not  have  advanced  his  

arguments seeking enhancement of compensation. Dismissal  

of  special  leave  petition  has  become  final  as  against  DDA.  

When SLP filed by DDA was heard and disposed of by this  

Court  (vide  Order  dated  12.05.2011),  the  appellants  were  

pursuing  their  review petition  before  the  High Court  which  

came to be dismissed on 13.10.2011.  So far as the appellants  

are concerned, the order was then res subjudice.  Order of this  

Court dismissing the special leave petition preferred by DDA,  

in our view, is not an impediment to the appellants to pursue  

their appeals and we proceed to consider merits of the rival  

contentions.     

10. Market  Value:  First  question  that  emerges  is  what  

would  be  the  reasonable  market  value  which  the  acquired  

lands are capable of fetching.  While fixing the market value of  

the acquired land, the Land Acquisition Officer is required to  

keep in mind the following factors:-  (i)  existing geographical

Page 9

9

situation of the land; (ii) existing use of the land; (iii) already  

available  advantages,  like  proximity  to  National  or  State  

Highway or road and/or developed area and (iv) market value  

of  other  land  situated  in  the  same  locality/village/area  or  

adjacent or very near to the acquired  land.  

11. The  standard  method  of  determination  of  the  

market value of any acquired land is by the valuer evaluating  

the land on the date of  valuation publication of  notification  

under  Section  4(1)  of  the  Act,  acting  as  a  hypothetical  

purchaser willing to purchase the land in open market at the  

prevailing price on that day, from a seller willing to sell such  

land  at  a  reasonable  price.  Thus,  the  market  value  is  

determined  with  reference  to  the  open  market  sale  of  

comparable land in the neighbourhood, by a willing seller to a  

willing buyer, on or before the date of preliminary notification,  

as that would give a fair indication of the market value.

12. In  Viluben  Jhalejar  Contractor v.  State  of  Gujarat  

(2005)  4  SCC  789,  this  Court  laid  down  the  following  

principles for determination of market value of the acquired  

land: (SCC pp.796-97, paras 17-20)

Page 10

10

“17.  Section  23  of  the  Act  specifies  the  matters  required  to  be  considered  in  determining  the  compensation;  the  principal  among  which  is  the  determination of the market value of the land on the  date of the publication of the notification under sub- section (1) of Section 4.   

18. 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 the cases where the owner is  in possession and enjoyment of  the property and in  the cases where he is not.

19. 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 instances  as well as other evidences have to be considered.

20. 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  negative factors vis-à-vis the land under acquisition by  placing the two in juxtaposition.…..”

13. The  courts  adopt  comparable  sales  method  for  

valuation of land while fixing the market value of the acquired  

land. Comparable sales method of valuation is preferred rather  

than methods of valuation of land such as capitalization of net  

income method or expert opinion method, because it furnishes

Page 11

11

the  evidence  for  determination  of  the  market  value  of  the  

acquired land at which the willing purchaser would pay for the  

acquired land if it had been sold in the open market at the  

time of issuance of notification under Section 4 of the Act.

14.  While taking comparable sales method of valuation  

of land for fixing the market value of the acquired land, there  

are certain factors which are required to be satisfied and only  

on  fulfillment  of  those  factors,  the  compensation  can  be  

awarded according to the value of the land stated in the sale  

deeds.  In Karnataka Urban Water Supply and Drainage Board  

and Ors. v.  K.S. Gangadharappa & Anr., (2009) 11 SCC 164,  

factors  which  merit  consideration  as  comparable  sales  are,  

interalia, laid down as under:-

“It  can  be  broadly  stated  that  the  element   of  speculation   is  reduced  to  minimum  if  the  underlying  principles  of  fixation of  market   value with  reference   to  comparable sales are made:

(i) when sale is within a reasonable  time  of  the   date  of  notification   under  Section  4(1);

(ii) It should be a bona fide transaction; (iii) It should be  of the land acquired or of the  

land adjacent  to the land  acquired; and  (iv) It should possess similar advantages.

It is only when these factors are present, it can merit a  consideration  as  a  comparable  case  (See  Special   Land  Acquisition Officer v. T. Adinarayan Setty (AIR 1959 SC 429)

Page 12

12

These aspects have been highlighted in Ravinder  Narain  v.  Union of India  (2003) 4 SCC 481.”  

15. Appellants  have  produced  Exs  A7  to  A10-four  

perpetual lease deeds of residential plots in Pocket C of Vasant  

Kunj  Area between September 1995 to December 1996, the  

details of which are as under:   

Exh. Sale Date Plot  No.

Size (Sq.Mtr.)

Sale Price (Rs.)

Rate (Rs. per sq.yd.)

A-7 22.09.95 59C 218 5,75,05,000/- 28,719/-  A-8 02.02.96 5C 220 96,55,000/- 36,695/- A-9 02.02.96 8C 231 1,01,61,000/- 36,779/- A-10 10.12.96 13C 242 1,37,60,000/- 47,542/-

16. Exs  A7  to  A10  are  lease  deeds  of  small  plots  

executed by DDA.  Plots in the above lease deeds are in the  

same vicinity of the acquired land and High Court had taken  

the same as comparable sales.  The size of the plots covered in  

the exemplars are smaller.  If there is a dissimilarity in regard  

to the area, it is open to the court to make proper deduction  

towards smallness of area.  We find no error in the approach  

of the High Court taking Exs A7 to A10 as comparable sales  

for fixation of market value.  

17. The High Court has taken average of sale price of  

Exs A7 to A10 and deducted 40% towards smallness of the

Page 13

13

plot taken for comparison, further deducted one third towards  

development.  Though we may finally affirm the rate fixed by  

the High Court, for the reasons stated infra we fix the market  

value in accordance with the well settled principles laid down  

by this Court.   

