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REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.7314-7365 of 2005

UNION OF INDIA                                 ….. APPELLANT

VERSUS

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

WITH

Civil Appeal No.77-273 of 2006, Civil Appeal No.613-627  of 2006, Civil Appeal No.5058 of 2006, Civil Appeal  No.4683 of 2006, Civil Appeal No.4599 of 2006, Civil Appeal No.5059 of  2006, Civil Appeal No.5237 of 2006, Civil Appeal No.5238 of  2006, Civil Appeal No.4744 of 2006, Civil Appeal No…8599  of 2014 @ SLP (C) No.21015 of  2006, Civil Appeal No…8600 of 2014 @ SLP (C) No.21734 of  2006, Civil Appeal No.118 of 2007, Civil Appeal No.3181 of  2007 and Civil Appeal No.870 of 2007.

J U D G M E N T

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ADARSH KUMAR GOEL, J.

1. Leave granted in SLPs.

2. These  appeals  have  been  preferred  against  the  

judgment of the Punjab & Haryana High Court in a group  

of  matters  involving  the  issue  of  determination  of  

compensation  for  the  land  acquired  by  the  appellant-

Union of India in two sets of acquisition.

2. One of the notifications under Section 4 of the Land  

Acquisition Act, 1894 (for short “the Act”), in question,  

was issued on 14th March, 1989 to acquire 72.9375 acres  

of land in villages Bir  Kheri  Gujran, District  Patiala,  for  

development of military cantonment at Patiala in Punjab.  

The  Collector  vide  award  dated  13th August,  1991,  

assessed the market value of the acquired land at the  

rate  of  Rs.2  lakh  per  acre.   The  Reference  Court  

enhanced the amount of compensation to Rs.9,05000/-  

per  acre.   A  learned  Single  Judge  of  the  High  Court  

reduced  the  same  to  Rs.105.80  per  square  yard  vide  

order dated 1st April, 1999, which has been affirmed by  

the Division Bench.   

3. In  the  other  set  of  acquisition,  covered  by  

notification  under  Section  4  of  the  Act  dated  16th  

September,  1988,  for  the  land  measuring  498.03,  the  

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Collector  vide award dated 27th March,  1991,  awarded  

compensation at the rate of Rs.2 lakh per acre for the  

land in villages Kheri Gujran and Bir Kheri Gujran and for  

the land in villages Sher Majra, Haji Majra and Pasiana at  

the rate of Rs.1,50,000/- per acre. The Reference Court  

vide award                dated 6th April, 1998 enhanced the  

compensation to Rs.2,75,000/- per acre for the land in  

villages Kheri Gujran and Bir Kheri Gujran.  In respect of  

land in the revenue estate of village Haji Majra, for the  

land  upto  500  meters  on  Patiala  Sangrur  Road,  

compensation was awarded at the same rate but for the  

rest  of  the  land  compensation  was  awarded  at  

Rs.2,33,750/-  per  acre.   For  villages  Pasiana  and  Sher  

Majra, the rate awarded was the same as for village Haji  

Majra.  On further appeal, the learned Single Judge of the  

High  Court  enhanced  the  amount  of  compensation  to  

Rs.4,48,159/- per acre which has been affirmed by the  

Division  Bench  with  slight  modification  by  way  of  

enhancement.

4. Thus, the Division Bench has upheld the view of the  

learned Single Judge in reducing the compensation from  

Rs.9,05,000/- per acre, fixed by the Reference Court, to  

Rs.105.80 per square yard fixed by the learned Single  

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Judge in respect of the land covered by notification dated  

14th March,  1989  and  for  the  land  covered  under  

notification  dated  16th September,  1988,  the  

compensation was marginally enhanced to Rs.4,54,662/-  

per acre.

5. Aggrieved by the judgment of the Division Bench,  

the Union of India has preferred these appeals.  However,  

the  land  owners  have  accepted  the  compensation  

awarded by the Division Bench.

