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CASE NO.: Appeal (civil)  2485 of 2001

PETITIONER: Viluben Jhalejar Contractor (D) By LRs.

RESPONDENT: State of Gujarat

DATE OF JUDGMENT: 13/04/2005

BENCH: B.P. Singh & S.B. Sinha

JUDGMENT: JUDGMENT

W I T H

CIVIL APPEAL NO. 2486-2487 OF 2001

S.B. SINHA, J :

       The Government of Gujarat issued a notification under Section 4(1) of  the Land Acquisition Act (the Act) for acquisition of lands situated in the  town Santrampur which would have come under submergence of water  released from Kadana Jalagar Yojna due to water logging at Kadana Dam.   A declaration in terms of Section 6 was made on 13th October, 1980.  In  response to the notification issued to the claimants under Section 9 of the  Act, compensation at the rate of Rs. 40/- per square feet for the acquired  lands was claimed.  Compensation ranging from Rs. 35/- to Rs. 60/- per  square meter was offered by the Land Acquisition Officer in terms of an  award dated 16th March, 1982 under Section 11 of the Act.  An application  for reference was filed by the claimants under Section 18 of the Act  requiring the Land Acquisition Officer to refer the matter relating to  determination of the market value of the acquired lands to the Civil Court.   Before the Reference Court, the claimants initially  claimed compensation at  the rate of Rs. 200 per square meter which was subsequently enhanced to Rs.  250/- per square meter.  By a judgment and order dated 16th April, 1996, the  learned District Judge allowed the reference application filed by the  claimants determining the market value at the rate of Rs. 225/- per square  meter.  The State of Gujarat preferred an appeal thereagainst in the High  Court of Gujarat which was marked as First Appeal No. 5041/96.  A  Division Bench of the High Court by a judgment and order dated 11th May,  1999 allowed the said appeal and remitted the matter to the Reference Court  on the premise that the deed of sale whereupon the claimants relied upon had  not been proved in accordance with law.  Before the District Court, upon  remand parties adduced evidence.

       The Reference Court relying on or on the basis of a deed of sale dated  15th December, 1978 (Ex. 145), whereunder a piece of land measuring 46.30  square meters situated at Godhra Bhagal was sold and other evidences  brought on records came to the conclusion that the lands under acquisition  would have fetched at least Rs. 200/- per square meter.  The Reference Court  was further of the opinion that the claimants were furthermore to incur  development charges which would have varied between 33% to 53% and on  the basis thereof determined the market value at the rate of Rs. 134 per  square meter.

       Furthermore, the Reference Court extended the statutory benefits of  solatium in terms of Section 23(2) of the Act as well as interest thereon in  terms of Section 28 thereof.  Both the parties preferred appeals thereagainst  before the High Court of Gujarat.

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       A Division Bench of the High Court was of the view that the acquired  lands were fully developed.  The records of the case also indicated that after  the acquired lands were submerged in the water of Kadana dam, the  development of the area of Pratappura had shifted to the locality known as  Godhra Bhagal.  The basis for awarding compensation was the deed of sale  dated  15th December, 1978 (Ex. 145), whereby approximately 46.30 square  meters had been transferred at a consideration of Rs. 270/- per square meter,  and upon making a deduction of 33% for the larger area and 25% for the  smaller area, the claimants were  held to be entitled to receive compensation  at the rate of Rs. 180/- per square meter having large area and Rs. 200/- per  square meter for the lands having small area.

       The High Court, however, having regard to the decision of this Court  in Prem Nath Kapur and Another Vs. National Fertilizers Corporation of  India Limited and Others [(1996) 2 SCC 71] was of the opinion that the  claimants were not entitled to interest on the amount of solatium.  Aggrieved  thereby, both the parties are before us.

       Ms. Hemantika Wahi, learned counsel appearing on behalf of the  State of Gujarat would contend that the High Court committed a manifest  error in passing the impugned judgment relying on or on the basis of the  deed of sale of Survey No. 1177 which measured only 46.30 square meters  and situated in a different locality whereas the area under acquisition was  approximately 30,000 square meters belonging to one family.

