REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.      2170-2171      OF 2020 (Arising out of SLP(C) Nos.16945-46 of 2018)

SAJAN                     …..Appellant

VERSUS

STATE OF MAHARASHTRA  AND OTHERS                                                        …..Respondents

WITH

CIVIL APPEAL NOS. 2172-2173   OF 2020 (Arising out of SLP(C) Nos.6393-6394 of 2020

@ SLP(C) Diary No.24459 of 2019)  

J U D G M E N T R. BANUMATHI, J.

Leave granted.

2. These appeals have been filed by the appellants assailing the

impugned judgment and final order dated 21.08.2017 passed by the

High Court of Judicature at Bombay Bench at Aurangabad in First

Appeal No.601 of 1997 along with Cross Objection St. No.22145 of

1997 in  the  First  Appeal  in  and  by  which  the  High  Court  partly

allowed the appeal and inter-alia reduced the compensation for the

land by giving 40% deduction towards development cost.  

3. The facts giving rise to these appeals are that  land in  Gat

No.85 at village Mhasekota, Tehsil Soyegaon, District Aurangabad

1

admeasuring 6 acres (2.40 hectares) owned by the partnership firm

of  the  appellant  and  respondents  No.2  and  3  was proposed  for

acquisition for the purpose of construction of Hiwra Dam project by

the  office  of  the  Executive  Engineer,  Jalgaon  Medium  Project

Division. Accordingly, on 29.03.1982, the Special Land Acquisition

Officer issued notification under Section 4 of the Land Acquisition

Act,  1984 (for  short,  “Land  Acquisition  Act”)  and  on  03.11.1983,

notification  under  Section  6  was published.  Out  of  this  acquired

land,  land  admeasuring  0.80  hectares  was  non-agricultural  land

used for  running  the  Sugar  Mill  by  the  partnership  firm and the

remaining was cultivable land.  

4. The Special Land Acquisition Officer, Aurangabad passed an

award dated 01.09.1986 under Section 11 of the Land Acquisition

Act  awarding  compensation  considering  valuation  of  land  @

Rs.29,712/-  (Rs.20,000/-  per  hectare  for  0.80  hectares  non-

agricultural land, Rs.9500/- per hectare in respect of 1.44 hectare

cultivable land and Rs.200 per hectare in respect of 0.16 hectare

Potkharaba land).  Apart from the costs of the land, the S.L.A.O.

has also fixed the valuation of structure under three heads i.e. (i)

Civil part/Building valuation Rs.3,67,100/-; (ii) Electrical installation

(now  to  be  demolished)  Rs.1,06,000/-;  and  (iii)  Mechanical

2

machinery  (dismantling  and  transportation)  Rs.1,05,000/-,  total

Rs.5,78,100/-. To this compensation amount, statutory entitlement

of  30%  solatium  and  12%  enhancement  of  compensation  value

w.e.f.  notification  under  Section  4  was  added.  The  net  amount

payable was calculated at Rs.36,00,385.50/-.

5. Aggrieved,  the appellant  and also respondents No.2 and 3

filed reference application (Land Acquisition Reference No.299/94)

under Section 18 of Land Acquisition Act on the ground that market

value  has  not  been  properly  determined.  The  appellant  and

respondents  No.2  and  3  further  claimed  damages  and  loss  of

business                      @ Rs.5,00,000/- per year since 1981 till 1986

to the tune of Rs.30,00,000/-. The appellants claimed market value

@  Rs.10  per  sq.ft  and  claimed  total  compensation  at

Rs.1,69,45,111/- along with other statutory benefits.  

6. The  Reference  Court-Civil  Judge,  Senior  Division,

Aurangabad, vide judgment and award dated 24.04.1996 awarded

compensation at the enhanced rate of Rs.6/- per sq. ft. for the entire

acquired  land  by  treating  the  entire  land  as  land  meant  for

non-agricultural use and deducted 10% towards development costs,

Rs.3,86,867/-  towards  demolishing  and  dismantling  charges  of

electrical, mechanical and machinery installation, Rs.5,00,000/- was

3

awarded  for  loss  of  earning  for  the  period  from  1981  to  1986,

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

Rs.15,000/-  towards  transportation,  loading  and  unloading  along

with  the  statutory  benefits.  Thus,  total  additional  claim  of  the

appellant to the extent of Rs.23,73,011/- was allowed.