6. We have heard learned counsel for the parties.

7. Learned  counsel  for  the  appellant-Union  of  India  

submitted  that  enhancement  of  compensation  beyond  

the award of the Collector by the Reference Court and  

the High Court was not justified as the sale transactions  

relied upon by the land owners could not be the basis for  

fixation  of  compensation.   The  said  instances  were  of  

land nearer to the city which land, being better located,  

had higher value.  It is for this reason that in respect of  

the land covered by notification dated 14th March, 1989,  

rate of compensation fixed by the Reference Court was  

reduced by the High Court.  Plea that for taking into small  

instances  cut  of  60%  should  be  applied  was  wrongly  

disregarded.   Thus,  methodology followed by the High  

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Court was not appropriate.  Reliance has been placed on  

law laid down in Basant Kumar and ors. vs. Union of  

India and Ors.1, Smt.     Indumati Chitaley   vs. Union of  

India and Anr.2 and Special Land Acquisition Officer  

vs. Karigowda and Ors.3.  It was further submitted that  

the  sale  transactions  Exp.  P-21  and  P-22  have  been  

wrongly  relied  upon  ignoring  the  objection  of  the  

appellant and on that basis the Division Bench erred in  

enhancing the compensation to Rs.4,54,662/- per acre in  

respect of the acquisition covered by notification dated  

16th September, 1988.

8. On  the  other  hand,  learned  Counsel  for  the  land  

owners  supported  the  view  taken  in  the  impugned  

judgment.  It was pointed out that the land was located  

adjacent  to  the  municipal  limits  near  Golf  Course  and  

residential area.  Its distance was 3 kms. from Phagwara  

Chowk.  The land had potential  value for development  

into residential and commercial area.   

9. We have considered the rival submissions.  Before  

considering  the  merits  of  the  rival  contentions,  we  

consider it appropriate to refer to the discussion on the  

issue by the High Court which is as follows:- 1 (1996) 11 SCC 542 2 (1995) Suppl. 4 SCC 219 3 (2010) 5 SCC 708

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“In  the  present  case,  situation  is   altogether  different.   While  deciding  issue  regarding cut, referred to above, argument   of  counsel  for  the  Union of  India  that  cut   imposed is required to be enhanced is also  liable  to be rejected.   In  view of  situation  the  land  under  acquisition,  as  referred  to  above,  cut  imposed to  the  extent  of  20%  was  perfectly  justified.   Counsel  for  the  Union  of  India  has  tried  to  support  his   argument by citing  various  judgments  but   no  benefit  of  those  judgments  can  be  extended to Union of India because at the   time  when  matter  was  argued  before   Additional District Judge, no serious dispute  was  raised  by  Union  of  India  regarding  potential  value  of  the  land  under  acquisition.   No evidence was led to show  that the land acquired had no potential for   developing it into residential or commercial   area.  Argument to impose higher cut was  rightly rejected by the learned Single Judge,   after taking note of evidence on record.

Argument  of  counsel  for  the  Union  of   India that since the land was situated at a   distance  of  1  to  1-1/2  kms  of  municipal   limits,  as  such,  higher  cut  be  imposed,  is   not justified, in view of evidence on record.   It had come in evidence that the land under  acquisition  was  situated  next  to  the  municipal limits and was situated very near   to golf course.  In view of this, no case is   made out for further cut as prayed for.

In the present case, learned Single Judge  has  rightly  placed  reliance  to  award  compensation upon sale instance Ex.  P-21  and  Ex.P-22.   While  determining   compensation,  reliance  has  also  been  placed on statements PW 4, P27, PW10.  It   had  come  on  record  that  land  subject   matter of sale instance, referred to above,   was situated within a distance of 20 killas or   less from the land under acquisition.  Sale  deed  Ex.  P23  was  rightly  ignored  as  it   pertained  to  constructed  house  and  there   was  no  evidence  on  record  to  show  that   what was the value of land underneath the  

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constructed  portion  of  the  house.   Under   these  circumstances,  this  Court  is  of  the  opinion  that  award  of  compensation  @  Rs.105.80  paisa  per  square  yard  to  the  claimants by the learned Single Judge was  perfectly justified.”

