REPORTABLE IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 4212-4223 OF 2004

lA.P. HOUSING BOARD      …. Appellant

Versus

K. MANOHAR REDDY & ORS.    …. Respondents

JUDGMENT

Dr. MUKUNDAKAM SHARMA, J.

1. The present  appeals are filed by the appellant and are  

directed  against  the  judgment  and  order  dated  

08.06.2001 passed by the High Court holding that the  

respondents-claimants are entitled to compensation at  

the rate of Rs. 75/- per square yard for the acquired  

lands after deducting 1/3rd from the said amount, i.e.,  

Rs. 25/- per square yard, along with other benefits as  

awarded by the Civil Court.

2. The State Government  of Andhra Pradesh by issuing a  

notification under Section 4(1) of the Land Acquisition  

Act,  1894  [hereinafter  referred  to  as  “the  Act”]  on  

16.01.1985,  which was published  in the  Gazette  on  

17.04.1985,  proposed  to  acquire  an  extent  of  land  

measuring  84  acres  24  guntas  of  land  situated  in  

Survey  Nos.  4,  5,  6,  7,  8,  13,  14  and  108  of  

Pothireddipalli  village,  Sangareddy  Mandal,  Medak  

District.  The aforesaid  notification was followed by a  

notification  under  Section  6  of  the  Act.  The  Land  

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Acquisition  Officer  thereafter,  taking  into  

consideration the sale transactions of adjoining lands  

for a period of three years prior to the publication of  

notification in question, passed an award determining  

the  market  value  of  the  land  in  question  at  Rs.  

36,000/- per acre.

3. The  respondent-claimants  being  dissatisfied  with  the  

aforesaid  award  passed  by  the  Land  Acquisition  

Officer, sought for a reference under Section 18 of the  

Act  to the  Civil  Court  claiming compensation at Rs.  

100/-  per  square  yard  for  the  acquired  land.  

Consequent to the said prayer, a reference  case was  

registered. The respondents-claimants examined eight  

witnesses  and  also  produced  some  documents  on  

record in the nature of sale deeds exhibited as A1 to  

A15.  On  behalf  of  the  Land  Acquisition  Officer,  

documents were produced which were exhibited as B1  

to B22.  

4. The District Judge, who heard the reference case, after  

considering  the  oral  and  documentary  evidence  

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produced before him, passed a common judgment and  

order dated 29.12.1997 fixing the market value of the  

land acquired at Rs. 50/- per  square yard and also  

awarded  30  per  cent  solatium on the  market  value  

and a further sum of 12 per cent additional  market  

value  in  terms  of  the  Section  23(1)(A)  of  the  Land  

Acquisition Act. The Civil Court also awarded interest  

at 9 per cent per annum for the first year and 15 per  

cent per annum thereafter.  

5. The respondents-claimants, still aggrieved, filed appeals  

before the High Court under Section 54 of the Act. The  

Land  Acquisition  Department  of  the  Government  of  

Andhra Pradesh and the appellants herein also filed  

appeals  before  the  High  Court  contending  inter alia  

that  the  reference  court  was  not  justified  in  

determining  compensation  on  the  basis  of  square  

yards of land when a large extent of land measuring  

84  acres  24  guntas  had  been  acquired.  Another  

contention that was raised on behalf of the State was  

that  the  reference  court  should  have  at  least  made  

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deduction towards development charges which could  

have been done in the range between 33 per cent to 65  

per cent since the land acquired was a large tract of  

land whereas the exemplar is small plot of land.

6. Contention of the respondents on the other hand in their  

appeals was that similarly situated lands were sold for  

Rs. 200/- per square yards to Rs. 300/- per square  

yards  and,  therefore,  the  valuation  fixed  by  the  

reference court should be enhanced.  

7. The aforesaid appeals were heard by the High Court and  

by a common judgment and order dated 08.06.2001  

the Court, taking into consideration the generality of  

the situation and the proximity of the land in question  

to industrial establishments and its potentiality, held  

that  the  claimants  were  entitled  to  compensation of  

Rs. 75/- per square yard for the acquired lands and  

then deducted 1/3rd from the said amount, which is  

Rs. 25/- per square yard, and consequently held that  

the  respondents-claimants  would  be  entitled  for  

payment of compensation at the rate of Rs. 50/- per  

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square  yard  with  other  benefits  as  awarded  by  the  

Civil Court. Being aggrieved by the aforesaid judgment  

and  order,  the  Andhra  Pradesh  Housing  Board  has  

filed the present appeals on which we have heard the  

learned counsel appearing for the parties.

