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PETITIONER: LAND AQUISITION OFFICER

       Vs.

RESPONDENT: JASTI ROHINI

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 of  1994  as first  case  and to SLP (C) Nos. 352829 of  1994  as  second case. 720 3.   Notification  issued  under Section 4(1)  of  the  Land Acquisition Act, 1894 in the first case was published on 16- 6-1983  for  acquiring 9.47 acres near Eluru  town  of  West Godavari  District of Andhra Pradesh to provide house  sites to the poor.  Again, 14.10 acres of land was acquired in the second   case  for  the  same  purpose  by  publishing   the notification  under  Section 4(1) on  23-3-1985.   The  Land Acquisition Officer awarded compensation under Section 11 at Rs  40,000  per acre in both the cases.  On  reference,  the Subordinate  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 29-9-1993  enhanced  the 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 of 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 10-1-1977 acquiring 2.17 acres of land in T.S. No. 135 of the nearby lands, the LAO had awarded  at

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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 at 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.  A- 12 in OP No. 6/85 which is pending  in appeal in the High Court apart from the sale deed Ex.   A-10 relied  on and accepted by the High Court in both the  cases and Exs.  A- 16 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 Exs.   A-16  and  17 sold on 2-2-1983  from  the  very  same acquired  land  and claimed to be on the basis of  a  layout 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 lands  as prevailing  near about the date of acquisition 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-10 in which the land sold  is 120  sq. yds. 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 Section 47-A of the Stamp Act.  In fact, the reference court mainly relied upon that document and awarded compensation on its basis. 721 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 Officer1.  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 under Section 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 neighbourhood   possessed   of   similar   features.     The notification under Section 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  Section 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 phenomenon evolved by  the courts to fix the price of land arrived between  the hypothetical willing buyer and willing seller bargaining  as prudent   persons   without  a  medium  (sic   modicum)   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 acquisition comprised of all utility reached in a competitive field as on the date of the notification and the

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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  Section 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 1 (1994) 4 SCC 595 722 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  part 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 land acquired etc. without the sanction of the Collector  or after  Section  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 compensation.   Its  consideration should  alone be confined to the market value prevailing  as

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on the date of the notification under Section 4(1). 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. yds. 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 solely on 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  Section  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 723 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 OP 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  abutting 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  Punjab2 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   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

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contended  for  or of purchase for such purposes as  on  the date  of  proposed acquisition prima  facie  indicates  that 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 2 (1993) 4 SCC 245 724 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 consideration 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 case2,  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 v. Union of  India3 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 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

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providing  house  sites  to the poor,  there  have  been  no building  activities in the neighbourhood, there is no  rise in  the 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 Shri 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 3 (1993) 3 SCC 240 725 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 Section 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   15-3-1985  and  in  the  second  case   on   25-5-1985. Therefore, 12% additional compensation shall be paid to  the claimants   from  the  respective  dates  of  Section   4(1) notification  till  the  date  of  taking  possession.   The claimants  are entitled to solatium under Section  23(2)  at 30% and the interest under Section 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 Section  26  and  the judgment  and decree of the High Court under Section 54  are set  aside.   The claimants are entitled  to  the  aforesaid amounts.  In the circumstances, parties are directed to bear their own respective costs. 726