Holding

A deduction of one‑third of the market value is not justified where the acquired land is fully developed and suitable for immediate building, so the High Court’s reduction of compensation was erroneous.

Summary

The appellants' lands in Visakhapatnam were acquired under the Land Acquisition Act, 1894. They claimed a compensation of Rs 10 per square yard, while the Sub‑Judge fixed the market value at Rs 11 but awarded Rs 10 per square yard. The Andhra Pradesh High Court reduced the compensation to Rs 6.50 per square yard, applying a one‑third deduction on the basis of the Tribeni Devi principle for large housing schemes. The Supreme Court held that such a deduction is unwarranted where the land is fully developed, has all amenities, and is suitable for immediate construction, even if it forms part of a larger tract. Consequently, the Court allowed the appeals, restoring the compensation to that awarded by the Sub‑Judge (Rs 10 per square yard) with interest and solatium. The decision clarifies that the deduction under Section 24 applies only when development expenses are necessary, not merely because the land is part of a large acquisition.

Issues considered

Whether a deduction of one‑third of the market value under Section 24 of the Land Acquisition Act is justified when the acquired land is fully developed and requires no further development.
Whether the principle laid down in Tribeni Devi v. Collector, Ranchi (AIR 1972 SC 1417) is applicable to the present case.
How to determine the market value of land acquired in a large tract for housing schemes when comparable sales involve smaller, fully developed plots.

Legislation cited

Land Acquisition Act, 1894s. 18, s. 24, s. 4(1)

Subjects

Land acquisitionCompensationMarket valueSection 24Deduction of valueFully developed landHousing schemeTribeni Devi principle

Judgment

A BHAGAWATHULLA SAMANNA AND ORS.
v.
SPECIAL TAHSILDAR AND LAND ACQUISmON OFFICER
VISAKHAPATNAM MUNICIPALITY, VISAKHAPATNAM

SEPTEMBER 18, 1991
B /

( N.M KASLIWAL AND M .. FATHIMA BEEVI, JJ. ]

Land Acquisition Act, 1894:
Section 24-Compensation-Award of:-£xpenses required for
C development of the land-Deduction of one-third value thereof-Whether
and when justified. · '

The appellants' lands were acquired under the Land Acquisition Act.
The appellants claimed land value at the rate of Rs. 10 per sq. yard, '1ut the
Land Acquisition Officer awarded compensation at the rate of Rs.0.88 per
D sq. yard. On a reference the Sub'-Judge determined the market value at
Rs.11 i)er sq. yard on th~ basis ,of'certain ·c~mparable transactions, but
granted the compens~tion at'the rate ofRs~io as the appellants themselves 'r
had claimed only at that rate. o~' an appeal preferred by the
Respondent-State, the High Court determined the market value of the
E lands at the rate of Rs. 6.50 per sq. yard and reduced the total
conipensation, following the decision of this Court in Tribeni Devi v.
Collector, Ranch~ AIR 1972 SC 141 that a deduction of 1/3 of the value is
to be made when large extent of land is acquired under housing scheme.

Aggrieved by the High Court's decision, the appellants preferred the
F present appeals, contending that the High Court had erroneously applied
the principle laid down in Tribeni Devi's case without properly
appreciating the nature of the land in question and the purpose for which
it had been acquired. It was further contended that there was n·o
justification for making any deduction since the land in question was fully
G developed and eminently suitable for being used as house sites. Even in
respect of the land acquired for the purpose of formation of the road, it
was argued, the High Court wrongly proceeded on the basis that expenses
have to be incurred for development.

On belralf of the Responde~ts, it was contended that the appellants'
H lands form part of large tract acquired for the purpose of construction of
172
BHAGAWA1HUU.A v. lAND ACQUISIDON OFFICER 173

houses, that the other transaction based ·on which compensation was A
decided by the Sub-Judge, related to small plots of land which were fully
developed and while comparing the transactions, it was necessary to take
. into account the development that is required to be made for bringing the
acquired land suitable for the purpose of construction and that 1/3 of the
value was rightly deducted.
B
Allowing the appeals, this Court,

~-- HELD 1. The principle of deduction in the land value covered by
the compl'trable sale is adopted in order to arrive at the market value of the
acquired land. In applying the principle it is necessary to consider all C
relevant facts. It is not the extent of the area covered under the
acquisition, the only relevant factor. Even in the vast area there may be
land which is fully developed having all amenities and situated in an
advantageous positi.on. If smaller area within the large tract is already
developed and suitable for building purposes and have in its vicinity
roads, drainage, electricity, communications etc. then the principle of D
--(' deduction simply for the reason that it is part of the large tract acquired,
may not be justified. (177-D].

Tribeni Devi v;Coll<:ctor, Ranchi, AIR 1972 SC 1417, distinguished.