8. The  evidence  adduced  by  the  witnesses  and  the  

documents relied upon and referred to by the courts  

below  were  also  placed  before  us  which  we  have  

carefully  scrutinized.  Out  of  the  15  exhibits,  viz.,  

Exhibits  A1  to  A15,  which are  sale  deeds  produced  

and exhibited by the respondents-claimants before the  

reference court, what is really relevant for our purpose  

are  Exhibits  A1  to  A9,  as  they  pertain  to  lands  

situated at Survey No. 8 which are similar to the land  

which  was  sought  to  be  acquired  under  the  

notification in question. The aforesaid sale deeds were  

executed  apriori  the  date  of  the  notification  issued  

under Section 4(1) of the Act.  Exhibits A1 to A5 relate  

to transactions of sales of land in Survey No. 8 at the  

rate  of  Rs.  50/-  per  square  yard,  Exhibits  A6 & A7  

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relate to transaction of sales of land in Survey No. 13  

at the rate of Rs. 60/- per square yard and Exhibit A9  

relates to transaction of sale of land in Survey No. 4 at  

the  rate  of  Rs.  48.30  per  square  yard.  Another  

important aspect which is to be noted at this stage is  

that  the  proposal  for  acquisition  of  this  land  was  

initiated on 12.10.1982. In light of the said fact, one of  

the  contentions  of  the  appellants  was  that  the  

aforesaid  purchase  of  property  under  all  the  sale  

deeds were made in anticipation of acquisition of land  

thereby showing inflated rate of sale.  

9. It  is  true  that  all  the  aforesaid  Exhibits  which  are  

produced by the respondents-claimants were executed  

after  12.10.1982  when  the  aforesaid  proposal  for  

acquisition  was  initiated.  It  is  also  clear  from  the  

evidence  on record that J.  Subbiah [PW-3] who was  

examined  in the  reference  case  is  also  the  claimant  

No. 7 and was a signatory to Exhibit A9 and is also  

related to Deva Sahayam [PW-2] who was the vendor.  

Similarly, Narayana Goud [PW-5] purchased the land  

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from PW-2 in respect of Exhibit A3 whereas PW-5 is  

signatory in sale deeds, viz., Exhibits A1 and A2. But,  

the  fact  remains  that  the  land which is  acquired  is  

very  ideal  and  suitably  located,  there  being  a  court  

house  and  bus  stand  in  proximity  to  the  acquired  

land. There is also evidence on record indicating that  

the  acquired  land  is  abutting  the  main  highway.  

Therefore, the acquired land has potential value to be  

properly used and developed even for housing project  

or to exploit it for commercial purposes. The acquired  

land,  although classified  as  agricultural  land,  could  

always be converted to land of good quality by making  

investments like filling up of the land, providing road,  

sewage system and other civic amenities. The land in  

question having such potential value could, therefore,  

be  converted  to  a  land  of  good  quality  by  investing  

money towards its development.  

10. This Court while dealing with the admissibility of the sale  

deed in the case of Cement Corporation of India Ltd. v.  

Purya  &  Ors.  reported  in  (2004)  8  SCC  270 at  

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paragraph 28 held that even the vendor or vendee to a  

sale deed are not required to be examined themselves for  

proving the contents thereof  if  the contents of the sale  

deed are held to be admissible by Court in accordance  

with law: -

“28.  Section  51-A  of  the  LA  Act  may be  read  literally  and  having  regard  to  the  ordinary  meaning  which  can  be  attributed to  the  term  ‘acceptance  of  evidence’  relating  to  transaction  evidenced  by  a  sale  deed,  its  admissibility  in  evidence would be beyond any question. We are  not oblivious of  the fact that only by bringing a  documentary  evidence  in  the  record  it  is  not  automatically brought on the record. For bringing   a documentary evidence on the record, the same  must  not  only  be  admissible  but  the  contents  thereof  must be proved in accordance with law.  But when the statute enables a court to accept a  sale deed on the records evidencing a transaction,  nothing  further  is  required  to  be  done.  The  admissibility of  a certified copy of  sale deed by  itself  could  not  be  held  to  be  inadmissible  as  thereby secondary evidence has been brought on  record  without proving  the  absence  of  primary  evidence.  Even the vendor  or  vendee thereof  is  not  required  to  examine themselves  for  proving  the  contents  thereof.  This,  however,  would  not  mean  that  the  contents  of  the  transaction as  evidenced  by  the  registered  sale  deed  would  automatically  be  accepted.  The  legislature  advisedly has used the word ‘may’. A discretion,  therefore, has been conferred upon a court to be  exercised  judicially,  i.e.  upon  taking  into  consideration the relevant factors.”