7. Respondent-State filed First Appeal No.601 of 1997 assailing

the aforesaid order and the appellant and respondents No.2 and 3

also filed Cross Objection bearing St. No.22145 of 1997. Initially this

cross-objection was dismissed by the High Court for non-removal of

objections. Restoration application was also dismissed on account

of  inordinate delay and the appeal  filed by the respondents was

partly allowed. Against this dismissal, the appellant and respondents

No.2 and 3 filed appeal No.2432 of 2005 before the Supreme Court

which was allowed vide judgment dated 20.04.2011 and the matter

was remitted back to the High Court for fresh disposal taking into

consideration the law laid down by this court in recent judgments.

8. Thereafter,  by  impugned  Judgment  dated  21.08.2017,  the

High Court  partly  allowed the appeal  as well  as cross-objections

and passed the following award:-

i. Cost  of  the  land  @ Rs.6/-  per  sq.ft. (Deduction at 10%)

…. Rs.9,40,896/-

ii. Dismantling and damage …. Rs.4,26,890/-

4

of Civil work costs iii. Replacement  of

electrical installation …. Rs.2,39,000/-

iv. Depreciated  value  of machineries

…. Rs.6,62,000/-

v. Loss of business …. Rs.5,00,000/-

Total …. Rs.21,60,974/-

9. Mr. Gopal Balwant Sathe, learned counsel for the appellant

assailed  the  impugned judgment  contending  that  the  High  Court

failed to consider the valuation certificate (Exh.-21) duly proved by

PW-2-Mukund  Dharashivkar-Empanelled  Government  Valuer

whose  evidence  remained  unrebutted  by  the  State  Government.

Further, it has been submitted that Exh.-21 proves that the civil work

comes  to  the  tune  of  Rs.9,55,000/-,  electrical  installation

Rs.3,21,000/-  and  mechanical  installation  Rs.10,69,000/-  which

totally comes to Rs.23,45,000/- and the depreciation value comes to

Rs.14,28,000/-.  Totally,  the valuation of  the civil,  mechanical  and

electrical structure comes to Rs.63,80,000/- and the valuation done

by PW-21-Valuer has not been considered by the High Court. It was

further submitted that the High Court has completely ignored the

fact  that  the  respondents  had  not  adduced  any  documentary

evidence to show that the valuation certificate (Exh.-21) issued by

PW-2 is not proper and lacks precision. It was further submitted that

computation  of  loss  of  business  @  Rs.1,00,000/-  per  year  is

5

completely erroneous. It was submitted that the High Court erred in

not  taking  into  consideration  that  the  appellant  had  to  close  the

sugar factory and face financial crisis suffering decree of civil court

for recovery of loan amount as the appellant had raised loan from

the bank.   It  was further  submitted that  the High Court  erred in

making  deduction  of  40%  though  the  lands  were  acquired  for

irrigation project which does not require development charges like

providing basic amenities like roads, water etc. and the Reference

Court  rightly  made  deduction  of  10%  which  is  a  reasonable

deduction and the High Court erred in reducing the compensation

amount.   

10. On the other  hand,  Mr.  Aaditya A.  Pande,  learned counsel

appearing  for  the  State  of  Maharashtra  has  submitted  that  the

Reference Court has committed an error by considering the market

value  of  fully  developed  plot  and  comparing  the  same  with

undeveloped land.  It was submitted that village Mhasekota is a very

small  village having a  population  of  one thousand,  situated  in  a

remote area without any development potentials and there was no

potential value of the acquired land as non-agricultural land. It was

further contended that no purchaser will come forward to purchase

the large area of land admeasuring 1.44 hectares on square feet

6

basis and without considering this aspect, the Reference Court had

enhanced  the  compensation  @ Rs.  6.90  per  sq.ft.  Drawing  our

attention  to  the  evidence  of  the  State  witness  Dilip  Gudwe,

Sub-Divisional  Officer,  it  was submitted that  SDO had visited the

site  and  factory  premises  and  submitted  a  report  (Exh.-54)

mentioning that the factory was not in operation and the machinery

was  lying  idle  and  considering  the  same,  the  High  Court  has

recorded a finding that the claimants had closed the sugar factory.

The learned counsel urged that the High Court rightly reduced the

compensation awarded by the First Appellate Court and there is no

ground warranting interference with the impugned judgment.   

11. We have heard Mr. Shirish K. Deshpande and Mr. Sagar N.

Pahune Patil, learned counsel appearing on behalf of the appellants

and Mr. Rahul Chitnis, learned counsel appearing on behalf of the

respondent-State.  We  have  carefully  considered  the  contentions

and perused the impugned judgment and materials on record.

