REPORTABLE

IN THE SUPREME COURT OF INDIA

     CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.6127-6128 OF 2011 (Arising out of Special Leave Petition (Civil) Nos.22086-22087 of 2009)

Valliyammal and another etc. … Appellants

Versus

Special Tahsildar (Land Acquisition) and another etc. … Respondents

With

CIVIL APPEAL NOS.6132-6133 OF 2011 (Arising out of SLP(C) Nos. 25581-25582 of 2009)

CIVIL APPEAL NOS.6135-6138 OF 2011 (Arising out of SLP(C) Nos. 25587-25590 of 2009)

CIVIL APPEAL NO.6134 OF 2011 (Arising out of SLP(C) Nos. 25591 of 2009)

CIVIL APPEAL NOS.      6139-6140 OF 2011   (Arising out of SLP(C) Nos. 25596-25597 of 2009)

CIVIL APPEAL NOS.6141-6146 OF 2011 (Arising out of SLP(C) Nos. 33777-33782 of 2009)

CIVIL APPEAL NO.6147 OF 2011 (Arising out of SLP(C) No. 33808 of 2009)

CIVIL APPEAL NOS. 6148-6154 OF 2011 (Arising out of SLP(C) Nos. 2194-2200 of 2010)

CIVIL APPEAL NO.6155 OF 2011 (Arising out of SLP(C) No. 12581 of 2010)

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CIVIL APPEAL NO.6156 OF 2011 (Arising out of SLP(C) No. 22831 of 2010)

CIVIL APPEAL NO.6157 OF 2011 (Arising out of SLP(C) No. 23654 of 2010)

CIVIL APPEAL NO. 6158 OF 2011 (Arising out of SLP(C) No. 23655 of 2010)

CIVIL APPEAL NO.6159 OF 2011 (Arising out of SLP(C) No. 23656 of 2010)

CIVIL APPEAL NO. 6160 OF 2011 (Arising out of SLP(C) No. 23657 of 2010)

CIVIL APPEAL NO.6161 OF 2011 (Arising out of SLP(C) No. 23658 of 2010)

CIVIL APPEAL NO.6162 OF 2011 (Arising out of SLP(C) No. 23659 of 2010)

CIVIL APPEAL NO.6163 OF 2011 (Arising out of SLP(C) No. 23666 of 2010)

CIVIL APPEAL NO. 6164 OF 2011 (Arising out of SLP(C) No. 23669 of 2010)

CIVIL APPEAL NO. 6165 OF 2011 (Arising out of SLP(C) No. 23641 of 2010)

CIVIL APPEAL NO.6166 OF 2011 (Arising out of SLP(C) No. 23643 of 2010)

CIVIL APPEAL NO.6170 OF 2011 (Arising out of SLP(C) No. 1147 of 2011)

CIVIL APPEAL NO. 6168 OF 2011 (Arising out of SLP(C) No. 1961 of 2011)

CIVIL APPEAL NO.6169 OF 2011 (Arising out of SLP(C) No. 2187 of 2011)

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CIVIL APPEAL NO. 6171 OF 2011 (Arising out of SLP(C) No. 3520 of 2011)

CIVIL APPEAL NO. 6167 OF 2011 (Arising out of SLP(C) No. 26825 of 2011)

J U D G M E N T

G.S. Singhvi,  J.

1. Delay  in  filing  Special  Leave  Petition  (Civil)  Nos.33777-

33782/2009,  22831/2010,  23641/2010,  23643/2010  and  1961/2011  is  

condoned.

2. Leave granted.

3. These  appeals  filed  against  the  judgments/orders  passed  by  

different  Division  Benches  of  the  Madras  High  Court  substantially  

reducing the amount of compensation determined by Additional District  

Judge,  Erode  and  Principal  Subordinate  Judge,  Erode  (hereinafter  

referred to as, “the Reference Court”) are illustrative of the plight of the  

owners of small parcels of land, who are deprived of the only source of  

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livelihood and who have to spend substantial  amount in litigation and  

wait for years together to get just and reasonable compensation in lieu of  

the compulsory acquisition of their land by the State.  

4. For the sake of convenience,  we shall  first advert  to the factual  

matrix of the appeals arising out of SLP (C) Nos.25581-82 of 2009 –  

Jaganatha Gounder v. Special Tahsildar (Land Acquisition), Erode and  

another  because  learned  counsel  for  the  parties  made  submissions  

keeping in view the factual matrix of those cases.

5. In exercise of the powers vested in it  under Section 4(1) of the  

Land Acquisition Act,  1894 (for short, “the Act”), the Government of  

Tamil  Nadu issued  notification  dated 17.1.1997 for  the  acquisition  of  

55.89 acres land comprised in different survey numbers of village Erode  

for construction of houses by the Tamil Nadu Housing Board (for short,  

“the Board”).   