1. This Court in a catena of decisions has laid down that  

when  a  large  tract  of  land  is  acquired  and  sale  

instances produced for small plots as exemplar, the  

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best course for the court to arrive at a reasonable and  

fare valuation is to deduct a reasonable  percentage  

from the valuation shown in the exemplar land and  

on  the  basis  thereof  to  arrive  at  a  just  and  fair  

valuation. In Rishi Pal Singh and Others vs. Meerut  

Development Authority and Anr. reported in (2006)  

3 SCC 205, this Court while dealing with the issue  

relating to a large tract of land held as follows:-

5…….With  respect  to  the  first  reason,  that  is,  exemplars of  small  plots have been  taken into  consideration by the Reference Court, in the first  instance  our  attention  was  invited  to  some  judgments of this Court to urge that there is no  absolute  bar to exemplars of  small  plots being  considered provided adequate discount is given  in  this behalf.  Thus  there  is  no  bar in  law to  exemplars of small plots being considered. In an  appropriate case, especially when other relevant  or  material  evidence  is  not  available,  such  exemplars  can  be  considered  after  making  adequate  discount.  This  is  a  case  in  which  appropriate  exemplars  are  not  available.  The   Reference Court has made adequate discount for   taking  the  exemplars  of  small  plots  into  consideration…………

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In  Administrator  General  of  West  Bengal  v.  Collector,  

Varanasi, reported at  (1988) 2 SCC 150, this Court held  

(paragraph 12) that where large tracts of land are required  

to be valued, valuation in transactions with regard to small  

plots  cannot  directly  be  adopted  for  valuing the  

compensation of large tracts of land.   

“12.  It is  trite proposition that prices  fetched for   small plots cannot form safe bases for valuation of   large tracts of land as the two are not comparable  properties. The  principle that evidence of  market  value of  sales of  small,  developed plots is not a  safe guide in valuing large extents of land has to   be  understood  in  its  proper  perspective.  The   principle  requires  that  prices  fetched  for  small   developed  plots  cannot  directly  be  adopted  in  valuing large extents. However, if it is shown that  the large extent to be valued does not admit of and  is ripe for use for building purposes; that building  lots that could be laid out on the land would be  good selling propositions and that valuation on the  basis of  the method of hypothetical lay out could   with justification be adopted, then in valuing such  small, laid out sites the valuation indicated by sale   of  comparable small sites in the area at or about  the time of  the notification would be relevant. In  such a case, necessary deductions for the extent  of  land required  for  the  formation of  roads and  other civil amenities; expenses of  development of   the  sites  by  laying  out  roads,  drains,  sewers,  water and electricity lines, and the interest on the  outlays  for  the  period  of  deferment  of  the  realisation of  the price; the profits on the venture  etc.  are  to  be  made.  In  Sahib  Singh  Kalha  v.  Amritsar  Improvement  Trust  this Court  indicated  that deductions for  land required  for  roads and  other developmental expenses can, together, come  up  to  as  much  as  53  per  cent.  But  the  prices  fetched for small plots cannot directly be applied in  the case of  large areas, for  the  reason that the  former reflects the “retail”  price of  land and the  latter the “wholesale” price.”

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1. On the  admissibility  and  relevance  of  sale  deeds,  this  

Court  in  Ranvir  Singh  &  Anr.  V.  Union  of  India  

reported in (2005) 12 SCC 59 held as follows: -

“31.  Furthermore, it is well  settled that the sale  deeds pertaining to the portion of lands which are  subject to acquisition would be the most relevant  piece of evidence for assessing the market value  of the acquired lands.”

“36.  Furthermore,  a  judgment  or  award  determining  the  amount of  compensation is  not  conclusive. The same would merely be a piece of   evidence.  There  cannot be any fixed criteria for   determining the increase in the value of land at a  fixed rate. ……………...”

1. It was held in the case of Union of India & Anr. v. Ram  

Phool & Anr. reported in (2003) 10 SCC 167 that : -

“6. ………... the sale price in respect of a small bit  of  transaction would  not  be  the  determinative  factor  for  deciding  the  market value  of  a  vast  stretch of land. ……..”

1. In  the  case  of  Kasturi  &  Ors.  v.  State  of  Haryana  

reported in (2003) 1 SCC 354 this Court held as follows:  

-  

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“7.  ………….  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;  maybe 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,  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  

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factors  which  may  have  to  be  taken  into  consideration while applying the cut in payment  of compensation towards developmental charges,   maybe 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.”