12. The  land  Gat  No.85  admeasuring  6  acres,  situated  at

Mhasekota in Soygaon Tahsil of Aurangabad district, owned by the

appellants-claimants came to be acquired by the Government for

construction  of  Hiwra  medium  project.  The  land  Gat  No.85

admeasuring 2 hectares 40 R came to be acquired including 0.16

7

hectare Potkharaba land. Out of this area, land admeasuring 0.80

hectare has been converted into non-agriculture (N.A) purpose for

installation of  Khandsari  factory (sugar  factory).  Rest  of  the area

admeasuring 1.44 hectare is appellants claim that they have been

using for non-agricultural purpose. Though the claimants had asked

for  non-agricultural  permission  for  the  land  admeasuing  1.44

hectare out of the land Gat No.85, the same was not granted by the

concerned authority. The S.L.A.O. on 29.03.1982 has published the

notification  under  Section  4  of  the  Land  Acquisition  Act  and  on

01.09.1986  awarded  the  compensation  for  the  acquired  land

admeasuring 0.80 R, since converted into the non-agriculture land,

at the rate of Rs.2.00 per sq. meter i.e. Rs.20,000/- per hectare. The

S.L.A.O.  has  awarded  the  compensation  to  the  agricultural  land

admeasuring 1.44 R at the rate of Rs.9500/- per hectare. So far as

Potkharaba land, which is 0.16 hectare is concerned, the S.L.A.O.

has awarded the compensation at the rate of Rs.200/- per hectare.

The S.L.A.O. has awarded total compensation at Rs.29,712/- as the

costs of the land, as stated above.  

13. So  far  as  the  use  of  the  entire  land  for  non-agricultural

purpose  is  concerned,  the  High  Court  found  that  the  Reference

Court is justified in treating the entire land having the potential for

8

non-agricultural  purpose  of  the  remaining  area  –  1.44  hectare.

Referring to the Project  report  – Exh.42 -  scheme of  the factory

approved  by  the  Small  Scale  industries,  Aurangabad,  the  High

Court found that the main raw material required for the sugar factory

is sugarcane and part of the building is used for keeping the raw

materials.  The  High  Court  further  found that  besides flow sheet,

certain  part  of  the  land  would  be  utilised  for  office  building,

workshop, staff quarters, etc. and also used for parking and various

other purposes. The High Court also pointed out that the State has

not adduced any evidence to the effect that the land admeasuring 1

hectare  44  R  out  of  the  acquired  land  was  mainly  used  for

agricultural  purpose  and  not  for  the  non-agricultural  purpose.  In

view of the concurrent findings by the Reference Court and by the

High  Court  that  apart  from  0.80  hectare,  the  land  measuring  1

hectare 44 R be taken as having the potential for non-agricultural

purpose, we do not find any reason to take a different view.

Market value and deduction for development

14. The  High  Court  has  taken  Exh.23  dated  03.06.1976  as

exemplar  which  is  the  sale  deed for  plot  admeasuring  30x32 ft.

9

(960 sq.ft.) for Rs.3,000/- i.e. at the rate of Rs.3.12 per sq.ft. The

appellants have also placed further reliance on the sale deed dated

03.02.1982  Exh.35  wherein,  the  plot  of  admeasuring  5023  sq.ft.

was sold for Rs.35,000/- i.e. Rs.6.90 per sq.ft. The High Court has

taken  Exh.23  sale  deed  dated  03.06.1976  and  had  taken  10%

increase for every year and arrived at the value at Rs.6 per sq.ft.

Even going by Exh.35 sale deed (03.02.1982) under which Rs.5023

sq.ft. was sold for Rs.35,000/- i.e. Rs.6.90 per sq.ft., Exh.35 sale

deed (03.02.1982) is after possession of the land was taken by the

State  Government  (21.11.1981)  and  Section  4  Notification  dated

10.02.1982. Since Exh.35 sale deed dated 03.02.1982 is between

two dates - date of taking possession of the land and the date of

Section  4  Notification,  it  is  necessary  to  adopt  a  reasonable

valuation. Considering Exh.23 and Exh.35, the value adopted by the

Reference  Court  at  Rs.6.90  per  sq.ft.,  in  our  view,  fixation  of

valuation  at  Rs.6.90  per  sq.ft.,  the  value  adopted  is  fair  and

reasonable and the same is affirmed.  

15. Taking the value at Rs.6.90 per sq.ft, the High Court deducted

40% towards the development cost and calculated the value of the

land at Rs.2,61,300 sq.ft. at Rs.9,40,896.00. While determining the

market value of the acquired land, normally one-third deduction i.e.

33 1/3% towards development charges is allowed. After referring to

10

number of judgments, in Major General Kapil Mehra and Others vs.

