RAJENDRA VASSUDEV DESHPRABHU (DEAD) A THROUGH LRS. & ORS.versusDEPUTY COLLECTOR (RETD.) & LAND ACQUISITION OFFICER, PANAJI

                   [2011] 11 S.C.R. 817


    RAJENDRA VASSUDEV DESHPRABHU (DEAD)                        A
             THROUGH LRS. & ORS.
             .               v.
  DEPUTY COLLECTOR (RETD.) & LAND ACQUISITION
                  OFFICER, PANAJI
          (Civil Appeal No. 8539 of 2011)                      s
                    OCTOBER 11, 2011

      [R.V. RAVEENDRAN AND A.K. PATNAIK, JJ.]

      Goa, Daman and Diu Agricultural Tenancy Act, 1964 - C
ss. 18A, 1BK and 3 - Enhancement of compensation for the
 acquired land - Land subjected to tenancy- Land Acquisition
Officer apportioned compensation at the rate of 50 % for
landlord and 50 % for tenant - Award passed by Land
Acquisition Officer at the rate of Rs. 17 per sq. m. enhanced D
to Rs. 175 per sq. m. by the Reference Cowt - High Court
restored the award of Rs. 171- per sq.m. - On appeal held:
When the Notification was issued for land acquisition, the
Land Use Act whereby land vest in tenant could be valued
only as an agricultural land, was not in force - Thus, market E
 value of the land could be determined with reference to the
 development potential for non-agricultural purposes - Mere
 fact of obtaining of sanction from Mamlatdar for sale of such
 land would not depress the price of the land nor affect its
potential for being developed as residential or industrial use F
- lnspite of s. 3 which prohibits conversion of agricultural land
for non-agricultural use in public interest, compensation was
determined as Rs. 78 per sq. m. for neighboring agricultural
land acquired under the same Notification which has attained
finality and there is no reason why the said rate should not G
apply to the instant case - Order of High Court holding that
compensation for the land should be less than compensation
for the land which is not subjected to tenancy, is not correct-
Thus, order of High Court is modified by increasing the
                            817                                H
    818      SUPREME COURT REPORTS            [2011] 11 S.C.R.

A compensation for the acquired land from Rs. 17 per sq. m.
  to Rs. 78 per sq. m. - Goa Land Use (Regulations) Act, 1991
    -s. 2.
       Appellants -are the legal heirs of the co-owners of
  land. Notification was issued for acquisition of certain
8
  land including the land of the co-owners. The said land
  was tenanted and is in occupation of tenants and vested
  in them on the Tiller's Day in terms of Section 18A of the
  Goa, Daman and Diu Agricultural Tenancy Act, 1964. The
  Land Acquisition Officer awarded compensation for the
C acquired land at the rate of Rs. 17 per sq. m. As the co-
  owners admitted their tenancy rights, the Land
  Acquisition Officer directed that the compensation to be
  divided between the owners and the tenants at the rate
  of 50% each. The Reference Court increased the
D compensation from Rs. 17 per sq. m. to Rs. 75 per sq. m.
  The High Court set aside the judgment and award of the
  Reference Court and restored the award of Rs. 17/- per
  sq. m. by the Land Acquisition officer.

E      Appellants contended before this Court that in regard
  to the remaining extent of land acquired under the same
  Notification, the High Court by judgment dated 14.11.2008
  in FA No. 123/2003 (The Deputy Collector (Dev.) & LAO,
  Panaji vs. Smt. Sita Devi) determined the compensation as
F Rs.78 per sq.m. and therefore, the compensation should
  have been the same in regard to the land of the appellants
  also.          ··

          Allowing the appeal, the Court
G      HELD: 1.1. Section 2 of the Goa Land Use
  (Regulations) Act, 1991 provides that no land which is
  vested in a tenant under the provisions of the Goa,
  Daman and Diu Agricultural Tenancy Act, 1964 shall be
  used or allowed to be used for any purpose other than
H agriculture. If the Land Use Act was af.lplicable to the land
 RAJENDRA VASSUDEV DESHPRABHU (D) THR. LRS. v. 819
             DY. COLLECTOR & ANR.

