REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.1086 OF 2006

Special Land Acquisition Officer & Anr. ..Appellant(s)

- Versus -

M.K. Rafiq Saheb ..Respondent(s)

J U D G M E N T

GANGULY, J.

1.  The  issue  involved  in  the  present  case  is  

whether the quantum of compensation awarded by the  

High  Court  in  a  land  acquisition  dispute  is  

excessive or not.

2. A notification was published under section 4(1)  

of  the  Land  Acquisition  Act,  1894  (hereinafter  

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referred  to  as  ‘the  Act’)  on  17.7.1994  for  the  

acquisition  of  the  respondents  land  measuring  34  

guntas in Sy. No. 6/2 of Binnamangala Mahavartha  

Kaval, K.R. Puram, Bangalore South Taluk.  

3.  The  Special  Land  Acquisition  Officer  

(hereinafter referred to as ‘SLAO’) passed an award  

on 26.9.1995 granting compensation at Rs.1,30,000/-  

per acre along with statutory benefits. The SLAO  

concluded that the lands were agricultural and no  

sale  transactions  relating  to  the  same  were  

available.  Sale  transactions  were  available  in  

respect  of  non-agricultural  lands  but  they  could  

not  be  adopted  for  determining  the  valuation  of  

agricultural  land.  Therefore,  the  SLAO  chose  to  

rely on acquisition proceedings in respect of lands  

in  the  vicinity  for  determining  land  value.  

Accordingly, it was found that in the neighbouring  

villages  of  Benniganahalli,  B.  Narayanapura  and  

Kaggadasapura villages, land had been acquired in  

favour  of  DRDO  complex  where  the  government  had  

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approved awards fixing land value at Rs.1,30,000/-.  

The said valuation was thus adopted by the SLAO in  

the instant case.  

4. Possession of the land was taken on 11.4.1996.

5.  Dissatisfied  by  the  award  of  the  SLAO,  the  

respondent filed a reference under section 18 of  

the Act for enhancement of compensation.

6.  The  Reference  Court,  vide  judgment  dated  

28.5.1999,  enhanced  compensation  to  Rs.4,00,000/-  

per acre and also awarded statutory benefits. The  

Reference  Court  concluded  that  based  on  the  

evidence on record, it could not be said that the  

land  in  question  was  agricultural  land  for  all  

practical  purposes  since  it  was  situated  by  the  

side of a residential locality and was in the midst  

of a highly developed industrial locality. Thus, it  

held  that  though  the  land  remained  agricultural  

land  on  the  records,  it  was  not  an  agricultural  

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land for all practical purposes and no agricultural  

activities could be carried out on it. The Court  

did not rely upon sale deeds Exhibit P3, P4, P5,  

P6, P7 and P8. Exhibit P7 and P8 were not relied  

upon as the parties to the transaction had not been  

examined. Ex. P3 and P4 were corner sites, were not  

within vicinity of the acquired land and were sold  

in  a  public  auction,  and  thus  also  held  not  

reliable. The respondent had also produced Ex. P9,  

which  was  a  gazette  notification  dated  20.1.1997  

issued  by  the  Revenue  Secretariat,  fixing  the  

market value of the immovable property coming under  

the jurisdiction of several Sub-Registrar’s office  

situated  in  Bangalore,  for  the  purpose  of  

collecting  stamp  duty.  The  Reference  Court  

discarded the same on the reasoning that the Court  

did not know what was the basis of determination of  

market value for the purpose of collecting stamp  

duty in respect of immovable properties by the Sub  

Registrar.