6. By an award dated 3.3.2000, the Land Acquisition Officer fixed  

market  value of  the acquired land at  the rate  of  Rs.50,000/-  per  acre.  

This did not satisfy the appellants who filed applications under Section  

18(1) of  the Act and claimed compensation at  the rate of  Rs.50/-  per  

square yard by asserting that the acquired land is situated near Erode-

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Perundurai  and Sennimalai  Road junction and residential  colonies like  

Anna  Nagar,  Sri  Nagar,  Bharthi  Nagar,  Rail  Nagar,  Jeeva  Nagar,  

Subramania  Nagar,  Kalaigner  Karunanidhi  Nagar,  Arts  College,  

Women’s College, Kongu Higher Secondary School, St. Joseph Clinic,  

Hospitals etc. and was having potential for being used for housing and  

business purposes.  Thereupon, the Collector made reference to the Court  

for the determination of the compensation payable to the appellants.  The  

Reference  Court  considered  the  pleadings  of  the  parties  and evidence  

produced  by  them  and  concluded  that  the  appellants  are  entitled  to  

compensation at the rate of Rs.28/- per square feet.

7. Both, the appellants and the respondents challenged the judgment  

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

They also filed applications under Order XLI Rule 27 of the Code of  

Civil Procedure for permission to adduce additional evidence.  The High  

Court allowed the applications and directed the Reference Court to give  

opportunity to the parties to adduce additional evidence and make fresh  

determination of the compensation payable to the appellants and remit its  

findings along with the documents.

8. In  compliance  of  the  direction  given  by  the  High  Court,  the  

Reference  Court  considered  the  additional  evidence  produced  by  the  

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parties and opined that the appellants are entitled to compensation at the  

rate of Rs.19.28 per square feet.    

9. After receiving the report of the Reference Court, the High Court  

considered the evidence produced by the parties and held that valuation  

of the land, which was made basis by the Land Acquisition Officer for  

fixing market value cannot be relied upon because that land was situated  

far away from the acquired land.  The High Court noted that there was a  

steady  increase  of  property  value  in  the  area  because  of  repeated  

acquisitions made on behalf of the Board, referred to the topo-sketch and  

sale deed Exhibit C.8 dated 8.2.1991 and observed:

“………….The said property is in a housing colony by name  K.K.Nagar and the area is considered to be a developed area.  Therefore  we are  of  the  opinion  that  the  valuation  as  found  mentioned  in  Ex.C.8  could  be  taken  as  Bench  Mark for  the  purpose  of  fixing  the  market  rate.   In  fact  we have  taken  a  document of the year 1989 showing the market rate at Rs.20/-  per  sq.ft.  for  arriving  at  the  market  rate  in  respect  of  the  property  acquired  as  per  the  notification  issued  in  the  year  1991.

Even though as  per  Ex.C.8  dated 8.2.1991 the  property  was  sold at the rate of Rs.30/- per sq.ft., the said transaction relates  to a smaller  extent.   However as per  the subject  notification  larger extent of property was acquired and as such the value as  shown in Ex.C.8 cannot be taken in its entirety for arriving at  the market rate. The Housing Board has to develop the property  for  housing  purposes.   It  is  in  evidence  that  the  acquired  property  was  only  an  agricultural  property  and  it  has  no  potential as a housing site.  No evidence was placed on the side  of the claimants to show that they have been getting substantial  income  from  the  property  or  it  has  got  high  potential  as  a  

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house-site.   Therefore  we  are  of  the  view  that  necessary  deduction has to be made towards development charges.”

The High Court then adverted to the principles laid down by this  

Court in  State of Uttar Pradesh v. Ram Kumari Devi (1996) 8 SCC  

577,  Viluben Jhalejar Contractor v. State of Gujarat (2005) 4 SCC  

789, Atma Singh v. State of Haryana (2008) 2 SCC 568, The General  

Manager,  Oil  and  Natural  Gas  Corporation  Ltd.  v.  Rameshbhai  

Jivanbhai Patel (2008) 14 SCC 745, Revenue Divisional Officer-cum-

L.A.O. v. Shaik Azam Saheb etc. (2009) 4 SCC 395,  Faridabad Gas  

Power  Project,  NTPC  v.  Om  Prakash (2009)  4  SCC  719  for  

determination of market value of the acquired land as also the rule of  

deduction towards development cost and held:

“The acquired property is a manwari land and even according  to the claimants it was not a house-site developed by them. The  acquisition was only for construction of residential houses and  therefore  necessarily  the  Housing  Board  has  to  spend  considerable  amount  for  development  and  to  make  it  fit  for  construction  of  residential  units.   On  the  other  hand,  the  property in Ex.C.8 is a developed site and the same was sold  only  as  a  house-site.  Therefore  considering  the  advantages,  development and potential of the property in Ex.C.8 vis-a-vis  the disadvantages,  undeveloped state and lack of potential  of  the acquired property, we are of the view that deduction at the  rate of 40% has to be given towards development charges.”