       The learned counsel would contend that the High Court ought to have  deducted 50% from the value of the land in Survey No. 1177,  not only  keeping in view of the fact the acquired lands have large area but also on the  ground of future developments which were required to be made.  It was  submitted that keeping in view the fact that the claimants would be getting  the amount of compensation in lump sum, the High Court erred in passing  the impugned judgment.  In support of the said proposition, strong reliance  has been placed on Bhagwathula Samanna and Others Vs. Special Tahsildar  and Land Acquisition Officer, Visakhapatnam Municipality, Visakhapatnam  [(1991) 4 SCC 506], Land Acquisition Officer Revenue Divisional Officer,  Chittor Vs. L. Kamalamma (Smt.) Dead by LRs and Others [(1998) 2 SCC  385] and Ravinder Narain and Another Vs. Union of India [(2003) 4 SCC  481].

       Mr. Ranjit Kumar, learned senior counsel appearing on behalf of the  Claimants-Appellants, on the other hand, would contend that the High Court  failed to take into consideration the fact that the lands situated in village  Pratappura were fully developed whereas lands situated in Godhra Bhagal  were not so developed and in that view of the matter it was not a case where  the amount of compensation should have been determined upon deduction to  the extent of 33% and 25% respectively for the large and small area.  It was  further contended that  deduction both for the largeness of the area as well as  the development is not permissible.  Reliance in this connection has been  placed The Registrar, University of Agricultural Sciences, Dharwad Vs.  Balanagouda (Dead) By LRs. & Ors. [Civil Appeal Nos. 62-65 of 2000  disposed of on 10th December, 2003].

       It was further contended that the High Court committed a manifest  error in refusing to grant interest on solatium relying on or on the basis of  the decision of this Court in Prem Nath Kapur (supra) which stands  overruled by a Constitution Bench of this Court in Sunder Vs. Union of  India [(2001) 7 SCC 211].

       The land under acquisition consisted of 16 plots.  Out of them two  plots measured 18528 square meters and 10993 square meters respectively.   The area of the small plots which are 14 in number are as under:

"S.No.  C.T.S. No.              Area acquired (in sq.m) 1.              833                             130.00

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2.              838                               46.20 3.              839                               35.28 4.              834                             365.56 5.              857                             234.00 6.              858                               47.77 7.              859                               47.97 8.              860                               47.97 9.              861                               46.60 10.             862                               63.18 11.             840                             54.60 12.             841                             42.00 13.             842                             26.40 14.             843                             28.38

                               Total          1215.91"

       The learned Land Acquisition Collector in his award noticed that the  population of Santrampur town was 12000.  The acquired lands were  situated near an area known as Main market.  It was held:

"Pucca residential houses, quarters of Government  employees, rest house and open lands are there  very near to the acquired lands.  Acquired lands  are of regular square shape having even level and  is located in downwards about 4 feet from road  level, surrounding lands are generally used for  purpose other than agriculture purpose.  These  lands are more useful for residential purpose i.e. all  lands are having N.A. potentialiaties.  S.No. 25 is  "Wada" land and this land is situated towards  Godhra Lunawada road.  Lunawada and on  Northern side of road going towards Santrampur  and near Chikhota river Santrampur is reserved for  recreation place in implemented development map,  whereas presently well and Bungalow of His  Highness Maharaja Shri Krushnakumar Sinh is  situated in the said land."

       The High Court as regard the question as to whether the area is a  developed one or not noticed the deposition of Barjorbhai Jalejar Contractor  who alleged:

"The acquired lands were having facilities of  electricity, water and roads.  It is borne out from  his evidence that the claimants’ ancestors were  carrying on business of distillery till 1949 and  thereafter they had started business of pulse and  rice mills on the acquired lands.  It is an admitted  fact that the acquired lands were converted into  non-agricultural use since many years prior to the  acquisition."

       Before us, Ms. Wahi did not raise any contention that the sale instance  relied upon by the Reference Court as also the High Court was improper.   She, however, drew our attention to the following observations made by the  Reference Court:

"However, the fact remain that the lands under  acquisition are situated in the area called as  Pratappura in Santrampura town, whereas the sale  deed, ex. 145, pertains to a property situated in  Godhra Bhagol area  The sale deed is not about the  property situated in Pratappura area.  Furthermore,  though the amount of consideration of the entire

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land is Rs. 20,000/-, but there is no just and proper  data about the valuation of the built up portion of  the said plot.  The L.A. Officer in his award dtd.  16.3.82 fixed the valuation of the built-up portion  at Rs. 7,500/- but in the sale deed, ex. 145, nothing  specific is mentioned about the separate valuation  of the built-up portion in the land.  The witness  Giriraj Pandit, in his deposition, stated that when  the property was purchased, at that time,  construction work in the plot was only upto plinth  level.  However, in this connection, perusing the  sale deed, ex. 145, it is, specifically, stated that in  the land, a house was situated and even  Santrampur Municipality issued a house no. 3484,  to this house.  Therefore, this part of the deposition  of witness Giriraj Pandit, appears to be contrary to  the averments made in the sale deed, ex. 145."