Union of India and Another (2015) 2 SCC 262, the Supreme Court

held as under:-

“36. While  determining  the  market  value  of  the  acquired  land, normally  one-third  deduction  i.e.  33  1/3%  towards  development charges is allowed. One-third deduction towards development was allowed in  Tehsildar (LA) v.  A. Mangala Gowri  (1991) 4 SCC 218, Gulzara  Singh v.  State  of  Punjab  (1993)  4  SCC  245,  Santosh Kumari v.  State  of  Haryana  (1996)  10  SCC 631,  Revenue Divl. Officer  and  LAO v.  Sk.  Azam  Saheb  (2009)  4  SCC  395,  A.P. Housing Board v. K. Manohar Reddy (2010) 12 SCC 707, Ashrafi v. State of Haryana (2013) 5 SCC 527 and Kashmir Singh v. State of Haryana (2014) 2 SCC 165.

37. Depending on the 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 v.  Krishan Kumar  (2011)  15  SCC  297,  Director,  Land  Acquisition v.  Malla Atchinaid  (2006)  12  SCC  87,  Mummidi  Apparao v.  Nagarjuna Fertilizers & Chemicals Ltd.  (2009) 4 SCC 402 and  Lal Chand v. Union of India (2009) 15 SCC 769.”

16. Rule  of  one-third  deduction  towards  development  is  the

general  rule. But depending upon the purpose of acquisition and

taking  note  of  well  planned  layouts,  if  any,  the  deduction  for

development  cost  may  vary  from  20%  to  75%.  Observing  that

deduction towards development can range from 20% to 75% of the

price of the plot, in Lal Chand vs. Union of India and Another (2009)

15 SCC 769, the Supreme Court held as under:-

“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

11

percentages mentioned above are tentative standards and subject to proof to the contrary.)

…….

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%.”

17. In  the  present  case,  since  the  land  was  acquired  for  the

construction of Hiwra Dam project, much of the development like in

the case of a layout for housing colony is not required. In our view,

40% deduction made by the High Court appears to be on the higher

side. Considering the purpose of the acquisition and the facts and

circumstances of  the case,  20% deduction  for  development  cost

would  be  reasonable.  Taking  the  entire  land  2,61,300  sq.ft.  as

non-agricultural  and  making  20% deduction  for  the  development

cost, the value of the land is calculated at Rs.12,54,530/- as under:-

Value of the land 2,61,360 x 6.90 …. Rs.18,03,384.00 20% deduction …. Rs.3,60,67.68 Rounded to …. Rs.3,60,677/- Total …. Rs.14,42,707/-

Valuation of the construction/civil works

18. PW-2-Mukund Dharashivkar in his valuation report Exh.21 has

considered the valuation of the civil work and foundation under four

12

heads:-  (i)  reproduction  costs;  (ii)  market  value  as  on  today;

(iii) dismantling costs and damages; and (iv) transportation costs of

good  materials.  The  reproduction  costs  has  been  shown  as

Rs.9,55,020/- whereas, the market value as on the date of report

has  been  shown  at  Rs.5,26,575/-  and  Rs.4,09,565/-  has  been

shown  under  the  head  of  dismantling  costs  and  damages  and

further Rs.17,325/- has been shown as transportation costs of good

materials.  PW-2-Mukund  Dharashivkar  has  deposed  that  the

valuation of the civil work is Rs.5,26,575/- and that it includes the

valuation of foundation embedded in the earth. As referred to by the

High Court in its judgment in Para (28), PW-2-Mukund Dharashivkar

has considered the civil work and foundation with regard to power

house, office and workshop, staff quarter, water storage tank and

other  infrastructure/constructions with  size,  specifications and the

number  of  items.  Per  contra,  witness  No.3  for  the  State,

Sub-Divisional  Engineer,  Mr.  Dilip  Gudwe  has  assessed  the

valuation of civil work amounting to Rs.3,67,100/-. After extracting

the relevant portion of the judgment of the Reference Court as to

the valuation of the civil work, the evidence of PW-2 and witness

No.3 for the State-              Sub-Divisional Engineer, the High Court

has assessed the valuation of the dismantling costs and damages

of  civil  work  and  foundation  to  the  tune  of  Rs.4,09,565/-  and

13

Rs.17,325/- for transportation costs of good materials and arrived at

the total amounting to Rs.4,26,890/-. We do not find any reason to

take a  different  view and we affirm the amount  of  Rs.4,26,890/-

towards damages of civil work and foundation and transportation of

good materials.

