Holding

The High Court correctly reduced the compensation because, for a large acquisition, market value must be fixed on an acreage basis and sale deeds of small parcels are not a proper basis, and the building valuation was supported by reliable evidence.

Summary

The Kerala State Electricity Board acquired 7 acres 8 cents of land and a building under a notification issued on 13 October 1979 pursuant to Section 4(1) of the Land Acquisition Act, 1894. The Land Acquisition Officer fixed compensation at Rs 1,432.50 per cent for the land, which the Reference Court enhanced to Rs 3,000 per cent and increased the building award. The Kerala High Court, on appeal by the respondents, reduced the land compensation to Rs 2,000 per cent, holding that the sale deeds of small parcels within municipal limits could not be used to determine market value for a large acquisition. The appellants challenged this reduction before the Supreme Court. The Court held that for a large extent of land, compensation must be fixed on an acreage basis, and sale deeds of small, post‑notification parcels are not a reasonable basis for valuation; it also found the building valuation evidence satisfactory. Consequently, the Supreme Court dismissed the appeal, affirming the High Court’s reduction of compensation.

Issues considered

When determining compensation for a large acquisition, can sale deeds of small parcels within municipal limits be used as a basis for market value?
Should compensation for a large extent of land be fixed on an acreage basis rather than on a per‑cent or square‑yard/foot basis?
Did the High Court err in its appreciation of the building’s valuation?

Legislation cited

Land Acquisition Act, 1894s. 4(1)

Subjects

Land acquisitionCompensationMarket valueAcreage basisSquare yard basisBuilding valuationKerala High CourtReference CourtSale deedsMunicipal limits

Judgment

P. RAJAN AND ANR. A
~

THE KERALA STATE ELECTRICITY BOARD AND ANR.
f
OCTOBER 25, 1996

[K. RAMASWAMY AND S.P. KURDUKAR, JJ.] B

Land Acquisition Act, 1894 :

Compensation-Award of-Reference Court enhancing
compensation-High Court reducing the same-Justification-Held, when C
large extent of land is acquired, determination of compensation on the
basis of square yard or square foot basis is wrong principle-A/so land
converted into building plots or land in well developed area like heart of
commercial centre to be given weightage-Sale deeds furnished-Does not
furnish reasonable basis since the lands are within municipal limits and
well developed-Post-notification sale of small extent-A/so does not D
furnish reasonable basis for determination of market value and
compensation.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 14526 of
1996.
E
From the Judgment and Order dated 29.1.90 of the Kerala High
Court in L.A.A. No. 232 of 1986.

John Mathew, Roy Abhram and M.K.D. Namboodri for the
Appellants. F
G.Viswanatha Iyer, T.G.N. Nair and M.T. George for the
Respondents, No. I.

The following Order of the Court was delivered :
G
Leave granted.

Notification under Section 4(1) of the Land Acquisition Act was
published on October 13, 1979 acquiring a large extent ofland admeasuring
7 acres, 8 cents together with a building situated in 1600 sq.mtrs. of the H
3
4 SUPREME COURT REPORTS [1996] SUPP. 8 S.C.R.

A land. The Land Acquisition Officer awarded compensation@ Rs. 1432.50
per cent, Rs. 2,35,283 for the building and Rs. 24,033 for the trees as well
as Rs. 4, 19,006 for the wells. The reference Court enhanced the
compensation for the land to Rs. 3 ,000 per cent and awarded an additional
amount of Rs. 1,83,783,60 towards building and Rs. 17,958 as value of
improvements. The respondents filed an appeal before the High Court.
B The High Court allowed the appeal of the responder.!, reducing the land
value to Rs. 2,000 per cent. This appeal by special leave has been filed by
the appellants-claimants challenging the reduction of the compensation
by the High Court.

The question for consideration is: whether the view taken by the
C High Court is correct in law? It is seen that the courts below have relied
upon Exs. A-1, A-2, A-7 and A-9. The respondents have reied upon Exs.
,
R-1 and R-6. Ex. A- I is the sale deed dated July 3 l, 1978 pertaining to sale
of an extent of 2-112 cents of land whose value was worked out @ Rs.
3,000 per cent spoken to by A W-4. It is an admitted position that the lands
D covered by the said sale transaction are situated within the municipal limits
in a developed area. The distance between the acquired land and the land
covered by the sale deed is 2-1/2 kms. Under these circumstances, the said
sale deed does not furnish any reasonable basis to determine the market
value and compensation. Equally, Ex. A-2 is dated November 15, 1978
spoken to by A W-2. lt is a small extent ofland situated within the municipal
E limits which worked out at Rs. 4,000 per cent. Ex. A-7 is dated August I,
1979 and the extent of the land has not been mentioned; but it is an admitted •
position that it is a small piece of land purchased by AW-3 which worked
out to Rs. 26,000 per cent. Ex. A-9 is a post-notification sale deed dated
October 9, 1980 pertaining to sale of an extent of three cents of land
purchased by A W-5 which worked to Rs. 5,000 per cent. This also being
F post-notification and being in respect of a small extent of land, does not
furnish any reasonable basis for determination of the market value and
compensation.

It is well settled legal position that when large extent of land is
G acquired, determination of compensation on the foot of a cent, square
yard or square foot is wrong principle. This Court repeatedly emphasised,
that the principle of fixation on acreage basis would be the correct principal.
'
The other principle is that if the land acquired is situated in a developed
area and is converted into buildings in a colony after obtaining sanction
from the competent authority or is situated in a well-developed area like
·H in the heart of a commercial centre, determination of the compensation
P. RAJAN v. KERALA STATE ELECTRICITY BO. 5

could be on square yard basis after giving due deduction according to law. A
Determination on square foot basis would be confined only to highly
developed Commercial land or land situated at a place in the heart of a
city like Nariman Point in Bombay or Cannaught Place in Delhi. This
principal of determination of compensation on square foot basis would be
justified.
B
It is seen that Ex. R-1 is dated October 27, 1979 involving 15 cents
of land sold by RS-! which worked out to Rs. 2,800 per cent. In view of
the large extent of land and in view of the fact that the sale deeds are in
respect of small extents of land, they do not offer any reasonable basis to
determine the market value and compensation higher than that granted by
the High Court which had become final. C

Under these circumstances, we do not find any compelling evidence
or the application of any wrong principle of law to conclude that the High
Court has ignored any material evidence in determining the compensation.
No error of law has been committed by the High Court for warranting
interference with the valuation of the market value of the land. D

As regards the building, it is not in dispute that the Executive
Engineer of the Department of the Government assessed the value of the
building. Though the Commissioner Engineer appointed by the reference
Court had valued the building and the material at Rs. 1,85,026 consisting E
of the valuation and appreciation of I 5 per cent etc. the High Court found
that there is reliable evidence placed on record in awarding I 5% more as
was assessed by the Engineer. This also being on appreciation of evidence,
we do not find any unimpeachable material to find that the view taken by
the High Court is warranted for interference on the facts of this case.
F
Under these circumstances, we do not find any compelling reason
warranting interference.

The appeal is accordingly dismissed. No costs.
G
G.N. Appeal dismissed.