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PETITIONER: LAND ACQUISITION & ANR. ETC.

       Vs.

RESPONDENT: SMT. JASTI ROHINI  & ANR. ETC.

DATE OF JUDGMENT27/10/1994

BENCH: RAMASWAMY, K. BENCH: RAMASWAMY, K. VENKATACHALA N. (J)

CITATION:  1995 SCC  (1) 717        JT 1995 (2)   339  1994 SCALE  (5)75

ACT:

HEADNOTE:

JUDGMENT: ORDER 1.   Leave granted. 2.   In  disposal  of  the  three  appeals  by  this  common judgment,  we  shall refer to SLP(C) No. 12300/94  as  first case and to SLP(C) Nos.3528-29 as second case. 3.   Notification   issued   under  s.4(1)   of   the   Land Acquisition  Act,  1894 in the first case was  published  on June  16, 1983 for acquiring 9.47 acres near Eluru  town  of West Godavari Dist. of Andhra Pradesh to provide house sites to  the poor.  Again, 14. 1 0 acres of land was acquired  in the  second  case  for the same purpose  by  publishing  the Notification  under  s.4(1)  on March 23,  1985.   The  Land Acquisition  Officer  awarded compensation under  s.  11  at Rs.40,000/-  per acre in both the cases.  On reference,  the Sub-ordinate Judge, Eluru, enhanced the market value in  the first  case to Rs. 105/- per sq. yard by deducting  30%  for developmental charges out of Rs. 150/- per sq. yard fixed as its value, with usual solatium and interest.  In the  second case,  he enhanced to Rs.70/-per sq. yard as claimed by  the claimants  therein.   On  appeal, the  High  Court,  by  the impugned   separate  judgments  dated  September  29,   1993 enhanced die market value to Rs. 150/- in respect of land in the  second case but he upheld in the first case the  market value of the land at Rs.150/per sq. yard granting the  usual solatium  and  interest.   Thus, these  appeals  by  special leave. 4.   We  have  heard  learned  counsel  on  both  sides  and considered  the reasoning or the High Court and also of  the reference court vis-a-vis the evidence on record.  Both  the Courts committed manifest error of law.  The main thrust  of the  arguments  for the claimants is that the award  of  the Civil Court in Ex.A-3 marked in the second case relating  to notification dated Janu- 341 ary 10, 1977 acquiring 2.17 acres of land in T.S. No.135  of

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the nearby lands, the LAO had awarded at Rs.8.75 per sq. yd. and the reference court determined its compensation at,  Rs. 50/-  per  sq. yd., which was upheld on appeal by  the  High Court.   The fixation of market value of acquired  lands  as prevailing in 1983-85 a Rs.150/- is not high.  Claimant also relied upon another award on reference which is the  subject matter  in  the first case and yet another award  Ex.A12  in O.P.  No.6/85 which is pending in appeal in the  High  Court apart  from the sale deed Ex.AIO relied on and  accepted  by the  High Court in both the cases and Ex.A16 and 17  in  the first case. 5.   The question, therefore, is what would  be  the  market value prevailing as on the    respective      dates       of notification.  In the first case claimants have relied  upon two  sale deeds Ex.A16 and 17 sold on February 2, 1983  from the  very same acquired land and claimed to be on the  basis of  a lay-out said to have been obtained from the  competent authorities.  According to the claimants, it would work  out at Rs. 150/- per sq. yd.  Since the claimants themselves had sold  those lands to others, they would reflect  the  market value  of lards as prevailing near about the date of  acqui- sition   and  could  be  of  assistance  to  determine   the compensation  as on 1983.  In the other case, the  claimants relied upon the very same award as also sale deed Ex.  A. IO in  which  the  land sold is 120 sq. yd. for a  sum  of  Rs. 16,000/-  working  out  at  Rs. 133/  -  per  sq.  yd.   The reference  court  relied upon the Basic  Valuation  Register maintained  by  the  municipalities  on  the  basis  of  the notification  issued by the Government under s.47-A  of  the Stamp Act.  In fact, the reference court mainly relied  upon that document and awarded compensation on its basis. 6.   The admissibility and evidentiary value of the  entries in the Basic Value Register was considered by this Court  in Jawajee  Nagnatham v. Revenue Divisional Officer,  Adilabad, A.P.,  1994 (4) SCC 595.  After an  elaborate  consideration this Court held that the Basic Value Register is  maintained only  for  fiscal  purpose  of  collecting  stamp  duty  and registration  charges.  The market value  mentioned  therein cannot form a foundation to determine the compensation  u/s. 23(1)  of the Act.  It is settled law that the market  value should be determined on the hypothesis of the price  fetched in the bona fide sale by a willing vendor who would agree to sell  the lands to a willing vendee of the acquired land  or the land in the neighborhood possessed of similar  features. The notification u/s.47(A) which is meant to be a guide  for collection   of   revenue   cannot  form   the   basis   for determination  of market value of the land under s.23(1)  of the  Act.   The question of fixation of market  value  is  a paradox  which  lies at the heart of the law  of  compulsory purchase  of land.  The paradox lies in the facts  that  the market  value concept is purely a phenomena evolved  by  the courts  to  fix  the  price  of  land  arrived  between  the hypothical  willing buyer and willing seller  bargaining  as prudent  persons without a medium of constraints or  without any extraordinary circumstances.  But the condition of  free market  is  the  very  opposite  of  the  condition  of  the compulsory  purchase which is ex-hypothesis, a situation  of constraints.    Therefore,  to  say,  that  for   compulsory purchase, compensation is to be assessed and market value is to  be  determined  in  that state  of  affairs  has  to  be visualised  in terms by its direct opposite.  To  solve  the riddle, courts have consistently evolved the principle  that the present value as on the date of the compulsory 342 acquisition   comprised   of  all  utility  reached   in   a

