Holding

The market value of the acquired land is Rs.1,08,000 per acre (a 10% deduction from Rs.1,20,000) and the appellants are entitled to statutory compensation under Sections 23(1‑A), 23(2) and interest under Section 28.

Summary

The appellants, landowners whose 89 acres were acquired for a sugar mill under the Land Acquisition Act, 1894, challenged the compensation awarded. The High Court had fixed a market value of Rs.1,20,000 per acre but reduced it by 33% because the exemplars were small plots, arriving at Rs.80,000 per acre. The Supreme Court examined the proper method of ascertaining market value, the relevance of small‑plot exemplars, and the need to consider the land's potential for industrial use. It held that small‑plot exemplars can be used as a guide when larger ones are unavailable, but only a modest deduction is justified. Consequently, the Court fixed the market value at Rs.1,08,000 per acre (a 10% deduction) and awarded statutory sums under Sections 23(1‑A), 23(2) and interest under Section 28.

Issues considered

The correct method for ascertaining market value of land acquired under the Land Acquisition Act, 1894.
Whether a deduction should be made from market value when the exemplars are of small plots.
Whether the potentiality of the land for industrial use affects the market value and the extent of any deduction.
The admissibility of sale deeds (Ex R‑6, R‑7) as evidence for valuation.
The entitlement to statutory sums under Sections 23(1‑A), 23(2) and 28 of the Act.

Legislation cited

Land Acquisition Act, 1894s. 11, s. 18, s. 23(1-A), s. 23(2), s. 24, s. 28, s. 4, s. 9

Subjects

market valueland acquisitioncompensationdeductionpotentialitystatutory sumLand Acquisition Actindustrial landvaluationsale deeds

Judgment

\.

A ATMA SINGH (DIED) THROUGH LRS. & ORS. ,...
v.
STATE OF HARYANA & ANR

DECEMBER 7, 2007
B
[G.P. MATHUR AND D.K. JAIN, JJ.)

Land Acquisition Act, 1894:

c ss.4, 23(1-A) and 28-Acquisition of large tracts of land-For
the purpose ofsetting up an industry-Market value-Ascertainment
of-By placing reliance on exemplars of small pieces of land-
.
Deduction of33%from the market value on the ground that exemplars
forming basis for ascertainment ofmarket value were ofsmall pieces
D ofland-Propriety of-Held: Market value rightly assessed-Market
value ofsmall pieces ofland can be used as a safe guide to determine
the market value oflarge tracts ofland when exemplars oflarge pieces
of lands are not available-In the instant case, acquisition being/or
the purpose ofsetting up an industry, the acquired land will contribute
E to production ofgoods yielding good profit-Hence deduction of10%
from the market value would meet the ends ofjustice.
Market value--Of land acquired-Ascertainment of-Guiding
factors-Discussed

F Words and Phrases- 'Market value '-Meaning ofin the context
ofland acquisition. '
•
A Notification u/s 4 of Land Acquisition Act, was issued for
acquisition of the land of the appellants. The land was situated as
one compact unit in four villages. The Land Acquisition Collector
G gave an award on the basis of quality ofland, by dividing the acquired
land in seven categories. The market value assessed varied from
Rs. 6000/- to Rs. 35000/- per acre. On reference u/s 18, compensation
was awarded at a flat rate of Rs. 43,000/- per acre by placing reliance
on two instances of sale deeds (Ex R-6 and R-7). On appeal, High
H 1120
ATMASINGH(DIED)THROUGHLRS. v. STATE 1121

Court relying on the copies of sale deeds (Exbts P-7, 9 and 10) A
pertaining to land which was subject matter of acquisition, held that
the market value of the land acquired was Rs. 1,20,000/- per acre.
It made a deduction of33% on the ground that the exemplars filed
by the appellants were of small pieces. Besides, appellants were also
held entitled to statutory sums u/s 23 (1-A), 23 (2) and 28 of the Act. B
State's appeal was dismissed. Hence the present appeals by the
Landowners.