  at the time of acquisition, then the land could be used · A
  only as agricultural land and could be valued only as an
  agricultural land. But the Land Use Act, came into force
  with effect from 2.11.1990. The relevant date for the
  purpose of determination of compensation is the date of
  publication of preliminary notification under Section 4(1) B
  of the Land Acquisition Act, 1894 which is 1.2.1990. On
  that day the Land Use Act was not in force and
  consequently there was no restriction that the use land
  vested in the tenant should be used only for agricultural
  purposes. Therefore, the market value of the land could c
. be determined with reference to the development
  potential for non-agricultural purposes. [Para 7) [825-E-
 H]
      1.2. Under Section 18K of the Tenancy Act, the mere
 fact that the sanction has to be obtained from Mamlatdar     D
 for sale of such land would not depress the price of the
 land, nor affect its potential for being developed as
 residential or industrial use. [Para 8) [826-A-B]

      1.3. Section 3 of the Tenancy Act provides that if any E
 owner of agricultural land applies for conversion thereof
 for non-agricultural use, the Government may, instead of
 granting conversion, prohibit such conversion in public
 interest. The risk not being permitted to convert the land
 sho~d also be taken note of while assessing the market F
 value with reference to development potential of the land.
 Such a contingency exists in regard to all agricultural
 lands and is not specific to the appellants. lnspite of
 Section- 3 of Tenancy Act, compensation has been
 determined as Rs.78/- per sq.m. for neighbouring G
·agricultural lands and there is no reason why the said
 rate should not apply to the land in question also. [Para
 9] [826-C-E]

     1.4. The High Court committed an error in holding that
 the compensation for the land in question should be          H
   820     SUPREME COURT REPORTS              (2011] 11 S.C.R.


A lesser than the compensation for a land which is not
  subject to tenancy. It relied upon the principle that a free
  hold land normally commands higher compensation
  while the land burdened with encumbrances secures
  lesser price and the fact of a tenant in occupation would
B be an encumbrance and no willing purchaser would
  willingly offer the same price as would be offered for a
  freehold land. The said principle would apply only where
  a property subject to encumbrances is to be sold to a
  private purchaser or is acquired subject to the tenancy.
c In the instant case, the landlords were awarded only 50%
  of the compensation amount and remaining 50% was
  awarded to the tenants. The High Court mixed up a sale
  subject to encumbrances with an acquisition free from
  encumbrances under the Land Acquisition Act, 1894. The
  two are conceptually different. If a property subject to a
0
  lease and in the possession of a lessee is offered for sale
  by the owner to a prospective private purchaser, the
  purchaser being aware that on purchase he would get
  only title, but not possession and that the sale in his
  favour would be subject to an encumbrance, namely the
E lease, would offer a price taking note of the
  encumbrances. Naturally such a price would be less than
  the price of a property without any encumbrances. But
  when a land is acquired free from encumbrances, what
  is acquired is not only the landlord's right, but also the
F lessee's rights. In such a case compensation awarded is
  for the property free from encumbrances, which includes
  the lessee's rights also. [Para 10] (826-F-H; 827-A-E]

       1.6. As the High Court has already determined Rs.78
G per sq.m. as the compensation in regard to the adjoining
  lands acquired under the same notification vide its
  judgment dated 14.10.2008 (Dy. Collector (Development)
  and Land Acquisition Officer, Panaji v. Smt. Sitadevi & Ors.
  in FA No.12312003) and the said judgment has attained
H finality, there is no reason why the same compensation
RAJENDRA VASSUDEV DESHPRABHU (D) THR. LRS. v. 821
            DY. COLLECTOR & ANR.

should not be awarded for the land in the instant case             A
also. Thus, the order of the High Court is modified by
increasing the compensation for the acquired land from
Rs.17 per sq.m. to Rs.78 per sq.m. [Paras 11 and 12] [828-
D-G]
                                                                   B
     M. B. Gopala Krishna and Ors. v. Special Deputy
Collector, LandAcquisition (1996) 3 SCC 594: 1996 (2) SCR
248; Dy. Collector( Development) and Land Acquisition
Officer; Panaji v. Smt. Sitadeviand Ors. in FA No.123/2003
- referred to.
                                                                   c
                      Case Law Reference:
    1996 (2) SCR 248           Referred to.          Para 10
    CIVIL APPELLATE JURISDICTION : Civil Appeal No.
8539 of 2011.                                                      D
    From the Judgment & Order dated 14.10.2008 of the High
Court of Bombay at Goa in First Appeal No. 138 of 2003.
    L. Nageswara Rao, A. Raghunath for the Appellants.
                                                                   E
     Siddharth Bhatnagar, Pawan Kumar Bansal, T. Mahipal for
the Respondents.

