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PETITIONER: TRIBENI DEVI AND ORS.

       Vs.

RESPONDENT: COLLECTOR OF RANCHI

DATE OF JUDGMENT25/01/1972

BENCH: REDDY, P. JAGANMOHAN BENCH: REDDY, P. JAGANMOHAN HEGDE, K.S. MATHEW, KUTTYIL KURIEN

CITATION:  1972 AIR 1417            1972 SCR  (3) 208  1972 SCC  (1) 480  CITATOR INFO :  R          1981 SC1632  (1)  R          1982 SC 940  (3)  R          1992 SC 666  (4)

ACT: Land  Acquisition Act (1 of  1894)--Compensation--Principles for determing.

HEADNOTE: According  to the general principles set out in sections  23 and  24  of the Land Acquision Act,  1894,  for  determining compensation,  the compensation payable to the owner of  the land is the market value which is determined by reference to the  price which a seller might reasonable expect to  obtain from  a willing purchaser; but since it may not be  possible to ascertain this with any amount of precision the authority charged with the duty to award compensation is bound to make an  estimate  judged  by an objective  standard.   The  land acquired,  has,  therefore,  to  be  valued  not  only  with reference  to its condition at the time of  the  declaration under s. 4 of the Act, but its potential value also must  be taken into account.  This Court has laid down the methods of valuation to be adopted in ascertaining the market value  of the  land on the date of the notification under s. 4,  which are  : (i) opinion of experts (ii) the price paid  within  a reasonable time in bona fide transactions of the purchase of the  lands  acquired  or the lands  adjacent  to  the  lands acquired  and  possessing  similar advantages  and  (iii)  a number  of  years  purchase of  the  actual  or  immediately prospective  profits of the lands acquired.  These  methods, however,  do  not preclude the Court from taking  any  other special  circumstance  into consideration,  the  requirement being  always to arrive as near as possible an  estimate  of the  market  value.   In arriving at  a  reasonable  correct market  value  it may be necessary to take even two  or  all these methods into account in as much as the exact valuation is not always possible as no two lands may be same either in respect of the situation or the extent or the  potentiality, nor  is it possible in all cases to have  reliable  material from which that valuation can be accurately determined. [211 H]

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Special Land Acquisition Officer- Bangalore v. T. Adinarayan Setty, [1959] Supp. 1 S.C.R. 404, referred to. In  the  present case, the High Court was not  justified  in adopting  the  sale-deed  in respect of  a  land  which  was farther  away not only from the land acquired, but from  the town.   The annual rental value of the land acquired,  based on  the  rent fixed in 1944 when that land was not  of  such great value as-, it had acquired at the time when section  4 notification  was  issued, would also not furnish  a  proper method of computation.  The High Court was not justified  in giving 10 per cent towards potential value, be. cause,  that element was inherent in the fixation of market value of  the land  and could not be assessed separately.  The High  Court was also not justified in disallowing 5 per cent awarded  by the  Judicial  Commissioner Is  compensation  for  severance merely  because there was an entrance to the land.   When  a portion of the land is acquired and a large portion left out there would be diminution. in the value of land that is left out for which some compensation has to be allowed. [214 B]

JUDGMENT: CIVIL  APPELLATE JURISDICTION: C.A..Nos. 661, 1380,  1885  & 1886 of 1967.  209 Appeal  from the judgment and order dated February 25,  1965 of the Patna High Court in First Appeals Nos. 437 and 438 of 1959. S.  V.  Gupte,  B. P. Rajgarhia and U.  P.  Singh,  for  the appellants  in  C.A.  Nos. 661 and 1380  of  1967)  and  for respondent No. 1 C.A. Nos. 1885 and 1886 of 1967). D. Goburdhun, for the respondent (in C.A. Nos. 661 and  1380 if 1967 and for the appellant (in C.A. Nos. 1885 and 1886 of 1967). The Judgment of the Court was delivered by P.  laganmohan  Reddy, J. These appeals are  by  certificate against  the  judgment  of  the Patna  High  Court  in  land acquisition appeals.  Two notifications dated 7-7-1954 under section 4 of the.  Land Acquisition Act 1894 (Act 1 of 1894) (hereinafter  called ’the Act’), were issued one in  respect of  a  portion of Plot Nos. 178 and  1784  admeasuring  2.65 acres and the other in respect of the whole of the plot  No. 1783  admeasuring 2 acres situated in Ward No. 3  of  Ranchi Municipality.   Section 6 notification in respect  of  these lands was published on 7-9-1954 and possession was taken  on 23-9-1954  under  section 17(1) after making  a  declaration under section 17(4) that the provisions of section 5A  shall not  apply.   The  Collector  awarded  compensation  of  Rs. 1,20,419-6-11  in respect of the first acquisition  and  Rs. 47,648-13-6  in respect of the second.  Thereafter,  at  the instance  of the claimant, a reference under section  18  of the  Act  was made to the Judicial  Commissioner  of  Chhota Nagpur,  Ranchi who. while maintaining the market value,  of the   land,   awarded  by  the   Collector,   gave   further compensation  for  severance at the rate of 5%  and  10%  in respect  of  potential  value of  the  land.   The  Judicial Commissioner, however, did not grant the 15% solatium  under section 23(2) of the Act.  Being dissatisfied, the claimants preferred appeals to the High Court.  The High Court revised the compensation and awarded Rs. 90,000/-per acre and 15% as solatium on the market value under section 23(2) of the  Act but  did not grant them the 5% towards severance.   Interest at 6% per annum on the amount of enhanced compensation  from 23-9-1954 together with costs was also decreed.  Against the

