Holding

When a large area is acquired, the court may consider comparable sales of small plots with necessary adjustments, and the deduction for development charges is not rigidly fixed, generally one‑third for agricultural/undeveloped land with potential, subject to factual variations.

Summary

The Lucknow Development Authority acquired a large tract of land for a housing scheme and the Special Land Acquisition Officer fixed its market value at Rs.2.20 per sq. ft., later increased to Rs.6 per sq. ft. by the acquisition tribunal after considering sale deeds of small plots. The landowners appealed, claiming the land’s proximity to a highway and developed colonies gave it a much higher potential value. The Supreme Court held that when a large area is acquired, rates for small plots cannot be the sole basis for valuation, though comparable sales may be used with appropriate adjustments. It also clarified that the deduction for development charges is not fixed at 25% and, for agricultural or undeveloped land with potential, a one‑third deduction is normally appropriate, subject to factual variations. Applying these principles, the Court sustained a market value of Rs.8 per sq. ft. and ordered a one‑third deduction for development charges, thereby allowing the appeal in part.

Issues considered

Can the market value of a large tract of land be fixed based on sale deeds of small plots?
What factors must be considered in determining compensation under Sections 23, 24 and 25 of the Land Acquisition Act, 1894?
Whether the deduction for development charges should be 25% as fixed by the tribunal or can be adjusted to one‑third?
How should the potentiality of land adjacent to developed areas be treated in valuation?

Legislation cited

Code of Civil Procedure, 1908s. 96
Land Acquisition Act, 1894s. 11, s. 18, s. 23, s. 24, s. 25, s. 4(1), s. 54, s. 6
Urban Land Ceiling Act, 1976

Subjects

Land acquisitionCompensationMarket valueDevelopment chargesPotentiality of landLarge tract valuationSection 23 Land Acquisition ActSection 24 Land Acquisition ActSection 25 Land Acquisition ActComparative sales

Judgment

\-
!

't-·
LUCKNOW DEVELOPMENT AUTHORITY A
v.
KRISHNA GOP AL LAHOTI AND ORS.

NOVEMBER 2, 2007
B
[DR. ARIJIT P ASAYAT AND LOKESHWAR
-t
i SINGHPANTA,JJ.]

Land Acquisition Act, 1894-ss.23, 24 & 25:
c
Acquisition of large tracts of land-Fixation of market value-
With reference to sale instances in respect of small plots of land-
Permissibility-Held: Where large area is subject matter ofacquisition,
rate at which small plots are sold cannot be a safe criteria-However,
in absence of any other material and in appropriate cases, the
D
;
..
·~
adjudicating Court can make comparison ofprices paidfor small plots
and determine compensation in respect ofthe acquired land albeit after
making necessary deductions /adjustments.
Acquisition of land-For development purpose-Determination
of compensation-Deduction towards development charges-Held: E
Depends upon facts of each case-In respect of agricultural/
undeveloped land having potentialfor housing or commercialpurposes,
normally I/3rd compensation has to be deducted subject to certain
variations depending on nature ofthe acquired land, its location, extent
of expenditure involved for development etc. F
Land situated in village was acquired by Appellant authority
under a Housing and Development Scheme. Special Land
Acquisition Officer determined market value of acquired land at the
rate of Rs.2.20 per sq. ft. and on that basis awarded compensation
under Section 11 of the Land Acquisition Act, 1894. Land owners G
filed reference application under Section 18 of the Act seeking higher
-c~··
compensation contending that the acquired land was adjacent to the
Lucknow-Sitapur Highway and near developed colonies and hence
had great potential. Tribunal determined market value of the land
921 H
I
----.(
\

