IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO(s). 2432 OF 2005

Gajanan and Others  …Appellants Versus

State of Maharashtra and another …Respondents

J U D G M E N T

1. This  appeal  is  directed  against  the  judgment  of  the  Bombay High  

Court whereby the appeal preferred by the respondents under Section 54 of  

the Land Acquisition Act, 1894 (for short, ‘the Act’) was partly allowed and  

the amount of compensation determined by Civil  Judge, Senior Division,  

Aurangabad  (hereinafter  described  as,  ‘the  Reference  Court’)  was  

substantially reduced.  

2. The  appellants’  land  comprised  in  Gat  No.  85  measuring  6  acres  

situated in Mhasekot village, Aurangabad district was acquired by the State  

Government in 1982 for Hivra Medium Project. By  an  award  dated  

1.9.1986, the Special Land Acquisition Officer directed the respondents to

pay compensation amounting to Rs.36,00,385.50/- to the appellants under  

the following heads:  

1 True area of the land acquisition. 133.42 H.R.

2 The compensation of dry land Rs.13,36,440.00

3 Valuation of trees Rs.83,071.25

4 Valuation of wells Rs.2,00,811.00

5 a) Agril. Lands of S.No.85@ Rs. 9500/- H.R. 1-60 Rs.15,200.00

b) N.A. Land of S.No.85 O-80 @ Rs.20,000/- Rs.16,000.00

c) Building valuation Rs.3,67,100.00

d) Damaged & Shifting charges Rs.2,11,000.00

6 Total Compensation Rs.1,65,522.25

7 30% Solatium Rs.5,95,456.70

8 12%  enhancement  of  compensation  on  market  value w.e.f. notification u/s 4

Rs.8,75,306.50

9 Total Compensation of Amount Rs.36,00,385.50

3. Feeling dissatisfied with the quantum of compensation, the appellants  

filed an application under Section 18 of Act and claimed that market value  

of the acquired land is Rs.150 per square meter. They also claimed higher  

compensation for the civil structure, machinery,  electrical and mechanical  

installations  of  the  Khandsari  factory  which  they  had  established  on  a  

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portion of the land.   The respondents filed reply to contest the appellants’  

claim for  higher  compensation  and  pleaded  that  the  award  made  by  the  

Special Land Acquisition Officer was legally correct and justified.

4. On  the  pleadings  of  the  parties,  the  Reference  Court  framed  the  

following issues:

“1. Whether the claimant proves that the valuation made by  L.A.O. is improper inadequate and not as per the market value?

2. Whether the claim petition is in limitation?

3. Whether  the  claimant  proves  that  he  accepted  compensation amount under protest?  If not, what is its effect?

4. Whether the claimant is entitled to additional amount of  compensation claimed?

5. What order?”

5. After considering the pleadings of the parties and evidence produced  

by them, the Reference Court passed order dated 24.4.1996 and determined  

the amount of compensation as under:-  

(i) Market value of the acquired land (total measuring) at the  

rate of Rs.6/- per square feet.

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(ii)  Rs.3,86,867/-  towards  demolition  and  dismantling  of  

electrical, mechanical and other installations.

(iii) Rs.5,00,000/- towards loss of earning for the period from  

1981 to 1986.

(iv) Rs.91,000/- towards damages and dismantling charges.

(v) Rs.15,000/- towards transportation charges.

The  Reference  Court  also  declared  that  the  appellants  are  entitled  to  

solatium, interest etc.

6. The  Division  Bench  of  the  High  Court  partly  allowed  the  appeal  

preferred by the respondents, set aside the determination of market value made  

by  the  Reference  Court  and  restored  the  one  made  by  the  Special  Land  

Acquisition Collector. The High Court also quashed the compensation awarded  

by the Reference Court towards demolition and dismantling charges, damages  

to the structure and machinery of the factory and transportation charges.  As  

regards the loss of earning, the High Court held that the appellants are entitled  

to Rs.1,00,000/- for the loss of earning for one year instead of Rs.5,00,000/-.