Kousholyo Devi v•. Lo11d Acquisitio11 Officer, (1984] 2 SCR 900; E
Admi11istrator Ge11erol of West Be11gal v. Collector, Varanasi, AIR 1988 SC
943; Special Tahsildar, Land Acquisition, Vishakapat11am v. Smt. A. Man-
go/a Gowri, 1991 (2) Scale 301, relied on.
2 In the instant case, the lands involved are of even level and fit for
construction without the necessity for levelling or reclamation. Having F
fou,nd that the land is to be valued only as building sites and stated the
advantageous position in which the land in question lies though forming
part of the larger area, the High Court should not have applied the
principles of deduction. (177 F-H).
3. The proposition that large area of land cannot possibly fetch a G
price at the same rate at which small plots are sold is not absolute
proposition and in given circumstances it would be permissible to take
into account the price fetched by the small plots of land. If the larger tract
of land because of advantageous position is capable of being used for the
purpose for which the smaller plots are used and. is also situated in a H
174 SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R.

A developed area with' little or no requirement of further development, the
principle or deduction of the value for purpose of comparison is not
warranted. With regard to the nature of the plots involved in these two.
cases, it has been satisfactorily shown on the evidence on record that the
land has facilities of road and other amenities and is adjacent to a
B developed colony and in ~uch circumstances it is possible to util~se the
entire area in question as house sites. In respect of the land acquired for
the road, t~e same advantages are available and it did not require any
further development. (178-B,C).

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 1221 &
C 1222of1977. ·

From the Judgment dated 20;1.1976 of the Andhra Pradesh High
Court in Appeal Nos. 758 and 632of1975.

Mrs. Shyamala Pappu and Ms. Indira Sawhney. for the Appellants.

D T.V.S.N. Chari for the Respondent.

The Judgment of the Court was delivered by

FATHIMA BEEVI, J. The appellants are aggrieved that the High
Court by the common judgment dated 20.1.1976 in two cases had substan-
E tially reduced on erroneous grounds the enhanced compensation allowed
by the Subordinate Judge on reference under Section 18 of the Land Ac-
quisition Act (for short the Act).

Civil Appeal No. 1222 of 1977 relates to acquisition of Ac. 8.33 cents >-
of land in Survey No. 2/1 of Dondaparthi village in pursuance to Notifica-
F tion under Section 4(1) of the Act published on 7.7.1966 for construction of
quarters for the staff of Port Trust .

.Civil Appeal No. 1221 of 1977 relates to acquisition of Ac.1.68 cents
of land in Survey No. 2/2A of the same village in pursuance to the Notifica-
tion published on 1.8.1968 for the purpose of formation of the national
G highway diversion r~ad.
The appellants claimed land value at the rate of Rs. 10 per sq. yard
since the Land Acquisition Officer awarded only 0.88 paise per sq. yard.
The learned Subordinate Judge determined the ,market value of the land at
the rate of Rs; 11 per sq. yard accepting as basis the value of land under the
H transactions evidenced by Exhibits A-1 to A-4, but granted the compensa-
BHAGAWA1HUUA v. LAND AOOUISillON OFF1CER[FA1HIMABEEVI,J.) 175

tion at the rate of, Rs. 10 per sq; yard as the claimants themselves had A
claimed compensation at the rate of Rs. 10 per sq. yard. The State
preferred appeal against the said judgment of the Subordinate Judge to the
High Court of Ari.dhra Pradesh. The High Court accepted Exhibits A-1 to
A-4 as reflecting the value of land in the neighbourhood. It however fol-
lowing the decision of this Court in Tribeni Devi v. Collector, Ranchi, AIR
19n SC 1417, that a deduction of 1/3 of the value is to be made wh~n large B
extent of land is acquired under housing scheme, determined the market
value of the appellants· land at the rate of Rs. 650 paise per sq. yard and
accordingly reduced the total compensation allowed by the Subordinate
Judge.

The learned counsel for the appellants contended before us that the C
High Court had erroneously applied the principle laid down in Tribeni
Devi's case (supra) without properly appreciating the nature of the land in
question and the purpose for which it had been acquired. It was submitted
that the land in question was fully developed and eminently suitable for
being used as house sites and, therefore, there was no justification for
making any deduction. It is also pointed out that even in respect of the D
land acquired for the purpose of formation of the road, the High Court
wrongly proceeded on the basis that expenses have . to be · incurred for
development and thus in awarding the compensation, the High Court
wrongly applied principles of deduction of 1/3 of the value. The learned
counsel has taken us through the relevant evidence and maintained that the
· learned Subordinate Judge had reduced the land value to Rs. 10 per sq. E
yard though the market value was higher at Rs. 11 per sq. yard only be-
cause the appellants had themselves limited the claim to Rs. 10 per sq.
yard. ·
- -(
The learned counsel for the respondent maintained that the
appellants' land forms part of large tract acquired for the purpose of con- F
struction of houses, that the sale deed Exhibits A-1 to A-4 relate to small
plo:s which are fully developed 'and when the transaction is compared, it is
necessary to take into account the development that is required to be made
for bringing the acquired land suitable for the purpose of construction and
that the High Court was right in making the deduction of 1/3 of the value in
the facts and circumstances of the case. G
In awarding compensation in acquisition proceedings, the Court has
necessarily to determine the market value of the land as on the date of the
relevant Notification. It is useful to consider the value paid for similar land
at the material time under genuine transactions. The market value en-
visages the price which a willing purchaser may pay under bona fide trans- H
176 SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R.