1.   Further,  in  the  case  of  Shaji  Kuriakose  &  Anr.  v.  

Indian Oil Corpn. Ltd. and Ors.  reported in  (2001) 7  

SCC 650, this Court held that: -  

“3.  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  

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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, 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. ……………”

1.  In  Lal Chand v.  Union of India & Anr.,  reported  at  

(2009) 15 SCC 769,  this  Court  while  determining  the  

rate  at  which  development  charges  may  be  deducted,  

held (paragraph 8):

..The percentage of 'deduction for development' to  be  made to  arrive at the market value  of  large  tracts  of  undeveloped  agricultural  land  (with  potential for  development), with reference  to the  sale  price  of  small  developed  plots,  varies  between  20%  to  75%  of  the  price  of  such  developed plots, the percentage depending upon  the nature of development of the lay out in which   the exemplar plots are situated. The 'deduction for   development'  consists  of  two  components.  The   first is with reference  to the area required to be  utilised for developmental works and the second  is the cost of the development works….

….9.  Therefore  the  deduction  for  the  'development factor' to be made with reference to  the price of a small plot in a developed lay out, to  arrive at the cost of undeveloped land, will be for   

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more  than  the  deduction  with reference  to  the  price of  a small plot in an unauthorized private  lay  out  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. Even among  the  layouts  formed  by  DDA,  the  percentage  of   land utilized for roads, civic amenities, parks and  play  grounds  may  vary  with reference  to  the  nature  of  layout  -  whether  it  is  residential,  residential-  cum-commercial  or  industrial;  and  even  among  residential layouts,  the  percentage  will differ having regard to the size of  the plots,  width of the roads, extent of community facilities,   parks and play grounds provided.  Some of  the  layouts  formed  by  statutory  Development  Authorities may have large areas earmarked for   water/sewage  treatment  plants,  water  tanks,  electrical sub-stations 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%.

1.  It is, therefore, implicit from the aforesaid discussion of  

case  law  and  precedent  that  whatever  could  be  

deducted towards development charges for developing  

a particular plot of land could range between 20 per  

cent to 75 per cent.  This is a very wide bracket,  no  

doubt,  but  an  appropriate  deduction  befitting  the  

situation, location and the nature of the land justifying  

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the  deduction  made  could  be  arrived  at  upon  

estimation of  all  the aforesaid factors.  If  the land is  

already  developed  and  could  be  used  as  a  

commercial/residential plot, what should be deducted  

would be in the lower side whereas if development is  

to  be  made,  like  filling  up  of  the  land,  providing  of  

roads,  sewage  and  other  civic  amenities,  etc.,  the  

range of the deduction could be higher.

2.  Considering the facts and circumstances of the present  

case, and the situation of the land, what could be an  

appropriate deduction in our estimation is 1/3rd from  

the  awarded  amount  towards  development  charges.  

We have referred to the evidence adduced in this case  

which  shows  that  the  land  is  agricultural  land  and  

therefore  would  require  extensive  development to be  

utilised as a residential site.

3.  The High Court interfered with the rate of market value  

fixed by the reference court and raised it to Rs. 75/-  

per square yard from Rs. 50/- per square yard as fixed  

by the reference court and thereafter  deducted 1/3rd  

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from  the  aforesaid  rate  towards  the  development  

charges. However,  the High Court has not given any  

reason,  let  alone  cogent  reasons,  for  increasing  the  

aforesaid  rate  from  Rs.  50/-  to  Rs.  75/-.  Such  a  

course was also not permissible in view of the clear  

evidence which was relied upon and exhibited by the  

claimants-respondents  themselves,  presented  as  

Exhibits A1 to A9. Those were sale deeds which were  

executed in proximity to the date  of acquisition and  

there is also evidence on record to indicate that the  

proposal  for  acquisition  of  the  acquired  land  was  

initiated  as  on  12.10.1982.  Therefore,  such  an  

increase  without  any  supporting  reasons  cannot  be  

said to be valid and legal.  

4.  Therefore, relying on the Exhibits which were produced  

by the claimants-respondents and which are found as  

a  reliable  yardstick  for  determining  the  valuation in  

the present case, we determine the market value of the  

land at Rs. 50/- per square yard as on the date of the  

notification  and  direct  that  1/3rd of  the  awarded  

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amount shall be deducted from the aforesaid valuation  

towards development charges. It  is needless to point  

out here that the respondents shall also be entitled to  

the  statutory  benefits  as  provided for  under  Section  

23(1),  28  and  34  of  the  Act  for  which  the  decision  

rendered  in  the  case  of  Sunder  v.  Union  of  India  

reported  in  (2001)  7  SCC  211 which  was  later  

affirmed and elaborated in the case of Gurpreet Singh  

vs.  Union  of  India  reported  in  (2006)  8  SCC 457  

would be applicable.  

5.   We accordingly allow these appeals.  However, we leave  

the parties to bear their own costs.  

   ............................................J

       [Dr. Mukundakam Sharma ]

............................................J         [ Anil R. Dave ]

New Delhi, September 30, 2010.

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