The  High  Court  also  took  cognizance  of  the  fact  that  the  sale  

instance Exhibit C.8 relied upon for fixing market value was in respect of  

a small piece of land and held:  

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“While fixing the market rate, very often, documents of smaller  extent would be taken as the basis. The normal rule in fixing  compensation  for  large  extent  of  land  with  reference  to  the  value shown in the sale document of lesser extent is that there  must be suitable deduction. It is common knowledge that larger  extent  of  property  invariably  fetch  less  when  compared  to  smaller extent. No prudent buyer would buy large extent of land  by quoting the price prevailing in the market for a small piece  of land.  

The document in Ex.C.8 is in respect of a property having only  1200 sq.ft. However as per the present notification, large extent  of property was acquired. Therefore we are of the considered  opinion that necessary deduction on account of small size of the  property retained for fixing the market value has to be given.  On an overall consideration of the matter, we fix the deduction  on account of small size of the plot taken as the basic document  at 20%.

Taking an overall view of the matter we are of the opinion that  40% deduction should be made towards development costs and  20% on account of small size of the plot taken as the basis to  arrive at the market value. Accordingly, while retaining Ex.C.8  dated 8.2.1991 (Rate Rs.30/- per sq.ft.) as the basic document  for  arriving  at  the  market  rate,  we  deduct  40%  by  way  of  development charges and 20% by way of small size of the plot  and arrive at the market rate at Rs.5,22,720/- per acre.”

10. The  facts  of  the  other  appeals  have  been  incorporated  in  a  

statement, which is marked as Schedule ‘A’ and shall be treated as part of  

this judgment.  A perusal of the statement shows that various parcels of  

land  were  acquired  by  the  State  Government  vide  notifications  dated  

9.10.1990,  15.4.1991,  16.4.1991,  22.5.1991,  27.5.1991,  8.4.1992,  

15.3.1995,  17.1.1997,  12.2.1997  and  19.3.1997  and  the  High  Court  

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reduced the market value fixed by the Reference Court from Rs.19.28 to  

Rs.12/- and from Rs.20/- to Rs.8/- per square feet.

11. Shri V. Giri, learned senior counsel appearing for the appellants in  

some of the cases criticized the impugned judgments/orders primarily on  

the  ground  that  while  reducing  market  value  fixed  by  the  Reference  

Court,  the  High  Court  completely  ignored  the  settled  rule  that  the  

landowner is entitled to the benefit of escalation in land prices.  Learned  

senior counsel then argued that the High Court was not at all justified in  

making 40% deduction towards the cost of development and 20% further  

deduction on account of smallness of the size of plot, which was taken as  

basis  for arriving at the market value ignoring that  the appellants  had  

suffered huge monetary loss on account of non-payment of compensation  

for years together.  The other learned counsel appearing for the appellants  

adopted the arguments of Shri Giri.

12. Shri  Gurukrishna  Kumar,  Additional  Advocate  General,  Tamil  

Nadu  fairly  stated  that  the  appellants  are  entitled  to  the  benefit  of  

escalation in land prices but argued that the deduction of 40% towards  

development cost and 20% due to smallness of the size of the plots sold  

vide Exhibit C.8 cannot be termed as excessive.

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13. We  have  considered  the  respective  arguments  and  carefully  

perused the record.   At the threshold, it will be useful to notice some of  

the judgments in which the Court has laid down guiding principles for  

determination of market value of the acquired land.   

14. In Shaji Kuriakose v. Indian Oil Corporation Limited (2001) 7  

SCC 650, this Court held:

“It  is  no  doubt  true  that  courts  adopt  comparable  sales  method of valuation 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. Comparable 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,  

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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  depending  upon  the  disadvantages  attached with the acquired land.”

(emphasis supplied)

15. In Viluben Jhalejar Contractor v. State of Gujarat (supra), this  

Court  laid  down the following principles  for  determination  of  market  

value of the acquired land:

“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.

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.

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.

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  

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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 acquisition

(vi)  some  special  disadvantageous  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  roads,  leaving  open  spaces,  plotting  out  smaller  plots,  waiting  for  purchasers  and  the  hazards  of  an  entrepreneur.  Such  development  charges  may  range  between  20% and 50% of the total price.”

16. In Atma Singh v. State of Haryana (supra), 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 consideration and  have to be neglected. The main object of the enquiry before the  

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court is to determine the market value of the land acquired. The  expression  “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  regard  to  its  existing  condition  with  all  its  existing  advantages  and  its  potential  possibilities  when  led  out  in  most  advantageous  manner  excluding any advantage due to carrying out of the scheme for  which  the  property  is  compulsorily  acquired.  In  considering  market value disinclination 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  determination  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, Prithvi Raj Taneja v. State of  M.P., Administrator General of W.B. v. Collector, Varanasi and  Periyar Pareekanni Rubbers Ltd. v. State of Kerala.