Partly allowing the appeal, the Court

HELD: 1. The claimant-appellants will be entitled to C
compensation at the rate of Rs.1,08,000/- per acre. Besides the
above amount, they will also be entitled to the statutory sum in
accordance with Section 23(1-A) and solatium at the rate of30% in
accordance with Section 23(2) of the Act. They will also be entitled
to interest as provided in Section 28 of the Act. D
[Para 16] [1133-E, F)
2. The market value is the price that a willing purchaser would
pay to a willing seller for the property having due regard to its existing
condition with all its existing advantages and its potential possibilities
when led out in most advantageous manner excluding any advantage E
due to carrying out of the scheme for which the property is
compulsorily acquired. In considering market value, disinclination
of the vendor to part with his land and the urgent necessity of the
purchaser to buy should be disregarded. The guiding star would be
i the conduct of hypothetical willing vendor who would offer the land F
and a purchaser in normal human conduct would be willing to buy as
a prudent man in normal market conditions but not an anxious dealing
at arms length nor facade of sale nor fictitious sale brought about in
quick succession or otherwise to inflate the market value. The
determination of market value is the prediction of an economic event G
viz., a price outcome of hypothetical sale expressed in terms of
probabilities. [Para 4) (1126-E, F, G]

Thakur Kanta Prasad v. State of Bihar, AIR (1976) SC 2219;
Prithvi Raj Taneja v. State ofMP. AIR (1977) SC 1560; Administrator H
1122 SUPREME COURT REPORTS [2007] 12 S.C.R.
•
A General of West Bengal v. Collector, Varanasi, AIR (1988) SC 943;
and Periyar v. State ofKera/a, AIR (1990) SC 2192, referred to.

3. For ascertaining the market value of the land, the potentiality
of the acquired land should also be taken into consideration.
B Potentiality means capacity or possibility for changing or developing
into state of actuality. It is well settled that market value ofa property
has to be determined having due regard to its existing condition with
all its existing advantages and its potential possibility when led out
in its most advantageous manner. The question whether a land has
potential value or not, is primarily one of fact depending upon its
C condition, situation, user to which it is put or is reasonably capable
of being put, and proximity to residential, commercial or industrial
areas or institutions. The existing amenities like, water, electricity,
possibility of their further extension, whether near about town is
developing or has prospect of development have to be taken into
D consideration. Failing to consider potential value of the acquired land
is an error of principle. [Para 5) [1127-B, C, D, EJ

Kaushalya Devi v. L.A. 0. Aurangabad, AIR (1984) SC 892; and
Suresh Kumar v. Tl. Trust, AIR (1980) SC 1222, relied on.
E Collector Raigarh v. Hari Singh Thakur, AIR (1979) SC 472;
Raghubans Narain v. State of UP., AIR (1969) SC 465; and
Administrator General, W B. v. Collector Varanasi, AIR (1988) SC
943, referred to.

F 4. The High Court rightly held that no reliance could be placed
upon Ex.R-6 and R-7 for determining the market value of the land.
The High Court held that the two sale deeds ( Ex.R-6 and R-7) on
which reliance was placed by Reference court, were of31.12.1980,
while in the instant case, the notification under Section 4 of the Act
G was published much later i.e. on 9.2.1983. That apart, Ex.R-6 and
R-7 were actually mutation orders and the corresponding sale deeds ,,_
had not been brought on the record. In fact, the Reference court, in
the earlier part of the judgment, had itself discarded Ex. R-6 and R-
7 as they were mutation orders and were inadmissible in
H evidence. [Para 6] (1127-E, F, G)
1 ATMASINGH(DIED)THROUGHLRS.v. STATE 1123

5. The High Court accepted the price exhibited by the three A
sale transactions(Ex. P-7, P-9 and P-10) which came to little more
than Rs.1,20,000/- per acre. Apart from these three sale deeds, no
other exemplars were filed either by the State or by the landowners.
It thus recorded a finding that the market value of the land was
Rs.1,20,000/- per acre. There being no other documentary evidence, B
the view taken by the High Court that the market value of the land
was Rs.1,20,000/- per acre is perfectly correct and calls for no
interference. [Para 7] [1128-C, D]