       Pratappura appears to be a small town.  There is nothing on record to  show that the area was fully urbanized.  However, in the area, a distillery, a  Rice Mill, a Pulse Mill and even an Ice Factory had been running.   Although, the Land Acquisition Collector referred to certain sale instances in  his award, as indicated hereinbefore, we may assume that the sale deed dated  15th December, 1978 (Ex. 145) should be the basis for determination of  compensation despite the fact that it relates to a very small piece of land.     While determining the amount of compensation, certain factors must be  taken into consideration.  When the amount of compensation is determined  on yardage basis, at least one-third of the land acquired should be deducted  towards development purposes, viz., providing roads, electricity, drainage  facility and other betterment developments.  Such development charges may  be in between 33% to 53%.         The Reference Court was of the view that although the area was  developed, there is nothing on record to show that there had been facilities  of internal roads drainage and other facilities.  The learned Reference Court,  however, arrived at a finding of fact that nothing was brought on record to  show that on the date on which the possession had been taken, a distillery,  rice mill, pulse mill and ice factory had been functioning.

       The Reference Court, as noticed hereinbefore, was of the opinion that  keeping in view of the fact that the area of the land covered by Ex. 145 was  a small piece of land, the market price for the acquired land should be  determined at Rs. 200/- per square meters wherefrom 33% should be  deducted towards development charges.  The High Court, however, was of  the opinion that 33% should be deducted from the total amount of  consideration covered by Ex. 145 for the large area and 25% for the small  area.

       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.

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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-‘-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 (v) lower level requiring the  depressed portion to be filled up (v) regular shape (v) remoteness from developed  locality (vi) level vis-‘-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.

       Certain peculiar features of this case may, at this juncture, be noticed.   Due to construction of Kadana Dam and due to water logging causing  submergence, the development of Pratappura even according to the  Claimants had practically stopped.  Development shifted to the area known  as Godhra Bhagal.  The finding of the Reference Court to the effect that the  acquired lands had  potentiality for more development is, thus, not correct.   

       A river known as Suki  intervened between the Santrampur town and  Godhra Bhagal.  In a case of this nature, it is difficult to evolve a principle  which would apply to all situations.  Some amount of rational guess work, in  our opinion, is inevitable.

The purpose for which acquisition is made is also a relevant factor for  determining the market value.           In Basavva (Smt.) and Others Vs. Spl. Land  Acquisition Officer and Others [(1996) 9 SCC 640], deduction to the extent  of 65% was made towards development charges.   

       In Bhagwathula Samanna (supra), it has been held: "11. The principle of deduction in the land value  covered by the comparable sale is thus adopted in  order to arrive at the market value of the acquired  land. In applying the principle it is necessary to  consider all relevant facts. It is not the extent of the

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area covered under the acquisition which is the  only relevant factor. Even in the vast area there  may be land which is fully developed having all  amenities and situated in an advantageous position.  If smaller area within the large tract is already  developed and suitable for building purposes and  have in its vicinity roads, drainage, electricity,  communications etc. then the principle of  deduction simply for the reason that it is part of the  large tract acquired, may not be justified.

       In L. Kamalamma (supra), this Court held: "\005Ext. B-30 is a sale deed dated 9-8-1976, the  transaction having taken place prior to eight  months from the issue of the preliminary  notification for acquisition of land in the present  case. Having found that the piece of land referred  in Ext. B-30 is situated very close to the lands that  are acquired under the notification in question the  reference court and the High Court relied upon the  said document and, in our view, rightly. Further  when no sales of comparable land were 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 layout, lump sum payment as  also the waiting period required for selling the sites  that would be formed.

       In Administrator General of West Bengal Vs. Collector, Varanasi  [(1988) 2 SCC 150], deduction to the extent of 53% was allowed.