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7. We have heard learned counsel for the parties and carefully perused the  

record. It is borne out from the record that out of the total acquired land, the  

appellants had utilised 0.80 hectares in 1976 for establishing Khandsari factory.  

As a sequel to initiation of the acquisition proceedings, the appellants had to  

close  the  factory.   The  Reference  Court  referred  to  the  statement  of  PW-2  

Mukund Dharashivkar,  a  consulting  engineer-cum-approved  valuer  and held  

that  while  the  appellants  had  been  able  to  prove  that  as  a  result  of  the  

acquisition of land, they had to close the Khandsari factory and suffered huge  

financial loss, the State did not adduce any evidence on the issue of loss of  

business and damage to the structure, machinery and electric and mechanical  

installation and that the statement made by DW-1 Nilkanth Tukaram Bhosale  

was not at all relevant.  The discussion on this issue is contained in paragraphs  

19 to 41 of the order of the Reference Court.

8. The Reference  Court  then referred to  the  sale  instance  Exhibit  23 by  

which land measuring 30’ x 32’ feet was sold in 1976 for a sum of Rs.3,000/-  

and another sale instance Exhibit 35 by which 5023 square feet land was sold in  

1982 for a sum of Rs.35,000/- and observed:

“46. The certified copy of sale instance produced at Exh.23 is  in respect of mauza Gondegaon which is of the year, 1976 and  does  have  evidentiary  value  which  was  in  respect  of  land  

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admeasuring  32'x30'  for  a  consideration  of  Rs.3,000/-.  It  is  contended that the price of gut No.85 is decided on the basis of  agricultural  land  in  respect  of  80  R  which  was  used  for  construction  of  Khandsari  sugar  mill  in  respect  of  which  Petitioner  obtained  nonagricultural  permission  from  the  concerned authority. The remaining portion of 1 Hector 60 R  with also used as nonagricultural land. As per valuation of PW- 2 Dharashivkar, 5 to 6 acres of land is required for Khandsari  Sugar mill  in order to store fuels,  sugarcane and other allied  purposes.  This  fact  also  has  been admitted  on  behalf  of  the  State, hence, there is no manner of doubt that 1 Hector 60 R of  land  would also  fetched  more  value  at  the  rate  of  N.A.  assessment. But the learned S.L.A.O. has given the price on the  basis of agricultural land in respect of sale in view of the fact  that  no  actual  permission  was  obtained  by  the  Petitioner,  in  respect  of  1  Hector  60  R  of  land  which  as  per  the  learned  Counsel  for  the  Petitioner  should  have  been  considered  nonagricultural land because of its long use and not taking of  crops on the said field.

47. The  Petitioner  in  order  to  prove  the  price  of  nonagricultural  open  plot,  placed  reliance  of  the  sale  deed  Exh.35  in  which  5023  square  feet  of  land  was  sold  at  Rs.35,000/- in year, 1982 in respect of land situated at Jargaon  which  is  at  a  distance  of  2  km.  from Mhasekote.  However  nothing  was  but  the  Petitioner  in  his  cross  examination  regarding the non-consideration of this land for the purpose of  determining the valuation or compensation. Thus, the entire gut  No.85 having be used by the Petitioner for the production of  sugar and its allied purposes, the entire land was utilized for  nonagricultural purpose.

48. There is nothing on the record to show that the rest of the  land of 1 Hector 60 R was used for agricultural purpose. This  fact  appears  to  have  been  not  considered  by  the  S.L.A.O.  Moreover,  the  factory  was situated  on  State  Highway  going  from Pachora to Sillod and Railway Station of Pachora is at a  distance of just 11 kms. from the factory.  Hence looking into  

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its use and situation of the factory on the suit alongwith other  vital factors, the S.L.A.O. was duty bound to consider the value  of the suit land in respect of its nonagricultural use.