922 SUPREME COURT REPORTS [2007] 11 S.C.R.

·-tr
A at Rs.6 per sq.ft. and accordingly awarded compensation. The award
was upheld by the High Court. Hence the present appeal.
Party allowing the appeal, the Court
HELD: 1. Where large area is the subject matter of acquisition,
B rate at which small plots are sold cannot be said to be a safe criteria.
It cannot, however, be laid down as an absolute proposition that the ~
..._
rates fixed for the small plots cannot be the basis'for fixation of the
rate. For example, where there is no other material it may in
appropriate cases be open to the adjudicating Court to make
c comparison of the prices paid for small plots ofland. However, in
such cases necessary deductions/adjustments have to be made while
determining the prices. [Paras 15and16] [928-D-F]
The Collector of Lakhimpur v. Bhuban Chandra Dutta, AIR
(1971) SC 015; Prithvi Raj Taneja (dead} by Lrs. v. The Stqte of
D
Madhya Pradesh and Anr., AIR (1977) SC 1560 and Smt. Kausalya .lI
Devi Bogra and Ors. etc. v. Land Acquisition Officer, Aurangabad and f
Anr., AIR (1984) SC 892, relied on.
Suresh Kumar v. Town Improvement Trust, Bhopal, (1989) 1
!
E SVLR (C) 399, referred to.
2. Compensation must be determined by reference to the price
which a willing vendor might reasonably expect to receive from the
willing purchaser. While considering the market value, disinclination
of the vendor to part with his land and the urgent necessity of the
F purchaser to buy it must alike be disregarded, neither must be
considered as acting under any compulsion. The value of.the land
is not to be estimated as its value to the purchaser. But similarly
this.does not mean that the fact that some particular purchaser might
desire the land more than others is to be disregarded. The wish of a
G particular purchaser, though not his compulsion may a~ways be taken
A •...; • ~

into consideration for what it is worth. [Para 17] [929-A-C] ....,__
f

Vyricherla Narayana Gajapatiraju v. Revenue Divisional Offic.er,
Vizagapatam, AIR (1939) P .C. 98, relied on.
H
LUCKNOWDEVELOPMENTAUTHORITYv. KRISHNA 923
"'t~ GOPALLAHOTI
3.1. Section 23 of the Land Acquisition Act, 1894 enumerates A
the matters to be considered in determining compensation. The first
·criterion to be taken into consideration is the market value of the
land on the date of the publication of the notification under Section
4(1). Similarly, Section 24 of the Act enumerates the matters which
the Court shall not take into consideration in determining the B
i
> compensation. A safeguard is provided in Section 25 of the Act that
the amount of compensation to be awarded by the Court shall not
be less than the amount awarded by the Collector under Section 11.
Value of the potentiality is to be determined on such materials as
are available and without indulgence in any fits of imagination. c
Impracticability of determining the potential value is writ large in
almost all cases. There is bound to be some amount of guess work
involved while determining the potentiality. [Para 17) [929-C-E)
3.2. The element of speculation is reduced to minimum if the
.... underlying principles of fixation of market value with reference to lJ
')
c~mparable sales are made: (i) when sale is within a reasonable time
of the date of notification under Section 4(1 ); (ii) it should be a bona
fide transaction; (iii) it should be of the land acquired or of the land
adjacent to the land acquired; and (iv) it should possess similar
advantages. It is only when these factors are present, it can merit a E
consideration as a comparable case.
[Paras 18and19] [929-F-H; 930-A]
3.3. The deduction to be made towards development charges
cannot be proved in any strait-jacket formula. It would depend upon
F I
the facts of each case. There may be various factual factors which
may have to be taken into consideration while applying the cut in
payment of compensation towards developmental charges, maybe
in some cases it is more than I/3rd and in some cases less than
l/3rd. [Paras 21and22] [930-B-C; 931-A]
G
-
~-
3.4. There is difference between a developed area and an area
having potential value, which is yet to be developed. In respect of
agricultural land or undeveloped land which has potential value for
housing or commercial purposes, normally l/3rd amount of
compensation has to be deducted out of the amount of compensation H
~\
'