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judgment and decree, the claimants have filed Civil  Appeals 661 & 1380/67 while the State has filed Civil Appeals  1885- 86/67. The lands in question which have been acquired were  earlier leased on 22-9-1944 to the Military authorities on a rent of Rs.  600/-  per  month  for a period of  6  months  under  a registered deed with option Lo renew for a maximum period of 10 years 2lO which period expired on 21-9-1954.  One of the conditions of the  lease  was that on the termination of  the  lease,  the lessor  would exercise the option given under the  lease  to purchase  all buildings, structures, gardens and  any  other structures constructed by the lessee during their occupation of the leased property, at 75 per cent of the valuation that would  be determined by the Superintending Engineer,  Chhota Nagpur Circle, and in case the lessors refused to  purchase, the  lessee  was  entitled to dismantle and  take  away  the materials.  Towards the end of the lease period, the Govern- ment of Bihar decided to acquire the property for the  State Soldiers,   Sailors   and  Airmen’s  Board   and   initiated proceedings as aforesaid. In these appeals the only question that has to be determined is : What is the market value of the property as on the date of section 4 notification ? In the valuation report given by the Land Acquisition Officer, Ranchi, Ex-1, the principle of capitalisation on the basis of 20 times the annual rental of Rs. 7,200/- at the rate of Rs. 600/- p.m. was adopted as the price  of-the lands. In that report it was also pointed  out that  the sale price of 1.08.5 acres out of the premises  of the Ranchi Club as per registered sale-deed, Ex.  C-1  dated 1-4-1953,  was  Rs. 41,470/- per acre. which was  not  fair. Apart  from these 25 other sale transactions in  respect  of portions  of Plot No. 1789 between 1952 and 1953  were  also referred in that report.  Some of these lands were  situated opposite to the Ranchi Club and the sale price came to Rs. 1092/- per katha, which is about Rs. 60,000/- per acre.   He was  further  pointed  out that some other  lands  a  little further  away from the main road but belonging to  the  same Plot No. 1789 were sold at the rates between Rs. 250 / /- to Rs.  800/- per katha.  This report formed the basis  of  the award  made by the Collector.  The High Court took  judicial notice,  and  in  our  view  rightly  so,  that  after   the termination  of  the Second World War in 1945 there  was  a rise in land values due to the increased demand of homestead lands  for  building purposes.  It also  considered  various sale-deeds  produced and proved on behalf of  the  claimants along  with the oral evidence to determine the market  value of the land.  The objections from both the appellant and the respondent  were  taken into account in respect of  each  of these  and most of them were considered as not furnishing  a proper  or  adequate valuation either having regard  to  the distance  of the lands which were the subject-matter of  the sale  or  the  inadequacy  of  the  information   pertaining thereto.  The High Court, however, adopted the price in  the sale  deed  Ex-C-1 executed on 6-5-1953 by the  Ranchi  Club Ltd.,   in  favour of the President of India in  respect  of 1.085  acres 3 bighas 5 kathas 10 chhataks in Plot No.  1221 for  Rs.  45,000/:as the basis for arriving  at  the  market value of the acquired land.  211 Though the land in question was situated on the main Ranchi- Chaibasa Road, a strong objection was taken against adopting the  price as a basis because it was not only 1/2 mile  away from  the land under acquisition but what was sold was  only