Electrical installation and re-installation

19. As  against  the  amount  of  Rs.3,86,867/-  awarded  by  the

Reference  Court,  the  High  Court  has  awarded  Rs.2,39,000/-

towards depreciated market value of the electrical installation. As

per the project report that was initially prepared for the year 1976,

cost of factory installation was given at Rs.6,93,677/- and as per

award, it has been given Rs.5,78,100/-. Referring to Exh.21 report

and evidence of PW-2-Mukund Dharashivkar, the Reference Court

has awarded Rs.3,86,867/- towards dismantling charges in respect

of  electrical,  mechanical  and re-installation.  During the course of

dismantling  and  re-installation,  there  is  every  possibility  of  the

electrical installation being damaged. Considering the findings of the

Reference Court,  in our view, the High Court was not justified in

reducing  the  amount  of  Rs.3,86,867/-  to  Rs.2,39,000/-  on  the

ground  of  depreciated  market  value  of  electrical  installation.

Therefore, the amount of Rs.3,86,867/- awarded by the Reference

14

Court  is  affirmed. For the dismantling of  the electrical  installation

and  re-installation  of  the  same,  the  amount  of  Rs.2,39,000/-

awarded  by  the  High  Court  is  enhanced  to  Rs.3,86,867/-  as

awarded by the Reference Court.

Replacement cost of machinery and mechanical installation

20. Based on the report Exh.21 and the evidence of PW-2, the

High Court has awarded depreciated market value of the machinery

and mechanical  installation to  the  tune of  Rs.6,62,000/-  and the

same is affirmed.

Loss of business

21. A perusal  of  the  evidence  of  PW-2-Mukund  Dharashivkar

examined on behalf of the appellants shows that in the year 1978-

79, when the witness has visited the factory of the appellants, he

noticed that the production of the sugar was stopped. As pointed out

by the Reference Court as well as by the High Court, as regards

income, no statement  of  income had been produced.  During the

period 1981 till 1986, the sugar mill was idle. The balance sheet for

the years        1975-76 as per Exh.33 shows that the factory was

running  in  loss  initially  during  the  year  1975-76.  Though  the

appellants  have  claimed  that  they  were  making  profit  of

Rs.2,00,000/-  per  year,  as  pointed  out  by  the  courts  below,  no

15

statement had been filed to show that the sugar factory was making

profit  of  Rs.2,00,000/-.  The  courts  below  have  recorded  the

concurrent findings for awarding the compensation of Rs.5,00,000/-

for  loss  of  business  from  the  year  1981,  the  time  of  taking

possession of the property and compensation paid in the year 1986.

The compensation amount of Rs.5,00,000/- paid towards the loss of

business is also affirmed.

22. The compensation awarded to the appellants under various

heads is modified as under:-

Sr. No.

Description  of Items

By  the  High Court  

By  the  Supreme Court

i. Land value Rs.9,40,896/- Rs.14,42,707/- ii. Civil work Rs.4,26,890/- Amount confirmed iii Replacement  of

electrical installation Rs.2,39,000/- Rs.3,86,867/-  as

awarded  by  the Reference Court

iv Depreciated value of the  machinery  and mechanical installation

Rs.6,62,000/- Amount confirmed

V Loss  of  business from  the  year  1981 to 1986

Rs.5,00,000/- Amount confirmed

In the counter affidavit filed by the respondent-State, it is stated that

the  office  of  the  Executive  Engineer,  Jalgaon  Medium  Project

Division-1 has deposited the decreetal amount of Rs.72,02,224/- by

way of a cheque deposited in the Civil court. Further the amount of

Rs.10,00,000/-  has been paid to the appellant  on 21.09.2018 by

way of cheque bearing No.000081 vide receipt No.0114362 and the

16

amount  of  Rs.5,00,000/-  has  been  paid  to  the  appellants  on

02.11.2018  by  way  of  the  cheque  bearing  No.000094

(receipt  No.0114663).  It  is  stated  that  the  appellant  has  also

executed  the  receipt  of  the  above  said  amount  and  has  also

executed an acknowledgement to the effect that,  his entire claim

has been settled. As per the modified amount of compensation, the

appellants are entitled to the balance amount.  

23. In the result,  the impugned judgment  and final  order  dated

21.08.2017  passed  by  the  High  Court  of  Judicature  at  Bombay

Bench at  Aurangabad in First  Appeal No.601 of  1997 along with

Cross  Objection  St.  No.22145  of  1997  in  the  First  Appeal,  is

modified as stated above in Para (22) and these appeals are partly

allowed.  The  balance  amount  as  per  the  modified  amount  of

compensation be paid to the appellants/claimants with all statutory

benefits as awarded by the Reference Court.

..…………………….J.       [R. BANUMATHI]

..…………………….J.        [A.S. BOPANNA]

New Delhi; March 17, 2020.

17