10. It  is  well  settled in determining compensation for  

acquired land,  price paid  in a  bona fide transaction of  

sale  by  a  willing  seller  to  a  willing  buyer  is  adopted  

subject  to  such transaction being adjacent  to  acquired  

land, proximate to the date of acquisition and possessing  

similar  advantages.   Of  course,  there  are  other  well  

known methods of valuation like opinion of experts and  

yield method.  In absence of any evidence of a similar  

transaction,  it  is  permissible  to  take  into  account  

transaction  of  nearest  land  around  the  date  of  

notification  under  Section  4  of  the  Act  by  making  a  

suitable allowance.  There can be no fixed criteria as to  

what would be the suitable addition or subtraction from  

the value of the relied upon transaction.  In  Chimanlal  

Hargovinddas vs.  Special Land Acquisition Officer,  

Poona and anr.  4  , this Court summed up the principle as  

follows:-  

“4. The following factors must be etched on  the mental screen:

(1) ……………. (2) …………….

4 (1988) 3 SCC 751

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(3) ……………. (4) ……………. (5) The  market  value  of  land  under  

acquisition has to be determined as on the  crucial date of publication of the notification  under Section 4 of the Land Acquisition Act   (dates of notifications under Sections 6 and  9 are irrelevant).

(6) The determination has to be made  standing on the date line of valuation (date  of  publication  of  notification  under  Section   4)  as  if  the  valuer  is  a  hypothetical   purchaser willing to purchase land from the  open  market  and  is  prepared  to  pay  a  reasonable price as on that day. It has also   to be assumed that the vendor is willing to   sell the land at a reasonable price.

(7) In  doing  so  by  the  instances  method,  the  court  has  to  correlate  the  market  value  reflected  in  the  most  comparable  instance  which  provides  the  index of market value.

(8) Only genuine instances have to be  taken  into  account.  (Sometimes  instances   are rigged up in anticipation of acquisition of   land.)

(9) Even  post-notification  instances  can  be  taken  into  account  (1)  if  they  are  very  proximate,  (2)  genuine  and  (3)  the  acquisition  itself  has  not  motivated  the  purchaser to pay a higher price on account   of  the  resultant  improvement  in  development prospects.

(10) The most comparable instances out   of  the  genuine  instances  have  to  be  identified on the following considerations:

(i) proximity from time angle, (ii) proximity from situation angle. (11) Having  identified  the  instances  

which provide the index of market value the  price reflected therein may be taken as the  norm  and  the  market  value  of  the  land  under  acquisition  may  be  deduced  by  making  suitable  adjustments  for  the  plus   and  minus  factors  vis-à-vis  land  under  

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acquisition  by  placing  the  two  in  juxtaposition.

(12) A balance-sheet of plus and minus  factors may be drawn for this purpose and  the  relevant  factors  may  be  evaluated  in  terms  of  price  variation  as  a  prudent   purchaser would do.

(13) The market value of the land under   acquisition has thereafter to be deduced by  loading  the  price  reflected  in  the  instance  taken as norm for plus factors and unloading  it for minus factors.

(14) The  exercise  indicated  in  clauses   (11)  to  (13)  has  to  be  undertaken  in  a   common sense manner as a prudent man of   the  world  of  business  would  do.  We  may  illustrate  some  such  illustrative  (not   exhaustive) factors:

Plus factors Minus factors

1.  smallness  of  size

1. largeness of area

2.  proximity  to  a  road

2. situation in the  interior  at  a  distance from the  road

3.  frontage  on  a  road

3. narrow strip of  land with very small  frontage compared  to depth

4. nearness to  developed area

4. lower level  requiring the  depressed portion  to be filled up

5. regular shape 5. remoteness  from developed  locality

6.  level  vis-à-vis  land  under  acquisition

6.  some special  disadvantageous  factor which  would deter a  purchaser

7.  special  value  for  an  owner  of  an  adjoining  property to whom  

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it may have some  very  special  advantage

