K. POSAYYA AND ORS.versusSPECIAL TAHSILDAR

A                           K. POSAYYA AND ORS.
                                          v.
                             SPECIAL TAHSILDAR

                                   MAY 10, 1995

B            [K. RAMASWAMY AND N. VENKATACHALA, JJ.J

          Land Acquisition Act 1894:

          S.23( I )-Compensation-Award of-Large extent of land acquired for
C Project-T1ibal la11ds-No11-transferable-No sale deed to rely 01t-Transac-
    tion in adjacent villag,,-Brought up document to inflate market valu~Hence
    rightly rejected by High Cowt-Valuation detennined by High Court-Held,
    no inteiference called for-Doctrine of Reinstatement value-Held not ap-
    plicable.

D         Lands to the extent of 163.80 acres belonging to the appellants, were
    acquired under the Land Acquisition Act and the Award fixed the market
    value of the lands at Rs. 400 per acre. The lands were rain-fed, in which
    dry crops were raised prior to acc1uisition. On Reference, the Subordinate
    Judge enhanced the compensation to Rs. 22,000 per acre. On appeal the
E   High Court reduced the compensation to Rs. 21,000 per acre.

           In these appeals, it was contended that the lands were situated in a
    notified tribal area in which the Scheduled Areas Land Transfer Regula-
    tion Act, 1970 has been in force thus prohibiting sale of the lands by tribals
    to non-tribals, and therefore the appellants could not secure any sale deed,
F   but in the neighbouring village, one acre of land was sold for Rs. 20,000
    and the High Court was not justified in acting upon the same.

          Dismissing the appeal, this Court

          HELD : 1. The sale deed (Ex.A-1) was brought into existence after
G the notification and possession was taken of the lands. This is the
    notorious document relied in all the subsequent references. Only the
    attestor was examined in proof of the documents. It would be obvious that
    it was a brought up document to inflate the market value of the lands
    under acc1uisition not only in the village but in the surrounding villages.
H   The High Court, therefore, was right in rejecting the said document and
                                         342
                         K.POSAYYAv. SPL. TAHSILDAR                          343

    refusing to place reliance for determination of the compensation. Exhibit A
    A-2, judgment of the single Judge of the High Court relied upon by the
    appellants relate to the same reference court. The lands therein were
    acquired for project. They are the wet lands. Since the counsel for the
•   Government did not appear and no material was placed on record and
    since in earlier cases, award was confirmed for a sum of Rs. 22,000 per B
    acre, the single Judge enhanced the compensation to Rs. 22,000. That is
    obviously illegal approach adopted by the High Court in determining the
    market value of large tracts of lands covered by the project. It would
    appear that the other references were not brought to the notice of the
    Judges. Therefore, it cannot form the basis for fixing the market value at
    a higher rate. (346-C-E]                                                   C
          2. The contention that the doctrine of reinstatement value in deter-
    mination of the market value to the lands of depressed value due to
    operation of the Andhra Pradesh Scheduled Areas Land Transfer Regula-
    tion Act, 1970 prohibiting alienation of the land between the tribals and
    non-tribals cannot be accepted. What is relevant in fixation of the market      D
    value of the land under s.23(1) is prevailing price as on the date of
    notification under s.4 (1). The reasoning of the High Court that since the
    tribals have no capacity to purchase the land an_d the lands, therefore, are
    not possessed of market value also is not a correct approach. (347-C]
                                                                                    E
             3. The reference Court should be circumspect, pragmatic and careful
      in analysing the evidence and arriving at just and fair market value of the
    . lands under acquisition which could be fetched on the date of the notifica-
      tion. The nature of the land, the crops raised and the nature of the income
      likely to be derived from the lands, the expenditure to be incurred for
      raising the crops and the net profits etc. would be the relevant factors in   F
      arriving at the net market value and if evidence is produced in that behalf
      on its basis applying the suitable 10 years multiplier, the market _value
      need to be determined. The owner or claimant should not be put to loss
      by under valuation. But, at the same time public exchequer should not be
      put to undue burden by excess valuation. It is the statutory duty of the      G
      Court to maintain the balance between diverse interests. (347-H, 348-A-B]

          Administrator General of West Bengal v. Collect01; Varanasi, AIR
     (1988) SC 943, distinguished.