For ascertaining the market value of the land, the potentiality of  the  acquired  land  should  also  be  taken  into  consideration.  Potentiality  means  capacity  or  possibility  for  changing  or  developing into state of actuality. It is well settled that market  value of a property has to be determined having due regard to  its  existing  condition with  all  its  existing  advantages  and its  potential  possibility  when  led  out  in  its  most  advantageous  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  amenities  like  water,  electricity,  possibility of their further extension, whether near about town  is developing or has prospect of development have to be taken  into  consideration.  See  Collector  v.  Dr.  Harisingh  Thakur,  Raghubans  Narain  Singh  v.  U.P.  Govt.  and  Administrator  General,  W.B.  v.  Collector  Varanasi.  It  has  been  held  in  Kausalya Devi Bogra v. Land Acquisition Officer and Suresh  

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Kumar  v.  Town  Improvement  Trust  that  failing  to  consider  potential value of the acquired land is an error of principle.”

17. In fixing market value of the acquired land, which is undeveloped  

or  under-developed,  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 is acquired.  In  Kasturi v. State of Haryana  

(2003) 1 SCC 354, the Court held:

“............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  roads  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  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 of a  developed area. In 84 acres of land acquired even if one portion  on one side abuts the main road, the remaining large area where  planned development is required, needs laying of internal roads,  

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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)

18. 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 & Mandal Revenue 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.  In  

Lal Chand v. Union of India (2009) 15 SCC 769, the Court indicated  

that percentage of deduction for development to be made for arriving at  

market  value  of  large  tracts  of  undeveloped  agricultural  land  with  

potential for development can vary between 20 and 75 per cent of the  

price of developed plots and observed:  

“The ‘deduction for development’ consists of two components.  The first is with reference to the area required to be utilised for  

1

developmental  works  and  the  second  is  the  cost  of  the  development works. …

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 for  more than the deduction with reference to the price of a small  plot in an unauthorised 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.”

19. In  A.P. Housing Board v. K. Manohar Reddy (2010) 12 SCC  

707, the rule of 1/3rd deduction towards development cost was invoked  

while determining market value of the acquired land. In  Subh Ram v.  

State of Haryana (2010) 1 SCC 444, this Court held as under:  

“Deduction of “development cost” is the concept used to derive  the  “wholesale  price”  of  a  large  undeveloped  land  with  reference to the “retail  price” of a small  developed plot. The  difference between the value of a small developed plot and the  value of a large undeveloped land is the “development cost”.  Two factors have a bearing on the quantum (or percentage) of  deduction in the “retail price” as development cost. Firstly, the  percentage of deduction is decided with reference to the extent  and nature of development of the area/layout in which the small  developed  plot  is  situated.  Secondly,  the  condition  of  the  acquired  land  as  on  the  date  of  preliminary  notification,  whether it was undeveloped, or partly developed, is considered  and  appropriate  adjustment  is  made  in  the  percentage  of  deduction to take note of the developed status of the acquired  land.

The percentage of deduction (development cost factor) will  be  applied  fully  where  the  acquired  land  has  no  development. But where the acquired land can be considered  to be partly developed (say for example, having good road  

1

access or having the amenity of electricity, water, etc.) then  the development cost (that is, percentage of deduction) will  be modulated with reference to the extent of development of  the acquired land as on the date of acquisition. But under no  circumstances, will the future use or purpose of acquisition  play  a  role  in  determining  the  percentage  of  deduction  towards development cost.”

(emphasis supplied)

20. If  the  impugned  judgment  is  considered  in  the  light  of  the  

principles laid down in the aforesaid cases, there is no escape from the  

conclusion  that  the  same  suffer  from  multiple  errors  and  call  for  

interference by this Court.

21. The first error committed by the High Court relates to deduction of  

40% towards  development  charges.   While  doing  so,  the  High Court  

ignored its own finding that the acquired land was situated in the vicinity  

of  the  residential  colonies  developed  by  the  Board  and  other  

establishments as also the fact that the respondents had not produced any  

evidence to show that they will have to start the development work from  

scratch.   Therefore,  the  High Court  could  have,  at  best,  applied  1/3rd  

deduction towards development cost.    