51. Thus, if gut No.85 admeasuring 2 Hectors 40 R i.e.,  6  acres if converted into gunthas, it comes to 240 gunthas. One  guntha come to 1089 square feet.  If  this  1089 square feet  is  multiplied by 240 gunthas, then it comes to 2,61,360 square feet  and by deducting 10% of the land from the above area, it comes  to 2352224 square feet. Thus, the value at the rate of Rs.6/- per  square feet for 235224 square feet comes to Rs.14,11,344/-.

52. In the instant case, the notification appears to be of the  year, 1981 and the award came to be passed in the year, 1986.  Thus, after six years from the passing of the notification, the  award  was  passed.   The  land  of  960  square  feet  of  village  Gondegaon as per Exh.23 was sold at Rs.3000/-. Thus, the rate  was nearly between Rs.3 to 4 per square feet. Taking this rate  into consideration from Rs.3/- per square feet, the rate of Rs.6/-  per square feet in the instant case would not be exhorbitant in  light of the submissions made in that behalf accompanied by  the report of the valuer Exh.21 as laid down in 1993 BCJ page  27  even though no formal  permission  for  N.A.  purpose  was  granted by the concerned authority.”

9. On the issue of valuation of the structure of the factory,  plant and  

machinery and loss of business, the Reference Court observed:

“55. During the course of cross-examination of Mr. Gulwe, it  admitted by him that the valuation which has been shown to  him in respect of electrical and mechanical establishments were  taken into consideration by him in the valuation report given by  the Petitioner himself to the Government approved valuer. It is  further admitted by him that dismantling charges were granted  by him on the valuation report of Mr. Dharashivkar. It is further  admitted  by  him  that  the  executive  engineer  had  come  

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alongwith him on the site for inspection. The entire report was  based on the valuation given by the Petitioner but he had not  specifically  given  the  valuation  of  the  machinery  on  the  premises of the factory. It is further admitted by him that the  valuation of the machinery cannot be given by the State but the  valuation  of  dismantling  charges  is  sustainable.  It  is  further  admitted by him that he had only given the valuation in respect  of civil and no valuation in respect of electrical and mechanical  was done.

56.  The valuation certificate given by PW-2 Dharashivkar is  placed at Exh.21. Thus, it appears from the record that as per  the project report that was initially prepared in the year, 1976  the cost of factory installation was given at Rs.6,98,677/- and as  per  the  award it  has been given Rs.5,78,100/-.  The plaintiff- Petitioner  has  claimed  Rs.91,000/-towards  dismantling  costs  and  damages  and  Rs.15000/-  towards  transportation  and  loading and unloading. Even though the costs of Rs.6,98,677/-  was initially claimed in the project report, the project report is  dated 1974-75. Thus, by the time the award was pronounced,  there would have been depreciation of 10% in the valuation of  the  machineries.  Thus,  the  value  record  by  the  S.L.A.O.  regarding these machineries to the tune of Rs.5,78,100/- which  has also been admitted by the executive engineer needs to be  accepted as there was no vital dispute on this point. As a matter  of  fact,  whatever  entire  claim made by the  Petitioner  on the  basis  of  purchase  made by him does not  sustain  in  law,  the  same was properly assessed by the State as per project report  but it only mentions about the building valuation and damages  and shifting charges, but does not mention about the demolition  and dismantling charges in respect of electrical mechanical and  machinery  installation  which  comes  to  Rs.1,29,267/-,  1,25,300/- and 1,32,300/-respectively. Thus, cumulatively,  the  Petitioner is entitled to get Rs.3,86,867/-.

57.  As regards the loss in business sustained by the Petitioner  due to acquisition by the respondent has been requisitioned at  Rs.2 lacs per year as net income for a period of 20 to 25 years.  As  per  the  expert,  who  is  a  Government  approved  valuer,  evidence  PW-2  Dharashivkar  whose  evidence  has  not  been  

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completely shattered on the point of valuation of the factory,  and so also as regards the valuation of structure and machinery,  so  also  the  valuation  of  executive  engineer  DW-3 Gulwe  to  some extent admitted the report given by Dahrashivkar. Hence  in order to support the factum that the evidence given by the  assessor  and  valuer  as  per  Exh.21  needs  to  be  taken  into  consideration.”