          4. Claimant stands in the position of plaintiff and the onus is on him H
    344                   SUPREME COURT REPORTS [1995] SUPP. 1 S.C.R.

A to adduce necessary and relevant evidence in proof of the objection for
    higher compensation. The court is also enjoined to carefully scrutinise and
    analyse the evidence and applying the acid test of a prudent purchaser and
    a willing vendor or the realised income on the crops, the true, correct and
    fair market value should be arrived at. The reference court has absolutely
B   failed to apply these tests in determining the compensation. Rejecting the
    evidence relied on by the claimants under Ex.A-1 to A-6, there is no other
    evidence to enhance the compensation. (348-C-D]

          5. The doctrine of reinstatement value cannot be applied in deter-
    mining the market value under s.23(1) of the Act. The reason is obvious.
C   There will always be a gap between the date of the notification and the date
    of payment. To recompensate the loss, payment of interest under s.28,
    solatium under s.23(2) in appropriate cases after the Amendment Act
    68/84 has come into force and 12% per annum of the additional amount
    under s.23(1-A) are provided for. (348-E)

D         6. Though the High court has applied wrong principle but the
    conclusion reached by the High Court in determining the compensation at
    Rs. 12,000 per acre cannot be said to be illegal warranting interference.
                                                                        [348-F]
          [This Court expressed its hope that the State Government would
E settle all the claims in a Lok Adalat as was done in respect of acquisition
    of lands for Srisailam Project and Vishakapatnam Steel Project.] [348-F]

          CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 5568-71
    of 1995 Etc.

F        From the Judgment and Order dated 2.3.94 of the Andhra Pradesh
    High Court in A.Nos. 1341-44 of 1992.

          P.P. Rao, Naramimha P.S. and V.G. Pragasam for the Appellants.

          Guntur Prabhakar for the Respondent.
G
          The Judgment of the Court was delivered by

          K. RAMASWAMY, J. Leave granted.

          Jelluru and Yerrakaluva Reservoir to prevent inundation of agricul-
H tural lands and to control floods, was taken out and 500 acres of land was
           K.POSAYYAv.SPLTAHSILDAR[K.RAMASWAMY,J.]                        . 345
                                                  \

 acquired as a part of Vengalrayasagar project for submersion. Notification A
 under s.4(1) of the Land Acquisition Act, 1894, (for short, 'the Act') was
 published on March 22, 1979. 400 acres of land, as a part of that Scheme ·
 situated in Alivelu village in Polayaram Manda! in West Godavari District
 of Andhra Pradesh was acquired, out of which, we are concerned with
 about 163.80 acres in these appeals. The Land Acquisition Officer in his B
 award dated July 31, 1980, fixed the market value of the _lands at Rs. 400
 per acre. The lands are rain-fed in which dry c~ops were raised prior to
 acquisition. On reference u;,der s.18, the Subordiriate Judge enhanced the
 compensation to Rs. 22,000 per acre. The High Court in the impugned
 judgment in Appeal No. 1341 and batch of 1992 reduced the compensation
 to Rs. ll,000 per acre. Thus these appeals by special leave.               C
         Shri PP Rao, learned senior counsel for the appellants, contended
  that Alivelu village is situated in notified tribal area in which the Scheduled
  Areas Land Transfer Regulation Act, 1970 is in force which prohibits sale
  of the lands by the tribals to the non-tribals. the appellants being tribals .D
  could not secure any sale deed. In the neighbouring village under Ex.A-1
  dated October. 12, 1980 when one acre of land was sold for a sum of
  Rs.20,000, the High Court was not jnstified in refusing to act upon the
  same. Equally, it is contended that in another judgment and decree of the
  High Court, in relation to lands acquired for Vengalrayasagar project,
  determined the compensation at the rate of Rs. 20,000 per acre, the : E
  appellants are entitled to at least to Rs. 22,000 per acre. Being the tribal,
  they cannot afford to purchase the lands elsewhere. The Court, therefore,
  should grant compensation at "reinstatement value" for rehabilitation of the
  tribals under Ex.A-5 and A-6, the awards made by the reference court in
· OP No. 17-18/80, the Subordinate Judge awarded at the rate of Rs. 22,000 F
  per acre which became final. The High Court misapplied the principle laid
  by this Court in Administrator General of West Bengal v. Collector, Varanas~
  AIR (1988) SC 943, in reducing the price applying the principle of deduc-
  tion of 50% to the agricultural lands. The High Court, therefore, erred in
  wrong application of the principles of law in determining the compensation
  to the agricultural land.                                          ·            .G

