Holding

The market value of the land is Rs 6 per square yard and, after deducting one‑third for development, the compensation is Rs 4 per square yard; the appeal is allowed.

Summary

The State acquired 5 acres 589‑1/3 sq. yards of land in Vishakapatnam for a housing scheme in 1963. The initial compensation of Rs 1.58 per sq. yard was enhanced by the Civil Court to Rs 10 per sq. yard with 15% solatium and 4% interest, a figure affirmed by the High Court. On appeal, the Supreme Court examined the proper method of fixing market value under Section 23(1) of the Land Acquisition Act, 1894, holding that the price a willing seller would obtain on the date of the acquisition notification is the appropriate measure. The Court accepted the sale transactions of the same land (purchase at Rs 0.42 and sale at Rs 5 per sq. yard) as evidence and fixed the market value at Rs 6 per sq. yard, after which a one‑third deduction for development of roads, drainage and amenities was applied, yielding a net compensation of Rs 4 per sq. yard. The appeal was allowed, directing payment of the revised amount with solatium and interest.

Issues considered

The correct determination of "market value" of land under Section 23(1) of the Land Acquisition Act, 1894.
Whether recent sale transactions of the same land should be considered in fixing market value.
The appropriate percentage deduction from market value for development charges in a housing scheme.

Legislation cited

Constitution of Indias. Article 136
Land Acquisition Act, 1894s. 23(1), s. 4(1)

Subjects

Land acquisitionMarket valueCompensationValuationDeduction for developmentSection 23Housing schemeSupreme CourtArticle 136

Judgment

A
SPL. TEHSILDAR LAND ACQN. VISHAKAPATNAM
v.
SMT. A. MANGALA GOWRI

AUGUST 9, 1991

B [N.M. KASLJWAL AND K. RAMASWAMY, JJ.]

Land Acquisition Act, 1894: Section 23-Acquisition of land-
Compensation-Market value-Fixation of-Principles to be followed
-Acquisition for housing scheme-Valuation of land-Deduction
from the market value for development of land-Dependant on situa-
tion of land and need for development.
c
Constitution of India, 1950: Article 136---Land Acquisition-
Compensation-Valuation of /and-When Supreme Court would
interfere.

D The respondent's land admeasurin~ 5 acres-589-1/3 Sq. yards was
acquired by the State Government in 1963 for a housing scheme and
compensation at Rs.1.58 per Sq. yard was awarded. On reference, the
Civil Court enhanced the compensation to Rs.IO per Sq. yard with
solatium at I5 per cent and interest at 4 per cent. On appeal and cross 1- •.
appeals, the High Court confirmed the award.
E
In the appeal before this Court, on behalf of the Department, it
.was contended that the respondent had purchased the land in question
in I96I in three documents at Rs.0.42 p. per sq. yard and sold in I963
one acre of the land at Rs.5 per sq. yard and, therefore, the deeds under
which the transactions took place reflected the prevailing market value ,
F of the land in question, and courts below committed grave error in ~
relying on a decision of the High Court awarding Rs.IO per sq. yard in
respect of another land acquired under a Notification of I96I, and that
when a large extent of land was acquired for a housing scheme, at least
I/3 of the land should be deducted towards laying the roads, setting up
parks, drainage and other amenities.
G
Allowing the appeal, this Court,

HELD: I.I The market value postulated in Section 23(1) of the +- ~
Land Acquisition Act, I894 is designed to award just and fair compensa-
tion for the lands acquired. The word "market value" would postulate
H price of the land prevailing on the date of the publication of the notifica-

472
TEHSILDAR v. A.M. GOWRI 473

lion under Section 4(1). In determining the market value of the land,
A
the price which a willing vendor might reasonably expect to obtain from
a willing purchaser would form the basis. For ascertaining the market
.• ...( rate, the Court can rely upon such transactions which would offer a
reasonable basis to fix the price. The price paid in sale or purchase of
the land acquired within a reasonable time from the date of the acquisi-
tion of the land in question would be .the best piece of evidence. In its B
absence the price paid for a land possessing similar advantages to the
land in neighbourhood of the land acquired in or about the time of the
notification would supply the data to assess the market value. [475E-G I
Periya & Pareekanni Rubbers Ltd. v. Siate of Kera/a, [1990]
Supp. I SCR 362, referred to.
1.2 In the instant case, admittedly, the claimant purchased land c
at Rs.0.42 p. and in a span of one year and four months, sold at Rs.5 per
sq yard. When the claimants themselves sold as a willing seller of an
acre ofland @Rs.5 per sq. yard, if a large extent offive acres and odd under
acquisition is offered to be sold as a block, it would not fetch higher rate
h.ut surely he negotiated for a lesser rate, if not the same market value D
of Rs.5 due to time lag of nine months. May be the payment of Rs.10 per
sq. yard to the owner of another land acquired in 1961 was a windfall.
Taking the totality of the facts and circumstances, the High Court
committed grave error in completely ignoring the sale transactions of the
lands under acquisition. In view of the time lag, the prevailing market
value of the land as on the date of the notification would be Rs.6 per E
sq. yard. [476B, E-G I

