A. Natesam Pillai vs Spl. Tahsildar, Land Acqusition, Tiruchy

Versus

Spl. Tahsildar, Land

Acquisition, Tiruchy ... Respondent

JUDGMENT

Dr. Mukundakam Sharma, J.

2

1. This appeal is directed against the judgment and order dated

27.11.2002 passed by the Madras High Court whereby the High

Court reversed the order passed by the Reference Court by

reducing the amount of compensation granted by the Reference

Court to the appellant from Rs. 17/- per sq. feet to Rs. 9/- per sq.

feet.

2.

Before we

deal with

the

contentions raised before us, brief facts leading to the filing of the

present appeal are required to be stated. For providing house sites

at Adi Dravidas, land measuring an extent of 3.90 acres comprised

in Survey No. 118/A in Palangudi Village was acquired by the

Government of Tamil Nadu by issuing a notification under Section

4(1) of the Land Acquisition Act which was published on 3 23.9.1992. The Land Acquisition Officer awarded a sum of Rs.

1.72 per sq. ft. for the acquired land. At the instance of the

aggrieved land owner, i.e. the appellant, reference was made under

Section 18 of the Land Acquisition Act before the Additional Sub

Court, Trichy.

3. Before the Reference Court, the appellant adduced

documentary evidence in the form of Sale Deeds Exs. A1 to A4 and

examined two witnesses. The Revenue also produced documents

exhibited as Exs. B1 and B2, but no witness was examined from

the side of the Revenue. The Reference Court after consideration

and appreciation of the evidence adduced fixed the market value of

the acquired land at Rs. 17/- per sq. feet. 4

4. Being aggrieved by the said order, the State preferred an appeal

before the High Court. The question for consideration before the

High Court was whether the amount of compensation for the

acquired land fixed by the Reference Court i.e. Rs. 17/- per sq. feet is

correct or not and whether the appeal filed by the State for reducing

the amount of compensation be allowed.

5. The

High

Court

after

consideration of the records came to the conclusion that the amount

of compensation i.e. Rs. 17/- per sq. feet is on the higher side, and

that the appropriate amount of compensation would be Rs. 9/- per

sq. feet and accordingly reversed the order passed by the Reference

Court with the aforesaid modification of the rate of compensation

fixing the same at Rs. 9/- per sq. ft.

5

6. The appellant, original owner of the land, has filed this appeal

praying for setting aside the order passed by the High Court and has

prayed for enhancement of the amount of compensation taking into

consideration the potential value of the land.

7. The learned counsel appearing for the appellant contended that

the High

Court

took

notice of

the

market

value of

the

acquired

land only with reference to the actual use. According to the appellant,

the Court failed to take notice of its value with reference to the better

use to which it is reasonably capable of being put to in the immediate

or near future and thereby failed to take into consideration future

potentiality of the land and instead based itself only on the realized 6 possibility and thus committed an error.

8. The learned counsel appearing for the respondent, on the other

hand, contended that the amount of compensation granted by the

High Court is appropriate, and does not deserve to be interfered

with.

9. The

Reference

Court

granted

compensation at Rs. 17/- per sq. feet after holding that the acquired

land is a potential house site being located in a very important

locality and that the amount of compensation granted by the Land

Acquisition Officer, i.e., 1.72 per sq. ft. was totally an unjust and

inadequate amount.

10. The High Court, on the other hand, fixed the market value of 7 the acquired land at Rs. 9/- per sq. ft. by setting aside the order

passed by the Reference Court. The High Court while coming to the

aforesaid conclusion held that Ex. A3 is a comparable sale

transaction. Under Ex. A3, 1710 sq. ft. land was sold for Rs.

20,000/- which would work out to Rs. 11/- per sq. ft. Nonetheless,

the High Court also pointed out the fact that the acquired land has

got higher

potential

value, as

the

acquired

land is

abutting

the main

road and

when compared with the land covered under Ex. A3, the acquired

land is surrounded by Schools, Shops, Panchayat Union Office etc.