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7.  Instead,  the  Reference  Court  proceeded  to  

determine the market value of land on the basis of  

compensation  awarded  in  the  judgment  and  award  

dated  13.8.1998  made  by  the  Reference  Court  in  

respect  of  land  in  the  neighbouring  villages  of  

Kaggadasapura  and  Mahadevapura,  pursuant  to  the  

preliminary  notification  dated  28.7.1988.  In  the  

said  villages,  about  110  acres  of  land  had  been  

acquired  and  market  value  was  fixed  at  

Rs.2,48,000/-  per  acre.  The  difference  between  

dates of preliminary notifications in the abovesaid  

villages and in the instant case was 5 years and 15  

days. Accordingly, the Reference Court gave a 10%  

enhancement  for  each  year  in  respect  of  lands  

acquired in and around Bangalore city, relying on  

the  judgment  in  J.     Narayan   v. Land  Acquisition  

Officer, (1980) 2 KLJ 441, by which land value came  

to Rs.3,73,000/- per acre. However, the Reference  

Court found that the land had more potentiality and  

was  situated  in  the  midst  of  a  heavy  industrial  

area and in the immediate vicinity of an already  

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developed residential locality. It was also in the  

vicinity of a road known as Old Madras road as well  

as  the  road  leading  to  the  airport.  Hence,  the  

Reference  Court  was  of  the  opinion  that  the  

respondent was entitled to a higher market value  

than  Rs.3,73,000/-  per  acre.  Thus,  the  Reference  

Court  held  that  Rs.4,00,000/-  per  acre  would  be  

reasonable  and  fair  market  value  in  the  instant  

case.

8.  The  respondent,  still  dissatisfied  with  the  

compensation  awarded,  filed  an  appeal  before  the  

High Court of Karnataka. The appellant also filed  

cross-objections under Order 41, Rule 22 of CPC.

9.  The  High  Court,  by  way  of  impugned  judgment  

dated  17.6.2004,  enhanced  the  compensation  to  

Rs.35,17,470/- per acre and also awarded all other  

statutory benefits.

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10.  The  High  Court  accepted  the  finding  of  the  

Reference Court that the land in question was fit  

to be utilized as a non-agricultural site as it was  

fully  supported  by  evidence  on  record.  The  High  

Court agreed with the Reference Court that the land  

had ceased to be agricultural land and was fit to  

be used as a housing site or an industrial site.  

11. The High Court then went onto determination of  

quantum  of  compensation.  It  concurred  with  the  

Reference  Court  in  rejecting  Ex.  P7,  P8  and  P9,  

stating that they could not be relied upon as they  

related  to  transactions  which  had  happened  after  

the issuance of the preliminary notification. Since  

other sale transactions were available, which had  

taken  place  within  reasonable  time  prior  to  the  

issuance  of  the  section  4(1)  notification,  post-

dated  sale  transactions  could  not  be  considered.  

The High Court also concurred in rejecting Ex. P3  

and  P4  on  ground  that  these  sale  transactions  

related to corner sites sold at a public auction.  

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Corner sites fetched much more than other sites and  

when sold at a public auction, the price depended  

upon the whims and fancies of the bidders. Thus,  

Ex. P3 and P4 could not be relied upon to determine  

market value. Ex. P6 related to the sale of a site  

with a building and thus it was not accepted. The  

High Court was of the opinion that Ex. P5 could be  

used to determine market value. Ex. P5 was a sale  

deed dated 23.4.1993 of the market value of a site  

measuring around 30’ X 40’ fixed at Rs.2,50,000/-,  

which worked out to Rs.182/- per square feet. The  

High Court also deducted 50% of the market value  

shown in Ex. P5 towards developmental charges, and  

market value of the acquired land was computed at  

Rs.95/- per sq. ft.

12.  Being  aggrieved  by  the  enhancement  in  

compensation  granted  by  the  High  Court,  the  

appellant  approached  this  court  by  filing  this  

appeal.

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13. The point that arises for consideration before  

us  is  whether  High  Court  has  correctly  enhanced  

compensation?  Two  related  questions  have  to  be  

answered to determine the same.

a. Whether the land is agricultural land or has  

it ceased to be so?

b. Whether Ex. P5, which relates to sale instance  

of a small piece of non-agricultural land, can  

be used to determine the market value of land?

14. The appellant has challenged the finding of the  

High Court that the land ceased to be agricultural  

land. It contended that the land was agricultural  

land, as was clearly seen from the records and no  

conversion  charges  were  paid  to  convert  it  into  

non-agricultural land.  