6. While determining the market value, the potentiality of the
land acquired has also to be taken into consideration. The appellants c
have led evidence to show that the acquired land had the potentiality
to be used for commercial, industrial and residential purposes. In
view of the evidence of PW.I, who had prepared a site plan and PW.2
the Patwari, there can be no manner of doubt that the acquired land
had the potentiality for being used for commercial, industrial and D
residential purposes and there was fair possibility of increase in its
market value in the near future. Therefore, the fact that the
exemplars filed by the appellants were of the small pieces ofland
could not be a ground to discard them specially when exemplars of
large pieces ofland were not available. They could, therefore, be E
used as a safe guide for determining the market value of the land.
[Para 8] [1128-E, F; 1129-B]
7. The reasons for the principle that price fetched for small
j plots cannot form safe basis for valuation oflarge tracts ofland, are
F
that substantial area is used for development of sites like laying out
roads, drains, sewers, water and electricity lines and other civic
amenities. Expenses are also incurred in providing these basic
amenities. That apart, it takes considerable period in carving out
the roads making sewers and drains and waiting for the purchasers.
·\ G
Meanwhile the invested money is blocked up and the return on the
investment flows after a considerable period of time. In order to
make up for the area of land which is used in providing civic
amenities and the waiting period during which the capital of the
entrepreneur gets locked up, a deduction from 20% onward,
H
1124 SUPREME COURT REPORTS [2007] 12 S.C.R.

A depending upon the facts of each case, is made.
[Para 13J (1132-B, C, DJ
8. In the instant case, the land has not been acquired for a
Housing Colony or Government Office or an Institution. The land
B has been acquired for setting up a sugar factory. The factory would
produce goods worth many crores in a year. A sugar factory apart
from producing sugar·atso produces many by-products in the same
process. Therefore, the profit from a sugar factory is substantial.
Moreover, it is not confined to one year but will accrue every year
so long as the factory runs. The factory cannot be set up without land
C and if such land is giving substantial return, there is no justification
for making any deduction from the price exhibited by the exemplars
even if they are of small plots. In view of the facts and circumstances
of the case, a deduction of 10% from the market value of the land,
would meet the ends of justice.
D (Paras 14and15J (1132-E, F, G; 1133-A, B, DJ
Administrator General ofWest Bengal v. Collector, Varanasi, AIR
(1988) SC 943; Chimanlal v. Special Land Acquisition Officer, AIR
(1988) SC 1652; Basant Kumar and Ors. v. Union ofIndia and Ors.,
E (1996J 11SCC542, K. Vasundara Devi v. Revenue Divisional Officer
(LAO), [1995J 5 SCC 426; and HP. Housing Boardv. Bharat S. Negi
and Ors., [2004J 2 SCC 184, distinguished.
Bhagwathula Samanna and Ors. v. Special Tehsildar and Land
Acquisition Officer, Visakhapatnam Municipality, [1991J4SCC506;
F and Kasturi and Ors. v. State ofHaryana, [2003J 1SCC354, referred
to.
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 3148-
3157 of 2000.
G From the Judgment/Order dated 4.1.1989 of the High Court of
Punjab and Haryana at Chandigarh in RF.A. Nos. 373-377, 690, 691,
692, 693 and 378/1986.
Manjit Singh, A.AG., M.L. Varma, Mahendra Anand, Anoop G.
H Choudhary, Rakesh Dwivedi, Bijender Chahar, Rishi Malhotra, Prem
ATMASINGH(DIED)THROUGHLRS. v. STATE 1125
[G.P.MATHUR,J.]
Malhotra, Chander Shekhar Ashri, T.V. George, Vinay Garg, Abhinav A
Jain, Jyotie Chahar, Deepam Garg, Jagbir Singh Malik, Devendra Kumar
Singh, S.K., Bansal, Savitri Bansal, Roopak Bansal and Dr. Kailash
Chand for the appearing parties.
The Judgment of the Court was delivered by
B
G. P. MATHUR, J. 1. These appeals, by special leave, have been
preferred against the judgment and decree dated 4.1.1989 of High Court
of Punjab and Haryana at Chandigarh, by which 17 appeals preferred
by claimant-appellants (landowners) against the common judgment and
award of the Additional District Judge, Kurukshetra, dated 31.8.1985 C
had been decided. The claimant-appellants had sought enhancement of
the amount of compensation for acquisition of their land.
2. A notification under Section 4 of the Land Acquisition Act
(hereinafter referred to as 'the Act') was issued for acquisition of 89 acres
and 3 marlas of land for construction of a cooperative sugar mill. The D
land was situate as one compact unit in four villages viz Kankar Shahbad,
Chhapra, Jandheri and Jhambara and belonged to 17 families. In response
to the notice issued by the Collector under Section 9 of the Act,
landowners filed objections claiming compensation for their land which
had been acquired. The Land Acquisition Collector, after holding an E
enquiry, gave an award on 14.7.1983 under Section 11 of the Act. The
Collector gave award on the basis of quality ofland, for which purpose
he divided the acquired land in seven categories and the market value
was assessed at Rs.6,000/- to Rs.35,000/- per acre for different types
oflands. Feeling aggrieved by the award of the Collector, the appellants F
herein (landowners) sought reference to the Court under Section 18 of
the Act. The learned Additional District Judge awarded compensation at
a flat rate of Rs.43,000/- per acre by placing reliance on Ex. R-6 and
R-7, two instances of sale deeds of village Chhapra. After taking average
of these sale transactions, an addition of25% was made for fixing the G
market value of the land. Against the award made by the learned
Additional District Judge, the claimant-appellants (landowners) preferred
17 appeals before the High Court. The High Court after appraisal of
evidence on record held that the market value of the land acquired was
Rs.1,20,000/- per acre. It further held that the exemplars filed by the H
1126 SUPREME COURT REPORTS [2007] 12 S.C.R.