    The Judgment of the Court was delivered by

    R.V.RAVEENDRAN, J. 1. Leave granted.
                                                                   F
     2. An extent of 1,06,864 sq.m. of land including 5070 sq.m.
of land in Survey No. 284 (Part) in Pernem village of which the
appellants are co-owners was acquired in pursuance of
preliminary notification dated 12.1.1990 (Gazetted on
1.2.1990). By award dated 27.3.1991, the Land Acquisition          G
Officer awarded compensation for the acquired land atthe rate
of Rs.17 per sq.m. As there were three tenants, namely,
Krishna Arjun Kauthankar, Keshav Bhikaji Kauthankar and
Harischandra Bhikaji Kauthankar and as the co-owners had
admitted their tenancy righ!s. the Land Acquisition Officer        H
    822     SUPREME COURT REPORTS                [2011) 11 S.C.R.


A   directed that the compensation to be divided between the
    owners and the tenants at the rate of 50% each. The reference
    court, by judgment daed 22.11.2002, increased the
    compensation from Rs.17 per sq.m. to Rs.175 per sq.m. The
    appeal by the State was allowed by a division bench of the
s   Bombay High Court, by the impugned judgment dated
    14.11.2008. The High Court set aside the judgment and award
    of the reference court, thereby restoring the award of Rs.17/-
    per sq.m. by the Land Acquisition Officer, on the following
    reasoning:
c       " ..... the Applicants' acquired portion was garden land but
        tenanted and the tenants had become deemed purchasers
        of the same and the only interest which the applicants had
        in the said land was to receive the purchase price, and in
        such a case no willing purchaser would have ventured to
D      -purchase such a land for building purposes or for that
        matter for any other purpose from the applicants. The said
        Krishna Arjun Kauthankar and others were in possession
        of the land and had become deemed owners of the same.
        The learned reference court was not right in assessing the
E       value of the acquired land as having building potential
        based on several awards/sale instances which were of
        land dissimilar to the acquired land."

       3. The said judgment is challenged in this appeal by
F special leave. At the outset the appellants submitted that Late
  RajinderVasdev Deshprabhu (of whom appellants are the LRs.)
  and his brother late Raghuraj Vasdev Deshprabhu were the co-
  owners of the property,-and on their death their respective legal
  heirs have becol)"le the owners thereof; that the land was
G tenanted and is in occupation of Krishan Arjun Kauthankar and
  two others and vested in the tenants on the Tiller's day in terms
  of section 18A of the Goa, Daman and Diu Agricultural Tenancy
  Act, 1964 ('Tenancy Act' for short). They submitted that they do
  not dispute the award of the Land Acquisition Officer
  apportioning 50% of the compensation to the landlords and
H
 RAJENDRA VASSUDEV DESHPRABHU {D) THR. LRS. v. 823
    DY. COLLECTOR & ANR. [R.V. RAVEENDRAN, J.]
 50% to the tenants; and that out of 50% payable to landlords,        A
 the appellants are entitled to one half as the LRs. of Rajendra
 V.Deshprabhu and the remaining half is payable to the legal
 heirs of Raghuraj V.Deshprabhu. In other words the appellants
 restrict their claim to 25% of the award amount and submitted
 that even in regard to any increase in compensation, they are        B
 entitied to only 25%.

      4. The appellants contend that in regard to the remaining
 extent of land acquired under the same notification, the High
 Court by judgment dated 14.11.2008 in FA No. 123/2003 (The
 Deputy Collector (Dev.) & LAO, Panaji vs. Smt. Sita Devi) had        C
 determined the compensation as Rs.78 per sq.m. and therefore
 the compensation should have been the same in regard to their
 land also. Therefore question for consideration is whether the
 compensation for the acquired land should be increased to
 Rs.78/- per sq.m.                                                    D

        5. Respondents do not dispute that in regard to the
  adjoining lands compensation has been determined by the High
· Court at Rs. 78/- per sq.m. in Deputy Collector vs. Sita Devi
  (FA No.123/2003 decided on 14.11.2008) and that order not           E
  having been challenged, has attained finality. They also do not
  dispute the position that if the acquired land had not been
  subject to any tenancy right, the land owners would have been
  entitled to compensation at the said rate of Rs.78 per sq.m.
  They however contend that the land in question was different        F
  from the other acquired lands for which Rs.78/- per sq.m. has
  been awarded as compensation. They supported the judgment
  of the High Court on the following grounds:

       (i)   As the land was in the occupation of tenants, the
             appellants as owners would not have been able to         G
             sell the said land to any willing purchaser and obtain
             the market value. Even the tenants had obtained a
             purchase certificate under section 18H, they could
             not have sold the property, as there 'Was a
             restriction on transfer of the land purchased by the     H
    824           SUPREME COURT REPORTS                 [2011] 11 S.C.R.