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competitive field as on the date of the notification and the price  on which a prudent and willing vendor and  a  similar purchaser would agree.  The value of the land shall be taken to be the amount that the land if sold in the open market by a willing seller might be expected to realise from a willing purchaser.  A willing seller is a person who is a free agent to offer his land for sale with all its existing  advantages and  potentialities as on the date of the sale  and  willing purchaser taking all factors into consideration would  offer to  purchase  the land as on the date of the  sale.   Future suitability  or  adaptability of the land  for  any  purpose shall  not  be taken into account.  The  compensation  must, therefore,  be determined by reference to the price which  a willing  vendor  might reasonably expect to  obtain  from  a willing  purchaser  as  on  the  date  of  the  notification published under s.4(1). The disinclination of the seller  to part with his land and the urgent necessity of the vendee to purchase the land must, alike, be disregarded and neither of them must be considered as acting under compulsion. 7.   The reasonable method to determine the market value  of the acquired land is on the evidence of transactions of bona fide  sales of acquired land , but not on evidence of  sales of  such  land got up having had knowledge of  the  proposed acquisition,  the former would furnish reasonable  basis  to determine the compensation.  In its absence, bona fide sales but not manipulated sales of the lands in the  neighbourhood possessed of same or similar quality and having the same  or similar  advantages would give an unerring assurance to  the court to determine just and proper compensation.  Such sales must  not only be proved but also be bona fide  transactions etc.   These  factors  must  be established  as  a  fact  by examining  either  the  vendor or the  vendee.   Marking  of certified  copies of sale deeds are not proof of either  the contents  or  the  circumstances  in which  it  came  to  be executed.  Bona fide sale or series of sales of small pieces of  land do not furnish the sole basis to  determine  market value.   Bona fide sales may furnish evidence of the  market conditions  for consideration.  Fixation of market value  on the  basis  of the basic valuation register  is,  therefore, illegal and unsustainable. 8.   Section 24 of the Act puts an embargo on the court that it  shall not take into consideration the degree of  urgency for the acquisition; disinclination of the person interested to pan with possession of the acquired land; any increase in the value of the land acquired likely to accrue from the use to  which it will be put when acquired; any increase to  the value  of the other land of the person interested likely  to accrue  from the use to which the land acquired will be  put to;  any layout or improvements on or disposal of the ]  and acquired etc. without the sanction of the Collector or after s.4(1)  notification was published, special  suitability  or adaptability of the land for any purpose or any increase  in the value of the land on account of its being put to any use which  is  forbidden of law are opposed  to  public  policy. Therefore,  in determining the market value and fixation  of the compensation, the court should be alive to these factors and  keep  them at the back of the mind and  should  not  be influenced  by  the  future  or  later  development  in  the locality  or neighbourhood and should not get influenced  by the   prevailing   situation  as  on  the   date.   of   the determination of the 343 compensation.   Its consideration should  alone be  confined to  the  market  value  prevailing as on  the  date  of  the notification under s.4(1).