22. The second error committed by the High Court is that while fixing  

market value, it did not take into account the escalation in land prices.  In  

Ranjit  Singh  v.  U.T.  of  Chandigarh (1992)  4  SCC  659,  Land  

1

Acquisition  Officer  and  Revenue  Divisional  Officer  v.  Ramanjulu  

(2005)  9  SCC 594,  Krishi  Utpadan Mandi  Samiti  v.  Bipin Kumar  

(2004) 2 SCC 283, Sardar Jogendra Singh v. State of U.P. (2008) 17  

SCC  133,  Revenue  Divisional  Officer-cum-L.A.O.  v.  Shaik  Azam  

Saheb  (supra)  and  Oil  and  Natural  Gas  Corporation  Ltd.  v.  

Rameshbhai Jivanbhai Patel (supra), this Court has repeatedly held that  

the exercise undertaken for fixing market value and determination of the  

compensation  payable  to  the  landowner  should  necessarily  involve  

consideration of escalation in land prices. In the last mentioned judgment,  

the Court noticed the earlier precedents and observed as under:

“We have examined the facts of the three decisions relied on by  the respondents. They all related to acquisition of lands in urban  or  semi-urban  areas.  Ranjit  Singh  related  to  acquisition  for  development of Sector 41 of Chandigarh. Ramanjulu related to  acquisition  of  the  third  phase  of  an  existing  and  established  industrial  estate  in an urban area. Bipin Kumar related to an  acquisition  of  lands  adjoining  Badaun-Delhi  Highway  in  a  semi-urban area where building construction activity was going  on all around the acquired lands.

Primarily, the increase in land prices depends on four factors:  situation  of  the  land,  nature  of  development  in  surrounding  area, availability of land for development in the area, and the  demand for land in the area. In rural areas, unless there is any  prospect  of  development  in  the  vicinity,  increase  in  prices  would be slow, steady and gradual, without any sudden spurts  or  jumps.  On  the  other  hand,  in  urban  or  semi-urban  areas,  where the development is faster, where the demand for land is  high  and where  there  is  construction  activity  all  around,  the  escalation in market price is at a much higher rate, as compared  to  rural  areas.  In  some  pockets  in  big  cities,  due  to  rapid  development  and  high  demand  for  land,  the  escalations  in  

1

prices have touched even 30% to 50% or more per year, during  the nineties.

On the other extreme, in remote rural areas where there was no  chance of any development and hardly any buyers, the prices  stagnated for years or rose marginally at a nominal rate of 1%  or  2%  per  annum.  There  is  thus  a  significant  difference  in  increases in market  value of  lands in urban/semi-urban areas  and  increases  in  market  value  of  lands  in  the  rural  areas.  Therefore, if the increase in market value in urban/semi-urban  areas  is  about  10%  to  15%  per  annum,  the  corresponding  increases in rural areas would at best be only around half of it,  that is, about 5% to 7.5% per annum. This rule of thumb refers  to the general trend in the nineties, to be adopted in the absence  of  clear  and  specific  evidence  relating  to  increase  in  prices.  Where there are special reasons for applying a higher rate of  increase, or any specific evidence relating to the actual increase  in prices, then the increase to be applied would depend upon the  same.

Normally,  recourse  is  taken  to  the  mode of  determining the  market  value  by  providing  appropriate  escalation  over  the  proved  market  value  of  nearby  lands  in  previous  years  (as  evidenced by sale transactions or acquisitions), where there is  no  evidence  of  any  contemporaneous  sale  transactions  or  acquisitions  of  comparable  lands  in  the  neighbourhood.  The  said  method  is  reasonably  safe  where  the  relied-on  sale  transactions/acquisitions precede the subject acquisition by only  a few years, that is, up to four to five years. Beyond that it may  be unsafe, even if it relates to a neighbouring land. What may  be a reliable standard if the gap is of only a few years, may  become unsafe and unreliable standard where the gap is larger.  For  example,  for  determining  the  market  value  of  a  land  acquired  in  1992,  adopting  the  annual  increase  method  with  reference to a sale  or  acquisition in 1970 or  1980 may have  many pitfalls.  This  is  because,  over  the  course  of  years,  the  “rate”  of  annual  increase  may  itself  undergo  drastic  change  apart from the likelihood of occurrence of varying periods of  stagnation in prices or sudden spurts in prices affecting the very  standard of increase.”

1

23. Though it may appear repetitive, we deem it necessary to mention  

that  the  acquired  land  is  situated  in  the  close  vicinity  of  various  

residential colonies, educational institutions, hospitals etc. and is on the  

junction of two important roads.  Therefore, it can safely be concluded  

that the land is semi-urban and has huge potential for being developed as  

housing sites  and the High Court  should have added 10% per  annum  

escalation in the price specified in the sale deeds relied upon for fixing  

market value of the acquired land.

24. The  third  error  committed  by  the  High  Court  is  that  in  fixing  

market value of the land acquired vide notifications issued in 1991, 1992  

and 1995 with reference to sale deed dated 4.9.1990 vide which a piece  

of land was sold at the rate of Rs.20/- per square feet, the High Court did  

not add 10% escalation per annum in the land prices.

