Supreme Court of India
MAJ. GEN. KAPIL MEHRA & ORS.versusUNION OF INDIA & ANR.
- Citation
- 2014 INSC 734
- Decided
- 17 October 2014
- Disposal
- Dismissed
- Bench
- T S THAKUR
Holding
The Supreme Court upheld the High Court’s determination of market value using the average of comparable lease deeds with a 20% free‑hold uplift, a 20% auction‑premium deduction and a 60% development deduction, affirmed the statutory interest awards, and ordered proportionate costs, thereby dismissing the appeals.
Summary
The appellants, Maj. Gen. Kapil Mehra and others, challenged the compensation awarded by the Delhi Development Authority for land acquired under the Land Acquisition Act, 1894. The High Court had fixed the market value at Rs.14,974 per square yard by averaging four perpetual lease deeds, adding 20% for free‑hold conversion, deducting 20% for competitive bidding in auction sales and a total 60% deduction for development costs, and awarded interest under Sections 34 and 28 and proportionate costs. The Supreme Court examined the methodology for determining market value, the permissibility of averaging comparable sales, the treatment of lease‑hold versus free‑hold values, appropriate deductions for auction premiums and development, and the statutory duty to pay interest. It held that the High Court’s approach was consistent with established principles, affirmed the deductions and interest awards, and dismissed the appeals. The Court also upheld the award of proportionate costs under Section 27 of the Act.
Issues considered
- The proper method for determining market value of land under Section 23 of the Land Acquisition Act, 1894.
- Whether averaging the sale prices of four comparable lease deeds is permissible.
- Whether a premium should be added to reflect free‑hold value over lease‑hold value.
- Whether a deduction for competitive bidding in auction sales is required.
- The appropriate percentage deduction for development costs in a DOA‑planned layout.
- Whether interest under Sections 34 and 28 of the Act must be awarded on enhanced compensation.
- Whether proportionate costs should be awarded under Section 27 of the Act.
Legislation cited
- Code of Civil Procedure, 1908s. 35
- Land Acquisition Act, 1894s. 23, s. 23(1), s. 23(1-A), s. 23(2), s. 27, s. 28, s. 31, s. 34, s. 35, s. 4
Subjects
Land acquisitionMarket value determinationComparable sales methodLeasehold vs freeholdDevelopment deductionAuction premium deductionStatutory interestSection 27 costsDelhi Development Authority
Judgment
[2014] 10 S.C.R. 1153
MAJ. GEN. KAPIL MEHRA & ORS. A
v.
UNION OF INDIA & ANR.
(Civil Appeal Nos. 2545-2546/2012)
OCTOBER 17, 2014
B
[T.S. THAKUR AND R. BANUMATHI, JJ.]
Land Acquisition Act, 1894 - s.23 - Acquisition of land
- Market Value - Determination of - Held: Market value is
determined with reference to the open market sale of C
comparable land in the neighbourhood, by a willing seller to
a willing buyer, on or before the date of preliminary notification,
as that would give a fair indication of the market value.
Land Acquisition Act, 1894 - s.23 - Acquisition of land
0
- Market Value - Determination of - Comparable sales
method for valuation of land - Held: Comparable sales
method of valuation is preferred rather than methods of
valuation of land such as capitalization of net income method
or experl opinion method, because it furnishes the evidence
for determination of the market value of the acquired land at E
which the willing purchaser would pay for the acquired land if
it had been sold in the open market at the time of issuance
of notification u/s. 4.
Land Acquisition Act, 1894 - s.23 - Determination of F
Market Value on the basis of average price paid under sale
transactions - Scope - Legal position - Discussed - Held:
Where the lands acquired are of different type and different
locations, averaging is not permissible - But where there are
several sales of similar lands, more or less, at the same time, G
whose prices have marginal variation, averaging thereof is
permissible - For fixation of fair and reasonable market value
of any type of land, abnormally high value or abnormally low
value sales should be carefully discarded - If the number of
1153 H
1154 SUPREME COURT REPORTS [2014] 10 S.C.R.
A sale deeds of the same locality and the same period with
short intervals are available, average price of the available
number of sale deeds shall be considered as a fair and
reasonable market price - Ultimately, it is in the interest of
justice for the land losers to be awarded fair compensation -
B All attempts should be taken to award fair compensation to
the extent possible on the basis of their accessibility to
different kinds of roads, locational advantages etc. - On facts,
the four perpetual lease deeds A-7 to A-10 relied upon by the
appellants were of the same locality and related to the period
c just prior to s.4(1) notification - High Court justified in taking
average of the said four exemplars and approach adopted by
the High Court in averaging the sale prices of Exs A 7 to A 10
cannot be said to be perverse.
Land Acquisition Act, 1894 - s. 23 - Determination of
D Market Value - Gap between "leasehold" price and "freehold"
price - To be taken into consideration -Held: 'Freehold land'
and 'leasehold land' are conceptually different - If a property
subject to a lease and in possession of a lessee is offered
for sale by the owner to a prospective private purchaser, the
E purchaser being aware that on purchase he will get only title
and not possession and that the sale in his favour will be
subject to encumbrance namely, the lease, he will offer a
price taking note of th'e encumbrances - Naturally, such a
price would be Jess than the price of a property without any
F encumbrance - But wtien a land is acquired free from
encumbrances, the market value of the same will certainly be
higher - On facts, Exs A 7 to A 10 were the perpetual lease
deeds relating to the period from September 1995 to
December 1996 and to get the perpetual lease deeds
G converted as freehold, the holder of perpetual leasehold had
to pay further amount to DOA - Having regard to the pen"od
of Exs A 7 to A 10 and the date of issuance of s.4 notification
dated 19.2.1997, addition of 20% to be added for arriving at
the value of 'freehold' property.
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MAJ. GEN. KAPIL MEHRA & ORS. v. UNION OF 1155
INDIA & ANR.
Land Acquisition Act, 1894 - s. 23 - Determination of A
Market Value - Auction sales of commercial I residential
plots - If a true index - Deduction towards competitive bidding
- Held: The general rule that the sale prices of the
comparable sales should be relied upon for calculating the
market value will not apply when the sale transactions relied s
upon are auction sales - On facts, 20% deduction made for
competitive bidding and value of acquired land fixed
accordingly.
Land Acquisition Act, 1894 - s. 23 - Determination of C
Market Value - Deductions made for development -
Essential components of - Held: Deduction towards
development depends upon the nature and location of the
acquired land - The deduction includes components of land
required to be set apart under the building rules for roads,
sewage, electricity, parks and other common facilities and also D
deduction towards development charges like laying of roads,
construction of sewerage - Rule of one third deduction
towards development appears to be the general rule - But so
far as Delhi Development Authority is concerned, or similar
statutory authorities, where well planned layouts are put in E
place, larger land area may be utilized for forming layout,
roads, parks and other common amenities - In the instant
case, having regard to the extent of the land acquired and the
development in and around Vasant Kunj area, it is
appropriate to make 35% deduction towards utilization of the F
land area in the layout for roads, drains, parks, playgrounds
and civic amenities - So far as the expenditure for
development of the large extent of land into a developed area
by construction of proper roads, underground drainage,
sewerage and erection of electricity lines, it is appropriate to G
make further deduction of 25% towards development charges.
Land Acquisition Act, 1894 - ss. 28 and 34 - Award of
compensation - Payment of interest - Held: Normally, Court
awards interest if it enhances compensation in excess of the
H
1156 SUPREME COURT REPORTS [2014] 10 S.C.R.
A amount awarded by the Collector, unless there are
exceptional circumstances - Award of interest uls.34 is
mandatory inasmuch the word used in the Section is 'shall' -
Interest payable u/s.34 is statutory- Claim for interest u/s.28
proceeds on the basis that due compensation not having
B been paid, the claimant should be allowed interest on the
enhanced compensation amount - Award of interest uls.28
is discretionary power vested in the Court and it has to be
exercised in a judicious manner and not arbitrarily - Use of
the word "may" in s.28 does not confer any arbitrary discretion
c on the Court to disallow interest for no valid or proper reasons
- Both in terms of s.34 and s.28, interest at 9% per annum is
payable for the first year of taking possession and 15% per
annum thereafter, if the amount of compensation was not paid
or deposited within a period of one year or deposited
D thereafter. ·
Land Acquisition Act, 1894 - s.27 - Award of
compensation - Payment of proportionate costs - Held: The
language of s.27(1) is clear and very wide and it gives power
to the courts to order costs to be paid by what persons and in
E what proportions they are to be paid - In making order for costs
uls.27(1), the court may have regard to the provisions of s.35
CPC -Ordinarily, when a litigant succeeds in part and fails in
part, the equitable order made is that he should receive
proportionate costs.