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9.The  question then is whether the High Court is  right  to determine  market value on the basis of  Ex.A.10;  reference awards and potential values as house sites.  It is seen that in the first case 9.49 acres of land was acquired and in the second  case  14. 1 0 acres of land was  acquired.   For  an acquisition of such vast area, reliance of small extents  of land of 120 sq. yd. does not furnish any satisfactory  basis for  fixation of the market value.  Ex.A. 10 is of  a  small extent  and  its  value at Rs.133/- per sq.  yd.  offers  no assistance.  The High Court, therefore, was clearly in error in determining the market value solelyon the’ basis of Ex.A. 10 marked, in the second case to determine the market  value at  enhanced rate of Rs. 150/-.  It is at the height of  the illegality.  The same document was marked in the first case. Ex.A-16  and  Ex.A-17  no doubt relate to  the  lands  under acquisition in the first case.  It would be obvious that the proposal for acquisition would take long time for its taking final  shape culminating in the issuance and publication  of the  notification  under s.4(1).  The  proposed  acquisition would  be invariably within the knowledge of the  owners  of the  land.  It is apparent from the dates of sale that  they were  not  bona  fide sales between a willing  vendor  to  a willing  vendee  and  price shown in  the  sale  deeds  were inflated to boost up the market condition for  determination of compensation.  Ex.A.3, the award and decree of the  civil court of 1977 acquisition wherein compensation at  Rs.50/was fixed is also based on the got up sales.  These factors were not critically examined either by the Reference court or the High   Court.  So  these  sales  also  do  not  assist   the claimants. Equally Ex. A. 12 in O.P. No. 56 of 1985 is  also based  on  the basic value register and  its  foundation  is knocked of at its bottom by the decision of this court.  For the  said reasons determination of compensation is  vitiated by application of wrong  principles of law. 10.  When we exclude these documents from    consideration, we do not have any other evidence  except the fact that  the lands are situated near Eluru Municipality within the master plan prepared for the municipal town.  The finding  recorded by the LAO in the award was that there is no upward trend in the prices, The High Court also accepted the, finding of the reference  court, that the lands, are interior  though  abut the  main  road.   It  was also found  that  there   are  no developmental activities in the neighbourhood as on the date of notification, the LAO, therefore, treated these lands  as agricultural  lands.  In our view, he is right  in  treating these lands correctly as agricultural lands. 11.  Shri  Tata  Rao,  the learned Senior  counsel  for  the claimants in the second case placed reliance on the judgment of this Court reported in Gulzara Singh v. State of  Punjab, 1993 (4) SCC 245, and contended that this Court had accepted the  potential  value  as a basis to  determine  the  market value,  and accordingly, he contended that the  lands  being situated  within the municipal limits, have potential  value and  that  therefore, market value should be  determined  on that basis.  We find no force in the contention.  In  fixing the  market value on the basis of its potentiality  for  use for  building purposes, it must be established  by  evidence aliunde that the potential purpose must exist as on the date 344 of  acquisition by other possible purchasers in  the  market conditions,  prevailing as on the date of the  notification; Existence  of constructed house or construction activity  in other  similar  lands  in  the  locality  for  the   purpose contended  for  or of purchase for such purposes as  on  the date  of  proposed acquisition prima  facie  indicates  that