25. We  may  have  sustained  20%  deduction  keeping  in  view  the  

smallness of the plots which were sold vide sale deeds dated 4.9.1990  

and 8.2.1991, but, in the peculiar facts of the case, we think that it will be  

wholly unjust to allow such deduction.  Majority of the appellants have  

been deprived of their entire landholding and they have waited for 14 to  

20 years for getting the compensation.  It appears that in compliance of  

the interim orders passed by the Court, some of the appellants did get  

2

25% and one of them get 35% of the compensation, but majority of them  

have  not  received  a  single  penny  towards  compensation  and  at  this  

distant point of time, it will be wholly unjust to deprive them of their  

legitimate  right  by  approving  the  20%  deduction  made  by  the  High  

Court.  In such matters, the Court cannot be oblivious of the fact that the  

landowners have been deprived of the only source of livelihood, the cost  

of living has gone up manifold and the purchasing power of rupee has  

substantially declined.

26. In  the  result,  the  appeals  are  allowed  and  market  value  of  the  

acquired land is fixed as under:

(i) For the acquisition made vide notification dated 9.10.1990,  

the base document will  be sale deed dated 4.9.1990 vide which  

land was sold at the rate of Rs.20/- per square feet.  One-third of  

Rs.20/- comes to Rs.6.6 per square feet.  After deducting Rs.6.6  

from Rs.20/-, market value of the acquired land will be Rs.13.4 per  

square feet which is rounded off to Rs.14/- per square feet.

(ii) For  the  acquisitions  made  by  the  notifications  issued  on  

15.4.1991,  16.4.1991 and 27.5.1991,  the  base document  will  be  

sale deed dated 8.2.1991 vide which land was sold at the rate of  

Rs.30/- per square feet. One-third of Rs.30/- is equal to Rs.10/- per  

2

square feet.  After deducting Rs.10/- from Rs.30/-, market value  

will be Rs.20/- per square feet.

(iii)   For the acquisition made vide notification dated 08.4.1992,  

the base document will  be sale deed dated 8.2.1991 vide which  

land was sold at the rate of Rs.30/- per square feet.   By adding  

10%  per  annum  in  lieu  of  escalation  in  the  land  prices  and  

deducting  1/3rd towards  development  cost,  market  value  of  the  

acquired land will be Rs.29.2 per square feet which is rounded off  

to Rs.30/- per square feet.    

(iv)   For the acquisition made vide notification dated 15.3.1995,  

the base document will  be sale deed dated 8.2.1991 vide which  

land was sold at the rate of Rs.30/- per square feet.   By adding  

10%  per  annum  in  lieu  of  escalation  in  the  land  prices  and  

deducting  1/3rd towards  development  cost,  market  value  of  the  

acquired land will be Rs.29.2 per square feet which is rounded off  

to Rs.30/- per square feet.

(v) For  the  acquisitions  made  by  the  notifications  issued  on  

17.1.1997  and  19.3.1997,  the  base  document  will  be  sale  deed  

dated 8.2.1991 vide which land was sold at the rate of Rs.30/- per  

2

square feet.  If 10% per annum is added in lieu of escalation in the  

land  prices  and 1/3rd is  deducted  towards  development  charges,  

market value of the acquired land will be Rs.35.3 per square feet  

which is rounded off toRs.36/- per square feet.   

The  appellants  shall  get  solatium,  interest  and  other  statutory  

benefits in accordance with the provisions of the Act.   

27. With a view to ensure that the landowners are not fleeced by the  

middleman, we deem it proper to issue the following further directions:

(i) Within one month from the date of receipt of copy of this  

judgment,  the  Land  Acquisition  Officer  shall  depute  an  officer  

subordinate  to  him not  below the  rank  of  Naib Tehsildar  or  an  

equivalent rank, who shall get in touch with the landowners and/or  

their legal representatives and inform them about their entitlement  

to receive enhanced compensation.

(ii) The concerned officers shall instruct the landowners and/or  

their  legal  representatives  to  open  savings  bank  account  in  a  

nationalized or scheduled bank, in case they already do not have  

such account.

2

(iii) The account numbers of the landowners and/or their legal  

representatives should be furnished by the concerned officer to the  

Land Acquisition Officer within a period of two months.

(iv) Within next one month, the Land Acquisition Officer shall  

deposit  the  amount  of  compensation  along  with  other  statutory  

benefits in the bank accounts of the landowners and/or their legal  

representatives by way of cheques.

….………………….…J. [G.S. Singhvi]

…..…..…………… …..J.

[H.L. Dattu] New Delhi; August 01, 2011.   

2

SCHEDULE ‘A’

S.  No.

SLP(C) Nos. & Name of  Parties

Date  of  Section 4(1)  Notification

Date  of  award  by  LAO  and  compensat- ion

Date  of  Reference  Court  order  and  Amount  fixed.  