A                  tenant in section 18K of the Tenancy Act which
                   required previous sanction of the Mamlatdar for
                   sale.

          (ii)     Section 3 of the Tenancy Act provided that when a
                   request is made by the owner of an agricultural land
B
                   to convert it to non agricultural purpose, the authority
                   concerned can grant conversion, or in public
                   interest prohibit the conversion. There was thus no
                   absolute right to get the land converted to non
                   agricultural use and develop it for other non-
c                  agricultural purposes.

          (iii)    Section 2 of the Goa Land Use (Regulations) Act,
                   1991 ('Land Use Act' for short) provides that no
                   land which vested in the tenant under the provisions
D                  of the Tenancy Act shall be used or allowed to be
                   used for any purpose other than agriculture. As the
                   land in question had vested in the tenants on the
                   Tiller's Day (8.10.1976), the land had to be used
                   only for agricultural purposes. The land therefore did
E                  not have the potential for development for any non-
                   agricultural purpose and therefore will have to be
                   valued only as an agricultural land. Even as
                   agricultural land, the market value will not be the
                   normal market value as it was tenanted.
F       6. We are not required to decide in this appeal, either the
  entitlement of the landlords/owners for compensation or the
  extent of share in the compensation. It is an admitted position
  that the land is tenanted and vested in the tenants under section
  18A of the Tenancy Act on the Tiller's Day (that is, 8.10.1976)
G and the tenants are deemed to have purchased the land. The
  purchase price under section 18D of the Tenancy Act was not
  however paid to the landlords and no purchase certificate had
  been issued to the tenants under section 18H of the Tenancy
  Act. According to the appellants, where land is acquired under
H the Land Acquisition Act, 1894, before payment of the purchase
RAJENDRA VASSUDEV DESHPRABHU (D) THR. LRS. v. 825
   DY. COLLECTOR & ANR. [R.V. RAVEENDRAN, J.]
price to the landlords under section 1BD of Tenancy Act and         A
before the iSS!-Je of purchase certificate to the tenants under
section 1BH of the Tenancy Act, inspite of the vesting under
section 18A of the Tenancy Act, the compensation will be
divided equally between the landlord and tenant as per standing
instructions of the government. The appellants contend that the     B
said procedure had been followed tSy the Land Acquisition
Officer in making the award by holding that 50% of the
compensation was payable to the landlords and 50% of
compensation was payable to the tenants. The appellants
submitted that neither the landlords, nor the tenants, have         c
disputed the said apportionment and therefore this appeal
does not involve any issue relating to entitlement to
compensation or apportionment thereof. It was further submitted
that the only issue in this appeal relates to the quantum of
compensation. In view of the said submission, we have only
                                                                    0
considered the question of quantum in this appeal, and have
not examined the rights of the landlord vis-a-vis the tenants.

      7. We may first deal with the contention of the respondents
with reference to the regulation of land use under the Land Use
Act. Section 2 of the said Act provides that no land which is       E
vested in a tenant under the provisions of the Tenancy Act shall
be used or allowed to be used for any purpose other than
agriculture. If the Land Use Act was applicable to the land at
the time of acquisition, then the land could be used only as
agricultural land and could be valued only as an agricultural       F
land. But the Land Use Act, came into force with effect from
2.11.1990. The relevant date for the purpose of determination
of compensation is the date of publication of preliminary
notification under section 4(1) of the Land Acquisition Act, 1894
which is 1.2.1990. On that day the Land Use Act was not in          G
force and consequently there was no restriction that the use
land vested in the tenant should be used only for agricultural
purposes. Therefore the market value of the land could be
determined with reference to the development potential for non
agricultural purposes.                                              H
    826      SUPREME COURT REPORTS                (2011] 11 S.C.R.

A      8. The next contention of the respondents is that a land
  purchased by a tenant under Chapter llA of the Tenancy Act,
  could not be sold without the previous sanction of Mamlatdar,
  under section 18K of the Tenancy Act. The mere fact that the
  sanction has to be obtained from Mamlatdar for sale of such
B land would not depress the price of the land, nor affect its
  potential for being developed as residential or industrial use.