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the  leasehold  right in the land.   These  objections  were rejected  on the ground that for all,practical purposes  the interest  that  was held or sold by the  Ranchi  Club  under Ex.C-1  was not inferior to an absolute title.  The area  of the land, the subject matter of the sale, was considered to be fairly large being more than 1 acre and the situation was also  the same as the land under acquisition except that  it was farther away from it.  In these circumstances, the  High Court  thought,  after a proper allowance is  made  for  the difference  in  distance,  the  transaction  yields  a  more acceptable  guide  for determining the market value  of  the land under acquisition and accordingly, it adopted twice the price.  as charged for the land in Ext.C-1 as  indicating  a fair  market value of the land in question.  The High  Court further added Rs. 7060/- per acre as the difference  between tenure  rights and lease-hold rights that were held by the President  of  India  and awarded Rs.  90,00O./-  per  acre. This. it did notwithstanding the fact that it was  conscious that  there was no definite data for the two additions  that have been made, because in its view, in cases of this nature a  certain amount of estimate has to be made which may  even be arbitrary.  Accordingly, it awarded compensation for  the 4.65  acres of land which was acquired by the Government  at Rs.  90,000/  per acre together with  15%  solatium  Payable under  clause (2) of section 23 of the Act. 5%  compensation for  severance of land from the claimants’ other portion  of the  land that remained with them after  acquisition,  which was awarded by the Judicial Commissioner, Chhota Nagpur, was disallowed  on the ground that there was an entrance to  the back portion of the land which was left with the #owners and also  because  there was no evidence to show  that  in  fact there had been any depreciation in he value of the remaining area and if so, to what extent.  On the other hand, it main- tained  the 10% on the market value of the land  awarded  by the Land Acquisition Court on account of the increase in the potentialities  of the land.  The basis adopted by the  High Court is challenged on the ground that they are contrary  to the  well established principles applicable for  determining the value of lands acquired under the Act. The  general principles for determining  compensation  have, been  set  out  in  sections  23  &  24  of  the  Act.   The compensation payable to the owner of the land is the  market value which is determined by reference to the price which  a seller  might  reasonably expect to obtain  from  a  willing purchaser, bat as this may not be possible to ascertain with any  amount  of precision, the authority charged  with  the duty to award compensation is bound to 212 make an estimate judged by an objective standard.  The  land acqui red  has,  therefore,  to  be  valued  not  only  with reference  to its condition at the time of  the  declaration under section 4 of the Act but its potential value also must be taken into account.  The sale-deeds of the lands situated in  the vicinity and the comparable benefits and  advantages which  they  have,  furnish  a rough  and  ready  method  of computing the market value.  This, however, is not the  only method.   The rent which an owner was actually receiving  at the   relevant  point  of  time  or  the  rent   which   the neighbouring  lands  of similar nature are fetching  can  be taken into account by capitalising the rent which  according to  the present prevailing rate of interest is 20 times  the annual rent.  But this also is not a conclusive  method.This Court had in Special Land Acquisition Officer, Bangalore  v. T. Adinarayan Setty(1), indicated at page 412 the methods of valuation to be adopted in ascertaining the market value  of

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the land on the date of the notificatioa under section  4(1) which  are  : (i) opinion of experts, (ii)  the  price  paid within  a  reasonable  time in  bona  fide  transactions  of purchase ,of the lands acquired or the lands adjacent to the lands acquired and possessing similar advantages; and  (iii) a  number  of years’ purchase of the actual  or  immediately prospective  profits of the lands acquired.  These  methods, however,  do  not preclude the Court from taking  any  other special  circumstances into consideration,  the  requirement being  always to arrive as near as possible an  estimate  of the  market  value.   In arriving to  a  reasonably  correct market value, it may be necessary to take even two or all of those  methods into account inasmuch as the exact  valuation is  not  always  possible as no two lands may  be  the  same either  in respect of the situation or the extent  or  the potentially nor is it possible in all cases to have reliable material  from  which  that  valuation  can  be   accurately determined. Bearing  these principles in mind, we do not think that  the High  Court was justified in adopting the registered  sale- deed,  Ex.C-1 executed by the Ranchi Club, in favour of  the President  of India, because that land is farther  away  not only from the, land acquired but from the town though it  is on  the  main  RanchiChaibasa Road.   Even  the  High  Court recognised  that  there  was no definite data  for  the  two additions  that have been made and in our view it would  not be  a proper method of ascertaining the value of  the  land ’acquired.   The only two documents that may  be  considered are  Ex.10  and  Ex-11 which are in  respect  of  the  lands situated in the vicinity and on either side of the land  ac- quired.   The other sale deeds are of smaller areas  and  do not furnish a proper basis for ascertaining the market value and have been- quite properly not relied upon by the learned Advocate for (1) (1959) (Supp1. 1) S.CR. 404.  213 the claimants’ The annual rental value of the land acquired, namely,  Rs. 7 200/- will also not furnish a proper  method of  computation because that was a rent fixed in  1944  when that land was not of such great value as it had acquired  at the time when sec. 4 notification was issued.  A perusal  of the  correspondence between the owners of the land  and  the Deputy  Commissioner  of  Ranchi would show  that  the  land owners  had given it at consessional rate to’  the  Military authorities  having regard to the purpose for which  it  was being put to use.  On behalf of the claimants great reliance is  placed on Ex.11 which is a sale-deed executed on  16-12- 1946 by the claimants the Ranchi Automobiles of an area of 1 bigha  17  kathas  equal to .617 acres  for  Rs.  1,45,000/. After  deducting  Rs. 15,403/- the price of  the  structures according ;to the Engineer’s report in 1959 (Ex-25), the net value of the land is Rs. 1,29,697/-.  This value would  work out  to Rs. 2,08,135.70 per acre.  The High  Court  rejected this  computation  on the ground that though  the  land  was contiguous to the land under acquisition, neither the  value of  the  pump and the other structures belonging  to  Burmah Shell  nor the value of the structures that might have  been on the land on the date of the sale which were built by  the vendees  as  lessees could be ascertained  either  from  the sale-deed  or the evidence.  Ex.10 is a lease in respect  of 1/3  acre granted by the owners to Thakur Chandra Bali  Shah and  others executed on 20-2-1950 on a monthly rent  of  Rs. 157/-.  The High Court calculated the monthly rental of  the land under acquisition at that rate to be not less than  Rs. 2,000/- per month or Rs. 24,000/- per year.  On the basis of