Date  of  High  Court  Judgment  in  Appeal  Suit  Nos.  and  rate  fixed

1. 22086-22087/2009  –  Valliyammal and another  v.  Special  Tahsildar  (Land  Acquisition),  Erode and another

19.3.1997 21.6.2000 & Rs.50,000/-  per acre

4.7.2003  and  Rs.28/-  per  square feet

28.4.2009  in  A.S.  Nos.200  &  201/2009  and  Rs.12/-  per  square  feet.

2. 25591/2009  –  Thangamuthu Gounder v.  Special  Tahsildar  (Land  Acquisition),  Erode  and  another

17.1.1997 3.3.2000  &  Rs.50,000/-  per acre

24.3.2005 and  Rs.30/-  per  square feet

2.3.2009  in  A.S.  No.  706/2006  and  Rs.12/-  per square feet

3. 25587-90/2009 – Mohan  and others etc v. Special  Tahsildar  (Land  Acquisition),  Erode  and  another

15.4.1991 10.06.1994  &  Rs.37,500/-  per acre

27.11.2002  and  Rs.20/-  per  square  feet

2.3.2009  in  A.S.  Nos.  813,  820,  821  and  822/2003 and Rs.8/- per  square  feet  (Rs.3,48,480/- per acre)

4. 25596-97/2009  –  K.R.Palaniappan  v.  Special  Tahsildar  (Land  Acquisition),  Erode  and  another   

9.10.1990/ 16.4.1991

28.9.1994,  10.6.1994  &  Rs.37,500/-  per acre

30.03.2001  and  Rs.16/-  per  square  feet

2.3.2009  in  A.S.  Nos.  170/2003 and 871/2006  and  Rs.8/-  per  square  feet

5. 33777-82/2009  –  Ramayammal  and others  v.  Special  Tahsildar  (Land  Acquisition),  Erode and another  

15.4.1991 10.6.1994  &  Rs.37.500/-  per acre

16.4.1999 and  Rs.2,18,500/-  per acre

2.3.2009  in  A.S.  Nos.759  to  764/1999  and  Rs.8/-  per  square  feet  (Rs.3,48,480/-  per  acre)  

6. 33808/2009  –  Vishwanatha Gounder v.  Special  Tahsildar  (Land  Acquisition) Erode

27.5.1991 03.7.1994  &  Rs.37,500/-  per acre

27.11.2006  and  Rs.20/-  per  square  feet

2.3.2009  in  A.S.  Nos.  721/2003 and Rs.8/- per  square  feet  (Rs.3,48,480/- per acre)

7. 2194-2200/2010  –  Veerasamy and others v.  Special  Tahsildar  (Land  Acquisition),  Erode  and  another

19.2.1997 31.6.2000  &  Rs.50,000/-  per acre

29.11.2002  and  Rs.28/-  per  square  feet

2.3.2009  in  A.S.  Nos.  727,  729,  730,  731,  732, 733 and 734/2003  and  Rs.12/-  per  square  feet  

8. 12581/2010  –  N.  Pazhanisamy Gounder v.  Special  Tahsildar  (Land  Acquisition),  Erode  and  another  

12.2.1997 3.3.2000  &  Rs.50,000/-  per  acre  (Rs.1.15  per  square feet)

2.3.2006 and  Rs.30/-  per  square feet

8.7.2009  in  A.S.  No.  854/2006  and  Rs.12/-  per  square  feet  (Rs.5,22,720/- per acre)

2

9. 22831/2010 – Arumugha  Gounder  and  another  v.  Special  Tahsildar  (Land  Acquisition),  Erode  and  another  

15.4.1991 10.6.1994  &  Rs.37,500/-  per acre

25.10.1999  and  Rs.17/-  per  square  feet

2.3.2009  in  A.S.  No.  325/2000 and Rs.8/- per  square  feet  (Rs.3,48,480/- per acre)

10. 23654/2010  –  Kulanthaiswamy  and  another  v.  Special  Tahsildar  (Land  Acquisition)  Erode  and  another

08.4.1992 22.5.1995  &  Rs.37,500/-  per acre

26.3.2007 and  Rs.20/-  per  square feet

11.12.2009 in A.S. No.  428/2008 and Rs.8/- per  square feet

11. 23655/2010  –  K.B.  Dakhinamoorthy  and  others  v.  Special  Tahsildar  (Land  Acquisition)  Erode  and  another

08.4.1992 22.5.1995  &  Rs.37,500/-  per acre

26.3.2007 and  Rs.20/-  per  square feet

11.12.2009 in A.S. No.  543/2008 and Rs.8/- per  square feet

12. 23656/2010  –  P.  Chandrasekar  and  others  v.  Special  Tahsildar  (Land Acquisition) Erode  and another