A fer to a willing seller. The land value can differ depending upon the extent
and nature of the land sold. A fully developed small plot in an important
locality may fetch a higher value than a larger area in an undeveloped
condition and situated in a remote locality. By comparing the price shown
in the transactions all variables have to be taken into consideration. The
transaction in regard to smaller· property ca'nnot, therefore, be taken as a·
B real basis for fixing the compensation for larger tracts of property. In
fixing the market value of a large property on the basis of a sale transaction
for smaller property, generally a deduction is given taking into considera-
tion 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. This principle has been stated by
C this Court in Tribeni Devi's case (supra).
In Koushalya Devi v. Land Acquisition Officer, (1984] 2 SCR 900,
this Court observed at pages 912-913 as und~r:
"When large tracts are acquired, the transaction in respect of
small properties do not offer a proper guideline........................
D In certain other cases this Court indicated that for determining
the market value of a large property on the basis of a sale
)>--·
transaction for smaller property a deduction should be given."
We shall also refer to the observations of this Court in Administrator
General of West Bengal v. Collector, Varanasi, AIR 1988 SC 943: -
E "The principle that evidence of market value of sales of small,
developed plots is not a safe guide in valuing large extents of
land has to be understood in its proper perspective. The prin-
ciple 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
F and is ripe for use for building purposes; that building fots that
could be laid-out on the land would be good selling proposi-
tions 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 sniall sites in the area at or about the time of the
G 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
of deferment of the realisation of the price; the profits on the
H venture etc. are to be made. "
BHAGAWATIIUU.A v. 1AND ACQUISmON 0Ff1CER[FA1HIMABEEVl,J.]l77

This Court has in a recent decision in Special Tahsildtzr Land Ac- A
quisition, Vishakapatnam v. Smt. A. Mangala Gowri, 1991(2) Scale 301,
following Tribeni Devi's case pointed out as under: -
"It is to be noted that in building Regulations setting apart the
lands f qr development of road&'; drainage and other amenities
like electricity etc. are condition precedent to approve lay out
for building colonies. Therefore, based upon the. situation of B
the land and the need for development the deduction shall be
made. Where acquired land is in the midst of already
developed land with amenities of roads, drainage, electricity
etc. then deduction of 1/3 would not be justified. In the rural
areas housing schemes lielating to weaker sections deduction Qf
1/4 may be justified." C
The principle of deduction in the land value covered by the com-
parable sale is thus adopted in order to arrive at the market value of the
acquired land. In applying the· principle it is necessary to consider all
relevant facts. It is not the eXtent of the area covered under the acquisi-
tion, the only relevant factor. Even in the vast area there may be land
which is fully developed having all amenities and situated in an ad- D
vantageous position. If smaller area within the large tract is already
developed and suitable for building purposes and have in its vicinity roads,
drainage, electricity, communications etc. then the principle of deduction
simply for the reason that it is part of the large tract acquired, may not
be justified.
E
The national highway runs very near to the proposed Port-trust
colony. The lands acquired already for the South Eastern Railway Staff
Quarters lie to the southern side of the land under acquisition. The town
planning trust road runs on the northern side of the land under acquisition.
The colony is in the fast developing part of the municipal town. The plot
of Ac. 1.68 cents in Survey No. 2/2A acquired for the formation of the diver- F
sion road is adjacent to built-in-area. The land involved in these cases is of
even level and fit for construction without the necessity for levelling or
reclamation. The. High cOilrt has itself concluded on the evidence that 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 G
ones and 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 stated the advantageous position in which the land
in question lies though forming part of the larger area, the High Court should
not have applied the principles of deduction. It is not in every case that
such deduction is to be allowed. Where the acquired land is in the H
178 SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R.

A midst of already developed land with amenities of roads, electricity etc.,
the deduction in the value of the comparable land is not warranted.

. The proposition that large area of land cannot possibly fetch a price
at the same rate at which small plots are sold is not absolute proposition
and in given circumstances it would be permissible to take into account the
B price fetched by the small plots of land. If the larger tract of land because
of advantageous position is capable of being used for the purpose for which
the smaller plots are used and is also situated in a developed area with little
or no·requirement of further development, the principle of ~eduction 'of
the value for purpose of comparison is not warranted. With tegard to the
nature of the plots involved in these two cases, it has been satisfactorily
C shown on the evidence on record that the land has facilities of r9ad and
other amenities and is adjacent to a developed colony and in such cir-
cumstances it is possible to utilise the entire area in question as house sites.
.In respect of the land acquired for the road, the same advantages are
available and it did not require any further development. We are; there-
fore, of the view that the High Court has erred in applying the principle of
D deduction; and reducing·the fair market value of land from Rs. 10 per sq .
. yard to Rs. 6.50 paise per sq. yard. In our opinion, no such deduction is
justified in the facts and circumstances of these cases. The appellants,
therefore, succeed.

· In the result, the appeals are allowed and the respondent is directed
E to pay the compensation as determined by the learned Subordinate Judge
with interest and solatium in accordance with law. In the circumstances of
the case, we make no order as to costs.

G.N. Appeals allowed.