A appellants were of small pieces ofland and, therefore, a deduction of 33%
had to be made and accordingly the market value of the land was assessed
at Rs.80,000/- per acre. Besides the market value, the appellants were
also held entitled to statutory sums under Section 23(1-A), 23(2) and 28
of the Act. The State ofHaryana had also filed appeals against the award
B of the Additional District Judge, but the same were dismissed.
3. The appeals in this Court have only been filed by the landowners
and the State ofHaryana has not filed any appeal challenging the judgment
and decree of the High Court. We have heard Shri M.L. Varma, learned
Senior Advocate for the appellants and Shri Rakesh Dwivedi, learned
C Senior Advocate for the Shahabad Cooperative Sugar Mills Ltd., for
whose benefit the land has been acquired.
4. In order to determine the compensation which the tenure-holders
are entitled to get for their land which has been acquired, the main question
D to be considered is what is the market value of the land. Section 23( 1)
of the Act lays down what the Court has to take into consideration while
Section 24 lays down what the Court shall not take into consideration
and have to be neglected. The main object of the enquiry before the Court
is to determine the market value of the land acquired. The expression
E 'market value' has been subject-matter of consideration by this Court in
several cases. The market value is the price that a willing purchaser would
pay to a willing seller for the property having due regard to its existing
condition with all its existing advantages and its potential possibilities when
led out in most advantageous manner excluding any advantage due to
F carrying out of the scheme for which the property is compulsorily acquired.
In considering market value disinclination of the vendor to part with his
land and the urgent necessity of the purchaser to buy should be
disregarded. The guiding star would be the conduct of hypothetical willing
vendor who would offer the land and a purchaser in normal human
G conduct would be willing to buy as a prudent man in normal market
conditions but not an anxious dealing at arms length nor facade of sale
nor fictitious sale brought about in quick succession or otherwise to inflate
the market value. The determination of market value is the prediction of
an economic event viz., a price outcome of hypothetical sale expressed
in terms of probabilities. See Thakur Kanta Prasad v. State of Bihar,
H
ATMASINGH(DIED)THROUGHLRS. v. STATE 1127
[G.P.MATHUR,J.]
AIR (1976) SC 2219; Prithvi Raj Taneja v. State of M P., AIR (1977) A
SC 1560; Administrator General of West Bengal v. Collector,
Varanasi, AIR (1988) SC 943 and Periyar v. State of Kera/a, AIR
(1990) SC 2192.
5. For ascertaining the market value of the land, the potentiality of
B
the acquired land should also be taken into consideration. Potentiality
means capacity or possibility for changing or developing into state of
actuality. It is well settled that market value of a property has to be
determined having due regard to its existing condition with all its existing
advantages and its potential possibility when led out in its most
advantageous manner. The question whether a land has potential value C
or not, is primarily one of fact depending upon its condition, situation, user
to which it is put or is reasonably capable of being put and proximity to
residential, commercial or industrial areas or institutions. The existing
amenities like, water, electricity, possibility of their further extension,
whether near about Town is developing or has prospect of development D
have to be taken into consideration. See Collector Raigarh v. Hari Singh
Thakur, AIR (1979) SC 472, Raghubans Narain v. State of U.P., AIR
(1969) SC 465 and Administrator General, W. B. v. Collector
Varanasi, AIR (1988) SC 943. It has been held in Kaushalya Devi v.
L.A.O. Aurangabad, AIR (1984) SC 892 and Suresh Kumar v. TI. E
Trust, AIR (1980) SC 1222 that failing to consider potential value of the
acquired land is an error of principle.
6. As mentioned earlier, the learned Additional District Judge had
awarded compensation at a flat rate ofRs.43,000/- per acre by placing F
reliance on Ex. R-6 and R-7, two instances of sale of village Chhapra.
After taking an average of these two sale transactions, an addition of25%
was made while fixing the market value of the land. The High Court held
that these two sale deeds were of 31.12.1980, while in the instant case,
the notification under Section 4 of the Act was published much later on G
9.2.1983. That apart, Ex.R-6 and R-7 were mutation orders and the
corresponding sale deeds had not been brought on the record. In fact,
the learned Additional District Judge, in the earlier part of the judgment,
had himself discarded Ex. R-6 and R-7 as they were mutation orders and
were inadmissible in evidence. The High Court, therefore, rightly held that
H
1128 SUPREME COURT REPORTS [2007] 12 S.C.R.