18. Determination  of  Market  Value  on  the  basis  of  

average price paid under sale transactions: For ascertaining  

the fair market value of the acquired land, High Court adopted  

the ‘average method’ by averaging the sale price of Exs A-7 to  

A-10 and calculated the  rate  at  Rs.37,433.75 paise  per  sq.  

yard.  The  appellants  contend  that  when  land  is  being  

compulsorily taken away, the landholder is entitled to claim  

the highest value which similar land in the locality is shown to  

have fetched in a bonafide transaction and High Court was not  

justified in averaging the sale prices of  four perpetual  lease  

deeds.  Appellants placed reliance upon the judgments of this  

Court  in  M.  Vijayalakshmamma  Rao  Bahadur vs.  Collector  

(1969) 1 MLJ SC 45 and State of Punjab and Anr. vs. Hans Raj  

(D)  by  Lrs.  And Ors., (1994)  5  SCC 734.  In  Hans  Raj  case  

(supra) it was held as under:

Page 14

14

“4.   Having given our anxious  consideration to the  respective  contentions, we  are of the considered view  that   the learned  Single  Judge  of  the  High Court  committed a grave error in working out average  price  paid  under  the  sale  transactions  to  determine   the  market value  of the acquired land on that basis.  As  the method of averaging the prices fetched by sales of  different lands of different kinds at different times, for  fixing  the  market  value  of  the  acquired  land,  if  followed, could bring about a figure of price which may  not at all be regarded as the price to be fetched by sale  of  acquired  land.   One  should  not  have,  ordinarily  recourse to such method. It is well settled that genuine  and bona fide sale transactions in respect of the land  under acquisition or in its absence  the bona fide sale  transactions proximate to the point  of acquisition of  the  lands  situated  in   the  neighbourhood  of  the  acquired  lands  possessing  similar  value  or  utility  taken place between a willing vendee and the  willing  vendor  which could  be   expected to  reflect  the true  value, as agreed between reasonable prudent persons  acting in the normal  market  conditions  are the real  basis to determine the market value.”    

19. Referring to Hans Raj’s case in Anjani Molu Dessai   

vs. State of Goa And Anr., (2010) 13 SCC 710,  this Court held  

as under:-

“20. The legal position is that even where there are  several  exemplars  with  reference  to  similar  lands,  usually  the  highest  of  the  exemplars,  which   is  a  bonafide  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 sales is on account of  undervaluation  or  other  price  depressing  reasons.  Consequently,  averaging  cannot  be  resorted  to.  We  may refer to two decisions of this Court in this behalf.”

Page 15

15

20. Where the lands acquired are of different type and  

different locations,  averaging is not permissible.   But where  

there are several sales of similar lands, more or less, at the  

same time,  whose prices have marginal  variation,  averaging  

thereof is permissible.  For the purpose of fixation of fair and  

reasonable market value of any type of land, abnormally high  

value  or  abnormally  low  value  sales  should  be  carefully  

discarded.  If the number of sale deeds of the same locality  

and the  same period with  short  intervals  are  available,  the  

average price of the available number of sale deeds shall be  

considered as a fair and reasonable market price.   Ultimately,  

it is in the interest of justice for the land losers to be awarded  

fair compensation.  All attempts should be taken to award fair  

compensation  to  the  extent  possible  on  the  basis  of  their  

accessibility to different kinds of roads, locational advantages  

etc.   Four perpetual lease deeds A-7 to A-10 relied upon by  

the  appellants  are  of  the  same  locality  –  Vasant  Kunj  

Residential  Scheme  and  relate  to  the  period  ranging  from  

September 1995 to December 1996, but they are just prior to  

Section  4(1)  notification.   In  our  view,  the  High  Court  was

Page 16

16

justified in taking the average of the said four exemplars and  

approach  adopted  by  the  High  Court  in  averaging  the  sale  

prices of Exs A7 to A10 cannot be said to be perverse.   

21. Freehold  vis-a-vis  Leasehold  Price - Market Value:  

Contention of the appellants is that Exs A7 to A10 relate to  

long term perpetual leasehold deeds and what was acquired  

was appellants’  freehold property  and freehold property has  

higher  value  than  the  leasehold  plot  and  suitable  addition  

should  have been made.   The appellant  contends that   the  

terms stipulated in perpetual leasehold are extremely stringent  

and in such cases, no sale is permitted without the permission  

of DDA and there are  many other  uncomfortable  clauses  in  

the terms of the perpetual lease deeds and all these ‘stringent  

conditions’   increase  the  gap  between  ‘freehold’  price  and  

‘leasehold’ price.  It is submitted that market value of ‘freehold  

property’ is much higher than the value of ‘leasehold property’  

and this was not taken into consideration by the High Court.   

22. In  M.B. Gopala Krishna & Ors.  vs.  Special Deputy  

Collector, Land Acquisition, (1996) 3 SCC 594, as relied upon  

by the appellants, it was  held as under:-

Page 17

17

“It is further contended by Shri Mudgal that value of  the land does not get  pegged down   on account of the land  being  in occupation  of a tenant and the circumstances in  this  behalf   taken  into  account  by  the  High  Court,  is  irrelevant.  We find no force in the contention.  A freehold  land and one burdened with encumbrances do  make  a big  difference   in  attracting   willing  buyers.   A  freehold  land  normally  commands  higher  compensation  while  the  land  burdened with encumbrances secures lesser price.  The fact  of a tenant in occupation would be an encumbrance and no  willing  purchaser  would  willingly  offer  the  same  price  as  would  be  offered  for  a  freehold  land.   Under  those  circumstances,  the  High  Court  would  be  right  in  its  conclusion  that  the  land  burdened  with  encumbrances  takes lesser price than  the freehold land. The encumbrances  would operate as a disabling factor to peg  down the price  when we compare the same with freehold land.”

The above observations were made in the aforesaid decision  

while  upholding  the  compensation  that  was  payable  to  the  

landlord without reference to the tenant’s rights.  The above  

principle  will  apply  only  where  a  property  subject  to  

encumbrances  is  to  be  sold  to  a  private  purchaser  or  is  

acquired subject to the tenancy.  

23. ‘Freehold land’ and ‘leasehold land’ are conceptually  

different.  If a property subject to a lease and in the possession  

of a lessee is offered for sale by the owner to a prospective  

private  purchaser,  the  purchaser  being  aware  that  on  

purchase he will get only title and not possession and that the  

sale in his favour will be subject to encumbrance namely, the  

lease, he will offer a price taking note of the encumbrances.