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there  is  demand for and the possibility of  the  immediate user of the land and it is a reasonable possibility to infer that  the  acquired lands also are  possessed  of  potential value.   Therefore,  the  existence of a demand  for  and  a market at the time of acquisition for potential use must  be established as a fact from reliable and acceptable  evidence to  show that if the acquired land has been thrown into  the market, others would have bought it for the special purposes or for building activity which would show the demand for and a  market to purchase the land possessed of potential  value for the purpose of building activity at that time.  On proof thereof the land must not be valued as though it has already been  built  up  but the possibility  to  use  for  building purpose existing as on the date of the notification must  be taken into consideration.  The question whether the land has potential  value as a building site or not is primarily  one of fact depending upon diverse factors as to its conditions, the use to which it is put or is reasonably capable of being put and its suitability for building purpose.  Its proximity to residential, commercial or industrial area, existence  of educational,    cultural,    industrial    or     commercial institutions,    existence   of   amenities   like    water, electricity,   drainage  and  the  possibility   of   future extension  in  that area, the existence of or  prospects  of development  schemes, the existence or absence  of  building activities towards the acquired land or in the neighbourhood thereof  are  the  relevant  facts to  be  taken  into  con- sideration  in evaluating the market value on the  basis  of potential  use  of the land. it is true that an  element  of guess, in an estimate, would have a play in determining  the market  value.   But  the present value alone  falls  to  be determined  and feats of imagination should not run riot  or travel  beyond  its manifest limits nor be an  arbitrary  or whim  of  the court in determining the compensation  or  the fixation of the market value.  The existing conditions,  the demand  for the land in the neighbourhood and other  related and  relevant  facts should be taken into  consideration  in determining the compensation on the basis of potential value of the land.  In Gulzara Singh’s case, it was found that the sale  deed Ex.A.9 was a genuine sale deed between a  willing vendor  and a willing vendee and it furnished the basis  for determination  of the market value.  It was also found  that the land was situated in the developing area and accordingly this  Court took those factors into consideration,  and  had fixed  the market value on the basis of potential  value  on existing conditions. 12.Equally the decision in Inder Singh & Ors. v. U.O.L, 1993 (3) SCC 240, renders little assistance.  In that case  also, it  was found that abadi land fetched Rs’ 33,600/- per  acre and  they had potential value for development, such  as  for building  houses etc. as in the immediate neighbourhood  the lands  were developed for industrial purpose.  Taking  those factors, this Court had determined the market value of abadi lands   at  Rs.42,000/-  and  of  other  barani   lands   at Rs.38,000/-  In  view of the nature of lands in  that  case, this  court  had determined the market value  at  the  rates mentioned therein after recording the finding that the  land possessed of 345 potential value.  In the appeals on hand, if the sale  deeds are excluded from consideration, there is no other  evidence to consider that the lands are possessed of  potential value for  building  purposes.   Though the  acquisition  was  for providing  house  sites to the poor, there  is  no  building activities  in  the neighbourhood, there is no rise  in  the

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market   condition  and  since  the  lands  are   admittedly agricultural  lands  as on that date, the  fixation  of  the market value as agricultural lands is just and fair, instead of  remanding the case as contended for by Sri Tata Rao  for further evidence. 13.  In the first case the notification was of the year 1983 and  in  the second case it was of the  year  1985.   Taking these  factors into consideration, we find that  the  market value  for  the  lands covered in the first  case  could  be determined at Rs.65,000/- per acre and for the lands in  the second  case  the  market  value  could  be  determined   at Rs.80,000/-  per  acre.  The claimants are entitled  to  12% additional  compensation  under s.23(1-A) from the  date  of notification  till  date of taking possession till  date  of deposit into court.  In the first case possession was  taken on  March 15, 1985 and in the second case on May  25,  1985. Therefore, 12% additional compensation shall be paid to  the claimants  from the respective dates of s.4(1)  notification till  the  date  of taking possession.   The  claimants  are entitled  to solatium under s.23(2) at 30% and the  interest under s.28 at 9 % on the enhanced compensation from the date of  the  taking possession for one year and  15%  after  the expiry of one year till date of-deposit into the court. 14.  The  appeals  are accordingly allowed.  The  award  and decree  of the reference court under s.26 and the  judgement and  decree of the High Court under s.54 are set aside.  The claimants  are  entitiled to the aforesaid amounts.  In  the circumstances,  parties  are  directed to  bear   their  own respective costs. 346