A no reliance could be placed upon Ex.R-6 and R-7 for determining the
market value of the land.
7. The claimant-appellants (landowners) had filed copies of four sale
deeds which are Exs.P-7, P-8, P-9 and P-10. In fact, Ex. P-7 is a copy
B of a sale deed by which Laxman Singh bought some land in village Chhapra
on 28. 7.1982, which itself became subject matter of acquisition. Laxman
Singh had deposed that he had bought the land for construction of shops.
All these four sale deeds related to sale transactions prior to the issuance
of the notification under Section 4 of the Act on 9.2.1983. The High Court
excluded Ex.P-8 from consideration as it related to a very small piece of
C land measuring 19 marlas only. The average price of the three sale deeds
viz. Ex. P-7, P-9 and P-10 came to little more than Rs.1,20,000/- per
acre. Apart from these three sale deeds, no other exemplars were filed
either by the State ofHaryana or by the landowners. The High Court
accepted the price exhibited by the aforesaid three sale transactions which
D came to little more than Rs.1,20,000/- per acre. It thus recorded a finding
that the market value of the land was Rs.1,20,000/- per acre. In our
opinion, there being no other documentary evidence, the view taken by
the High Court that the market value of the land was Rs.1,20,000/- per
acre is perfectly correct and calls for no interference ..
E
8. Shri Rakesh Dwivedi, learned senior counsel for the sugar mill
has submitted that the exemplars filed by the appellants were of very small
pieces of land and, therefore, they are not safe guide to determine the
market value of the land. It may be mentioned here that while determining
F the market value, the potentiality of the land acquired has also to be taken
into consideration. The appellants have led evidence to show that the >
acquired land had the potentiality to be used for commercial, industrial
and residential purposes. PW. I Rakesh Kumar had prepared a site plan
which showed that the acquired land was adjacent to the abadi of
G Shahabad and abutted the Shahabad-Ladwa Road. The site plan also
shows that there existed rice shellers, cold storage, shops, godowns, a
college and houses etc. on both sides ofShahabad-Ladwa Road. PW.2
Baldev Singh was Patwari of village Chhapra in the year 1983. He
deposed that all the four villages viz. Kankar Shahbad, Chhapra, Jandheri
and Jhambara are adjacent to each other and the acquired land abutted
H
ATMA SINGH (DIED) THROUGH LRS. v. STATE 1129
[G.P.MATHUR,J.]
the Shahabad-Ladwa Road. He further deposed that the acquired land A
was 2 kilometer from G.T. Road and there were buildings, godowns, a
cinema hall, factories on both sides of the Shahabad-Ladwa Road.
Therefore, there can be no manner of doubt that the acquired land had
the potentiality for being used for commercial, industrial and residential
purposes and there was fair possibility of increase in its market value in B
the near future. Therefore, the fact that the exemplars filed by the appellants
were of the small pieces of land could not be a ground to discard them
specially when exemplars oflarge pieces ofland were not available. They
could, therefore, be used as a safe guide for determining the market value
of the land. c
9. Learned counsel for the appellants has seriously challenged the
finding of the High Court that the market value of the land determined on
the basis of the exemplars filed by the parties should be reduced by one-
third on account of the fact that the exemplars relied upon for ascertaining
the market value related to sale of small pieces of land. According to Shri D
M.L. Verma, learned senior counsel for the appellants, there is no uniform
principle that if a large area has been acquired and the exemplars are of
small pieces of land, the market value exhibited by the exemplars must
necessarily be reduced by one-third. Shri Verma has placed strong reliance
on Bhagwathula Samanna & Ors. v. Special Tehsildar & Land E
Acquisition Officer, Visakhapatnam Municipality, [1991] 4 SCC 506,
wherein it was held as under:-
"In fixing the market value of a large property on the basis of
a sale transaction for smaller property, generally a deduction is F
given taking into consideration the expenses required for
development of the larger tract to make smaller plots within that
area in order to compare with the small plots dealt with under the
sale transaction. However, in applying this principle of deduction
it is necessary to consider all relevant facts. It is not the extent of
the area covered under the acquisition which is the only relevant G
factor. If smaller area within the large tract is already developed
and situated in an advantageous position suitable for building
purposes and have all amenities such as roads, drainage, electricity,
communications etc. then the principle of deduction simply for the
H
1130 SUPREME COURT REPORTS [2007] 12 S.C.R.