Page 18

18

Naturally,  such  a  price  would  be  less  than  the  price  of  a  

property  without  any  encumbrance.   But  when  a  land  is  

acquired  free  from encumbrances,  the  market  value  of  the  

same will certainly be higher.

24. Exs A7 to A10 are the perpetual lease deeds relating  

to the period from September 1995 to December 1996 and to  

get the perpetual lease deeds converted as freehold, the holder  

of  perpetual  leasehold  has  to  pay  further  amount  to  DDA.  

Having regard to the period of Exs A7 to A10  and the  date of  

issuance  of  Section  4  notification  dated  19.2.1997,  in  our  

view, addition  of 20%  is to be added for  arriving at the value  

of  ‘freehold’  property.   Adding 20% to  Rs.37,433.75 per  sq.  

yard which comes to Rs.7,486.75, the value is calculated at  

Rs.44,920.50 rounded off to Rs. 44,921/- per sq. yard.

25. Deduction Towards Competitive Bidding:  Exs A7 to  

A10 exemplars are perpetual lease deeds of commercial plots  

auctioned in Vasant Kunj area.  Learned senior counsel for the  

respondents contended that this  auctioned commercial  site  

can  never   be  equated  to  the  value  of  large  extent   of  

agricultural  land like the land acquired in the present case

Page 19

19

and those plots auctioned are developed plots on which the  

Government  had  spent  a  considerable  amount.   It  is  

contended  that  the  auction  prices  of  commercial  plots  in  

exemplars are not true index  of a fair market value of the land  

at  the  relevant  time  because  elements  of  speculation  and  

unfair competition  in such auctions and suitable deduction  

ought  to have been made  for competitive bidding.

26. While  considering  the  competition  involved  in  

auction  sales  of  commercial/residential  plots  and observing  

that the element of competition  in auction sales  make them  

unsafe  guides  for  determining  the  market  value  of  the  

acquired  lands,  in  Executive  Engineer,  Karnataka  Housing  

Board v.  Land Acquisition Officer, Gadag And Ors., (2011) 2  

SCC 246 paras 6 & 7, this Court held as under:-

“6.  But  auction-sales  stand  on  a  different  footing.  When purchasers start bidding for a property in an auction,  an element  of competition enters into the auction.  Human  ego, and desire to do better and excel over other competitors,  leads  to  competitive  bidding,  each  trying    to  outbid  the  others.  Thus in a well advertised open auction-sale, where a  large  number  of  bidders  participate,  there  is  always  a  tendency for  the price  of  the auctioned property  to go up  considerably.  On the other hand, where the auction-sale is  by banks  or financial  institutions, courts etc. to recover  dues, there is an element  of distress, a cloud regarding title,  and  a  chance  of  litigation,  which  have  the  effect   of  dampening  the  enthusiasm  of  bidders  and  making  them  cautious, thereby depressing the price.   There is therefore

Page 20

20

every likelihood of auction price being  either higher  or lower  than the real market price, depending  upon the nature  of  sale.  As a result,  courts are wary  of relying upon auction- sale   transactions  when  other  regular  traditional  sale  transactions  are  available  while  determining  the  market  value  of  the  acquired  land.   This  Court  in    Raj  Kumar    v.    Haryana State   (2007) 7 SCC 609 observed that the element    of  competition in auction-sales makes them unsafe guides  for determining the market value.

7. But  where  an  open   auction-sale  is  the  only  comparable  sale  transaction  available  (on  account  of  proximity  in situation  and proximity in time to the acquired  land),  the court  may have to, with caution, rely upon  the  price   disclosed  by  such  auction-sales,  by  providing   an  appropriate  deduction or cut to offset the competitive  hike  in value.   In this case,  the Reference Court and the High  Court, after referring   to the evidence relating  to other sale  transactions, found them to be inapplicable as they related  to far away properties.  Therefore we are left with only the  auction-sale transactions. On the facts and circumstances,  we are of the view  that a deduction or cut of 20% in the  auction  price  disclosed  by  the  relied  upon  auction  transaction  towards  the  factor  of  “competitive  price  hike”  would  enable  us  to  arrive  at  the  fair  market  price.”  (Underlining added)  

27. The  above  principle  was  reiterated  in  Raj  Kumar  

And Ors. v. Haryana State And Ors., (2007) 7 SCC 609 where  

in para 16, this Court has held as under:-

“16.  All  the  relevant  aspects  have  been  taken  into  consideration  and  we  do  not  find  any  error  in  principle  committed by the High Court justifying  our interference  in  appeal.   An argument was raised that the prices of  lands  fetched in auction had been ignored on the basis that prices  fetched  in  auction-sales  cannot  form  the  basis.   It  was  submitted that there was no general rule that such prices  cannot  be  adopted.   On  considering  the  relevant  facts  disclosed,  it  cannot  be  said  that  the  High  Court  has  committed any error in discarding those auction-sales while  determining  the  compensation  payable.   The  element  of  competition  in  auction-sales  does  not  make  them  safe

Page 21

21

guides.  Similarly, the argument that when a compact piece  of land is  acquired  there cannot be adoption of separate  rates, cannot be accepted in the light  of the decision of this  Court in Union of India  vs. Mangatu Ram (1997) 6 SCC 59.  That case related to acquisition of lands in the vicinity of the  present properties.  The ratio of that decision also supports  the distinction made by the Awarding Officer and the High  Court in the matter of fixing  the land value for the lands in  Satrod Khurd and Satrod Khas.”      

28. The  general  rule  that  the  sale  prices  of  the  

comparable  sales  should  be  relied  upon for  calculating  the  

market value will not apply  when the sale  transactions  relied  

upon  are  auction  sales.  As  per  the  decision  in  Karnataka  

Housing  Board’s  case  (2011)  2  SCC 246,  in  our  view,  20%  

deduction is to be made for competitive bidding.  Deducting  

20%  i.e.  Rs.8,984/-  from  Rs.44,921/-,  balance  arrived  at  

Rs.35,937/- per sq.  yard is fixed as the value for the acquired  

land.    