924 SUPREME COURT REPORTS [2007] 11 S.C.R.

A payable on the acquired land subject to certain variations depending
on its nature, location, extent of expenditure involved for
development and the area required for roads and other civic
amenities to develop the land so as to make the plots for residential
or commercial purposes. A land may be plain or uneven, the soil of
B the land may be soft or hard bearing on the foundation for the purpose +
of making construction; may be the land is situated in the midst of a ..(
developed area all around but that land may have a hillock or may
be low-lying or may be having deep ditches. So the amount of
expenses that may be incurred in developing the area also varies.
c A claimant who claims that his land is fully developed and nothing ·
more is required to be done for developmental purposes, must show
on the basis of evidence that itis such a land and it is so located. In
the absence of such evidence, merely saying that the area adjoining
his land is a developed area, is not enough particularly when the
D extent of the acquired land is large and even if a small portion of 1.
the land is abutting the main road in the developed area, does not r
give the land the character of a developed area. The fact that an
area is developed or adjacent to a developed area will not ipso facto
make every land situated in the area also developed to be valued
, . E as a building site or plot, particularly, when vast tracts are acquired,
as in this case, for development purpose. However, in cases of some
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, as the developmental charges required may be less on that
F account. {Para 22] [930-C-G; 931-A] ~

The Special Land Acquisition Officer, Bangalore v. T Adinarayan
Setty, AIR (1959) SC 429; Ravinder Narain andAnr. v. Union ofIndia,
[2003] 4 SCC 481; Kasturi and Ors. v. State ofHaryana, [2003] 1 SCC
354; Kiran Tandon v. Allahabad Development Authority and Anr.,
G [2004] 10 SCC 745; State of West Bengal v. Kedarnath Rajgarhia
Charitable Trust Estate, [2004] 12 SCC 425 and V Hanumantha Reddy ·r
(dead) by Lrs. v. Land Acquisition Officer and Manda! R. Officer, (2003]
12 sec 642, relied on.
4. Keeping in view the general principles and the factual
H
LUCKNOW DEVELOPMENT AUTHORITY v. KkISHNA 925
GOPALLAHOTI[PASAYAT,J.]
T
scenario as evident from the materials brought on record, the market A
value fixed (i.e. Rs. 8/- sq.ft.) is sustained but instead of 25%
development charges one-third has to be deducted. The entitlement~
shall be worked out on that basis. [Para 25) [931-E)

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5112 of
B
~ 2007.
~
From the final Judgment and Order dated 9.2.2005 of the High Court
of Judicature at Allahabad, Lucknow Bench, Lucknow in F.A. No. 541
1998.
Umesh Chandra, Krishna Chandra, S.A. Kashif and Shakil Ahmed
c
Syed for the Appellant.
Jayant Bhushan, Ashwani Garg and Vijay Kumar for the
Respondents.
D
~ The Judgment of the Court was delivered by
'~
DR. ARIJIT PASAYAT, J. 1. Leave granted.
2. Challenge in this appeal is to the judgment of a Division BetJ.ch
of the Allahabad High Court, Lucknow Bench dismissing the appeal filed
by the appellant under Section 54 of the Land Acquisition Act, 1894 (in E
short the 'Act') read with Section 96 of the Code of Civil Procedure,
1908 (in short 'CPC').
3. In the First Appeal challenge was to the award dated 18.2.1998
passed by the Presiding Officer, Nagar Mahapalika Tribunal, Lucknow F
l in a reference under Section 18 of the Act in land case No. 746of1991
titled Krishna Gopal Lahoti v. State of UP.
4. The factual background in a nutshell is as follows:
A large area of land measuring 194 bigha 19 biswa 14 biswansi and G
14 kachwansi situated in village Purania and Mahibullapur was sought to
be acquired by appellant-Lucknow Development Authority under the
housin.g and development scheme known as "Timber Nagar Avasiya
YoJana". Khasra plot No.379 measuring 8 bigha, and Khasra, plot
No.394 measuring 2 bigha, 8 biswa 15 biswansi situated at village H
926 SUPREME COURT REPORTS (2007] 11 S.C.R.