However, considering the fact that the acquired land is a large tract

of land wherein while making development there would be loss of

land due to both internal and external development like roads, etc., 8 and that when compared with the land of Ex. A3 which is a very

small area of land, there has to be deduction in value of the acquired

land and so calculating the rate of compensation was scaled down to

Rs. 9/- per sq. ft.

11. Therefore, it falls upon us to determine whether the High Court

was correct and justified in scaling down the compensation to be

given to

the

appellant.

To this

effect, we

must give

due

consideration to the Sale Deeds Exs. A1 to A4 placed by the

appellant, in order to determine the appropriate and just

compensation that must be given in pursuance of the instant land

acquisition.

12. It is important to note that Ex. A1 and Ex. A4 are sale deeds

executed subsequent to the date of notification under Section 4(1) 9 and for this reason, the High Court held these to be irrelevant for the

purpose of determining compensation. The first clause of Section 23

of the Act clearly provides that the amount of compensation awarded

for the land acquired is required to be determined on the basis of

market value of the land at the time of publication of the notification

under Section 4 of the Act. Therefore, it is the duty of both of the

Land

Acquisition Officer as also of the Court to determine the actual

compensation payable for the land acquired by referring to evidence

regarding fair and just compensation near about the proximate date

or on the date itself of the publication of the notification under

Section 4. At times, in order to prove the actual, fair and just

compensation for the land acquired, sale deeds of the adjacent land 10 or nearabout adjacent land are produced to indicate the trend of the

value of the land within the near vicinity of the acquired land. Such

sale deeds are taken notice of generally when they are prior in point

of time to the date of notification, and any sale deed which is post

notification dated is generally ignored, unless evidence is led to show

that there was no increase in price despite such acquisition.

13. This

Court in

Administrator General of W.B. v. Collector, Varanasi, reported at

(1988) 2 SCC 150, has held:

"Such subsequent transactions which are not proximate in point of time to the acquisition can be taken into account for purposes of determining whether as on the date of acquisition there was an upward trend in the prices of land in the area. Further under certain circumstances where it is shown that the market was stable and there were no fluctuations in the prices between the date of the preliminary notification and the 11 date of such subsequent transaction, the transaction could also be relied upon to ascertain the market value. This Court in State of U.P. v. Jitendra Kumar, reported at (1982) 2 SCC 382 observed: (SCC p. 383, para 3) "It is true that the sale deed Ex. 21 upon which the High Court has relied is of a date three years later than the notification under Section 4 but no material was produced before the court to suggest that there was any fluctuation in the market rate at Meerut from 1948 onwards till 1951 and if so to what extent. In the absence of any material showing any fluctuation in the market rate the High Court thought it

fit to rely upon Ex. 21 under which the Housing Society itself had purchased land in the neighbourhood of the land in dispute. On the whole we are not satisfied that any error was committed by the High Court in relying upon the sale deed Ex. 21."

But this principle could be appealed to only where there is evidence to the effect that there was no upward surge in the prices in the interregnum. The burden of establishing this would be squarely on the party relying on such subsequent transaction."

12

14. As a result of such acquisition, the market value of the adjacent

land would generally, and in most cases, go up and therefore, such

post notification transaction may not be a sound criterion to

determine and assess the value of the acquired land. In the present

case, the appellant has also not adduced any evidence to show that

the market value of adjacent land has not increased in the

interregnum. The Reference Court and the High Court were justified

in rejecting these sale deeds from consideration. We must, therefore,

keep the aforesaid two sale deeds outside our consideration while

assessing and determining the just and fair compensation for the

acquired land. Ex. A2 is also a sale deed but the same also is not a

safe guide as the price for the land covered therein was later on 13 increased to make it in parity with the government prescribed rate.

15. Consequently, it is to be seen if Ex. A3 may be relied upon in

determining the claim of the appellant. The High Court, while noting

that Ex. A3 does indeed represent a comparable sales transaction

also held that since the same concerns a very small area of land, it

could be applicable to the acquisition of a large tract of land as the

one in

question,

once

deduction

as

necessary

and

required

is given.