(15) The evaluation  of  these factors  of   course depends on the facts of each case.   There cannot be any hard and fast or rigid   rule.  Common sense is  the best  and most   reliable guide. For instance, take the factor   regarding  the  size.  A  building  plot  of  land   say  500  to  1000  sq.  yds.  cannot  be  compared with a large tract or block of land  of say 10,000 sq. yds. or more. Firstly while   a smaller plot is within the reach of many, a  large block of land will have to be developed   by preparing a  lay out,  carving out  roads,  leaving  open  space,  plotting  out  smaller   plots, waiting for purchasers (meanwhile the  invested money will be blocked up) and the   hazards of an entrepreneur. The factor can   be  discounted  by  making  a  deduction  by  way of an allowance at an appropriate rate   ranging approximately between 20 per cent   to 50 per cent to account for land required   to  be  set  apart  for  carving  out  lands  and  plotting out small plots. The discounting will   to some extent also depend on whether it is   a rural area or urban area, whether building  activity  is picking up, and whether waiting   period  during  which  the  capital  of  the  entrepreneur  would  be  locked  up,  will  be  longer or shorter and the attendant hazards.

(16) Every case must be dealt  with on  its own fact pattern bearing in mind all these  factors  as  a  prudent  purchaser  of  land  in   which position the judge must place himself. (17) These are general guidelines to be  applied  with  understanding  informed  with   common sense.”

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Again in  Viluben Jhalejar Contractor (D) by LRs. vs.  

State of Gujarat   5  ,   it was observed:-

“24. The purpose for which acquisition is made  is  also  a  relevant  factor  for  determining  the  market  value.  In  Basavva v.  Spl.  Land  Acquisition  Officer,  (1996)  6  SCC  640,  deduction  to  the  extent  of  65%  was  made  towards development charges.

25. In  Bhagwathula  Samanna,  (1991)  4  SCC  506, it  has been held: (SCC pp. 510-11, para   11)

“11.  The  principle  of  deduction  in  the  land  value covered by the comparable sale is thus   adopted in order to arrive at the market value  of the acquired land. In applying the principle it   is necessary to consider all relevant facts. It is   not the extent of the area covered under the  acquisition  which  is  the  only  relevant  factor.   Even in the vast area there may be land which   is  fully  developed  having  all  amenities  and  situated in an advantageous position. If smaller   area within the large tract is already developed  and suitable for building purposes and have in   its  vicinity  roads,  drainage,  electricity,   communications,  etc.  then  the  principle  of   deduction simply for the reason that it is part   of  the  large  tract  acquired,  may  not  be  justified.”

26. In  L. Kamalamma, (1998) 2 SCC 385, this  Court held: (SCC p. 387, para 6) “Ext. B-30 is a sale deed dated 9-8-1976, the   transaction  having  taken  place  prior  to  eight   months  from  the  issue  of  the  preliminary   notification  for  acquisition  of  land  in  the  present  case.  Having found that the piece of   land referred in Ext. B-30 is situated very close   to  the  lands  that  are  acquired  under  the  notification  in  question  the  Reference  Court   and  the  High  Court  relied  upon  the  said  

5 (2005) 4 SCC 789

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document  and,  in  our  view,  rightly.  Further  when  no  sales  of  comparable  land  were  available where large chunks of land had been  sold,  even  land  transactions  in  respect  of   smaller extent of land could be taken note of   as  indicating  the  price  that  it  may  fetch  in   respect  of  large  tracts  of  land  by  making   appropriate  deductions  such  as  for   development of the land by providing enough  space  for  roads,  sewers,  drains,  expenses  involved  in  formation  of  a  layout,  lump  sum  payment as also the waiting period required for   selling the sites that would be formed.”

27. In  Administrator  General  of  W.B. v.  Collector, (1988) 2 SCC 150, deduction to the  extent of 53% was allowed.

28. In  K.S.  Shivadevamma v.  Asstt.  Commr.  and Land Acquisition Officer, (1996) 2 SCC 62,  it was held: (SCC p. 65, para 10)

“10.  It  is  then  contended  that  53%  is  not   automatic but depends upon the nature of the  development  and  the  stage  of  development.   We  are  inclined  to  agree  with  the  learned  counsel that the extent of deduction depends  upon development  need in  each case.  Under   the Building Rules 53% of land is required to be  left out. This Court has laid as a general rule   that for laying the roads and other amenities   33-1/3% is required to be deducted. Where the  development  has  already  taken  place,   appropriate  deduction  needs  to  be  made.  In   this case, we do not find any development had  taken  place  as  on  that  date.  When  we  are  determining  compensation  under  Section  23(1),  as  on  the  date  of  notification  under  Section 4(1), we have to consider the situation   of the land development, if already made, and  other relevant facts as on that date. No doubt,   the  land  possessed  potential  value,  but  no   development had taken place as on the date.   In  view  of  the  obligation  on  the  part  of  the  owner  to  hand  over  the  land  to  the  City   Improvement  Trust  for  roads  and  for  other   amenities  and  his  requirement  to  expend  

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money  for  laying  the  roads,  water  supply   mains,  electricity  etc.,  the  deduction  of  53%  and  further  deduction  towards  development   charges  @ 33-1/3%,  as  ordered  by  the  High  Court, was not illegal.”