          The question, therefore, is, what is the correct principle of law to be
.. applied in determining the market value of vast extent of larids ai:quired
   for a project. Admittedly, Ex.A-1 dated December 31, 1980 is the torch
 · light for the claimants to lay higher claim. It is a post notification sale of H

              '
                    ..
    346                   SUPREME COURT REPORTS [1995) SUPP.1 S.C.R.

A the land situated. in Chakradevarapalli. According to the claimants, it is
    situated at a distance of 3 to 4 kilometers from the village Alivelu. Accord-
    ing to Land Acquisition Officer, the distance between the two villages in
    30 Kms. Possession of these lands; admittedly, was taken between April 15,
    1977 i.e. prior to the notification under s.4(1) and July 14, 1980, shortly
  .after the notification under s.4(1). It would, thus, be clear that the sale deed
B
    was brought into existence after the notification and possession was taken
    of the lands. This is the notorius document relied in all the subsequent
    references. Only the attestor was examined in proof of the documents. It
    would be obvious that it was a brought up document to inflate the market
  . value of the lands illider acquisition not ·only in this village but in the
C surrounding villages. The High Court, therefore, was right in rejecting the
    sa"i.d document and refuse to place reliance for determination of the
    compensation. Exhibit A-2, judgment of the single Judge of the High Court
    in AS No. 2500/86 arising out of OP No. 49184 of the same reference court.
  .The_lands therein were acquired for Vengalrayasagar project. They are the·
D wet lands. Since the counsel forthe Government did not appear and no
    material was placed on record and since . in earlier cases, award was
    confirmed for a sum of Rs, 22,000' per acre, the single Judge enhanced the
    compensation to Rs. 22,000. That is obviously illegal approach adopted by
    the High Court in determining the market value of project area, large tracts
    of lands covered by the project. It would appear that the learned Judge
E was not brought to the notice of other references. Therefore, it cannot be
    formed the basis to fix the market value at. a higher rate, though the
    judgment may be wrong.

           Equally the judgment in Ex.A-3 dated February 14, 1985 in AS No.
  F 232/82 and batch arising ou~ of 0 P No. 111/80 and batch of the land
     situated in Tadavai village, the Division Bench determined market value.at
     the rate of Rs. 20,000 per acre. The foundation for the said determination
    .was the notorious sale-deed Ex.A-1 which was marked therein as A-3.
     Equally, Ex.A-4 in OP No. 57/84 of the reference court is founded npon
     the earlier decision. ExA-5 and A-6, namely, OP Nos. 17-18/89 dated
•G November 29, 1990 were founded on the judgments-Ex.A-2 etc: in which
     Subordinate Judge granted at the rate of Rs. 22,000 per acre. Since the
     very basis of determination of the compensation is clearly erroneous,
     Ex.A-5 and A-6 cannot form any basis for "determination of the compen-
     sation. The Division Bench of the High Coi.irt in this appeal, placing
. H reliance on Ex.A-5 and A-6 which' arose from the s~e village Alivelu,
          K. POSAYYA v. SPL TAHSILDAR [K. RAMASWAMY,J.)                   347

 reduced the market value· to Rs. 12,000 per acre on the ratio in. Ad- A
 ministrator General of West Bengal's case. It is true, as rightly contended by .
 Shri Rao, that the ratio therein relates to the urban lands fit for building
 purpose and the same principle cannot be applied in determination of the
 market value of agricultural land. The contention that the doctrine of
 reinstatement value in determination of the market value to the lands of B
 depressed value due to operation of the Andhra Pradesh Scheduled Area• ·
 Land Transfer Regulation Act, 1970 prohibiting alienation of the land
 between the tribals and non-tribals, though, prim~ facie appears to be
 alluring but on deeper consideration, it cannot co=end acceptance. What
 is relevant in fixation of the market value of the land under s.23(1) is ·
 prevailing price as on. the date of notification under s.4(1). The reasoning C
 of the High Court that since the tribals have no capacity to purchase the
 land and the lands, therefore, are not possessed of market value also is not
 a correct approach.