16. In Rishi Pal Singh and Others vs. Meerut Development

Authority and Anr. reported in (2006) 3 SCC 205 this Court while

dealing with the issue relating to a large tract of land held as

follows:-

14

"5.......With respect to the first reason, that is, exemplars of small plots have been taken into consideration by the Reference Court, in the first instance our attention was invited to some judgments of this Court to urge that there is no absolute bar to exemplars of small plots being considered provided adequate discount is given in this behalf. Thus there is no bar in law to exemplars of small plots being considered. In an appropriate case, specially when other relevant or material evidence is not available, such exemplars can be considered after making adequate discount. This is a case in which appropriate exemplars are not available. The Reference

Court has made adequate discount for taking the exemplars of small plots into consideration............"

17. Furthermore, in Administrator General of W.B. v. Collector,

Varanasi (cited hereinabove), this Court has held:

"It is trite proposition that prices fetched for small plots cannot form safe bases for valuation of large tracts of land as the two are not comparable properties. The principle that evidence of market value of sales of small, developed plots is 15 not a safe guide in valuing large extents of land has to be understood in its proper perspective. The principle requires that prices fetched for small developed plots cannot directly be adopted in valuing large extents. However, if it is shown that the large extent to be valued does not admit of and is ripe for use for building purposes; that building lots that could be laid out on the land would be good selling propositions and that valuation on the basis of the method of hypothetical lay out could with justification be adopted, then in valuing such small, laid out sites the valuation indicated by sale of comparable small sites in the area at or about the time of the notification would be relevant. In such a case,

necessary deductions for the extent of land required for the formation of roads and other civil amenities; expenses of development of the sites by laying out roads, drains, sewers, water and electricity lines, and the interest on the outlays for the period of deferment of the realisation of the price; the profits on the venture etc. are to be made."

18. The small area of land measuring 1710 sq. ft. was sold for

Rs. 20,000/- as per Ex. A3 dated 15.7.92 which works out to a 16 value of Rs. 11/- per sq. ft. A comparison of the two plots,

namely, land in Ex. A3 and the acquired land shows that they are

not identical. While the land in Ex. A3 may not be an excellent

guide it is still a better guide than any other document exhibited

on record. The same could be used as a relevant yardstick to

assess the just and reasonable compensation in the present case.

19. We

find from

the

counter

affidavit

filed by

the

respondent-State that the said land covered by the Ex. A3 is

located out of the Municipal Corporation limit of Trichy, whereas

the acquired land is located within the Municipal Corporation limit

of Trichy. Consequently, it cannot be disputed that the acquired

land, being in the heart of the city and having excellent prospects

of being used as residential site, definitely has an edge regarding 17 the potential value over the land covered by Ex. A3.

20. This building potentiality of acquired land must also be taken

into consideration while determining compensation. In P. Ram

Reddy v. Land Acquisition Officer, Hyderabad Urban

Development Authority reported at (1995) 2 SCC 305, this Court

held as follows: -

"8. Building potentiality of acquired land.-- Market value of land acquired under the LA Act is the main component of the amount of compensation awardable for such land under Section 23(1) of the LA Act. The market value of such land must relate to the last of the dates of publication of notification or giving of public notice of substance of such notification according to Section 4(1) of the LA Act. Such market value of the acquired land cannot only be its value with reference to the actual use to which it was put on the relevant date envisaged under Section 4(1) of the LA Act, but ought to be its value with reference to the better use to which it is reasonably capable of being put in the immediate or 18 near future. Possibility of the acquired land put to certain use on the date envisaged under Section 4(1) of the LA Act, of becoming available for better use in the immediate or near future, is regarded as its potentiality. It is for this reason that the market value of the acquired land when has to be determined with reference to the date envisaged under Section 4(1) of the LA Act, the same has to be done not merely with reference to the use to which it was put on such date, but also on the possibility of it becoming available in the immediate or near future for better use, i.e., on its potentiality. When the acquired land has the potentiality of being used for building purposes in the immediate or near