F
Kunhayammed and Ors. vs. State of Kera/a and Anr.
c2000) 6 sec 359: 2000 (1) Suppl. scR 538 s.
Gangadhara Palo vs. Revenue Divisional Officer and Anr.
(2011) 4 SCC 602: 2011 (3) SCR 7 46; \liluben Jhalejar
G Contractor vs. State of Gujarat (2005) 4 SCC 789: 2005 (3)
SCR 542 Karnataka Urban Water Supply and Drainage
Board and Ors. vs. K.S. Gangadharappa & Anr. (2009) 11
SCC 164: 2009 (6) SCR 250; M. Vijaya/akshmamma Rao
Bahadur vs. Collector (1969) 1 MLJ SC 45; State of Punjab -
H and Anr. vs. Hans Raj (D) by Lrs. And Ors. (1994) 5 SCC 734;
MAJ. GEN. KAPIL MEHRA & ORS. v. UNION OF 1157
INDIA & ANR.
Anjani Mo/u Dessai vs. State of Goa And Anr. (2010) 13 SCC A
710: 2010 (14) SCR 997; M.B. Gopa/a Krishna & Ors. vs.
Special Deputy Collector, Land Acquisition (1996) 3 SCC
594: 1996 (2) SCR 248; Executive Engineer, Karnataka
Housing Board vs. Land Acquisition Officer, Gadag And Ors.
(2011) 2 SCC 246: 2011 (1) SCR 600; Raj Kumar And Ors. B
vs. Haryana State And Ors. (2007) 7 SCC 609: 2007 (9)
SCR 455; Haryana State Agricultural Market Board And Anr.
vs. Krishan Kumar And Ors. (2011) 15 SCC 297; Sabhia
Mohammed Yusuf Abdul Hamid Mui/a (Dead) by Lrs. and
Ors. vs. Special Land Acquisition Officer and Ors. (2012) 7 c
SCC 595; Special Tehsildar,. L.A. Vishakapatnam vs. Smt.A.
Mangala Gowri (1991) 4 SCC 218: 1991 (2) SCR 472;
Gu/zara Singh & Ors. vs. State of Punjab & Ors. (1993) 4 SCC
245: 1991 (2) SCR 472; Santosh Kumari & Ors. vs. State
of Haryana (1996) 10 SCC 631: 1996 (5) Suppl. SCR 315;
Revenue Divisional Officer-cum-LAO vs. Shaik Azam Saheb D
etc. (2009) 4 SCC 395: 2009 (1) SCR 289; A.P. Housing
Board vs. K. Manohar Reddy (2010) 12 SCC 707: 2010 (11)
SCR 1107; Ashrafi & Ors. vs. State of Haryana & Ors. (2013)
5 SCC 527: 2013 (6) SCR 148; Kashmir Singh vs. State of E
Haryana & Ors. (2014) 2 SCC 165; Haryana State
Agricultural Market Board and Anr. vs. Krishan Kumar and
Ors. (2011) 15 SCC 297; Deputy Director Land Acquisition
vs. Malla Atchinaidua And Ors. AIR 2007 SC 740: 2006 (10)
Suppl. SCR 885; Mummidi Apparao (Dead by LR) vs.
Nagarjuna Fertilizers & Chemical Ltd., AIR 2009 SC 1506; F
Lal Chand vs. Union of India and Anr. (2009) 15 SCC 769:
2009 (13) SCR 622; Basavva (Smt.) And Ors. vs. Sp/. Land
Acquisition Officer And Ors. (1996) 9 SCC 640: 1996 (3)
SCR 500 ; Kanta Devi & Ors. vs. State of Haryana And Anr.
(2008) 15 SCC 201: 2008 (10) SCR 367; Subh Ram & Ors. G
vs. State of Haryana & Anr. (2010) 1 SCC 444: 2009 (15)
SCR 287; Chandrasekhar (dead) by L.Rs. and Ors. vs. LAO
& Anr. (2012) 1 SCC 390: 2011 (15) SCR414; Lal Chand
vs. Union of India & Anr. (2009) 15 SCC 769: 2009 (13)
H
1158 SUPREME COURT REPORTS [2014] 10 S.C.R.
A SCR 622; Commissioner of Income Tax, Faridabad vs.
Ghanshyam (HUF) (2009) 8 SCC 412: 2009 (10)
SCR 1025; and Gurpreet Singh vs. Union of India (2006) 8
SCC 457: 2006 (7) Suppl. SCR 422 - referred to.
Case Law Reference:
B
2000 (1) Suppl. SCR 538 referred to Para 6
2011 (3) SCR 746 referred to Para 6
2005 (3) SCR 542 referred to Para 12
c 2009 (6) SCR 250 referred to Para 13
(1969) 1 MLJ SC 45 referred to Para 18
(1994) 5 sec 734 referred to Para 18
D 2010 (14) SCR 997 referred to Para 19
1996 (2) SCR 248 referred to Para 22
2007 (9) SCR 455 referred to Para 27
E 2011 (1) SCR 600 referred to Para 28
c2011) 15 sec 297 referred to Para 33
c2012) 1 sec 595 referred to Para 35
1991 (2) SCR 472 referred to Para 36
F
1996 (5) Suppl. SCR 315 referred to Para 36
2009 (1) SCR 289 referred to Para 36
2010 (11) SCR 1107 referred to Para 36
G 2013 (6) SCR 148 referred to Para 36
(2014) 2 sec 165 referred to Para 36
c2011) 15 sec 297 referred to Para 37
H
MAJ. GEN. KAPIL MEHRA & ORS. v. UNION OF 1159
INDIA & ANR.
2006 (10) Suppl. SCR 885 referred to Para 37 A
AIR 2009 SC 1506 referred to Para 37
2009 (13) SCR 622 referred to Para 37
1996 (3) SCR 500 referred to Para 38
B
2008 (10) SCR367 referred to Para 38
2009 (15) SCR287 referred to Para 38
2011 (15) SCR414 referred to Para 38
c
2009 (13) SCR622 referred to Para 40
2009 (10) SCR 1025 referred to Para 42
2006 (7) Suppl. SCR 422 referred to Para 46
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. D
2545-2546 of 2012.
From the judgment and order dated 24.12.2010 and
13.10.2011 of the Single Judge Bench of Delhi at New Delhi
in L.A. Appeal No. 149/07 and in CMP No. 735/2011. E
Appellant-in-person.
A. Sharan, Vishnu Saharya, Viresh B. Saharya, Sanchit G.,
Aprajita, Dhruv (For Saharya & Co.) for the Respondents.
F
The Judgment of the Court was delivered by
R. BANUMATHI, J. 1. These appeals are directed
against the impugned Orders dated 24.12.2010 and
13.10.2011 passed by Delhi High Court in L.A. Appeal No.149/ G
2007 and C.M. No.735/2011 in L.A. Appeal No.149/2007
respectively by which High Court awarded compensation at the
rate of Rs.14,974/- per sq. yard for appellants' land acquired
by the Delhi Development Authority (DOA) for development of
Vasant Kunj Residential Scheme, Delhi along with interest and
proportionate costs. H
1160 SUPREME COURT REPORTS [2014] 10 S.C.R.
A 2. Shorn of details of the previous notification in 1983 and
the earlier rounds of litigation, background facts in a nutshell
are as follows: On 19.2.1997, a. fresh notification was issued
by the Land and Building Department, Govt. of NCT of Delhi
under Sections 4 and 17 of the Land Acquisition Act, 1894 (the
B Act) proposing to acquire the land of the appellants measuring
12 Bigha (12096 sq. yards) for development of Vasant Kunj
under the planned development scheme of Delhi. Land
Acquisition Collector (LAC) by award No. 2/98-99 dated
18.9.1998 assessed the market value of the land@
C Rs.2,05,642.07 paise per bigha (Rs.205/-per sq.yard), adding
additional interest @ 12% per annum on the market value of
land and the solatium @ 30% on the market value of land and
the compensation was fixed @ Rs.37,21, 180.05 paise per
big ha.