29. Deduction   Towards   the   Development: The  High  

Court has deducted 40% from the average price to equalize the  

factor of the market value of a small plot of land as compared  

to  large  area  of  land acquired  and the  figure  works  out  to  

Rs.22,460.25.   High  Court  has  also  deducted  one  third  

towards development cost and determined the market value of  

the acquired land at Rs.14,974/- per sq. yard.

Page 22

22

30. Appellants  contend  that  the  rate  of  deduction  as  

applied  by  the  High  Court  was  highly  excessive  as  the  

acquired lands are situated in the area already developed and  

have all potential  for development.  It is submitted that the  

Court  repeatedly  held  that  in  assessing  the  compensation  

payable  in  respect  of  lands  which  had  the  potential  for  

housing  or  commercial  purposes,  normally  20%  of  the  

assessed  value  of  the  land  is  deducted,  depending  on  the  

nature of the land,  its location, extent of expenditure involved  

for  development  and the  land required for  roads and other  

civic amenities etc.  and while so,  thumb rule of  331/3% or  

one  third  cut  on  development  cost  cannot  be  used  in  a  

situation  when  the  exact  development  cost  has  been  

established  through evidence.  The appellants rely upon the  

documents  issued  by  Executive  Engineer  (Annexure  P-5)  to  

contend that the cost of development of Vasant Kunj is only  

Rs.330/- per Sq. Yard.

31. Mr.  Amarendra  Sharan,  learned  Senior  Counsel  

appearing for the respondents contended that in forming a lay  

out  by  Delhi  Development  Authority  or  any  statutory

Page 23

23

authority, 40% of the land area is to be deducted for formation  

of roads, drains, parks and other civic amenities and further  

35% is to be deducted towards development cost for forming  

the lay out,  levelling the road, construction of drainage and  

erection of electricity lines etc. It was submitted that deduction  

for development on both the components worked out to 70-

75% and the High Court was not justified in making standard  

deduction of  one  third.   It  was further  submitted that  if  a  

suitable deduction is made, the compensation awarded by the  

High  Court  seems  to  be  excessive  and  prayer  for  suitable  

reduction of the award is made.    

32. While  making  one  third  deduction  towards  

development cost,  the learned single Judge did not  keep in  

view  the  two  essential  components  of  deduction  for  

development.  Deduction  for  development  consists  of  two  

components:-  firstly,  appropriate  deduction  to  be  made  

towards  the area  required to be utilized for roads, drains  and  

common facilities like parks etc.; secondly, further deduction  

to be made towards the cost of development, that is cost of  

levelling  the land, cost of  laying  roads and drains, erection of

Page 24

24

electrical  poles  and  water  lines  etc.  For  deduction  of  

development  towards  land  and  development  charges,  the  

nature of development, conditions and nature of the land, the  

land required to be set apart under the  Building Rules for  

roads, sewerage, electricity, parks, water supply etc. and other  

relevant  circumstances  involved  are  required  to  be  

considered.

33. In  Haryana  State  Agricultural  Market  Board  And  

Anr. vs.  Krishan Kumar And Ors., (2011) 15 SCC 297,  it was  

held as under:

“10.  It is now well settled that if  the  value of small  developed plots  should be the basis, appropriate deductions  will have to be made therefrom towards the area to be  used  for  roads,  drains,  and  common  facilities  like  park,  open  space, etc.   Thereafter, further deduction  will have to be  made  towards the cost of development, that is, the cost of  leveling the land, cost  of laying roads and drains, and the  cost of drawing electrical, water and sewer lines.”  

34.   Consistent view taken by this Court is that one  

third deduction is made towards the area to be used for roads,  

drains,  and  other  facilities,  subject  to  certain  variations  

depending upon its nature, location, extent and development  

around the area.  Further, appropriate deduction needs to be  

made for development cost, laying roads, erection of electricity

Page 25

25

lines depending upon the location of the acquired land and the  

development that has taken place around the area.    

35. Reiterating the rule of one third deduction towards  

development, in Sabhia Mohammed Yusuf Abdul Hamid Mulla   

(Dead)  by Lrs. and Ors.  vs.  Special  Land Acquisition Officer  

and Ors.,  (2012) 7 SCC 595, this Court in paragraph 19  held  

as under:-

“19.  In fixing the market value  of the acquired land,  which is undeveloped or underdeveloped, the courts  have  generally  approved  deduction of 1/3rd   of the market  value  towards development  cost except when no development  is  required  to  be  made  for  implementation   of  the   public  purpose for which land in acquired.  In  Kasturi vs. State of  Haryana (2003) 1 SCC 354)  the Court held: (SCC pp. 359- 60, para 7)

“7… It is well  settled that in respect of agricultural  land or undeveloped  land which has potential  value  for housing  or commercial  purposes, normally 1/3rd  amount  of compensation has to be  deducted out of  the  amount   of  compensation   payable   on  the  acquired  land subject  to certain variations depending  on its nature, location, extent of  expenditure involved  for development  and the area required  for road and  other  civic  amenities  to  develop  the  land  so  as  to  make  the  plots  for  residential  or  commercial  purposes.  A land may be plain or uneven, the soil of  the  land  may  be  soft   or  hard  bearing   on  the  foundation for  the purpose of  making  construction;  may  be  the  land  is  situated   in  the  midst  of   a  developed area  all around  but that land may have  a  hillock or may be low-lying  or may be having  deep  ditches.   So  the  amount   of  expenses  that  may  be  incurred  in  developing   the  area  also  varies.   A  claimant  who claims that his land is fully developed  and  nothing  more  is  required  to  be  done  for  developmental  purposes, must show  on the basis of  evidence that it is  such a land and it is so located.   In