A reason that it is part of the large tract acquired, may not be justified.
In the present cases the lands covered by the acquisition are
located by the side of the National Highway and the Southern
Railway Staff Quarters with the Town Planning Trust road on the
north. The neighbouring areas are already developed ones and
B
houses have been constructed, and the land has potential value for
being used as building sites. Having found that the land is to be
valued only as building sites and having stated the advantageous
position in which the land in question lies though fonning part of
the larger area, the High Court should not have applied the
c principles of deduction. It is not in every case that such deduction
is to be allowed. Therefore, the High Court erred in making a
deduction of one third of the value of the comparable sale and thus
reducing the fair market value ofland from Rs. 10 per sq. yard to
Rs.6.50 per sq. yard."
D
Shri Verma has also referred to Kasturi & Ors. v. State of
Haryana, [2003] 1 SCC 354, wherein it was observed that in cases of
those land where there are certain advantages by virtue of the developed
area around, it may help in reducing the percentage of cut to be applied,
E as the development charges required may be less on that account. There
may be various factual factors which may have to be taken into
consideration while applying the cut in payment of compensation towards
development charges, may be in some cases it is more than I/3rd and in
some cases less than I/3rd. Therefore, in this case taking into consideration
F the potentiality of the acquired land for construction ofresidential and
commercial buildings, the deduction made was only 20%.
10. Shri Rakesh Dwivedi, learned senior counsel for the sugar mill
has, on the other hand, strenuously urged that the evidence of market value
shown by sale of small plots is not a safe guide in valuing large areas of
G land and the prices fetched for small plots cannot be directly adopted in
valuing large extent ofland as has been acquired in the present case. He
has thus contended that a deduction of 30% had rightly been made by
the High Court on account of acquisition of a large area. In support of
his contention, Shri Dwivedi has placed reliance upon several decisions
H of this Court. In order to appreciate the principle laid down therein, it
ATMASINGH(DIED)THROUGHLRS. v. STATE 1131
[G.P. MATHUR, J.]
will be useful to refer to them in some detail. In Administrator General A
of West Bengal v. Collector, Varanasi, AIR (1988) SC 943, it was held
as follows in para 6 of the report:-
'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 admit of and is B
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 a 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 C
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 civic 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 D
of deferment of the realisation of the prices; the profits on the
venture etc. are to be made."
11. In Chimanlal v. Special Land Acquisition Officer, AIR ( 1988)
SC 1652, it was held as follows in para 4 (15) of the reports.
E
"Firstly while a smaller plot is within the reach of many, a large
block of land will have to be developed by preparing a lay out,
carving out roads, leaving open space, plotting out smaller plots,
waiting for purchasers (meanwhile the invested money will be
blocked up) and the hazards of an entrepreneur. The factor can F
be discounted by making a deduction by way of an allowance at
an appropriate rate ranging approx, between 20% to 50% to
account for land required to be set apart for carving out lands and
plotting out small plots. The discounting will to some extent also
depend on whether it is a rural area or urban area, whether building G
activity is picking up, and whether waiting period drning which the
capital of the entrepreneur would be locked up, will be longer or
shorter and the attendant hazards"."
12. Shri Dwivedi has also referred to Basant Kumar & Ors. v. H
I

~
1132 SUPREME COURT REPORTS [2007] 12 S.C.R.