D 3. Aggrieved by the award, the appellants filed Reference
Petition under Section 18 of the Act before the Additional
District Judge (LAC), Delhi. In the reference court, the
appellants produced four documents Exs A7 to A10-perpetual
lease deeds of residential plots in Vasant Kunj, executed
E between September 1995 to December 1996 at the rates
ranging from Rs.28,719/- to Rs.47,542/- per sq. yard. The
reference court held that the lease deeds of auction of a
developed plot by a public authority are not a proper guide for
determining the fair market value of the acquired lands and
F reference court discarded the exemplars- Exs A7 to A10 lease
deeds and rejected the claim of the appellants for enhancement
of compensation.
4. Aggrieved by the decision of the reference court,
G appellants filed Land Acquisition Appeal No.149/2007 before
High Court of Delhi. The High Court had taken average of the
exemplars- Exs A7 to A10 and deducted 40% from the
average price towards smallness of the area and further
deducted one third towards development of land and fixed the
market value of the land at Rs.14,974/- per sq. yard. High Court
H
MAJ. GEN. KAPIL MEHRA & ORS. v. UNION OF. 1161
INDIA & ANR. [R. BANUMATHI, J.]
held that the appellants shall be entitled to 30% solatium on the A
above market value of the land under Section 23(2) of the Act
and 12% of the additional amount under Section 23(1-A) of the
Act. The High Court further ordered that in terms of Section 28
of the Act on the· enhanced market value, the appellants shall
be paid interest @ 9% per annum from 19.2.1997 i.e. date of B
notification under Section 4 of the Act till 18.2.1998 and
thereafter @ 15% per annum till the date of deposit of
compensation. It was also held that interest shall also be paid
on solatium and additional amount. The appellants filed
application C.M. No.735/2011 in L.A. Appeal No.149/2007 c
before the High Court under Sections 152 and 153 read with
Section 151 C.P.C. to award Rs.48 lakhs which was paid as
court fees and also prayed for award of interest under Section
34 for the enhanced compensation. The application was
allowed in part by order dated 13.10.2011, granting
0
proportionate costs to the appellants over and above
Rs.20,000/- as awarded in High Court's judgment dated
24.12.2010. Being aggrieved by the quantum of compensation
and award of proportionate cost, the appellants are before us.
5. First appellant- Maj. Gen. Kapil Mehra, party in person, E
contended that correct reckoning of market value is the highest
price in any sale deed of comparable instance and the High
Court was not justified in averaging the sale prices of the four
perpetual lease deeds, Exs A 7 to A 10 and the approach of the
High Court in averaging the sale prices of exemplars is F
erroneous. He further contended that the exemplars Exs A7 to
A 10 relied upon by the appellants are perpetual lease deeds
of residential plots in Vasant Kunj and what was acquired was
freehold lands of the appellants and the price difference
between the 'leasehold' and 'freehold' was not kept in view by G
the High Court for ascertaini11g the correct market value. It was
submitted that deductions made for development at one third
i.e. 331/3% and 40% for the smallness of area of exemplars
as compared to the largeness of the acquired lands are very
much on the higher side. H
1162 SUPREME COURT REPORTS (2014] 10 S.C.R.
A 6. The judgment of the High Court was challenged bY DOA
in Special Leave Petition (Civil) No.15272/2011 and the same
was dismissed by the Order dated 12.5.2011. Mr. Amarendra
Sharan, learned Senior Counsel appearing for the respondents
submitted that in the Special Leave Petition (Civil) No.15272/
s 2011, Maj. Gen. Kapil Mehra appeared in person and the said
special leave petition was dismissed by a speaking order and
the said order merges with the High Court order and the same
is binding upon the appellant and in separate appeals, the
appellants cannot challenge the adequacy of the compensation
c and the present appeals are not maintainable. Reliance was
placed upon the judgment of this Court in Kunhayammed and
Ors. vs. State of Kera/a and Anr. (2000) 6 SCC 359 and S.
Gangadhara Palo vs. Revenue Divisional Officer and Anr.,
(2011) 4 sec 602.
D 7. Without prejudice to the above contention, Mr.
Amarendra Sharan, learned Senior Counsel appearing for the
respondents submitted that the land acquired is 12 bigha which
is almost 12096 sq. yards which is thousand times more than
the area of the plots in Exs A7 to A10, that too, in fully developed
E commercial area and the sale price of such a small area cannot
be taken as the value for arriving at the market value of large
extent of area. It was submitted that it is not safe to rely upon
the allotment rates/auction rates in regard to the commercial
plots formed by DOA in a developed layout in determining the
F market value of the adjoining large extent of undeveloped land.
It was further submitted that in case of Delhi Development
Authority or any statutory authority, 40% of the land area is to
be deducted for formation of roads, drains, parks and common
amenities and further 35% deduction ought to have been made
G towards the cost of leveling the land, construction of sewerages,
laying electricity lines etc. Learned Senior Counsel submitted
that deduction for development ought to have been made at 70-
75% and the High Court was not justified in making nominal
deduction of 331/3% of the area.
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MAJ. GEN. KAPIL MEHRA & ORS. v. UNION OF 11-63
INDIA & ANR. [R. BANUMATHI, J.]
8. We have given our thoughtful consideration to the A
submissions and perused the materials on record.
9. Before we proceed to consider the merits of the matter,
let us first examine the preliminary objections raised by the
respondents as to the maintainability of these appeals. Of
8
course, Special Leave Petition (Civil) No.15272/2011 filed by
ODA was dismissed on 12.5.2011 by a speaking order. It is
well settled that when a special leave petition is dismissed with
reasons, there is a merger of the judgment of the High Court
in the order of the Supreme Court. Dismissal of special leave
petition filed by ODA only means that this Court felt that the C
quantum of Rs.14,974/- per sq. yard fixed by the High Court
need not be further reduced. In the special leave petition, though
first appellant appeared and resisted the same, the first
appellant could not have advanced his arguments seeking
enhancement of compensation. Dismissal of special leave D
petition has become final as against DOA. When SLP filed by
ODA was heard and disposed of by this Court (vide Order
dated 12.05.2011 ), the appellants were pursuing their review
petition before the High Court which came to be dismissed on
13.10.2011. So far as the appellants are concerned, the order E
was then res subjudice. Order of this Court dismissing the
special leave petition preferred by ODA, in our view, is not an
impediment to the appellants to pursue their appeals and we
proceed to consider merits of the rival contentions.
F
10. Market Value: First question that emerges is what
would be the reasonable market value which the acquired lands
are capable of fetching. While fixing the market value of the
acquired land, the Land Acquisition Officer is required to keep
in mind the following factors:- (i) existing geographical situation G
of the land; (ii) existing use of the land; (iii) already available
advantages, like proximity to National or State Highway or road
and/or developed area and (iv) market value of other land
situated in the same locality/village/area or adjacent or very
near to the acquired land.
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1164 SUPREME COURT REPORTS [2014] 10 S.C.R.
A 11. The standard method of determination of the market
value of any acquired land is by the valuer evaluating the land
on the date of valuation publication of notification under Section
4(1) of the Act, acting as a hypothetical purchaser willing to
purchase the land in open market at the prevailing price on that
B day, from a seller willing to sell such land at a reasonable price.
Thus, the market value is determined with reference to the open
market sale of comparable land in the neighbourhood, by a
willing seller to a willing buyer, on or before the date of
prelimfnary notification, as that would give a fair indication of
c the market value.
12. In Viluben Jhalejar Contractor v. State of Gujarat
(2005) 4 SCC 789, this Court laid down the following principles
for determination of market value of the acquired land: (SCC
pp.796-97, paras 17-20)
D
"17. Section 23 of the Act specifies the matters required
to be considered in determining the compensation; the
principal among which is the determination of the market
value of the land on the date of the publication of the
E notification under sub-section (1) of Section 4.
18. One of the principles for determination of thee amount.
of compensation for acquisition of land would be the
willingness of an informed buyer to offer the price therefor.
It is beyond any cavil that the price of the land which a
F willing and informed buyer would offer would be different
in the cases where the owner is in possession and
enjoyment of the property and in the cases where he is not.
19. Market value is ordinarily the price the property may
G fetch in the open market if sold by a willing seller
unaffected by the special needs of a particular purchase.
Where definite material is not forthcoming either in the
shape of sales of similar lands in the neighbourhood at or
about the date of notification under Section 4(1) or
H
MAJ. GEN. KAPIL MEHRA & ORS. v. UNION OF 1165
INDIA & ANR. [R. BANUMATHI, J.]
otherwise, other sale instances as well as other evidences A
have to be considered.