Page 26

26

the absence  of such evidence, merely saying  that the  area adjoining  his  land is  a developed area,  is  not  enough, particularly when the extent of the acquired  land is large and even if  a small portion of the land is  abutting the main road in the developed area, does not  give the land the character  or a developed  area.  In  84 acres of land acquired  even if  one portion on one  sides abuts the main road, the remaining large area  where planned development is required, needs laying  of  internal  roads,  drainage,  sewer,  water,  electricity  lines, providing civic amenities, etc.  However, in cases  of some land where  there are certain advantages  by   virtue  of the developed area around, it may  help in   reducing  the percentage of cut to be  applied, as the   developmental charges  required may be less on that   account.  There may be various factual factors which   may have to be taken into consideration while applying   the  cut  in  payment  of  compensation  towards  developmental  charges,  may be  in  some  cases  it  is   more than  1/3rd  and in some cases less than 1/3rd.  It   must be remembered that there is difference between a   developed  area  and  an  area  having  potential  value,   which is yet to be developed.  The fact that an area is   developed or adjacent to a developed  area  will  not   ipso facto make every land situated in the area  also   developed  to  be  valued  as  a  building  site  or  plot,   particularly when vast tracts are acquired, as in this   case, for development purpose.” (emphasis supplied)

The  rule  of  1/3rd deduction was  reiterated  in  Tejumal  Bhojwani v. State of U.P. ((2003)10 SCC 525, V. Hanumantha  Reddy v. Land Acquisition  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”   

36. While determining the market value of the acquired  

land,  normally  one  third  deduction  i.e.  331/3%  towards  

development charges is allowed. One third deduction towards  

development  was  allowed  in  Special  Tehsildar,  L.A.  

Vishakapatnam vs. Smt.A. Mangala Gowri, (1991) 4 SCC 218;

Page 27

27

Gulzara Singh & Ors. vs. State of  Punjab & Ors., (1993) 4 SCC  

245;  Santosh Kumari & Ors. vs.  State of Haryana, (1996) 10  

SCC 631; Revenue Divisional Officer-cum-LAO vs. Shaik Azam  

Saheb  etc.,  (2009)  4  SCC  395;  A.P.  Housing  Board vs.  K.  

Manohar Reddy, (2010)12 SCC 707;  Ashrafi  & Ors. vs.  State  

of Haryana & Ors., (2013) 5 SCC 527 and Kashmir Singh vs.  

State of Haryana & Ors., (2014) 2 SCC 165.

37. Depending on nature and location of the acquired  

land,  extent  of  land required to  be  set  apart  and expenses  

involved  for  development,  30%  to  50%  deduction  towards  

development was allowed in Haryana State Agricultural Market   

Board and Anr. vs.  Krishan Kumar and Ors. (2011) 15 SCC  

297;  Deputy Director  Land Acquisition  vs.  Malla  Atchinaidua  

And Ors. AIR 2007 SC 740; Mummidi Apparao (Dead by LR) vs.  

Nagarjuna Fertilizers & Chemical Ltd., AIR 2009 SC 1506; and  

Lal Chand vs. Union of India and Anr. (2009) 15 SCC 769.  

38. In few other cases, deduction of more than 50% was  

upheld.   In  the  facts  and  circumstances  of  the  case  in  

Basavva (Smt.) And Ors. v.  Spl. Land  Acquisition Officer And  

Ors.,            (1996)  9 SCC 640,  this  Court  upheld  the

Page 28

28

deduction of 65%.  In Kanta Devi & Ors. vs. State of Haryana  

And Anr.,  (2008)  15  SCC  201,  deduction   of  60% towards  

development charges was held to be legal.  This Court in Subh  

Ram & Ors. vs.  State of Haryana & Anr., (2010) 1 SCC 444,  

held  that  deduction  of   67%  amount  was  not  improper.  

Similarly, in Chandrasekhar (dead) by L.Rs. and Ors. vs. LAO  

& Anr., (2012) 1 SCC 390, deduction of 70% was upheld.  

39. We have referred to various decisions of this Court  

on deduction towards development to stress upon the point  

that deduction towards development depends upon the nature  

and  location  of  the  acquired  land.  The  deduction  includes  

components  of  land  required  to  be  set  apart  under  the  

building rules for roads, sewage, electricity, parks and other  

common  facilities  and  also  deduction  towards  development  

charges  like  laying  of  roads,  construction  of  sewerage.  

40. Rule  of  one  third  deduction  towards  development  

appears  to  be  the  general  rule.   But  so  far  as  Delhi  

Development  Authority  is  concerned,  or  similar  statutory  

authorities,  where  well  planned  layouts  are  put  in  place,  

larger land area may be utilized  for  forming layout,  roads,

Page 29

29

parks and other common amenities. Percentage of deduction  

for  development  of  land  to  be  made  in  DDA  or  similar  

statutory authorities with reference to various types of layout  

was  succinctly  considered  by  this  Court  in  Lal  Chand vs.  

Union of India & Anr. (2009) 15 SCC 769 and observing that  

the  deduction  towards  the  development  range  from 20% to  

75% of the price of the plots, in paras 13 to 22, this Court held  

as under:-

“13. The percentage of  “deduction for development” to  be made to arrive  at the market  value of  large tracts of  undeveloped  agricultural   land  (with  potential   for  development),  with  reference  to  the  sale   price   of  small  developed plots, varies between 20% to 75% of the price of  such developed plots, the percentage  depending upon the  nature of development of the layout in which the exemplar  plots are situated.

14. The “deduction for development” consists of two  components.  The first is with reference  to the area required  to  be utilized  for developmental works and the second is the  cost of the development  works.  For example, if a residential  layout is formed by DDA or similar statutory authority,  it  may utilize around 40% of the land area in the layout, for  roads,  drains,  parks,  playgrounds  and  civic  amenities  (community facilities), etc.

15. The  development  authority  will  also  incur  considerable  expenditure  for  development  of  undeveloped  land  into  a  developed  layout,  which  includes  the  cost  of  leveling  the  land,  cost  of  providing  roads,  underground  drainage and sewage facilities, laying water lines, electricity  lines and developing parks ands civil amenities, which would  be about 35% of the value of the developed plot.  The two  factors  taken  together  would  be  the  “deduction  for  development” and can account for as much as 75% of the  cost of the developed plot.