       In K.S. Shivadevamma and Others Vs. Assistant Commissioner and  Land Acquisition Officer and Another [(1996) 2 SCC 62], it was held:

"10. It is then contended that 53% is not automatic  but depends upon the nature of the development  and the stage of development. We are inclined to  agree with the learned counsel that the extent of  deduction depends upon development need in each  case. Under the Building Rules 53% of land is  required to be left out. This Court has laid as a  general rule that for laying the roads and other  amenities 33-1/3% is required to be deducted.  Where the development has already taken place,  appropriate deduction needs to be made. In this  case, we do not find any development had taken  place as on that date. When we are determining  compensation under Section 23(1), as on the date  of notification under Section 4(1), we have to  consider the situation of the land development, if  already made, and other relevant facts as on that  date. No doubt, the land possessed potential value,  but no development had taken place as on the date.  In view of the obligation on the part of the owner  to hand over the land to the City Improvement  Trust for roads and for other amenities and his  requirement to expend money for laying the roads,  water supply mains, electricity etc., the deduction

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of 53% and further deduction towards  development charges @ 33-1/3%, as ordered by  the High Court, was not illegal.

       In Hasanali Khanbhai & Sons & Ors. Vs. State of Gujarat, (1995) 2  SCC 422 and L.A.O. Vs. Nookala Rajamallu, (2003) 10 SCALE 307, it has  been noticed that where lands are acquired for specific purposes deduction  by way of development charges is permissible.

       We are not, however, oblivious of the fact that normally one-third  deduction of further amount of compensation has been directed in some  cases. [See Kasturi and Others Vs. State of Haryana, (2003) 1 SCC 354,  Tejumal Bhojwani (Dead) Through LRS. And Others Vs. State of U.P.,  (2003) 10 SCC 525, V. Hanumantha Reddy (Dead) BY LRS. Vs. Land  Acquisition Officer & Mandal R. Officer, (2003) 12 SCC 642, H.P. Housing  Board Vs. Bharat S. Negi and Others, (2004) 2 SCC 184 and Kiran Tandon  Vs. Allahabad Development Authority and Another, (2004) 10 SCC 745].                  In The Registrar, University of Agricultural Sciences, Dharwad  (supra), whereupon Mr. Ranjit Kumar placed strong reliance, the Court  noticed that if the acquisition is made for agricultural purpose, question of  development thereof would not arise; but if the sale instance was in respect  of small piece of land whereas the acquisition is for a large piece of land,  although development cost may not be deducted, there has to be deduction  for largeness of the land and also for the fact that these are agricultural lands.   In that view of the matter, deduction at the rate of 33% made by the High  Court was upheld.  It may not, therefore, be correct to contend, as has been  submitted by Mr. Ranjit Kumar, that there cannot be different deductions,  one for the largeness of the land and another for development costs.

       We have noticed hereinbefore that the purpose for which the land is  acquired must also be taken into consideration.  In the instant case, the lands  were acquired because they were to be submerged under water.  The land  would not have any potential value.  The development of area where the  land was situated had stopped.  On the other hand, the development began  on the other side of the river Suki.  The parties were aware of the  consequences of the project undertaken by the Government of Gujarat.  The  sale instances, for comparison, having regard to the nature and area of the  land carves out a distinction, inasmuchas the area sold under Ex. 145 is  46.30 square meters while two plots under acquisition measured 18528  square meters and 10993 square meters respectively.  We, therefore, are of  the opinion, having regard to the entire facts and circumstances of this case  that interest of justice would be subserved if compensation is determined at  the rate of Rs. 160/- per square meter for the large plots and Rs. 175/- per  square meter for the small plots.   

The claimants \026 Appellants, however, would be entitled to interest on  solatium as the said question is no longer res integra.  

In Sunder (supra), this Court overruled Prem Nath Kapur (supra).  The  Constitution Bench held:

"24. The proviso to Section 34 of the Act makes  the position further clear. The proviso says that "if  such compensation" is not paid within one year  from the date of taking possession of the land,  interest shall stand escalated to 15% per annum  from the date of expiry of the said period of one  year "on the amount of compensation or part  thereof which has not been paid or deposited  before the date of such expiry". It is inconceivable  that the solatium amount would attract only the  escalated rate of interest from the expiry of one  year and that there would be no interest on

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solatium during the preceding period. What the  legislature intended was to make the aggregate  amount under Section 23 of the Act to reach the  hands of the person as and when the award is  passed, at any rate as soon as he is deprived of the  possession of his land. Any delay in making  payment of the said sum should enable the party to  have interest on the said sum until he receives the  payment. Splitting up the compensation into  different components for the purpose of payment  of interest under Section 34 was not in the  contemplation of the legislature when that section  was framed or enacted.

       These Appeals are disposed of with the aforementioned directions.   There shall be no order as to costs.