29. In  Hasanali  Khanbhai  & Sons v.  State  of  Gujarat (1995) 5 SCC 422 and Land Acquisition  Officer v.  Nookala  Rajamallu,  (2003)  12  SCC  334 : (2003) 10 Scale 307, it has been noticed  that  where  lands  are  acquired  for  specific   purposes  deduction  by  way  of  development  charges is permissible.

30. We are not, however, oblivious of the fact   that  normally  one-third  deduction  of  further   amount of compensation has been directed in   some cases. (See  Kasturi v.  State of Haryana,  (2003) 1 SCC 354, Tejumal Bhojwani v. State of  U.P.,  (2003)  10  SCC  525,  V.  Hanumantha  Reddy v.  Land Acquisition Officer & Mandal R.   Officer, (2003) 12 SCC 642, H.P. Housing Board  v. Bharat S. Negi, (2004) 2 SCC 184 and Kiran  Tandon v.  Allahabad  Development  Authority,   (2004) 10 SCC 745.)

31. In  Registrar,  University  of  Agricultural   Sciences5 whereupon Mr Ranjit Kumar placed  strong  reliance,  the  Court  noticed  that  if  the  acquisition  is  made  for  agricultural  purpose,   question  of  development  thereof  would  not   arise; but if the sale instance was in respect of   a small piece of land whereas the acquisition is   for a large piece of land, although development   cost  may  not  be  deducted,  there  has  to  be   deduction for largeness of the land and also for   the  fact  that  these  are  agricultural  lands.  In   that view of the matter, deduction at the rate  of 33% made by the High Court was upheld. It   may not, therefore, be correct to contend, as  has been submitted by Mr. Ranjit Kumar, that   there cannot  be different  deductions,  one for   the  largeness  of  the  land  and  another  for   development costs.”

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11. As  regards  the  judgments  relied  upon  by  the  

appellant,  the  same are  distinguishable.   In  Indumati  

Chitaley  case (supra),  it was noticed that the land in  

question was agricultural land which could not be valued  

at par with the value of the non-agricultural land as was  

sought to be claimed on behalf of the appellant.  In the  

said case, unlike the present case, there was no finding  

that  the  land  had  immediate  potential  for  

residential/commercial  use.  In  Basant  Kumar  case  

(supra),  it  was  observed  that  while  considering  an  

instance of developed land as the basis for determining  

the value of the agricultural land, one third of the value  

has  to  be  deducted  towards  providing  amenities  like  

roads, parks, electricity, sewage etc.  We have already  

noted the law laid down by this Court that extent of cut  

depends  on  individual  fact  situations.   In  Karigowda  

case  (supra),  it  was  observed  that  the  existing  

potentiality  alone  has  to  be  taken  into  consideration  

while determining the compensation.  Remote beneficial  

factors  cannot  be  made the  basis  for  determining  the  

compensation.  It was further observed that comparable  

sales  method  is  a  preferred  method  over  the  other  

methods for determining the compensation.  There is no  

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CIVIL APPEAL NO.7314-7365/2005

dispute  with  these  propositions  but  in  the  facts  and  

circumstances of the case, we are unable to hold that the  

view taken by the High Court is vitiated by any error of  

principle  propounded  in  the  relied  upon  judgment  or  

otherwise.

12. We, thus, do not find any ground to interfere with  

the impugned judgment.

13. The  appeals  are  dismissed  with  no  order  as  to  

costs.

….…………………………….J. [ V. GOPALA GOWDA ]

….……………………………..J. NEW DELHI       [ ADARSH KUMAR GOEL ] September  9, 2014    

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