10. The  Division  Bench  of  the  High  Court  did  not  make  an  in-depth  

evaluation  of  the  pleadings  and  evidence  produced  by  the  parties  and  

rejected two sale instances by making a cryptic observation that the lands  

were  situated  at  considerable  distance.   While  doing  so,  the  High Court  

ignored  the  law laid  down by  this  Court  in  Thakarsibhai  Devjibhai  v.  

Executive Engineer, Gujarat  (2001) 9 SCC 584, the relevant portions of  

which are extracted below:

“So  far  as  the  other  question  of  distance  between  the  two  classes of lands is concerned, that by itself cannot derogate the  claim of the claimant unless there are some such other materials  to show that quality and potentiality of such land is inferior.  However,  distance  between  the  land  under  Ext.  16  and  the  present land, even if they are 5 km apart, would not be relevant,  the relevancy could be, their distances from Viramgam town.  We find,  as  per  the  map produced  by  the  State,  the  present  acquired land is about 3 km away from it, while the land under  Ext. 16 is about 2 km away from it. This difference is not such  as to lead to reduce the rate of compensation, specially on the  facts  of  this  case.  In  the  present  case,  as  we  have  recorded  above, it has been found that the quality including potentiality  of land between Ext.  16 and the present  one are similar.  No  evidence  has  been  led  on  behalf  of  the  State  to  find  any  

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difference between the two. In view of this, the inference drawn  by the High Court for reducing the compensation by Rs 10 per  sq m cannot be sustained.”

Indeed, the respondents had not adduced any other evidence which  

could be relied upon by the Reference Court for approving the determination  

of market value made by the Special Land Acquisition Officer.

11. We are further of the view that the judgment of the High Court runs  

contrary to the law laid down by this Court in recent judgments including  

Viluben Jhalejar Contractor v. State of Gujarat (2005) 4 SCC 789,  Atma Singh v.  

State of Haryana (2008) 2 SCC 568, Subh Ram v. State of Haryana (2010) 1 SCC 444  

and  A.P.  Housing Board v.  K. Manohar Reddy (2010) 12 SCC 707.  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  

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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  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  

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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.”

12. 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  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  

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prediction  of  an  economic  event  viz.  a  price  outcome  of  hypothetical sale expressed in terms of probabilities.”

13. Another error committed by the High Court is that while reducing the  

amount of compensation, it did not keep in view the rules evolved by this  

Court for giving benefit of escalation in land prices to the landowners and  

making  appropriate  deduction  towards  development  cost  whenever  it  is  

pleaded by the acquiring authority  or  the beneficiary that  it  will  have to  

spend substantial  amount  for  making  the land useful  for  the  purpose  for  

which it is acquired.  Yet another error committed by the High Court is that  

it  did  not  assign  any  cogent  reasons  for  reducing  the  amount  of  

compensation in lieu of the loss of business and in lieu of the damage to  

structure, plant and machinery etc.   

14. In the premise aforesaid, we feel that ends of justice will be served by  

remitting the matter to the High Court for fresh disposal of the appeal filed  

by the respondents.  

15. In the result, the appeal is allowed. The impugned judgment is set aside  

and the matter is remitted to the High Court for fresh disposal of the appeal  

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filed by the respondents. It is needless to say that while deciding the appeal  

afresh, the High Court will take into consideration the law laid down by this  

Court in recent judgments including those referred to hereinabove.  

……..………………………......................J.                            (G.S. SINGHVI)  

        ……..………………………......................J.                  (K.S. PANICKER RADHAKRISHNAN)  

New Delhi, April 20, 2011.

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