         It is settled law that market value is to be determined either on the D
   basis of the prevailing prices of, sale and purchase between \\illing vendor
                             of
   and willing vendee or value the crops realised applying suitable 10 years
   multi-plier or in case of land valued by expert valuer like urban properties
   could be considered for_ determination of the compensation. Market value
   cannot be fixed with mathematical precision but must be based on sound
   discretion exercised by the reference court in· arriving at just and · E
   reasonable price. It should not be based on feats of imagination or flight
   of fancy. Determination of compensation for compulsory acquisition invol-
   ves consideration of the price which a hypothetical willing purchaser Can
   be expected to pay for the lands in the existing use as well as relatable
   potentialities. The acid test is the arm chair of the willing vendor would '. F
   offer and a prudent willing buyer, taking all relevant prevailing conditions
   of the normal market, fertility of the land, location, suitability of the
   purpose for which it was purchased, its existing potentialities a,;d likely use
·· to which the land is capable of being put in the same condition would, offer
  to pay the price, as on the date of the notification. In case of acquisition G
  of large tracts of lands· for projects situated in several villages, stray
  sale-deed of small extent here and there would not form the basis to --
  determine the -compensation. The reference court should be circumspect,
  pragmatic and careful in analysing the evidence and arriving at just and
  fair market value of the lands under acquisition whic~_could be fetched on
· the d~te of the notification. The nature of the land, the crops raised and H


                '
         348                  SUPREMECOURTREPORTS (1995) SUPP. lS.C.R

     A the nature of the income likely to be derived from the lands, the expendi-
         ture to be incurred for raising the crops and the net profits etc. would be
         the relevant factors in arriving at the net market value and if evidence is      .4
         produced in that behalf on its basis applying the suitable 10 years multi-
         plier, the market value need to be determined. Tbe owner. or claimant
         should not be put to loss by under valuation. But, at the same time public
     B   exchequer should not be put to undue burden by excess valuation. It is the
         statutory duty of the Court to maintain the balance between diverse inter-
         ests.

                Claimant stands in the position of plaintiff and the onus is on him to
     C   adduce necessary and relevant evidence in proof of the objection for higher
         compensation. Tbe court is also injoined to carefully scrutinise and analyse
         the evidence and applying the acid test of a prudent purchaser and a willing
         vendor or the ryalised income· on the crops, the true, correct and fair
         market value should be arrived at. Tbe reference court has absolutely failed .
         to apply these tests in determining the compensation. Rejecting the ·
     D . evidence relied on by the claimants under Ex.A-1 to A-6, there is not other
         evidence to enhance the compensation.. Tbe doctrine of reinstatement
         value cannot be applied in determining the market value under s.23(1) of ·
         the Act. Tbe reason is obvious. There will always be a gap between the
         date of the notification and the date of payment. T!J recompensate the loss,
',   E payment of interest under s.28, solatium under s.23(2) in appropriate cases
         after the Amendment Act 68/84 has come into force and 12% per annum
         of the additional amount under s.23(1-A) are .provided for. It would,
         therefore, be illogical and unrealistic to apply the doctrme of reinstatement
         value in determination of the compensation under s ..23(1).            ·

               In this view, though the High Court has applied wrong principle but
         the conclusion reached by the High Court in determining the compensation
         at Rs. 12,000 per acre cannot be said to be illegal warranting interference.
         Before parting with the case, we express hope that the State Goverrunent
         should settle all the claims in a Lok Adalat as was done in respect of
         acquisition of lands for Srisailam Project and Vishakapatnam Steel Project.
         Tbe appeals are accordingly dismissed. No costs.

         GN.                                                     Appeals dismissed.