20. The amount of compensation cannot be ascertained
with mathematical accuracy. A comparable instance has
to be identified having regard to the proximity from time
B
angle as well as proximity from situation angle. For
determining the market value of the land under acquisition, .
suitable adjustment has to be made having regard to
various positive and negative factors vis-a-vis the land
under acquisition by placing the two in juxtaposition ...... "
c
13. The courts adopt comparable sales method for
valuation of land while fixing the market value of the acquired
land. Comparable sales method of valuation is preferred rather
than methods of valuation of land such as capitalization of net
income method or expert opinion method, because it furnishes D
the evidence for determination of the market value of the
acquired land at which the willing purchaser would pay for the
acquired land if it had been sold in the open market at the time
of issuance of notification under Section 4 of the Act.
E
14. While taking comparable sales method of valuation of
land for fixing the market value of the acquired land, there are
certain factors which are required to be satisfied and only on
fulfillment of those factors, the compensation can be awarded
according to the value of the land stated in the sale deeds. In
F
Kamataka Urban Water Supply and Drainage Board and Ors.
v. K.S. Gangadharappa & Anr., (2009) 11 SCC 164, factors
which merit consideration as comparable sales are, interalia,
laid down as under:-
"It can be broadly stated that the element of G
speculation is reduced to minimum if the underlying
principles of fixation of market value with reference to
comparable sales are made:
(i) when sale is within a reasonable time of the
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1166 SUPREME COURT REPORTS [2014] 10 S.C.R.
A 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
B
(iv) It should possess similar advantages.
It is only when these factors are present, it can merit
a consideration as a comparable case (See Special Land
Acquisition Officer v. T. Adinarayan Setty (AIR 1959 SC
c 429) These aspects have been highlighted in Ravinder
Narain v. Union of India (2003) 4 SCC 481."
15. Appellants have produced Exs A7 to A10-four
perpetual lease deeds of residential plots in Pocket C of
D Vasant Kunj Area between September 1995 to December
1996, the details of which are as under:
Exh. Sale Date Plot Size Sale Rate
No. (Sq. Price (Rs.
Mtr.) (Rs.) per
E sq.yd.)
A-7 22.09.95 59C 218 5, 75,05,000/- 28,719/-
A-8 02.02.96 SC 220 96,55,000/- 36,695/-
F A-9 02.02.96 SC 231 1,01,61,000/- 36,779/-
A-10 10.12.96 13C 242 1,37,60,000/- 47,542/-
16. Exs A 7 to A 10 are lease deeds of small plots executed
G by DOA. Plots in the above lease deeds are in the same vicinity
of the acquired land and High Court had taken the same as
comparable sales. The size of the plots covered in the
exemplars are smaller. If there is a dissimilarity in regard to the
area, it is open to the court to make proper deduction towards
smallness of area. We find no error in the approach of the High
H
MAJ. GEN. KAPIL MEHRA & ORS. v. UNION OF 1167
INDIA & ANR. [R. BANUMATHI, J.]
Court taking Exs A7 to A10 as comparable sales for fixation A
of market value.
17. The High Court has taken average of sale price of Exs
A7 to A10 and deducted 40% towards smallness of the plot
taken for comparison, further deducted one third towards
8
development. Though we may finally affirm the rate fixed by the
High Court, for the reasons stated infra we fix the market value
in accordance with the well settled principles laid down by this
Court.
18. Determination of Market Value on the basis of C
average price paid under sale transactions: For
ascertaining the fair market value of the acquired land, High
Court adopted the 'average method' by averaging the sale
price of Exs A-7 to A-10 and calculated the rate at Rs.37,433.75
paise per sq. yard. The appellants contend that when land is D
being compulsorily taken away, the landholder is entitled to
claim the highest value which similar land in the locality is shown
to have fetched in a bonafide transaction and High Court was
not justified in averaging the sale prices of four perpetual lease
deeds. Appellants placed reliance upon the judgments of this E
Court in M. Vijaya/akshmamma Rao Bahadur vs. Collector
(1969) 1 MLJ SC 45 and State of Punjab and Anr. vs. Hans
Raj (0) by Lrs. And Ors., (1994) 5 SCC 734. In Hans Raj case
(supra) it was held as under:
"4. Having given our anxious consideration to the F
respective contentions, we are of the considered view that
the learned Single Judge of the High Court committed a
grave error in working out average price paid under the
sale transactions to determine the market value of the
acquired land on that basis. As the method of averaging G
the prices fetched by sales of different lands of different
kinds at different times, for fixing the market value of the
acquired land, if followed, could bring about a figure of
price which may not at all be regarded as the price to be
fetched by sale of acquired land. One should not have, H
1168 SUPREME COURT REPORTS [2014] 10 S.C.R.
A ordinarily recourse to such method. It is well settled that
genuine and bona fide sale transactions in respect of the
land under acquisition or in its absence the bona fide sale
transactions proximate to the point of acquisition of the
lands situated in the neighbourhood of the acquired lands
B possessing similar value or utility taken place between a
willing vendee and the willing vendor which could be
expected to reflect the true value, as agreed between
reasonable prudent persons acting in the normal market
conditions are the real basis to determine the market
c value."
19. Referring to Hans Raj's case in Anjani Molu Dessai
vs. State of Goa And Anr., (2010) 13 SCC 710, this Court held
as under:-
D "20. The legal position is that even where there are several
exemplars with reference to similar lands, usually the
highest of the exemplars, which is a bonafide transaction,
will be considered. Where however there are several sales
of similar lands whose prices range in a narrow bandwidth,
E the average thereof can be taken, as representing the
market price. But where the values disclosed in respect
of two sales are markedly different, it can only lead to an
inference that they are with reference to dissimilar lands
or that the lower value sales is on account of
F undervaluation or other price depressing reasons.
Consequently, averaging cannot be resorted to. We may
refer to two decisions of this Court in this behalf."
20. Where the lands acquired are of different type and
different locations, averaging is not permissible. But where
G there are several sales of similar lands, more or less, at the
same time, whose prices have marginal variation, averaging
thereof is permissible. For the purpose of fixation of fair and
reasonable market value of any type of land, abnormally high
value or abnormally low value sales should be carefully
H
MAJ. GEN. KAPIL MEHRA & ORS. v. UNION OF 1169
INDIA & ANR. [R. BANUMATHI, J.]
discarded. If the number of sale deeds of the same locality and A
the same period with short intervals are available, the average
price of the available number of sale deeds shall be considered
as a fair and reasonable market price. Ultimately, it is in the
interest of justice for the land losers to be awarded fair
compensation. All attempts should be taken to award fair s
compensation to the extent possible on the basis of their
accessibility to different kinds of roads, locational advantages
etc. Four perpetual lease deeds A-7 to A-10 relied upon by the
appellants are of the same locality - Vasant Kunj Residential
Scheme and relate to the period ranging from September 1995 c
to December 1996, but they are just prior to Section 4(1)
notification. In our view, the High Court was justified in taking
the average of the said four exemplars and approach adopted
by the High Court in averaging the sale prices of Exs A 7 to A 10
cannot be said to be perverse.
D
21. Freehold vis-a-vis Leasehold Price - Market Value~
Contention of the appellants is that Exs A 7 to A 10 relate to long
term perpetual leasehold deeds and what was acquired was
appellants' freehold property and freehold property has higher
value than the leasehold plot and suitable addition should have E
been made. The appellant contends that the terms stipulated
in perpetual leasehold are extremely stringent and in such
cases, no sale is permitted without the permission of ODA and
there are many other uncomfortable clauses in the terms of the
perpetual lease deeds and all these 'stringent conditions' F
increase the gap between 'freehold' price and 'leasehold' price.
It is submitted that market value of 'freehold property' is much
higher than the value of 'leasehold property' and this was not
taken into consideration by the High Court.
G
22. In M.B. Gopala Krishna & Ors. vs. Special Deputy
Collector, Land Acquisition, (1996) 3 SCC 594, as relied upon
by the appellants, it was held as under:-
"lt is further contended by Shri Mudgal that value of the land
does not get pegged down on account of the land being H
1170 SUPREME COURT REPORTS [2014] 10 S.C.R.
A in occupation of a tenant and the circumstances in this
behalf taken into account by the High Court, is irrelevant.