        9. The next contention of the respondents was based on
    Section 3 of the Tenancy Act. Section 3 provides that if any
C owner of agricultural land applies for conversion thereof for non-
  agricultural use, the Government may, instead of granting
  conversion, prohibit such conversion in public interest. The risk
  not being permitted to convert the land should also be taken
  note of while assessing the market value with reference to
  development potential of the land. Such a contingency exists
D in regard to all agricultural lands and is not specific to the
  appellants. lnspite of section 3 of Tenancy Act, compensation
  has been determined as Rs.78/- per sq.m. for neighbouring
  agricultural lands and we see no reason why the said rate
  should not apply to the land in question also.
E
      10. The High Court committed an error in holding that the
  compensation for the land in question should be lesser than the
  compensation for a land which is not subject to tenancy. It relied
  upon the decision of this Court in M.B. Gopala Krishna & Ors.
F v. Special Deputy Collector, Land Acquisition (1996) 3 SCC
  594 wherein this Court observed :

          "A freehold land and one burdened with encumbrances do
          make a big difference in attracting willing buyers. A free
          hold land normally commands higher compensation while
G         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."

H         The said principle will apply only where a property subject
RAJENDRA VASSUDEV DESHPRABHU (D) THR. LRS. v. 827
   DY. COLLECTOR & ANR. [R.V. RAVEENDRAN, J.]

to encumbrances is to be sold to a private purchaser or is            A
acquired subject to the tenancy. The decision of this Court made
those observations when upholding the compensation that was
payable to the landlord, without reference to the tenant's rights,
where the tenant did not claim any compensation. But in this
case, the landlords have been awarded only 50% of the                 B
compensation amount and remaining 50% has been awarded
to the tenants. The High Court has mixed up a sale subject to
encumbrances with an acquisition free from encumbrances
under the Land Acquisition Act, 1894. The two are conceptually
different. If a property subject to a lease and in the possession     c
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, but not possession and that the sale in his
favour will be subject to an encumbrance, namely the lease, will
offer a price taking note of the encumbrances. Naturally such
                                                                      0
a price would be less than the price of a property without any
encumbrances. But when a land is acquired free from
encumbrances, what is acquired is not only the landlord's right,
but also the lessee's rights. In such a case compensation
 awarded is for the property free from encumbrances, which
 includes the lessee's rights also. We may illustrate by the          E
 following example:

     Let us assume the value of a property which is not subject
     to any lease is Rs.Ten lakhs. If that property was subject
     to a lease and if the possession was with the lessee, a          F
     purchaser will offer only Rs.Five lakhs as he will be
     purchasing a property with an encumbrance and will not
     be getting physical possession. But when the property
     subject to a lease is acquired, under the Land Acquisition
     Act, 1894, what is acquired is not only the landlord's right,    G
     title and interest, but also the lessee's right and interest.
     In- other words the property with all rights, free from
     encumbrances is acquired and the compensation is
     determined and paid for the property as one free from
     encumbrances. The rights of lessor as well as lessee are         H
    828        SUPREME COURT REPORTS                 [2011] 11 S.C.R.


A          extinguished. Therefore compensation payable will be the
           entire market value that is Rs.Ten lakhs which may be
           shared by the lessors and lessee at the rate of Rs.Five
           lakhs each or such other ratio as may be determined with
           reference to the extent of their respective rights. The Land
B          Acquisition Officer issue notice to all persons interested
           and hears them before making the apportionment of the
           compensation among the persons interested. The 'market
           value' of the property free from encumbrances 3cquired by
           the State will not therefore be the same as the price a
c          purchaser may pay to buy the property subject to a lease
           (encumbrances).

       11. As the High Court has already determined Rs. 78 per
  sq.m. as the compensation in regard to the adjoining lands
  acquired under the same notification vide its judgment dated
0 14.10.2008 (Dy. Collector (Development) and Land
  Acquisition Officer, Panaji v. Smt. Sitadevi & Ors. in FA
  No.12312003) and the said judgment has attained finality, there
  is no reason why the same compensation should not be
  awarded for this land also. The appellants have no grievance
E in regard to the apportionment made by the Land Acquisition
  Officer at the rate of 50% for the landlords and 50% for the
  tenants. The tenants apparently have not raised any dispute in
  regard to the apportionment. It is mad~ clear that if any dispute
  regarding apportionment is pending, this decision shall not be
F construed as determining the percentage of entitlement of
  appellants or other co-owners (not before us) or the tenants (not
  before us).

       12. In view of the above, this appeal is allowed and the
G order of the High Court is modified by increasing the
  compensation for the acquired land from Rs.17 per sq.m. to
  Rs. 78 per sq.m. All statutory benefits are also granted.

    N.J.                                             Appeal allowed.