08.4.1992 22.5.1995  &  Rs.37,500/-  per acre

26.3.2007 and  Rs.20/-  per  square feet

11.12.2009 in A.S. No.  610/2008   and  Rs.8/-  per square feet

13. 23657/2010  –  Pavayammal  and  others  v.  Special  Tahsildar  (Land Acquisition) Erode  and another

15.4.1991 10.6.1994  &  Rs.37,500/-  per acre

4.1.2006  and  Rs.20/-  per  square feet

11.12.2009 in A.S. No.  1002/2007  and  Rs.8/-  per square feet

14. 23658/2010 – Lakshmi &  Anr. v. Special Tahsildar  (Land Acquisition) Erode  and another

15.3.1995 25.3.1998  &  Rs.39,220/-  per acre

6.2.2006  and  Rs.22/-  per  square feet

11.12.2009 in A.S. No.  356/2007 and Rs.8/- per  square feet

15. 23659/2010  – Kannammal and others v.  Special  Tahsildar  (Land  Acquisition)  Erode  and  another

15.4.1991 10.6.1994  &  Rs.37,500/-  per acre

29.11.2005  and  Rs.20/-  per  square  feet

11.12.2009 in A.S. No.  748/2008 and Rs.8/- per  square feet

16. 23666/2010–Kannammal  @Rajeshwari  &  another  v.  Special  Tahsildar  (Land Acquisition) Erode  & another

15.3.1995 25.3.1998  &  Rs.50,000/-  per acre

29.11.2002  and  Rs.28/-  per  square  feet

11.12.2009 in A.S. No.  770/2004 and Rs.8/- per  square feet

17. 23669/2010  – Kannammal and others v.  Special  Tahsildar  (Land  Acquisition)  Erode  and  another

27.5.1991 10.6.1994  &  Rs.37,500/-  per acre

29.11.2005  and  Rs.20/-  per  square  feet

11.12.2009 in A.S. No.  760/2008 and Rs.8/- per  square feet

18. 23641/2010  – Chinnasamy  and  others  v.  Special  Tahsildar  

27.5.1991 3.7.1994  &  Rs.37,500/-  per acre

23.3.2001 and  Rs.17/-  per  square feet

2.3.2009  in  A.S.  No.  618/2003 and Rs.8/- per  square feet

2

(Land Acquisition) Erode  and another

19. 23643/2010  –K.N.  Arumugham  v.  Special  Tahsildar  (Land  Acquisition)  Erode  and  another

09.10.1990 28.9.1994  &  Rs.37,500/-  per acre

17.01.2005  and  Rs.75,000/-  per acre

2.3.2009  in  A.S.  No.  756/2008 and Rs.8/- per  square feet (Rs.3,48,480/- per acre)

20. 26825/2010  – Thambusamy  (Dead  by  LRs.)  v.  Special  Tahsildar  (Land  Acquisition)  Erode  and  another

27.5.1991 03.08.1994  &  Rs.37,500/-  per acre

27.3.2008 and  Rs.9/-  per  square feet

19.12.2009 in A.S. No.  835/2008 and Rs.8/- per  square feet

21. 1961/2011  –Nachimuthu  v.  Special  Tahsildar  (Land Acquisition) Erode  and another

19.2.1997 31.6.2000  &  Rs.50,000/-  per acre

31.3.2004 and  Rs.28/-  per  square feet

2.3.2009  in  A.S.  No.  544/2005  and  Rs.12/-  per square feet (Rs.5,22,720/- per acre)

22. 2187/2011–  Kannaki  &  another  v.  Special  Tahsildar  (Land  Acquisition)  Erode  and  another

19.3.1997 21.06.2000  &  Rs.50,000/-  per acre

29.2.2005 and  Rs.30/-  per  square feet

8.7.2009  in  A.S.  No.141/2006  and  Rs.12/- per square feet (Rs.5,22,720/- per acre)

23. 1147/2011  –Jayalakshmi  and  others  v.  Special  Tahsildar  (Land  Acquisition)  Erode  and  another

19.3.1997 21.6.2000  &  Rs.50,000/-  per acre

4.4.2006  and  Rs.25/-  per  square feet

8.7.2009  in  A.S.  No.  181/2007  and  Rs.12/-  per square feet (Rs.5,22,720/- per acre)

24. 3520/2011–P.Subbarayan  and  others  v.  Special  Tahsildar  (Land  Acquisition)  Erode  and  another

22.5.1991 10.8.1994  &  Rs.  37,500/-  per  acre  (Rs.  0.86  per  sq.  ft.)

21.11.2005  and  Rs.17/-  per  square  feet

8.7.2009  in  A.S.  No.  392/2007 and Rs.8/- per  square feet (Rs.3,48,480/- per acre)

2