We find no force in the contention. A freehold land and one
burdened with encumbrances do make a big difference in
attracting willing buyers. A freehold land normally
B commands higher compensation while the land burdened
with encumbrances secures lesser price. The fact of a
tenant in occupation would be an encumbrance and no
willing purchaser would willingly offer the same price as
would be offered for a freehold land. Under those
c circumstances, the High Court would be right in its
conclusion that the land burdened with encumbrances
takes lesser price than the freehold land. The
encumbrances would operate as a disabling factor to peg
down the price when we compare the same with freehold
land."
D
The above observations were made in the aforesaid
decision while upholding the compensation that was payable
to the landlord without reference to the tenant's rights. The
above principle will apply only where a property subject to
E encumbrances is to be sold to a private purchaser or is
acquired subject to the tenancy.
23. 'Freehold land' and 'leasehold land' are conceptually
different. If a property subject to a lease and in the possession
F of a lessee is offered for sale by the owner to a prospective
private purchaser, the purchaser being aware that on purchase
he will get only title and not possession and that the sale in his
favour will be subject to encumbrance namely, the lease, he will
offer a price taking note of the encumbrances. Naturally, such
G a price would be less than the price of a property without any
encumbrance. But when a land is acquired free from
encumbrances, the market value of the same will certainly be
higher.
24. Exs A7 to A10 are the perpetual lease deeds relating
H
MAJ. GEN. KAPIL MEHRA & ORS. v. UNION OF 1171
INDIA & ANR. [R. BANUMATHI, J.]
to the period from September 1995 to December 1996 and to A
get the perpetual lease deeds converted as freehold, the holder
of perpetual leasehold has to pay further amount to DDA.
Having regard to the period of Exs A 7 to A 10 and the date of
issuance of Section 4 notification dated 19.2.1997, in our view,
addition of 20% is to be added for arriving at the value of B
'freehold' property. Adding 20% to Rs.37,433.75 per sq. yard
which comes to Rs.7,486.75, the value is calculated at
Rs.44,920.50 rounded off to Rs. 44,921/- per sq. yard.
25. Deduction Towards Competitive Bidding: Exs A7 C
to A 10 exemplars are perpetual lease deeds of commercial
plots auctioned in Vasant Kunj area. Learned senior counsel
for the respondents contended that this auctioned commercial
site can never be equated to the value of large extent of
agricultural land like the land acquired in the present case and
those plots auctioned are developed plots on which the D
Government had spent a considerable amount. It is contended
that the auction prices of commercial plots in exemplars are
not true index of a fair market value of the land at the relevant
time because elements of speculation and unfair competition
in such auctions and suitable deduction ought to have been E
made for competitive bidding.
26. While considering the competition involved in auction
sales of commercial/residential plots and observing that the
element of competition in auction sales make them unsafe F
guides for determining the market value of the acquired lands,
in Executive Engineer, Karnataka Housing Board v. Land
Acquisition Officer, Gadag And Ors., (2011) 2 SCC 246 paras
6 & 7, this Court held as under:-
"6. But auction-sales stand on a different footing. G
When purchasers start bidding for a property in an auction,
an element of competition enters into the auction. Human
ego, and desire to do better and excel over other
competitors, leads to competitive bidding, each trying to
outbid the others. Thus in a well advertised open auction- H
1172 SUPREME COURT REPORTS [2014] 10 S.C.R.
A sale, where a large number of bidders participate, there
is always a tendency for the price of the auctioned property
to go up considerably. On the other hand, where the
auction-sale is by banks or financial institutions, courts etc.
to recover dues, there is an element of distress, a cloud
B regarding title, and a chance of litigation, which have the
effect of dampening the enthusiasm of bidders and making
them cautious, thereby depressing the price. There is
therefore every likelihood of auction price being either
higher or lower than the real market price. depending upon
c the nature of sale. As a result. courts are wary of relying
upon auction-sale transactions when other regular
traditional sale transactions are available while determining
the market value of the acquired land. This Court in Raj
Kumar v. Harvana State (2007) 7 SCC 609 observed that
the element of competition in auction-sales makes them
D
unsafe guides for determining the market value.
7. But where an open auction-sale is the only
comparable sale transaction available (on account of
proximity in situation and proximity in time to the acquired
E land), the court may have to, with caution, rely upon the
price disclosed by such auction-sales, by providing an
appropriate deduction or cut to offset the competitive hike
in value. In this case, the Reference Court and the High
Court, after referring to the evidence relating to other sale
F transactions, found them to be inapplicable as they related
to far away properties. Therefore we are left with only the
auction-sale transactions. On the facts and circumstances.
we are of the view that a deduction or cut of 20% in the
auction price disclosed by the relied upon auction
G transaction towards the factor of "competitive price hike"
would enable us to arrive at the fair market price."
(Underlining added)
27. The above principle was reiterated in Raj Kumar And
Ors. v. Haryana State And Ors., (2007) 7 SCC 609 where in
H oara 16, this Court has held as under:-
MAJ. GEN. KAPIL MEHRA & ORS. v. UNION OF 1173
INDIA & ANR. [R. BANUMATHI, J.]
"16. All the relevant aspects have been taken into A
consideration and we do not find any error in principle
committed by the High Court justifying our interference in
appeal. An argument was raised that the prices of lands
fetched in auction had been ignored on the basis that
prices fetched in auction-sales cannot form the basis. It s
was submitted that there was no general rule that such
prices cannot be adopted. On considering the relevant
facts disclosed, it cannot be said that the High Court has
committed any error in discarding those auction-sales while
determining the compensation payable. The element of c
competition in auction-sales does not make them safe
guides. Similarly, the argument that when a compact piece
of land is acquired there cannot be adoption of separate
rates, cannot be accepted in the light of the decision of
this Court in Union of India vs. Mangatu Ram (1997) 6
0
sec 59. That case related to acquisition of lands in the
vicinity of the present properties. The ratio of that decision
also supports the distinction made by the Awarding Officer
and the High Court in the matter of fixing the land value
for the lands in Satrod Khurd and Satrod Khas."
E
28. The general rule that the sale prices of the comparable
sales should be relied upon for calculating the market value will
not apply when the sale transactions relied upon are auction
sales. As per the decision in Kamataka Housing Board's case
(2011) 2 SCC 246, in our view, 20% deduction is to be made F
for competitive bidding. Deducting 20% i.e. Rs.8,984/- from
Rs.44,921/-, balance arrived at Rs.35,937/- per sq. yard is fixed
as the value for the acquired land.
29. Deduction Towards the Development: The High G
Court has deducted 40% from the average price to equalize
the factor of the market value of a small plot of land as
compared to large area of land acquired and the figure works
out to Rs.22,460.25. High Court has also deducted one third
towards development cost and determined the market value of H
the acquired land at Rs.14,974/- oer sa. vard.
1174 SUPREME COURT REPORTS [2014) 10 S.C.R.
A 30. Appellants contend that the rate of deduction as
applied by the High Court was highly excessive as the acquired
lands are situated in the area already developed and have all
potential for development. It is submitted that the Court
repeatedly held that in assessing the compensation payable in
s respect of lands which had the potential for housing or
commercial purposes, normally 20% of the assessed value of
the land is deducted, depending on the nature of the land, its
location, extent of expenditure involved for development and the
land required for roads and other civic amenities etc. and while
c so, thumb rule of 331/3% or one third cut on development cost
cannot be used in a situation when the exact development cost
has been established through evidence. The appellants rely
upon the documents issued by Executive Engineer (Annexure
P-5) to contend that the cost of development of Vasant Kunj is
D only Rs.330/- per Sq. Yard.
31. Mr. Amarendra Sharan, learned Senior Counsel
appearing for the respondents contended that in forming a lay
out by Delhi Development Authority or any statutory authority,
40% of the land area is to be deducted for formation of roads,
E drains, parks and other civic amenities and further 35% is to
be deducted towards development cost for forming the lay out,
levelling the road, construction of drainage and erection of
electricity lines etc. It was submitted that deduction for
development on both the components worked out to 70-75%
F and the High Court was not justified in making standard
deduction of one third. It was further submitted that if a suitable
deduction is made, the compensation awarded by the High
Court seems to be excessive and prayer for suitable reduction
of the award is made.