Page 30

30

16. On the other hand, if the residential plot is in an  unauthorized  private  residential  layout,  the  percentage  of  “deduction for development” may be far less.  This is because  in an unauthorized layout, usually no land will be  set apart  for parks, playgrounds and community facilities.  Even if any  land is set apart, it is likely to be minimal.  The roads and  drains  will also  be narrower,  just adequate  for movement  of vehicles.  The amount spent on development work would  also be comparatively less and minimal.  Thus the deduction  on  account  of  the  two  factors  in  respect  of  plots  in  unauthorized layouts, would be only about 20% plus 20% in  all 40% as against 75% in regard to DDA plots.

17. The “deduction for development” with reference  to  prices  of  plots  in  authorized private  residential  layouts  may  range  between  50%  to  65%  depending  upon  the  standards and quality of the layout.

18. The position with reference to industrial layouts  will be different.  As the industrial plots will be large (say of  the size of one or two acres or more as contrasted  with the  size of residential plots measuring 100 sq. m to 200 sq m),  and as there  will  be  very  limited civic  amenities   and no  playgrounds, the area to be set apart for development  (for  roads,  parks,  playgrounds and civic  amenities)  will  be far  less; and the cost  to be  incurred for development  will also  be marginally less, with the result the deduction to be made  from the cost of an industrial plot may range only between  45% to 55%  as contrasted  from  65% to 75% for residential  plots.

19. If  the  acquired  land  is  in  a  semi-developed  urban area,  and not  an undeveloped rural  area,  then the  deduction for development  may be as much less, that is, as  little   as  25%  to  40%,  as  some  basic  infrastructure  will  already be available. (Note: The percentages mentioned above  are tentative standards and subject to proof to the contrary.

20. Therefore  the  deduction  for  the  “development  factor” to be made with reference  to the price of a small plot  in a  developed layout, to arrive at the cost of undeveloped  land, will be far more than  the deduction with reference to  the price of a small plot in an unauthorized  private layout  or  an  industrial   layout.   It  is  also  well  known that  the  development  cost  incurred  by  statutory  agencies  is  much  higher than the cost incurred by private developers, having  regard to higher  overheads and expenditure.

Page 31

31

21. Even  among  the  layouts  formed  by  DDA,  the  percentage  of land utilized for roads, civic amenities, parks  and playgrounds may vary with reference to the nature of  layout-whether  it is residential , residential-cum-commercial  or  industrial;  and  even  among   residential  layouts,  the  percentage will differ having regard to  the size of the plots,  width of the roads, extent of community facilities, parks and  playgrounds provided.

22. Some  of  the  layouts  formed  by  the  statutory  development authorities may have  large areas earmarked for  water/sewage  treatment   plants,  water  tanks,  electrical  substations, etc. in addition to the usual areas earmarked  for  roads,  drains,  parks playgrounds and community/civic  amenities.   The purpose  of the aforesaid examples is only to  show  that  the   “deduction  for  development”  factor  is  a  variable percentage and the range of percentage itself being  very wide from 20% to 75%.”

Lal Chand’s case deals with acquisition of lands by DDA under  

the Rohini Residential Housing Scheme where 40% deduction  

was made towards the land area to be utilized for laying down  

of roads, drains etc.   Further deduction of 35% of the value of  

the developed plot towards cost of levelling the land, cost of  

providing  roads,  underground  drainage,  laying  down  water  

lines, electricity lines was made.   

41. In the instant case, having regard to the extent of  

the land acquired and the development in and around Vasant  

Kunj  area,  in  our  view,  it  is  appropriate  to  make  35%  

deduction towards utilization of the land area in the layout for  

roads, drains, parks, playgrounds and civic amenities.  So far

Page 32

32

as the expenditure for development of the large extent of   land  

into  a  developed  area  by  construction  of  proper  roads,  

underground  drainage,  sewerage  and  erection  of  electricity  

lines,  it  is  appropriate  to  make  further  deduction  of  25%,  

though  35% of  the  value  was  deducted  in  Lal  Chand case  

(supra) towards development charges.   Two components taken  

together,  the  total  deduction  to  be  made  would  be  60%.  

60% of Rs.35,937/- works out to Rs.21,562/- and deducting  

the same, the value of the land would be Rs.14,375/- per sq.  

yard. What was awarded by the High Court was Rs.14,974/-  

per  sq.  yard.  Since  the  SLP  (Civil)  No.15272/2011  filed  by  

DDA was dismissed by this Court on 12.5.2011 and the sale  

has become final as against the appellants, we are not inclined  

to  further  reduce  the  value  of  the  acquired  land  from  

Rs.14,974/- per sq. yard as determined by the High Court and  

the compensation awarded by the High Court at Rs.14974/-  

per sq. yard is maintained.             

42. INTEREST:  Contention of the appellants is that on the  

enhanced  compensation,  the  mandatory  interest  under  

Section 34 of the Act has not been awarded to them.   Placing

Page 33

33

reliance  upon  Commissioner  of  Income  Tax,  Faridabad  vs.   

Ghanshyam (HUF), (2009) 8 SCC 412, it is contended that the  

impugned  judgment  is  silent  on  granting  statutory  interest  

under  Section  34  of  the  Land  Acquisition  Act  and  the  

appellants  pray  for  award  of  interest  on  the  enhanced  

compensation.  The appellants filed C.M. No.735/2011 before  

the High Court seeking review for payment of interest which  

according to the appellants was omitted to be included and the  

said application was dismissed by the High Court.

43. Land Acquisition Act, 1894, provides for payment of  

interest  to  the  claimants  either  under  Section  34  or  under  

Section 28 of the Act.  Section 34 of the Act fastens liability on  

the Collector to pay interest on the amount of compensation to  

be worked out in accordance with provisions of Section 23(1)  

and the sub-section thereof, at the rate of 9% per annum from  

the  date  of  taking  possession  until  the  amount  is  paid  or  

deposited.  As per proviso to Section 34, if the compensation  

amount or any part thereof is not paid or deposited within a  

period of  one  year  from the date  of  taking over possession,  

interest shall be payable at the rate of 15% per annum from

Page 34

34

the date of expiry of the said period of one year on the amount  

of compensation or part thereof which has not been paid or  

deposited before the date of such expiry.  

