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PETITIONER: THE SPECIAL LAND ACQUISITION OFFICER,BANGALORE

       Vs.

RESPONDENT: V.T. VELU & ORS.

DATE OF JUDGMENT:       16/01/1996

BENCH: RAMASWAMY, K. BENCH: RAMASWAMY, K. G.B. PATTANAIK (J)

CITATION:  1996 SCC  (2) 538        JT 1996 (2)    37  1996 SCALE  (1)724

ACT:

HEADNOTE:

JUDGMENT:                          O R D E R      Leave granted.      Notification under Section 4(1) of the Land Acquisition Act 1  of 1894  (for short,‘the  Act’) was  published in the State Gazette  on April  27, 1972 acquiring 1 acre 6 gunthas of land  for defence  purpose. It is not in dispute that the property  was   requisitioned  under   Section  8   of   the Acquisition and   Requisition of Immovable Property Act 1952 (for short,  ‘the Property Act’) on 29.3.1965 and possession thereof      was taken. Subsequently, under Section 7 of the Property Act,  for determination  of the  rentals payable to the requisitioned property, market value of the property was fixed at  Rs.4 per sq.ft. and rents were paid on that basis. After notification  under Section  4(1) was  published,  the Collector made  his award  on 31.1.1976  under Section 11 of the Act  determining the  compensation  at  Rs.24,250/-  per acre. Dissatisfied therewith, on reference under Section 18, the Court  enhanced the compensation by its award and decree made under  Section 26  of the  Act  on  June  30,  1982  at Rs.75,000/- per  acre. On  appeal by the State as well as by the claimants, the High Court in the impugned judgment dated 27.8.1991 made  in M.F.A.  Nos.111 and 112 of 1983 dismissed the State  appeal  and  enhanced  the  compensation  in  the claimants’ appeal to Rs.5/- per sq.ft.      The High  Court proceeded on the finding that the lands were well  developed as  on the  date of  the requisition as well as  on the  date of  publishing the  notification under Section 4(1) of the Act. When the rentals under Section 7 of the Property  Act was  determined at  the rate of Rs.4/- per sq. ft.,  the determination  of the  compensation,  after  8 years in  1972 at the rate of 5/- per sq. ft. would be just, fair and  adequate. As  regards the deduction of 53% towards developmental charges,  the High  Court found that since the lands were situated already in developed area, deduction was not warranted.  Therefore, no deduction was made. Thus these

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appeals by  special leave  and the cross objections filed by the respondents.      Shri Veerappa,  the  learned  counsel  for  the  State, contended  that  the  view  of  the  High  Court  is  wholly unreasonable. As  on the date of requisition, the lands were only agricultural  lands and that after the establishment of the Defence  Establishment,  the  lands  were  bound  to  be developed and  that will  not be  a relevant circumstance in enhancing the compensation. The lands are yet to be required for development  and that,  therefore, deduction  of 53%  as held by  this Court  would be  proper deduction and that the High Court was not right in holding that the compensation at 5/- per  sq.ft. and  without deduction, is arbitrary. On the other hand, it has been contended by Shri Bobde, the learned senior counsel for the claimants/respondents that there is a steep gradual  increase in prices every year; when the Court had determined  the compensation  at Rs.4/-  per sq. ft., as early  as  in  1965,  taking  gradual  rise  in  prices  the claimants are entitled at least to Rs.10/- per sq. ft. It is further contended  that the  High Court  has determined  the value at Rs.5/- per sq.ft. and the finding of the High Court is not unreasonable  or arbitrary. It is also contended that since the  lands have  already been  developed, there  is no need for  deduction of  l/3rd or  53% as  contended for  and that, therefore,  the High Court was right in its conclusion that the  lands command  market value  at Rs.5/-  per sq.ft. without deduction.      Having  given   our  consideration  to  the  respective contentions, the  question that arises for consideration is: what would  be the  reasonable compensation for the acquired lands? It is true that rentals were determined for the lands requisitioned as on 29.3.1965 at Rs.4/- per sq. ft. It would be appropriate  to consider  at this  stage that  there is a distinction  between   the  determination   of  rentals  and determination of  compensation ultimately  to be paid to the land. As  far as  the scope  for determination of rentals is concerned, it  would be  appropriate to proceed on the basis of sq.  ft.; perhaps  that principle was rightly applied and rentals determined.  But the  said principle  will not  hold good to  determine compensation  for the  acquired land. The question. is: whether a normal, ordinary and prudent man, in given circumstances, would be willing to purchase 1 acre and 6 gunthas  of land  when offered in normal market conditions on sq.ft.  basis?  If  the  property  is  situated  in  well developed cities  like Nariman Point in Bombay and Connaught Place in  Delhi or other similar industrially well developed areas,  the   offer  for  sale  on  sq.  ft.  basis  may  be understandable. One  would, as  a prudent purchaser, shudder to purchase  lands on  sq.ft. basis. Determination of market value on  sq.  ft.  basis  would  be  arbitrary  and  is  an irrational principle  of law. It is now settled by series of judgments  of   this  Court   that  determination   of   the compensation on  sq. ft.  basis is a wrong principle of law, particularly when  large extents  of lands  are sought to be acquired for  public purpose.  Therefore, the High Court has proceeded on  a wrong  premise to determine the compensation on the basis of sq. ft.      The next  question is:  whether the lands are possessed of potential  value? It  is true that in the year 1965, when the lands were acquired, they were agricultural lands though they were  converted into non-agricultural lands. But due to the establishment  of defence  establishment, the lands were converted into residential purpose. But as in 1972 the lands were possessed  of potential  value for building purpose. It may  be   legitimate  to   determine  market  value  on  the

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square yard  basis. When  that is  done, reasonably  certain amount has  to be  deducted towards  developmental  charges. When such  large extent  of land  is sought  to be  used for building purposes, necessarily internal roads are to be laid and drainage  and other  civic amenities  are required to be provided. On  that premise at least 1/3 of the land acquired is to  be set  part for  road purpose, developmental purpose and other  civic amenities.  Only when genuine sale deeds of small extent  were the  basis to determine compensation, 53% and in  some cases  60% deduction  was upheld by this Court. The mere  fact that  there is a connecting road to the lands by itself  is not  a correct principle of law in refusing to deduct towards  developmental charges.  Considered from this perspective and  considered from  the point of potentiality, we think  that the  reasonable and  adequate compensation to which the  lands would  be possessed  would be Rs.1,50,000/- per acre.  This amount  would be  just,  fair  and  adequate compensation.      The claimants  are, therefore, entitled to compensation Rs.1.50 lakhs  per acre with interest at 9% per annum on the enhanced compensation  for one year from the date of Section 4(1) notification  and 15%  per annum  till date  of deposit into Court. They are also entitled to solatium at 30% on the enhanced compensation. The High Court has committed grievous error ingranting  additional amount  @ 12%  per annum  under Section 23(1A) of the Act since the award of the Collector was made as early as on January 31, 1976.      The  appeals   are  accordingly  allowed  but,  in  the circumstances,  without  costs.  The  cross  objections  are dismissed. No costs.