15.  We  reject  this  contention  of  the  appellant.  

That the land has ceased to be agricultural land  

and is capable of being used as a residential or  

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industrial site is a concurrent finding of fact by  

both the Courts below and is amply supported by the  

evidence  on  record.  We  uphold  the  same.  The  

appellant  did  not  file  any  appeal  impugning  the  

finding of the Reference Court that the land could  

not  be  treated  as  agricultural  land.  Not  having  

done  so,  it  is  not  open  to  the  appellant  to  

question  the  finding  of  the  High  Court  that  the  

land is not agricultural land.

16. Otherwise also, we are of the opinion that in  

light of the fact that the land was situated by the  

side of a residential locality and was in the midst  

of  a  highly  developed  industrial  locality,  the  

acquired land was capable of being used for non-

agricultural purposes and should be considered as  

non-agricultural  land  in  determination  of  

compensation.  We  find  support  in  this  reasoning  

from  the  judgment  of  this  court  in  Anjani  Molu  

Dessai v. State of Goa and Anr. reported in (2010)  

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13  SCC  710.  The  relevant  portion  of  the  said  

judgment is set out below:

“5. The High Court has also referred to  the  situation  of  the  property  and  has  noted  that  the  acquired  lands  are  in  a  village  where  all  basic  amenities  like  primary health centre, high school, post  office were available within a distance of  500  meters.  It  can  therefore  be  safely  concluded that the acquired lands are not  undeveloped  rural  land,  but  can  be  urbanisable land situated near a developed  semi-urban  village  with  access  to  all  infrastructure facilities.”

17. We find that the High Court relied on Ex. P5 to  

determine  the  market  value  of  compensation.  It  

appears that the said sale instance relates to a  

small residential site measuring 30’ X 43’ (125.309  

sq. mts). The acquired land in question measures 34  

guntas.  The  Reference  Court  rejected  Ex.  P5  in  

determining  market  value  of  land  since  it  found  

that the land covered by Ex. P5 was at a distance  

of 2 kms from the acquired land. We are of the  

opinion that the Reference Court erred in rejecting  

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Ex.  P-5  in  determining  compensation  for  the  

acquired land.

18. The judgment of the High Court is well reasoned  

and well considered. We find no perversity in its  

reasoning. The only issue is that Ex. P-5, which  

was relied upon by the High Court, relates to a  

small piece of land, whereas the acquisition is of  

a larger piece of land. It is not an absolute rule  

that when the acquired land is a large tract of  

land, sale instances relating to smaller pieces of  

land  cannot  be  considered.  There  are  certain  

circumstances when sale deeds of small pieces of  

land can be used to determine the value of acquired  

land which is comparatively large in area, as can  

be seen from the judicial pronouncements mentioned  

hereunder.

19.  It  has  been  held  in  the  case  of  Land  

Acquisition  Officer,  Kammarapally  Village,  

Nizamabad  District,  Andhra  Pradesh

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v. Nookala Rajamallu and Ors. reported in (2003) 12  

SCC 334 that:

“6. Where large area is the subject-matter  of acquisition, rate at which small plots  are  sold  cannot  be  said  to  be  a  safe  criterion. Reference in this context may  be made to few decisions of this Court in  Collector of Lakhimour  v. Bhuban Chandra  Dutta:  AIR  1971  SC  2015,  Prithvi  Raj  Taneja  v. State of M.P.  AIR 1977 SC 1560  and Kausalya  Devi  Bogra  v. Land  Acquisition Officer AIR 1984 SC 892.

7. It cannot, however, be laid down as an  absolute proposition that the rates fixed  for the small plots cannot be the basis  for  fixation  of  the  rate.  For  example,  where there is no other material, it may  in  appropriate  cases  be  open  to  the  adjudicating Court to make comparison of  the prices paid for small plots of land.  However,  in  such  cases  necessary  deductions/adjustments  have  to  be  made  while determining the prices.”