A Mahibullapur and belonging to the claimants Krishna Gopal Lahoti, Sharad
Kumar Lahoti, Sunil Klimar Lahoti and Sudhir Kumar Lahoti were also
acquired under the said scheme. The relevant notification under Section
4 was issued on 26.3 .1986. The notification under Section 6 of the Act
was published on 28.5 .1986. The possession of the acquired land was
B taken on 17.12.1986 and Award under Section I I of the Act was made
on 27 .5 .1988 by the Special Land Acquisition Officer. The Special Land +
~.
Acquisition Officer in his Award under Section I I of the Act determined
the market value of the land in question at the rate ofRs.2.20 per sq. ft.
5. Aggrieved by the aforesaid Award, reference under Section I8
C was preferred by the land owners, inter alia, stating that adjoining to
the land in question, there is Lucknow-Sitapur Highway and nearby the
acquired land there are number of colonies such as Aliganj Colony,
Kapurthala Complex, P & T Colony, Arif Complex, Public Service
Commission and Office of Geological Survey of India.
D
6. According to the landowners, the land in' question has great
potential value and the market value as determi'ned by the Special Land
Acquisition Officer is quite inadequate. The market value of the land at
the rate of Rs.60/- per sq.ft. wa5 claimed by the respondents besides
E statutory benefit under Act 68 of I984. r
7. The Lucknow Development Authority and the State ofU.P. filed
written statements separately. It was stated that the _compensation as
determined and awarded by the Special Land Acquisition Officer is quite
adequate and the claimants are not entitled to the benefits of the provisions
F of Act 68of1984. It was stated that claim petition is barred by time. It
is also barred by the provisions of the Urban Land Ceiling ~ct, 1976 (in
short 'ULC' Act) and by the provisions of Section 31 of the Act.
8. Both the parties led oral and documentary evidence.
G 9. The learned Tribunal could not find any substance in the pleas
raised by the appellants regarding claim being barred under various heads
as alleged in the written statements and all the issues were decided in
negative against the appellant. The Tribunal further found that the claimants
are entitled to the benefit of provisions of Act of 68 of 1984 and on the
H ba5is of the evidence on record, the Tribunal dete1mined the market value
I

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I

LUCKNOW DEVELOPMENT AUTHORITYv. KRISHNA 927
,,,.... GOPALLAHOTl[PASAYAT,J.]
of the land at Rs.6/- per sq. ft. and accordingly compensation was A
awarded by the impugned Award.
10. Against the Award, the First Appeal was filed before the High
Court. Primarily, it was contended before the High Court that the Tribunal
had not properly evaluated the evidence on record and wrongly placed
'B
~ reliance on a sale deed relating to a small piece of land. It was also
/ submitted that without any proper appreciation of materials on record the
compensation was enhanced.
11. Stand of the respondents before the High Court was that there
was no illegality in the Award passed by the reference court. It was c
submitted that the land was situated near densely populated area having
great potential value and the appellate authority is selling the same land at
the rate ofRs.300/- per sq. ft. The reference court on the basis of oral
and documentary evidence has awarded compensation at the rate of Rs.6/
- per sq. ft. along with other benefits as provided under the Act. The High D
~-
'\ Court found that the claimants had filed number of sale deeds of varying
rates ranging between Rs.10/- per sq. ft. to Rs.5/- per sq. ft. but the sale
deed relating to the plot No.166 situated at Mahibullahpur was relied upon
by the Tribunal and the reasons for enhancing the compensation were
assigned which according to the High Court did not call for any E
interference. The High Court did not find any substance in the plea of the
appellant that the sale deed (Ex.C-38) was unduly relied upon by the
Tribunal. It was pointed out that the/sale deed is related to a very small
piece of land as against t~e large area of more than 10 bighas involved in
the present case. The High Court referred to certain decisions of this Court
F
5- to hold that while determining the market value of the land, the potentiality
of the land is a very material consideration and several factors like location
of the land, its surroundings, availab!e facilities thereon in the vicinity, nature
of the land have to be taken into account. The High Court also found that
there was no similarity between the land which was the subject matter of
G.
dispute in land acquisition case No.204 of 1992 where the rate fixed was
--... Rs.1.85 per sq. ft .
12. The High Court further found that two sale deeds (Ga 26 and
Ga 27) reflected that the rate was Rs.3/- per sq. ft. However, instances
were refe1Ted to in holding that the market value is much higher. After H
928 SUPREME COURT REPORTS · [2007] 11 S.C.R.

