Holding

The Supreme Court held that the sale deeds cannot be relied upon to determine the market value for compensation and affirmed the reduction of compensation to Rs 56 per square yard.

Summary

The case concerned compensation for land acquired under the Land Acquisition Act, 1894 for a telephone exchange in Narasaraopet. The acquisition officer initially awarded Rs 40 per square yard, which was enhanced to Rs 75 per square yard by the Subordinate Judge on the basis of four sale deeds executed in 1978 at rates of Rs 71‑75 per square yard. The High Court reduced the award to Rs 56 per square yard, holding that the sale deeds were not representative of the market value and were likely inflated because the vendor was aware of the impending acquisition. On appeal, the Supreme Court examined whether such sale deeds could be relied upon to determine market value, emphasizing that the claimant bears the burden of proving the prevailing market price as of the notification date. The Court found that the sale deeds were suspect and could not be used to enhance compensation, and therefore affirmed the High Court’s reduction. Consequently, the appeals were dismissed without costs.

Issues considered

Whether sale deeds of small parcels executed before acquisition can be used as evidence of market value for compensation under Section 9 of the Land Acquisition Act
Whether the burden of proof of market value lies on the claimant and how it must be discharged
Whether the sale deeds are to be discarded as inflated or not genuine for the purpose of valuation

Legislation cited

Land Acquisition Act, 1894s. 18, s. 4(1), s. 9

Subjects

Land acquisitionCompensationMarket valueSection 9Section 18Sale deedsValuationBurden of proofInflated priceAndhra Pradesh

Judgment

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I

• M.V.K. GUNDARAO
v.
RJ;lVENUE DIVISIONAL OFFICER, (L.A.0.), NARASARAOPET

JANUARY 15, 1996
A

[K. RAMASWAMY AND G.B. PATTANAIK, JJ.] B

Land Acquisition Act, 1894:

Comp~nsaaon-Award o.f-Enhancement--Sale transactions in respect
of Land adjacent to ia1uls acquired-Not genuine transactions-With prior
knowledge ~f acquisition documents brought into existence to inflate market
c
value-Hena not entitled to rely upon the same for higher compensation.

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2518-21 of
1996.

From the Judgment and Order dated 21.2.92 of the Andhra Pradesh D
High Court in A. Nos. 2629/86 & 1183 of 1984.

A.T.M. Sampath for the Appellant.

G. Prabhakar for the Respondent
E
The following Order of the Court was delivered :

Leave granted.

We have heard the counsel on both sides. Notification under Section
4(1) of the Land Acquisition Act was published on January 3, 1980 acquiring F
5108-2/3 sq. yds. in survey Nos. 248/2, 249/2, 300/1and26767 sq. ft. or 2974-
114 sq. yds. in temporary Survey No. 249/3 and 300/2 situated in the middle
of Narasaraopet Town, Guntur District, Andhra Pradesh for construction of
Telephone Exchange building, Microwave Building and Microwave Tower.
The appellant has laid his claim for a sum of Rs. 80 per sq. yd. The Land G
Acquisition Officer in his award under Section 9 determined the compensation
@ Rs. 40 per sq. yd. on March 30, 1980. On reference under Section 18, the
Subordinate Judge, Narasaraopat in his award and decree dated December 15,
1982 enhanced the compensation at Rs. 75 per sq. yd. The High Court on
appeal by the State as well as by the claimants reduced the compensation to
Rs. 56 per sq. yd. Thus these appeals by special leave. The State did not file H
481
482 SUPREME COURT REPORTS [1996] l S.C.R.
A any appeal.

The Subordinate Judge relied on Ex. A-1 to A 4, sale deeds dated
September 16, 1978 executed in respect of 43 sq. yds. 69 sq. yds., 1-04 sq. yds.,
149 sq. yds. respectively, which worked out at the rates between Rs. 71 to Rs.
75 per sq. yd. Based thereon, the Subordinate Judge enhanced the compen-
B sation to Rs. 75 per sq. yd. The High Court concluded that since the lands
covered in the sale transactions relate to the small pieces of land, they did not
commend the same price for the total extent of the land to the acquisition
covering 5,000 and odd sq. yds. Accordingly reduced the compensation in the
impugned Judgment made in A.S. No. 2629/86 and 1183/84 dated February
c 21, 1992.

Mr. A.T.M. Sampath, Learned counsel for the appellant, contended that
the sale deeds between A-1 to A-4 relied on by the reference Court relates to
same acquired lands. The validity had not been questioned. Their genuineness
was not questioned. The consideration passed thereunder was not questioned
D and the Subordinate Judge recorded a finding that in view of these undisputed
facts, they form reasonable basis to determine the compensation since they
pertain to the very same land under acquisitions. Therefore, it would form the
best basis for determination of the compensation. We find that it is difficult
to accept that contention. It is settled law that the burden is on the claimant
to prove the prevailing market value as on the date of the Section 4(1)
E
Notification and it is the duty of the Court to assess the prevailing market value
applying pragmatic tests. The Court has to consider the evidence in the proper
perspective whether a willing vendee would prepare to purchase at the rates
offered by the willing vendor in an open market when the lands are put to sale.
It is the duty of the Court to sit on the arm chair of a prudent purchaser acting
F under normal market conditions and to decide the prevailing prices as on the
date of the notification. The land Acquisition Officer in his award has
specifically referred to all these sale transactions and stated thus :

"Sale Nos. 9, 10, 11, 16 and 22: In all these cases the vendor is the
same. The land of the same vendor in the same survey numbers is now
G under acquisition. The land holder is aware of this acquisition since
he orally consented for the same and it is suspected that he might have
got these sale registered for a higher value with the idea getting higher
rate of compensation. Hence these sales are discarded."

H It would thus be seen I.hat the appellant having had the knowledge of
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M.V.K. GUNDARAO v. REVENUE DIVISIONAL OFFICER, NARASARAOPET 483
the proposed acquisition for the public purposes obviously brought these A
documents to inflate the market value and that, therefore, these sale transac-
tions cannot be pressed into service. The learned Subordinate Judge has
committed palpable error of law in accepting ipso .facto those documents
without subjecting the evidence to closer and critical scrutiny, whether these
documents are genuine documents executed between willing vendor and
B
willing vendee. The answer would be obviously "No". The High Court,
therefore, was right in not relying upon those documents. If these documents
are excluded from consideration, there is no other evidence on record to
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consider for enhancement of the compensation. The High Court, therefore,
was right in reducing the compensation from Rs. 75 to Rs. 56 with consequen-
tial benefit of solatium and in:erest. The appeals are accordingly dismissed but, c
in the circumstances, without costs.

G.N. Appeals dismissed.

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