20. In the case of Bhagwathula Samanna and Ors. v.  

Special  Tahsildar  and  Land  Acquisition  Officer,  

reported in (1991) 4 SCC 506, it was held:

“13.  The  proposition  that  large  area  of  land cannot possibly fetch a price at the  

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same rate at which small plots are sold is  not  absolute  proposition  and  in  given  circumstances it would be permissible to  take into account the price fetched by the  small plots of land. If the larger tract  of land because of advantageous position  is capable of being used for the purpose  for which the smaller plots are used and  is also situated in a developed area with  little  or  no  requirement  of  further  development, the principle of deduction of  the value for purpose of comparison is not  warranted...”

21. In Land Acquisition Officer, Revenue Divisional  Officer, Chittoor v.  Smt. L. Kamalamma (dead) by  Lrs. and others, AIR 1998 SC 781, this Court held  as under:-

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

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22. Further, it has also been held in the case of  

Smt. Basavva and Ors. v.  Special Land Acquisition  

Officer and Ors  ,   reported in AIR 1996 SC 3168, that  

the court has to consider whether sales relating to  

smaller pieces of land are genuine and reliable and  

whether they are in respect of comparable lands. In  

case  the  said  requirements  are  met,  sufficient  

deduction should be made to arrive at a just and  

fair market value of large tracks of land. Further,  

the  court  stated  that  the  time  lag  for  real  

development and the waiting period for development  

were  also  relevant  factors  to  be  considered  in  

determining compensation. The court added that each  

case depended upon its own facts. In the said case,  

based  on  the  particular  facts  and  circumstances,  

this  court  made  a  total  deduction  of  65%  in  

determination of compensation.

23. It  may  also  be  noticed  that  in  the  normal  

course  of  events,  it  is  hardly  possible  for  a  

claimant to produce sale instances of large tracks  

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of land.  The sale of land containing large tracks  

are generally very far and few.  Normally, the sale  

instances  would  relate  to  small  pieces  of  land.  

This limitation of sale transaction cannot operate  

to the disadvantage of the claimants.  Thus, the  

Court should look into sale instances of smaller  

pieces of land while applying reasonable element of  

deduction.  

24. In the present case, the land acquired is 34  

guntas and the notification under section 4 of the  

Act was issued on 17.7.1994. We have already held  

that for the purposes of determining compensation,  

the acquired land should be considered to be non-

agricultural land. Ex. P-5 is a sale deed for sale  

of  a  non-agricultural  land  dated  23.4.1993.  The  

land covered by the sale deed is about 2 kms. away  

from the acquired land.  

25. In contrast, the Reference Court relied upon  

the compensation awarded for acquisition of land in  

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the  neighbouring  villages,  which  had  occurred  5  

years prior to the present acquisition. We are of  

the opinion that market value of the land acquired  

in  the  present  case  is  much  better  reflected  by  

exemplar  Ex.  P-5,  which  relates  to  sale  of  land  

just 2 kms. away from the acquired land and is just  

a little over a year before the issuance of the  

section  4  notification  in  the  present  case.  All  

other sale deeds presented before this Court could  

be relied upon and were rightly rejected by both  

the  Reference  Court  and  the  High  Court  for  the  

reasons given above.

26. Thus, we are of the opinion that the sale deed  

Ex. P-5 was rightly relied upon by the High Court  

in determining compensation.  

27. The High Court made a 50% deduction since the  

sale instance Ex. P-5 related to a smaller piece of  

land. We are of the considered view that the said  

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deduction should be increased to 60%, which we find  

fair, just and reasonable in the circumstances.

28.  Hence,  the  judgment  of  the  High  Court  is  

modified  to  the  extent  of  the  abovementioned  

deduction. All other findings of the High Court are  

sustained.

29. The appeal is thus dismissed with the aforesaid  

modification.  

30. No order as to costs.

.....................J. (ASOK KUMAR GANGULY)

.....................J. New Delhi (SWATANTER KUMAR) July 05, 2011

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