G
32. While making one third deduction towards
development cost, the learned single Judge did not keep in
view the two essential components of deduction for
development. Deduction for development consists of two
components:- firstly, appropriate deduction to be made towards
H
MAJ. GEN. KAPIL MEHRA & ORS. v. UNION OF 1175
INDIA & ANR. [R. BANUMATHI, J.]
the area required to be utilized for roads, drains and common A
facilities like parks etc.; secondly, further deduction to be made
towards the cost of development, that is cost of levelling the
land, cost of laying roads and drains, erection of electrical poles
and water lines etc. For deduction of development towards land
and development charges, the nature of development, B
conditions and nature of the land, the land required to be set
apart under the Building Rules for roads, sewerage, electricity,
parks, water supply etc. and other relevant circumstances
involved are required to be considered.
33. In Haryana State Agricultural Market Board And Anr. C
vs. Krishan Kumar And Ors., (2011) 15 SCC 297, it was held
as under:
"10. It is now well settled that if the value of small
developed plots should be the basis, appropriate D
deductions will have to be made therefrom towards the
area to be used for roads, drains, and common facilities
like park, open space, etc. Thereafter, further deduction
will have to be made towards the cost of development, that
is, the cost of leveling the land, cost of laying roads and E
drains, and the cost of drawing electrical, water and sewer
lines."
34. Consistent view taken by this Court is that one third
deduction is made towards the area to be used for roads,
drains, and other facilities, subject to certain variations F
depending upon its nature, location, extent and development
around the area. Further, appropriate deduction needs to be
made for development cost, laying roads, erection of electricity
lines depending upon the location of the acquired land and the
development that has taken place around the area. G
35. Reiterating the rule of one third deduction towards
development, in Sabhia Mohammed Yusuf Abdul Hamid
Mui/a (Dead) by Lrs. and Ors. vs. Special Land Acquisition
H
1176 SUPREME COURT REPORTS [2014] 10 S.C.R.
A Officer and Ors., (2012) 7 SCC 595, this Court in paragraph
19 held as under:-
"19. In fixing the market value of the acquired land,
which is undeveloped or underdeveloped, the courts have
generally approved deduction of 1/3rd of the market value
8
towards development cost except when no development
is required to be made for implementation of the public
purpose for which land in acquired. In Kasturi vs. State of
Haryana (2003) 1 SCC 354) the Court held: (SCC pp.
359-60, para 7)
c
"7 ... It is well settled that in respect of agricultural
land or undeveloped land which has potential value: for
housing or commercial purposes, normally 1/3rd amount
of compensation has to be deducted out of the amount of
D compensation 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 road and other civic amenities to develop the
land so as to make the plots for residential or commercial
E 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 all around but
that land may have a hillock or may be low-lying or may
F 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
G
evidence, merely saying that the 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 or a
H
MAJ. GEN. KAPIL MEHRA & ORS. v. UNION OF 1177
INDIA & ANR. [R. BANUMATHI, J.]
developed area. In 84 acres of land acquired even if one A
portion on one sides abuts the main road, the remaining
large area where planned development is required, needs
laying of internal roads, drainage, sewer, water, electricity
lines, providing civic amenities, etc. However, in cases of
some land where there are certain advantages by virtue B
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 account. There
may be various factual factors which may have to be
taken into consideration while applying the cut in c
payment of compensation towards developmental
charges, may be in some cases it is more than 1/3rd and
in some cases less than 1/3rd. It must be remembered
that there is difference between a developed area and an
area having potential value, which is yet to be developed.
0
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 as a
building site or plot, particularly when vast tracts are
acquired, as in this case, for development purpose." E
(emphasis supplied)
The rule of 1/3rd deduction was reiterated in Tejumal
Bhojwani v. State of U.P. ((2003)10 SCC 525, V.
Hanumantha Reddy v. Land Acquisition Officer, (2003)
12 SCC 642, H.P. Housing Board v. Bharat S. Negi F
(2004) 2 SCC 184 arid Kiran Tandon v. Allahabad
Development Authority. (2004)10 SCC 745"
36. While determining the market value of the acquired
land, normally one third deduction i.e. 331/3% towards G
development charges is allowed. One third deduction towards
development was allowed in Special Tehsildar, L.A.
Vishakapatnam vs. Smt.A. Mangala Gowri, (1991) 4 SCC 218;
Guliara Singh & Ors. vs. State of Punjab & Ors., (1993) 4
H
1178 SUPREME COURT REPORTS [2014] 10 S.C.R.
A SCC 245; Santosh Kumari & Ors. vs. State of Haryana, (1996)
10 SCC 631; Revenue Divisional Officer-cum-LAO vs. Shaik
Azam Saheb etc., (2009) 4 SCC 395; A.P. Housing Board vs.
K. Manohar Reddy, (2010)12 SCC 707; Ashrafi & Ors. vs.
State of Haryana & Ors., (2013) 5 SCC 527 and Kashmir
B Singh vs. State of Haryana & Ors., (2014) 2 SCC 165.
37. Depending on nature and location of the acquired land,
extent of land required to be set apart and expenses involved
for development, 30% to 50% deduction towards development
was allowed in Haryana State Agricultural Market Board and
C Anr. vs. Krishan Kumar and Ors. (2011) 15 SCC 297; Deputy
Director Land Acquisition vs. Malla Atchinaidua And Ors. AIR
2007 SC 740; Mummidi Apparao (Dead by LR) vs. Nagarjuna
Fertilizers & Chemical Ltd., AIR 2009 SC 1506; and Lal Chand
vs. Union of India and Anr. (2009) 15 SCC 769.
D
38. In few other cases, deduction of more than 50% was
upheld. In the facts and circumstances of the case in Basavva
(Smt.) And Ors. v. Sp/. Land Acquisition Officer And Ors.,
(1996) 9 SCC 640, this Court upheld the deduction of 65%. In
E Kanta Devi & Ors. vs. State of Haryana And Anr., (2008) 15
sec 201, deduction of 60% towards development charges was
held to be legal. This Court in Subh Ram & Ors. vs. State of
Haryana & Anr., (2010) 1 SCC 444, held that deduction of 67%
amount was not improper. Similarly, in Chandrasekhar (dead)
F by L.Rs. and Ors. vs. LAO &Anr., (2012) 1 SCC 390, deduction
of 70% was upheld.
39. We have referred to various decisions of this Court on
deduction towards development to stress upon the point that
deduction towards development depends upon the nature and
G location of the acquired land. The deduction includes
components of land required to be set apart under the building
rules for roads, sewage, electricity, parks and other common
facilities and also deduction towards development charges like
laying of roads, construction of sewerage.
H
MAJ. GEN. KAPIL MEHRA & ORS. v. UNION OF 1179
INDIA & ANR. [R. BANUMATHI, J.]
I
40. Rule of one third deduction towards development A
appears to be the general rule. But so far as Delhi
Development Authority is concerned, or similar statutory
authorities, where well planned layouts are put in place, larger
land area may be utilized for forming layout, roads, parks and
other common amenities. Percentage of deduction for B
development of land to be made in DOA or similar statutory
authorities with reference to various types of layout was
succinctly considered by this Court in Lal Chand vs. Union of
India & Anr. (2009) 15 SCC 769 and observing that the
deduction towards the development range from 20% to 75% c
of the price of the plots, in paras 13 to 22, this Court held as
under:-
"13. The percentage of "deduction for development"
to be made to arrive at the market value of large tracts of
undeveloped agricultural land (with potential for D
development), with reference to the sale price of small
developed plots, varies between 20% to 75% of the price
of such developed plots, the percentage depending upon
the nature of development of the layout in which the
exemplar plots are situated. E
14. The "deduction for development" consists of two
components. The first is with reference to the area required
to be utilized for developmental works and the second is
the cost of the development works. For example, if a F
residential layout is formed by DOA or similar statutory
authority, it may utilize around 40% of the land area in the
layout, for roads, drains, parks, playgrounds and civic
amenities (community facilities), etc.
15. The development authority will also incur G
considerable expenditure for development of undeveloped
land into a developed layout, which includes the cost of
leveling the land, cost of providing roads, underground
drainage and sewage facilities, laying water lines,
electricity lines and developing parks ands civil amenities, H
1180 SUPREME COURT REPORTS [2014] 10 S.C.R.
A which would be about 35% of the value of the developed
plot. The two factors taken together would be the
"deduction for development" and can account for as much
as 75% of the cost of the developed plot.
16. On the other hand, if the residential plot is in an
B
unauthorized private residential layout, the percentage of
"deduction for development" may be far less. This is
because in an unauthorized layout, usually no land will be
set apart for parks, playgrounds and community facilities.