A granting deduction of 25% on account of expenses to be incurred towards
plotting and development charges, the rate was fixed at Rs.6/- per sq. ft.
Therefore, the High Court did not find any substance in the stand that the
deduction should be at least 40% and not 25% as done. Accordingly,
appeal as noted abeve was dismissed.
B
13 .1n support of the appeal, learned counsel for the appellant re-
iterated the stand taken before the High Court.
. 14. In response, learned counsel for the respondents submitted that
three sale deeds namely, C-38, 39 and 40 clearly show that rate is much
C higher. It was pointed out that this Court has depending on the facts of
the case, allowed deductions ranging between 20% to 33%. That cannot
be a hard and fast rule and in fact it would depend upon various factors.
15. Where large area is the subject matter of acquisition, rate at which
D small plots are sold cannot be said to be a safe criteria. Reference in this
context may be made to three decisions of this Court in The Collector
o/Lakhimpurv. Bhuban Chandra Dutta AIR (1971) SC 2015, Prithvi 1
Raj Taneja (dead) by Lrs. v. The State of Madhya Pradesh and Anr.,
AIR (1977) SC 1560 and Smt. Kausalya Devi Bogra and Ors. etc. v.
E Land Acquisition Officer, Aurangabad and Anr., AIR (1984) SC 892.
16. It cannot, however, be laid down as an absolute proposition that
the rates fixed for the small plots cannot be the basis for fixation of the
rate. For example, where there is no other material itmay in appropriate
cases be open to the adjudicating Court to make comparison of the prices
F paid for small plots ofland. However, in such cases necessary deductions/
adjustments have to be made while determining the prices.
17. In the case of Suresh Kumar v. Town Improvement Trust,
Bhopal, (1989) 1 SVLR (C) '.399 in a case under the Madhya Pradesh
Town Improvement Trust Act, 1960 this Court held that the rates paid
G for small parcels ofland do not provide a useful guide for determining the
market value of the land acquired. While determining the market value of
the land acquired it has to be correctly determined and paid so that there
is neither unjust enrichment on the part of the acquirer nor undue
deprivation on the part of the owner. It is an accepted principle as laid
H
} /

LUCKNOW DEVELOPMENT AUTHORITYv. KRISHNA 929
r GOPALLAHOTI[PASAYAT,J.]
down in the case of Vyricherla Narayana Gajapatiraju v. Revenue 'A
Divisional Officer, Vizagapatam, AIR (1939) P.C. 98 that the
compensation must be detennined by reference to the price which a willing
vendor might reasonably expect to receive from the willing purchaser.
While considering the market value, disinclination of the vendor to part
with his land and the urgent necessity of the purchaser to buy it must alike B
4I

}
be disregarded, neither must be considered as acting under any
compulsion. The value of the land is not to be estimated as its value to
the purchaser. But similarly this does.not mean that the fact that some
particular purchaser might desire the land more than others is to be
disregarded. The wish of a particular purchaser, though not his compulsion c
may always be taken into consideration for what it is worth. Section 23
of the Act enumerates the matters to be considered in determining
compensation. The first criterion to be taken into consideration is the
market value of the land on the date ofthe publication of the notification
under Section 4(1 ). Similarly, Section 24 of the Act enumerates the matters D
)..
') which the Court shall not take into consideration in determining the
compensation. A safeguard is provided in Section 25 of the Act that the
am01.~nt of compensation to be awarded by the Court shall not be less
than the amount awarded by the Collector under Section 11. Value of
the potentiality is to be determined on such materials as are available and
E
without indulgence in any fits of imagination. Impracticability of determining
the potential value is writ large in almost all cases. There is bound to be
some amount of guess work involved while determining the potentiality.
18. It can be broadly stated that the element of speculation is reduced
to minimum if the underlying principles of fixation of market value with i:
reference to comparable sales are made:
(i) when sale is within a reasonable time of the date of notification
under Section 4( 1);
I
(ii) it should be a bona fide transaction; G
,_,.
( (iii) it should be of the land acquired or of the land adjacent to the
land acquired; and
(iv) it should possess similar advantages.
H
)
--1
930 SUPREME COURT REPORTS [2007] 11 S.C.R.