44.  Section  28  empowers  the  courts,  if  it  was  

enhancing  the  compensation  awarded  by  the  Collector,  to  

award interest on the sum in excess of what the Collector had  

awarded as compensation.  Both in terms of Section 34 and  

Section 28, interest at 9% per annum is payable for the first  

year of taking possession and 15% per annum thereafter, if  

the amount of compensation was not paid or deposited within  

a period of one year or deposited thereafter.

45. Award of interest under Section 34 is mandatory in  

as much the word used in the Section is ‘shall’.  The scheme of  

the Act and the express provisions thereof establish that the  

interest payable under Section 34 is statutory.  The claim for  

interest under Section 28 of the Act proceeds on the basis that  

due compensation not having been paid, the claimant should  

be allowed interest on the enhanced compensation amount.  

The award of interest under Section 28 is discretionary power  

vested in the Court and it has to be exercised in a judicious

Page 35

35

manner and not  arbitrarily.   The use of  the word “may” in  

Section  28  does  not  confer  any  arbitrary  discretion  on  the  

Court  to  disallow  interest  for  no  valid  or  proper  reasons.  

Normally,  Court  awards  interest  if  it  enhances  the  

compensation  in  excess  of  the  amount  awarded  by  the  

Collector, unless there are exceptional circumstances.  

46. A  Constitution  Bench  of  this  Court  in  Gurpreet  

Singh vs.  Union of India,  (2006) 8 SCC 457, considering the  

scope of Section 34 and Section 28 of the Act,  has held as  

under:-  

“44. Section  34  of  the  Act  fastens  liability  on  the  Collector  to  pay  interest  on  the  amount  of  compensation  determined under Section 23(1) with interest from the date  of taking possession till date of payment or deposit into the  court to which reference under Section 18 would be made.  On  determination  of  the  excess  amount  of  compensation,  Section  28  empowers  the  court,  if  it  was  enhancing  the  compensation awarded by the Collector, to award interest on  the  sum in  excess  of  what  the  Collector  had  awarded  as  compensation. The award of the court may also direct the  Collector to pay interest on such excess or part thereof from  the date on which he took possession of the land to the date  of payment of such excess into court at the rates specified  thereunder. The Court stated: [Prem Nath Kapur vs. National   Fertilizers Corporation of India Ltd., (1996) 2 SCC 71, SCC p.  77, para 10]

“In other words,  Sections 34 and 28 fasten  the  liability  on  the  State  to  pay  interest  on  the  amount  of  compensation  or  on  excess  compensation  under  Section  28 from the  date  of  the  award  and  decree  but  the  liability  to  pay  interest  on  the  excess  amount  of  compensation  determined by the Court relates back to the date of

Page 36

36

taking  possession  of  the  land  to  the  date  of  the  payment of such excess ‘into the court’.”

45. The  Court  concluded:  (Prem  Nath  Kapur  case,   SCC  p. 78, para 12)

“12. It is clear from the scheme of the Act and the  express language used in Sections 23(1) and (2), 34  and 28  and now Section  23(1-A)  of  the  Act  that  each  component  is  a  distinct  and  separate  one.  When  compensation  is  determined  under  Section  23(1),  its quantification, though made at different  levels,  the  liability  to  pay  interest  thereon  arises  from the date on which the quantification was so  made but, as stated earlier, it relates back to the  date of taking possession of the land till the date of  deposit  of  interest  on  such  excess  compensation  into the court. … The liability to pay interest is only  on the excess amount of compensation determined  under Section 23(1) and not on the amount already  determined by the Land Acquisition Officer  under  Section 11 and paid to the party or deposited into  the  court  or  determined  under  Section  26  or  Section  54  and  deposited  into  the  court  or  on  solatium  under  Section  23(2)  and  additional  amount under Section 23(1-A).”

47. In the scheme of the Act, considering the different  

stages  at  which  interest  is  payable  on  the  compensation  

amount/enhanced  compensation,  the  Constitution  Bench of  

this Court in Gurpreet Singh’s case further held as under:-

“32. In the scheme of the Act, it  is seen that  the award of compensation is at different stages.  The  first  stage  occurs  when  the  award  is  passed.  Obviously,  the  award  takes  in  all  the  amounts  contemplated  by  Section  23(1),  Section  23(1-A),  Section 23(2) and the interest contemplated by Section  34 of the Act.  The whole of that amount is paid or  deposited by the Collector in terms of Section 31 of the  Act.   At  this  stage,  no  shortfall  in  deposit  is  contemplated, since the Collector has to pay or deposit  the amount awarded by him.  If a shortfall is pointed  out, it may have to be made up at that stage and the

Page 37

37

principle  of  appropriation  may  apply,  though  it  is  difficult to contemplate a partial deposit at that stage.  On the deposit by the Collector under Section 31 of the  Act, the first stage comes to an end subject to the right  of the claimant to notice of the deposit and withdrawal  or acceptance of the amount with or without protest.

33. The second stage occurs on a reference under  Section  18  of  the  Act.   When  the  Reference  Court  awards enhanced compensation, it has necessarily to  take  note  of  the  enhanced  amounts  payable  under  Section  23(1),  Section  23(1-A),  Section  23(2)  and  interest  on  the  enhanced  amount  as  provided  in  Section 28 of the Act and costs in terms of Section 27.  The Collector has the duty to deposit these amounts  pursuant to the deemed decree thus passed.  This has  nothing to do with the earlier deposit made or to be  made under and after the award.  If the deposit made,  falls short of the enhancement decreed, there can arise  the question of appropriation at that stage, in relation  to the amount enhanced on the reference.

34. The third stage occurs, when in appeal, the High  Court  enhances  the  compensation  as  indicated  already.   That  enhanced  compensation  would  also  bear  interest  on  the  enhanced  portion  of  the  compensation,  when  Section  28  is  applied.   The  enhanced  amount  thus  calculated  will  have  to  be  deposited in addition to the amount awarded by the  Reference Court if it had not already been deposited.   

35. The  fourth  stage  may  be  when  the  Supreme  Court  enhances the compensation and at that stage  too, the same rule would apply.”