A Union of India & Ors., [1996] 11 SCC 542, K. Vasundara Devi v.
Revenue Divisional Officer (LAO) [1995] 5 SCC 426, and HP.
Housing Board v. Bharat S. Negi & Ors. [2004] 2 SCC 184. In the
first cited case land was acquired for planned development of Delhi and
in the other two cases for Housing Boards and a deduction of 33% was
B applied.
13. The reasons given for the principle that price fetched for small
plots cannot form safe basis for valuation of large tracks of land, according
to cases referred to above, are that substantial area is used for
development of sites like laying out roads, drains, sewers, water and
C electricity lines and other civic amenities. Expenses are also incurred in
providing these basic amenities. That apart it takes considerable period
in carving out the roads making sewers and drains and waiting for the
purchasers. Meanwhile the invested money is blocked up and the return
on the investment flows after a considerable period of time. In order to
D make up for the area of land which is used in providing civic amenities
and the waiting period during which the capital of the entrepreneur gets
locked up a deduction from 20% onward, depending upon the facts of
each case, is made.
E 14. The question to be considered is whether in the present case
those factors exist which warrant a deduction by way of allowance from
the price exhibited by the exemplars of small plots which have been filed
by the parties. The land has not been acquired for a Housing Colony or
Government Office or an Institution. The land has been acquired for setting
F up a sugar factory. The factory would produce goods worth many crores
in a year. A sugar factory apart from producing sugar also produces many
by-product in the same process. One of the by-products is molasses,
which is produced in huge quantity. E.arlier, it had no utility and its disposal
used to be a big problem. But now molasses is used for production of
G alcohol and ethanol which yield lot of revenue. Another by-product
begasse is now used for generation of power and press mud is utilized in
manure. Therefore, the profit from a sugar factory is substantial. Moreover,
it is not confined to one year but will accrue every year so long as the
factory runs. A housing board does not run on business lines. Once plots
are carved out after acquisition of land and are sold to public, there is no
H
fl

ATMASINGH(DIED)THROUGHLRS. v. STATE 1133
[G.P.MATHUR,J.]
scope for earning any money in future. An industry established on acquired A
land, if run efficiently, earns money or makes profit every year. The return
from the land acquired for the purpose of Housing Colony, or Offices, or
Institution cannot even remotely be compared with the land which has
been acquired for the purpose of setting up a factory or industry. After
all the factory cannot be set up without land and if such land is giving B
substantial return, there is no justification for making any deduction from
the price exhibited by the exemplars even if they are of small plots. It is
possible that a part of the acquired land might be used for construction
of residential colony for the staff working in the factory. Nevertheless
where the remaining part of the acquired land is contributing to production c
of goods yielding good profit, it would not be proper to make a deduction
in the price ofland shown by the exemplars of small plots as the reasons
for doing so assigned in various decisions of this Court are not applicable
in tl1e case under consideration.
15. Having regard to the entire facts and circumstances of the case, D
we are of the opinion that a deduction of 10% from the market value of
the land, which has been atTived at by the High Court would meet the
ends of justice. Therefore, the market value of the acquired land forthe
purpose of payment of compensation to the land owners has to be
assessed at Rs. l ,08,000/- per acre. E
16. In the result, the appeals are partly allowed. The ciaimant-
appeilants will be entitled to compensation at the rate ofRs.1,08,000/-
per acre. Besides the above amount, they will also be entitled to the
statutory sum in accordance with Section 23(1-A) and solatiwn at the F
rate of30% on the market value of the land in accordance with Section
23(2) of the Act. They will also be entitled to interest as provided in
Section 28 of the Act. The appellants will be entitled to their costs.
K.K.T. Appeal partly allowed.
G
liiP J