Even if any land is set apart, it is likely to be minimal. The
c roads and drains will also be narrower, just adequate for
movement of vehicles. The amount spent on development
work would also be comparatively less and minimal. Thus
the deduction on account of the two factors in respect of
plots in unauthorized layouts, would be only about 20% plus
D 20% in all 40% as against 75% in regard to ODA plots.
17. The "deduction for development" with reference
to prices of plots in authorized private residential layouts
may range between 50% to 65% depending upon the
E standards and quality of the layout.
18. The position with reference to industrial layouts
will be different. As the industrial plots will be large (say of
the size of one or two acres or more as contrasted with
the size of residential plots measuring 100 sq. m to 200
F sq m), and as there will be very limited civic amenities and
no playgrounds, the area to be set apart for development
(for roads, parks, playgrounds and civic amenities) will be
far less; and the cost to be incurred for development will
also be marginally less, with the result the deduction to be
G made from the cost of an industrial plot may range only
between 45% to 55% as contrasted from 65% to 75% for
residential plots.
19. If the acquired land is in a semi-developed urban
H area, and not an undeveloped rural area, then the
MAJ. GEN. KAPIL MEHRA & ORS. v. UNION OF 1181
INDIA & ANR. [R. BANUMATHI, J.]
deduction for development may be as much less, that is, A
as little as 25% to 40%, as some basic infrastructure will
already be available. (Note: The percentages mentioned
above are tentative standards and subject to proof to the
contrary.
B
20. Therefore the deduction for the "development
factor'' to be made with reference to the price of a small
plot in a developed layout, to arrive at the cost of
undeveloped land, will be far more than the deduction with
reference to the price of a small plot in an unauthorized
private layout or an industrial layout. It is also well known C
that the development cost incurred by statutory agencies
is much higher than the cost incurred by private
developers, having regard to higher overheads and
expenditure.
D
21. Even among the layouts formed by DOA, the
percentage of land utilized for roads, civic amenities, parks
and playgrounds may vary with reference to the nature of
layout-whether it is residential , residential-cum-
commercial or industrial; and even among residential E
layouts, the percentage will differ having regard to the size
of the plots, width of the roads, extent of community
facilities, parks and playgrounds provided.
22. Some of the layouts formed by the statutory
development authorities may have large areas earmarked F
for water/sewage treatment plants, water tanks, electrical
substations, etc. in addition to the usual areas earmarked
for roads, drains, parks playgrounds and community/civic
amenities. The purpose of the aforesaid examples is only
to show that the "deduction for development" factor is a G
variable percentage and the range of percentage itself
being very wide from 20% to 75%."
Lal Chand's case deals with acquisition of lands by ODA under
the Rohini Residential Housing Scheme where 40% deduction H
1182 SUPREME COURT REPORTS [2014] 10 S.C.R.
A was made towards the land area to be utilized for laying down
of roads, drains etc. Further deduction of 35% of the value of
the developed plot towards cost of levelling the land, cost of
providing roads, underground drainage, laying down water lines,
electricity lines was made.
B
41. In the instant case, having regard to the extent of the
land acquired and the development in and around Vasant Kunj
area, in our view, it is appropriate to make 35% deduction
towards utilization of the land area in the layout for roads,
drains, parks, playgrounds and civic amenities. So far as the
C expenditure for development of the large extent of land into a
developed area by construction of proper roads, underground
drainage, sewerage and erection of electricity lines, it is
appropriate to make further deduction of 25%, though 35% of
the value was deducted in Lal Chand case (supra) towards
D development charges. Two components taken together, the
total deduction to be made would be 60%. 60% of Rs.35,937/
- works out to Rs.21,562/- and deducting the same, the value
of the land would be Rs.14,375/- per sq. yard. What was
awarded by the High Court was Rs.14,974/- per sq. yard. Since
E the SLP (Civil) No.15272/2011 filed by DOA was dismissed
by this Court on 12.5.2011 and the sale has become final as
against.the appellants, we are not inclined to further reduce the
value of the acquired land from Rs.14,974/- per sq. yard as
determined by the High Court and the compensation awarded
.
F by the High Court at Rs.14974/- per sq. yard is maintained .
42~ INTEREST: Contention of the appellants is that on the
enhanced compensation, the mandatory interest under Section
34 of the Act has not been awarded to them. Placing reliance
upon Commissioner of Income Tax, Faridabad vs.
G Ghanshyam (HUF), (2009) 8 SCC 412, it is contended that
the impugned judgment is silent on granting statutory interest
under Section 34 of the Land Acquisition Act and the appellants
pray for award of interest on the enhanced compensation. The
appellants filed C.M. No. 735/2011 before the High Court
H
MAJ. GEN. KAPIL MEHRA & ORS. v. UNION OF 1183
INDIA & ANR. [R. BANUMATHI, J.]
seeking review for payment of interest which according to the A
appellants was omitted to be included and the said application
was dismissed by the High Court.
43. Land Acquisition Act, 1894, provides for payment of
interest to the claimants either under Section 34 or under
8
Section 28 of the Act. Section 34 of the Act fastens liability on
the Collector to pay interest on the amount of compensation to
be worked out in accordance with provisions of Section 23(1)
and the sub-section thereof, at the rate of 9%'per annum from
the date of taking possession until the amount is paid or
deposited. As per proviso to Section 34, if the compensation C
amount or any part thereof is not paid or deposited within a
period of one year from the date of taking over possession,
interest shall be payable at the rate of 15% per annum from
the date of expiry of the said period of one year on the amount
of compensation or part thereof which has not been paid or D
deposited before the date of such expiry.
44. Section 28 empowers the courts, if it was enhancing
the compensation awarded by the Collector, to award interest
on the sum in excess of what the Collector had awarded as E
compenscation. Both in terms of Section 34 and Section 28,
interest at 9% per annum is payable for the first year of taking
possession and 15% per annum thereafter, if the amount of
compensation was not paid or deposited within a period of one
year or deposited thereafter.
F
45. Award of interest under Section 34 is mandatory in as
much the word used in the Section is 'shall'. The scheme of
the Act and the express provisions thereof establish that the
interest payable under Section 34 is statutory. The claim for
interest under Section 28 of the Act proceeds on the basis that G
due compensation not having been paid, the claimant should
be allowed interest on the enhanced compensation amount.
The award of interest under Section 28 is discretionary power
vested in the Court and it has to be exercised in a judicious
manner and not arbitrarily. The use of the word "may" in Section H
1184 SUPREME COURT REPORTS [2014) 10 $.C.R.
A 28 does not confer any arbitrary discretion on the Court to
disallow interest for no valid or proper reasons. Normally, Court
awards interest if it enhances the compensation in excess of
the amount awarded by the Collector, unless there are
exceptional circumstances.
B
46. A Constitution Bench of this Court in Gurpreet Singh
vs. Union of India, (2006) 8 sec 457, considering the scope
of Section 34 and Section 28 of the Act, has held as under:-
"44. Section 34 of the Act fastens liability on the
c Collector to pay interest on the amount of compensation
determined under Section 23(1) with interest from the date
of taking possession till date of payment or deposit into
the court to which reference under Section 18 would be
made. On determination of the excess amount of
D compensation, Section 28 empowers the court, if it was
enhancing the compensation awarded by the Collector, to
award interest on the sum in excess of what the Collector
had awarded as compensation. The award of the court
may also direct the Collector to pay interest on such excess
E or part thereof from the date on which he took possession
of the land to the date of payment of such excess into court
at the rates specified thereunder. The Court stated: [Prem
Nath Kapur vs. National Fertilizers Corporation of India
Ltd., (1996) 2 sec 71, sec p. 77, para 101
F "In other words, Sections 34 and 28 fasten the
liability on the State to pay interest on the amount of
compensation or on excess compensation under Section
28 from the date of the award and decree but the liability
to pay interest on the excess amount of compensation
G determined by the Court relates back to the date of taking
possession of the land to the date of the payment of such
excess 'into the court'."
45. The Court concluded: (Prem Nath Kapur case, SCC
H p. 78, para 12)
MAJ. GEN. KAPIL MEHRA & ORS. v. UNION OF 1185
INDIA & ANR. [R. BANUMATHI, J.]