future it is such potentiality which is regarded as building potentiality of the acquired land. Therefore, if the acquired land has the building potentiality, its value, like the value of any other potentiality of the land should necessarily be taken into account for determining the market value of such land. Therefore, when a land with building potentiality is acquired, the price which its willing seller could reasonably expect to obtain from its willing purchaser with reference to the date envisaged under Section 4(1) of the LA Act, ought to necessarily include that portion of the price of the land attributable to its building potentiality. Such price of the acquired land then becomes its market value envisaged 19 under Section 23(1) of the LA Act. If that be the market value of the acquired land with building potentiality, which acquired land could be regarded to have a building potentiality and how the market value of such acquired land with such building potentiality requires to be measured or determined are matters which remain for our consideration now."

21. This Court in Hasanali Khanbhai & Sons v. State of Gujarat

reported in (1995) 5 SCC 422 also held that:-

"3. .......But it is settled law by series of judgments of this Court that the court is not like an umpire but is required to determine the correct market value after taking all the relevant circumstances, evinces active participation in adduction of evidence; calls to his aid his judicial experience; evaluate the relevant facts from the evidence on record applying correct principles of law which would be just and proper for the land under acquisition. It is its constitutional, statutory and social duty. The court should eschew aside feats of imagination but occupy the armchair of a prudent, willing but not too anxious, purchaser and always ask the question as to what are the prevailing conditions and whether a willing purchaser would as a prudent man in the normal market conditions offer to purchase the acquired land at the rates 20 mentioned in the sale deeds. After due evaluation taking all relevant and germane facts into consideration, the Court must answer as to what would be the just and fair market value...... "

22. Therefore, it is clear from the aforementioned decisions of

this Court that the potentiality of the acquired land, in so far as it

relates to the use to which it is reasonably capable of being put in

the

immediate or near future, must be given due consideration. The

present acquired land has all the potentiality to be used as

building sites, even in the immediate future, as it is located at a

place in and around which building activity has already started.

The evidence on record also clearly indicates that acquired land is

abutting the main road. The acquired land is also surrounded by 21 schools, Panchayat union office, shops and residential building in

all three sides. The High Court also found, as a matter of fact,

that the area where the acquired land is situated is fit for

construction of houses. On an overall consideration and

appreciation of the records, we feel that the deduction due to the

small size of the exemplar land can easily be set off with the

corresponding increase in price of the acquired land when

compared with the land in Ex. A3 from the point of view of

potential value.

23. Although it is true that the land covered by Ex. A3 is a small

tract of land and therefore cannot be compared in size with the

large area of land acquired under the present notification, it is to 22 be concluded that the land in question would definitely fetch a

higher price than what is fixed by the High Court. A prospective

purchaser would only be too willing to pay for the acquired land

having immediate potentiality of being used as a residential site in

a prime locale at almost the same, if not, higher price than the

land covered by Ex. A3 which is located outside the Municipality

area.

24. We

are in

agreement with the conclusion of the High Court that the

acquisition of a large tract of land merits a discount in

compensation. However, in the present circumstance, it is

significant to note that the compensation granted by the High

Court does not match the potentiality of the land, even after the

discount has been taken into consideration. Even on giving a 23 discount in respect of the acquired land being a large tract as

compared to the small portion of land sold under Ex. A3, according

to us, the rate of Rs. 11/- would be adequate and just

compensation for the same.

25. In our considered opinion, by scaling down the rate of

compensation to Rs. 9/- from Rs. 11/- per sq. ft., the High Court

denied

just and

reasonable compensation to appellant, thereby resulting in a

miscarriage of justice.

26. We, therefore, hold that the appellant shall be entitled to

compensation at Rs. 11/- per sq. ft. for the acquired land which we

consider to be just and fair. Needless to say that the State shall

also be liable to pay additional compensation and solatium on the 24 amount enhanced and fixed in terms of this order including

payment of interest in terms of the rate of interest awarded by the

Reference Court. The appeal stands allowed to the aforesaid extent

without any costs.

......................................J. [Dr.

Mukundakam Sharma]

......................................J. [Anil R. Dave]

New Delhi, August 11, 2010.