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20  times  the annual rent if computed Rs.  4,80,000/as  the market  value which works out at Rs. 1,03,226/per acre.   It is, however, pointed out on behalf of the claimants that the High Court made a mistake in thinking that the rent for  the land leased under Ex.10 was Rs. 157/- p.m. and on that basis it calculated the annual rental value of 4.65 acres of  the’ acquired  land.   We  have  checked  the  figures  from  the original  lease and find that in fact the rent is Rs.  175/- and  not Rs. 157/-.  On this basis the rate per acre  of  20 times  annual  rental value would come  to  Rs.  1,26,000/-. Even if Ex.  11 is to be taken as, the basis and ,the  value of the structures as given by the Engineer in Ex.25 is to be accepted that cannot furnish a proper basis because the land in question is a small area of .617 acres or just over 1  an acre.   A  smaller area such as this on a  main  road  Would certainly  fetch  a higher price compared to  a  larger  un- developed  area  even though it may have a frontage  on  the main road.  In order to develop that area atleast the  value of  1/3  of the land will have to be  deducted  for  roads, drainage  and other amenities.  On this basis, the value  of the land at Rs. 2,08,135.70 per acre would, after  deduction of  1/3 come to Rs. 1,38,757/per acre.  On the basis of  the rental of Rs. 175/- p.m. in Ex.10, 214 the  value at 20 times the rental will work out  as  already seen  at Rs. 1,26,000/-.  Allowing for an increase in  rents from  1950 to 1954, the date of section 4 notification,  say at  5%  the  value  per  acre  may  be  Rs.  1,33,000/-   or thereabout.   If we take the average of Ex.10 and  Ex.11  as computed  by us the value per acre would come to  about  Rs. 1,35,878/-.  In our view, Rs. 1,35,000/- per acre would be a reasonable  rate at which compensation could be  awarded  to the  claimants.  The High Court was not justified in  giving 10% towards potential value because that element is inherent in  the fixation of the market value of the land  and  could not  be  assessed separately.  The High Court was  also  not justified   in  disallowing  5%  awarded  by  the   Judicial Commissioner,  Chhotanagpur  as compensation  for  severance merely  because there was an entrance to the land.   When  a portion left out there would be a diminution in the value of ;the  land that is left out for which some compensation  has to be allowed.  The 5% allowed by the Judicial Commissioner, Chhotanagpur  is  reasonable.  In this view,  the  claimants would  be entitled to a decree as follows in respect of  the lands acquired :-               (1)  At the rate of Rs. 1,35,000 per acre  for               4.65 acres;               (2)  5%  severence  and 15%  solatium  on  the               market value computed as in (1);               (3)  Interest  at 6% from the-date  of  taking               possession. The  appeals of the claimants are allowed to the  extent  of the variation and those by the Government are dismissed with costs.   The  claimants will be  entitled  to  proportionate costs  on  the difference between the  amounts  decreed  and those that are now awarded in each of the two appeals  filed by them. K.B.N. 864SupCI/72-2500-12-4-73 -GIPF. 215