"12. It is clear from the scheme of the Act and the A
express language used in Sections 23(1) and (2), 34 and
28 and now Section 23(1-A) of the Act that each
component is a distinct and separate one. When
compensation is determined under Section 23(1 ), its
quantification, though made at different levels, the liability 8
to pay interest thereon arises from the date on which the
quantification was so made but, as stated earlier, it relates
back to the date of taking possession of the land till the
date of deposit of interest on such excess compensation
into the court .... The liability to pay interest is only on the C
excess amount of compensation determined under
Section 23(1) and not on the amount already determined
by the Land Acquisition Officer under Section 11 and paid
to the party or deposited into the court or determined under
Section 26 or Section 54 and deposited into the court or
on solatium under Section 23(2) and additional amount D
under Section 23(1-A)."
47. In the scheme of the Act, considering the different
stages at which interest is payable on the compensation
amount/enhanced compensation, the Constitution Bench of this E
Court in Gurpreet Singh's case further held as under:-
"32. In the scheme of the Act, it is seen that the award
of compensation i~ at different stages. The first stage
occurs when the award is passed. Obviously, the award F ·
takes in all the amounts contemplated by Section 23(1),
Section 23(1-A), Section 23(2) and the interest
contemplated by Section 34 of the Act. The whole of that
amount is paid or deposited by the Collector in terms of
Section 31 of the Act. At this stage, no shortfall in deposit G
is contemplated, since the Collector has to pay or deposit
the amount awarded by him. If a shortfall is pointed out, it
may have to be made up at that stage and the principle of
appropriation may apply, though it is difficult to
contemplate a partial deposit at that stage. On the deposit
H
1186 SUPREME COURT REPORTS [2014] 10 S.C.R.
A by the Collector under Section 31 of the Act, the first stage
comes to an end subject to the right of the claimant to
notice of the deposit and withdrawal or acceptance of the
amount with or without protest.
33. The second stage occurs on a reference under
B
Section 18 of the Act. When the Reference Court awards
enhanced compensation, it has necessarily to take note
of the enhanced amounts payable under Section 23(1),
Section 23(1-A), Section 23(2) and interest on the
enhanced amount as provided in Section 28 of the Act and
c costs in terms of Section 27. The Collector has the duty
to deposit these amounts pursuant to the deemed decree
thus passed. This has nothing to do with the earlier
deposit made or to be made under and after the award. If
the deposit made, falls short of the enhancement decreed,
D there can arise the question of appropriation at that stage,
in relation to the amount enhanced on the reference.
34. The third stage occurs, when in appeal, the High Court
enhances the compensation as indicated already. That
E enhanced compensation would also bear interest on the
enhanced portion of the compensation, when Section 28
is applied. The enhanced amount thus calculated will have
to be deposited in addition to the amount awarded by the
Reference Court if it had not already been deposited.
F 35. The fourth stage may be when the Supreme Court
enhances the compensation and at that stage too, the
same rule would apply."
48. By going through the judgment of reference court as
G well as the High Court, we find that the appellants were
awarded interest in terms of Section 34 and Section 28 of the
Act. Section 4(1) notification was issued on 19.02.1997. The
reference court has not enhanced the compensation amount;
but has only confirmed the award passed by the Collector.
H However, while dismissing the reference, reference court held
MAJ. GEN. KAPIL MEHRA & ORS. v. UNION OF 1187
INDIA & ANR. [R. BANUMATHI, J.]
that the appellant shall be entitled to get interest in terms of the A
provisions of the Act for the period from 19.02.1997 till the date
of payment, meaning thereby that the statutory interest in terms
of Section 34 of the Act is payable.
49. When the High Court enhanced the compensation, the
8
High Court held that the appellants shall be paid interest in
terms of Section 28 of the Act. On the enhanced compensation,
High Court ordered payment of interest at the rate of 9% from
19.02.1997 to 18.2.1998 and thereafter at the rate of 15% per
annum till the date of payment. The relevant portion of the C
judgment of the High Court reads as under:-
"On the enhanced market value, the appellant shall
be paid interest under Section 28 of the Act @ 9% per
annum from 19.02.1997, the date of issuance of Section
4 notification for the first year ending on 18.02.1998 and D
thereafter, @ 15% per annum till the date of tender of
compensation. Interest shall also be paid on the-solatium
and the additional amount in view of the judgment of the
Supreme Court in the case of Sunder Vs. UOI reported
as 93(2001) DLT 569 (SC)." E
Since the statutory interest under Section 34 and also the
interest in terms of Section 28 of Act had been awarded to the
appellants, we find no merit in the grievance of the appellants
as to the payment of interest.
F
50. COSTS: By its judgment dated 24.12;2010, the High
Court enhanced the compensation at the rate of Rs.14,974/-
per sq. yard, but the High Court had then awarded only costs
of Rs.20,000/-. Thereafter, the appellants filed C.M. No. 735/
2011, interalia, contending that they ought to have been G
awarded entire costs at the rate of Rs. 50,000/- per sq. yard,
enhanced compensation as claimed by the claimants.
Appellants also claimed that the entire court fees of Rs.48 lakhs
affixed on the memo of appeal be included in the costs. High
Court rejected the plea of the appellants for inclusion of the H
11'88 SUPREME COURT REPORTS [2014) 10 S.C.R.
A entire court fees and costs at the rate of enhanced
compensation for the acquired land at Rs.50,000/- per sq. yard
as claimed by the appellants. But the High Court modified its
order by awarding proportionate costs in favour of the
appellants over and above the sum of Rs.20,000/-.
B
51. The appellant, party-in-person, contended that they
have paid court fees of Rs.48 lakhs and High Court ignored
the mandatory provisions of law in awarding costs and that court
fees is an integral part of costs. It was submitted that the
impugned order dated 13.10.2011 awarding "grant of
C proportionate costs" is not in accordance with well settled
principle of law. Appellants further contended that being partly
successful before the High Court, they cannot be deprived of
their claim of entire court fees and the costs.
D 52. The learned Senior Counsel for respondents submitted
that as per the well settled principle, the High Court has awarded
proportionate costs and there is no improper exercise of
discretion warranting interference by this Court.
53. Section 27 of the Act deals with costs. Section 27
E
reads as under:
"27. Costs:- (1) Every such award shall also
state the amount of costs incurred in the proceedings
under this Part, and by what persons and in w~at
F proportions they are to be paid.
(2) When the award of the Collector is not upheld,
the costs shall ordinarily be paid by the Collector, unless
the court shall be of opinion that the claim of the applicant
G was so extravagant or that he was so negligent in putting
his case before the Collector that some deduction from his
costs should be made or that he should pay a part of the
Collector's costs."
54. The language of Section 27(1) is clear and very wide
H
MAJ. GEN. KAPIL MEHRA & ORS. v. UNION OF 1189
INDIA & ANR. [R. BANUMATHI, J.]
and it gives power to the courts to order costs to be paid by A
what persons and in what proportions they are to be paid. In
making order for costs under Section 27(1 ), the court may have
regard to the provisions of Section 35 C.P.C. Analysing sub-
section (2) of Section 27, it appears to consist of three parts,
viz., (i) When the award of the Collector is not upheld, the costs B
shall ordinarily be paid by the collector as directed by the Court;
(ii) the court is not bound to do so in every case. If the court
forms opinion that the claim of the claimant is extravagant or
that he was so negligent in putting his case before the
Collector, then the court may make a different order as regards c
costs and (iii) the court may in such cases direct, that some
deduction be made from the costs of the claimant or that he
should pay a part of the Collector's costs.
55. Ordinarily, when a litigant succeeds in part and fails in
0
part, the equitable order made is that he should receive
proportionate costs. When considering the appellants' claim in
C.M. No. 735 of 2011, in exercise of its discretion, the High
Court rightly awarded proportionate costs and accordingly
directed payment of such proportionate costs of over and
above Rs.20,000/- as originally ordered. Merely because the E
appellants claimed compensation at the rate of Rs.50,000/- per
sq.yard, the respondents cannot be saddled with the liability of
paying the entire costs and the court fees paid by the
appellants. There is no improper exercise of discretion by the
High Court in awarding proportionate costs and we find no F
merit in the claim of the appellants claiming full costs.
56. We may incidentally refer to the statement of learned
Senior Counsel for the respondents that compensation amount
of about Rs.40 crores has already been paid to the appellants. G
57. We, therefore, do not find any merit in these appeals
and the appeals are dismissed accordingly. Parties are to bear
their respective costs.
Bibhuti Bhushan Bose Appeals dismissed. H
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