48.  By going through the judgment of reference court as  

well  as  the  High  Court,  we  find  that  the  appellants  were  

awarded interest in terms of Section 34 and Section 28 of the  

Act.   Section 4(1) notification was issued on 19.02.1997.  The  

reference court has not enhanced the compensation amount;

Page 38

38

but  has  only  confirmed the  award passed by the  Collector.  

However, while dismissing the reference,  reference court held  

that the appellant shall be entitled to get interest  in terms of  

the  provisions of the Act for the period from 19.02.1997 till  

the  date  of  payment,  meaning  thereby  that  the  statutory  

interest in terms of Section 34 of the Act is payable.

49.  When the High Court enhanced the compensation,  

the High Court held that the appellants shall be paid interest  

in  terms  of  Section  28  of  the  Act.  On  the  enhanced  

compensation, High Court ordered payment of interest at the  

rate of 9%  from 19.02.1997 to 18.2.1998 and thereafter at the  

rate of 15% per annum till the date of payment.  The relevant  

portion of the judgment of the High Court reads as under:-

“On the enhanced market  value,  the appellant  shall be paid interest under Section 28 of the Act @ 9%  per annum from 19.02.1997, the date of issuance of  Section  4  notification  for  the  first  year  ending  on  18.02.1998 and thereafter, @ 15% per annum till the  date of tender of compensation.  Interest shall also be  paid  on  the  solatium and the  additional  amount  in  view of the judgment of the Supreme Court in the case  of Sunder Vs. UOI reported as 93(2001) DLT 569 (SC).”  

Since  the  statutory  interest  under  Section 34 and also  the  

interest in terms of Section 28 of Act had been awarded to the

Page 39

39

appellants, we find no merit in the grievance of the appellants  

as to the payment of interest.

50. COSTS: By its  judgment  dated 24.12.2010,  the  High  

Court enhanced the compensation at the rate of Rs.14,974/-  

per  sq.  yard,  but  the  High  Court  had  then  awarded  only  

costs  of  Rs.20,000/-.   Thereafter,  the  appellants  filed  C.M.  

No. 735/2011,  interalia, contending that they ought to have  

been awarded entire costs at the rate of Rs. 50,000/- per sq.  

yard,  enhanced  compensation  as  claimed by  the  claimants.  

Appellants  also  claimed  that  the  entire  court  fees  of  Rs.48  

lakhs affixed on the memo of appeal be included in the costs.  

High Court rejected the plea of the appellants for inclusion of  

the  entire  court  fees  and  costs  at  the  rate  of  enhanced  

compensation  for  the  acquired  land  at  Rs.50,000/-  per  sq.  

yard  as  claimed  by  the  appellants.  But  the  High  Court  

modified its order by awarding proportionate costs in favour of  

the appellants over and above the sum of Rs.20,000/-.   

51. The appellant, party-in-person, contended that they  

have paid court fees of Rs.48 lakhs and High Court ignored  

the mandatory provisions of law in awarding costs and that

Page 40

40

court fees is an integral part of costs.  It was submitted that  

the  impugned  order  dated  13.10.2011  awarding  “grant  of  

proportionate  costs”  is  not  in  accordance  with  well  settled  

principle  of  law.  Appellants  further  contended  that  being  

partly  successful  before  the  High  Court,  they  cannot  be  

deprived of their claim of entire court fees and the costs.

52. The  learned  Senior  Counsel  for  respondents  

submitted that as per the well settled principle, the High Court  

has  awarded  proportionate  costs  and  there  is  no  improper  

exercise of discretion warranting interference by this Court.   

53. Section 27 of the Act deals with costs.  Section 27  

reads as under:

“27. Costs:- (1) Every  such  award  shall  also  state the amount of costs incurred in the proceedings  under  this  Part,  and  by  what  persons  and in  what  proportions they are to be paid.

(2) When  the  award  of  the  Collector  is  not  upheld,  the  costs  shall  ordinarily  be  paid  by  the  Collector, unless the court shall be of opinion that the  claim of the applicant was so extravagant or that he  was  so  negligent  in  putting  his  case  before  the  Collector that some deduction from his costs should  be made or that he should pay a part of the Collector’s  costs.”

54. The language of Section 27(1) is clear and very wide  

and it gives power to the courts to order costs to be paid by  

what persons and in what proportions they are to be paid.  In

Page 41

41

making order  for  costs  under  Section  27(1),  the  court  may  

have regard to the provisions of Section 35 C.P.C.  Analysing  

sub-section (2)  of  Section 27,  it  appears to consist  of  three  

parts, viz., (i) When the award of the Collector is not upheld,  

the costs shall ordinarily be paid by the collector as directed  

by the Court; (ii) the court is not bound to do so in every case.  

If  the court forms opinion that the claim of the claimant is  

extravagant or that he was so negligent in putting his case  

before the Collector, then the court may make a different order  

as regards costs and (iii) the court may in such cases direct,  

that some deduction be made from the costs of the claimant or  

that he should pay a part of the Collector’s costs.

55. Ordinarily,  when  a  litigant  succeeds  in  part  and  

fails in part, the equitable order made is that he should receive  

proportionate costs.  When considering the appellants’ claim  

in C.M. No. 735 of 2011, in exercise of its discretion, the High  

Court  rightly  awarded  proportionate  costs  and  accordingly  

directed  payment  of  such  proportionate  costs  of  over  and  

above Rs.20,000/- as originally ordered. Merely because the  

appellants claimed compensation at the rate of  Rs.50,000/-

Page 42

42

per  sq.yard,  the  respondents  cannot  be  saddled  with  the  

liability of paying the entire costs and the court fees paid by  

the appellants.  There is no improper exercise of discretion by  

the High Court in awarding proportionate costs and we find no  

merit in the claim of the appellants claiming full costs.   

56. We  may  incidentally  refer  to  the  statement  of  

learned Senior Counsel for the respondents that compensation  

amount of  about Rs.40 crores has already been paid to the  

appellants.

57. We, therefore, do not find any merit in these appeals  

and the appeals are dismissed accordingly.  Parties are to bear  

their respective costs.

…………………………..J (T.S. Thakur)

…………………………..J (R. Banumathi)  

New Delhi; October 17, 2014