A 19. It is only when these factors are present, it can merit a
consideration as a comparable case (See The Special Land Acquisition
Officer, Bangalore v. T Adinarayan ?etty, A!R (1959) SC 429).
20. These aspects havlbe~_n highlighted in Ravinder Narain and
B Anr. v. Union of India, [2003] 4 SCC 481.
21. The deduction to be made towards development charges cannot
be proved in any strait-jacket formula. It would depend upon the facts
of each case. ·
C 22. It is well settled that in respect of agricultural land or undeveloped
land which has-potential value for housing or commercial purposes,
normally 1/3~d amount of compensation has to be deducted out of the
amount of compensation payable on the acquired land subject to certain
variations depending on its nature, location, extent of expenditure involved
D for development and the area required for roads and other civic amenities
to develop the land so as to make the plots for residential or commercial
purposes. A land may be plain or uneven, the soil of the land may be
soft or hard bearing on the foundation for the purpose of making
construction; may be the land is situated in the midst of a developed area
E all around but that land may have a hillock or may be low-lying or may
be having deep ditches. So the amount of expenses that may be incurred
in developing the area also varies. A claimant who claims that his land is
fully developed and nothing more is required to be done for developmental
purposes, must show on the basis of evidence that it is such a land and
it is so located. In the absence of such evidence, merely saying that the
F area adjoining his land is a developed area, is not enough particularly when
the extent of the acquired land is large and even if a small portion of the
land is abutting the main road in the developed area, does not give the
land the character of a developed area. In 84 acres of land acquired even
if one portion on one side abuts the main road, the remaining large area
G where planned development is required, needs laying of internal roads,
drainage, sewer, water, electricity lines, providing civil amenities etc.
However, in cases of some 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, as the developmental charges required may be less
H
LUCKNOW DEVELOPMENT AUTHORITYv. KRISHNA 931
GOPALLAHOTI [PASAYAT, J.]

on that account. There may be various factual factors which may have to A
be taken into consideration while applying the cut in payment of
compensation towards developmental charges, maybe in some cases it
is more than I/3rd and in some cases less than I/3rd. It must be
remembered that there is difference between a developed area and an
area having potential value, which is yet to be developed. The fact that B
an area is developed or adjacent to a developed area will not ipso facto
make every land situated in the area also developed to be valued as a
building site or plot, particularly, when vast tracts are acquired, as in this '
case, for development pwpose.
23. The aforesaid aspects were highlighted in Kasturi and Ors. v.
c
State of Haryana, [2003] 1 SCC 354.
24. A reference may also be made to what has been stated in Kiran
Tandon v. Allahabad Development Authority and Anr., [2004] 10
SCC 745, State of West Bengal v. Kedarnath Rajgarhia Charitable D
Trust Estate, [2004] 12 SCC 425 and V Hanumantha Reddy (dead)
by Lrs. v. Land Acquisition Officer & Manda/ R. Officer, [2003] 12
sec 642.
25, Keeping in view the general principles and the factual scenario E
as evident from the materials brought on record, we sustain the market
value fixed (i.e. Rs.8/- sq.ft.) but instead of 25% development chargeS-
one-third has to be deducted. The entitlements shall be worked out on
that basis.
26. The appeal is allowed to the aforesaid extent with no order as F
} to costs.
B.B.B. Appeal partly allowed.