1.3 In Building Regulations, setting apart the lands for develop-
ment of roads, drainage and other amenities like electricity etc. are
condition precedent to approve lay out for building colonies. Therefore,
based upon the situation of the land and the need for development, the F
deduction shall be made. Where acquired land is in the midst of already
developed land with amenities of roads, drainage, electricity etc.
then deduction of 1/3 would not be justified. In the rural areas
housing schemes relating to weaker sections, deduction of 1/4 may be
justified. [477G-H, 478A]
G
Sp!. Tehsildar, Vishakapatnam v. Rednam .Dharma Rao & Ors.,
CA No. 4187of1982 decided on July 17, 1990; Tribeni Devi & Ors. v. Col-
lector of Ranchi, [1972] 3 SCR 208 at 213; Smt. Kaushalya Devi Bogre &
Ors. etc. v. The Land Acquisition Officer, Aurangabad, [1984] 2 SCR
900; Vijay Kumar Motilal v. State of Maharashtra, [1981] 2 SCC 719;
Vijaysingh Liladhar v. Special Land Acquisition Officer, [1983] 3 SCC H
474 SUPREME COURT REPORTS (1991) 3 S.C.R.

760; Sp!. Land Acquisition Officer, Bangalore v. T. Adinarayan Setty,
A
(1959) Sppl. I seR 404 and The Tehsi/dar, Land Acquisition, Vishakapa-
tnam v. P. Narasing Rao & Ors., (1985) 1 APLJ. 99, relied on.

1.4 In the instant case, 1/3 of the market value should be
deducted for development of the lands. [478B)
B
1.5 The market value is determined at Rs.6 per sq. yard and
after deducting 1/3 for development of lands, it would be Rs.4 per
sq. yard. [478C)

2. It is settled law that when wrong application of a principle has
been made or important points affecting valuation have been over-
c looked or misapplied by the High Court or Reference Court, this Court
would, under Article 136 of the Constitution, correct the same.

The Sp/. Land Acquisition Officer, Bangalore v. T. Adinarayan
Setty, (1959) Suppl. 1 SCR 41141; Dattatrayaya Shankarbhat Ambalgi
D and Ors. v. The Collec;tor of Sholapur and Anr., AIR (1970) SC
850=(1971) 3 sec 43; The Dollar Co. Madras v. Collector of Madras,
(1975] Suppl. sec 403 and Padma Uppal etc. v. State of Punjab &
Ors., (1977) 1 SCR329, relied on.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1351
E of 1976.

From the Judgment and Order dated 24.11.1975 of the Andhra
Pradesh High Court in A.S. No. 691of1972.

T.V.S.N. Chari forthe Appellant.
F
A. Subba Rao and A.D.N. Rao for the Respondents.

The Judgment of the Court was delivered by

K. RAMASWAMY, J. This appeal by special leave arises against
G the Division Bench judgment dated November 24, 1975 in A.S. No.
691of1972 of the A.P. High Court fixing the market value@ Rs.10
per square yard. The facts lie in a short compass are stated thereunder.
By notification under section 4( 1) of the Land Acquisition Act 1894 (in
short 'the Act') was published in the State Gazette on November 21,
1963 to acquire 5 acres-589-1/3 sq. yards in T.S. No. 981, Block No. 34
H of Waltair Ward, Vishakapatnam for a housing scheme. The Collector
TEHSILDAR v. A.M. GOWRI [RAMASWAMY, J.] 47.S

awarded at Rs.1.58 per sq. yard and on reference, the Civil Court A
enhanced the compensation to Rs.10 per sq. yard with solatium at 15
per cent and interest at 4 per cent. The respondent claimed @ Rs. 12
per sq. yard. On appeal and cross appeals the High Court confirmed
the award and dismissed the appeal as well as cross objections for
enhancement to Rs.12 per sq. yard. Two contentions have been raised
by Shri Narsimahachari, the learned counsel for the appellant. Under B
Ex. B. 6 dated August 3, 1961; under Ex. B-7 dated Sept. 5, 1961 and
Ex. B-8, dated Sept. 8, 1961 the respondent purchased one acre-1936
sq. yards in each documents in the same T.S. No. 981@ -0.42 p. per
sq. yard. He sold on January 24, 1963 in an extent of one acre under
Ex. B. 10 @ Rs.5 per sq. yard. Therefore, the aforesaid sale deeds,
Ex. B. 6, B. 7, B. 8 and B. lOwill reflect the prevailing market value of
the land in question. The Trial Court and the High Court committed
c
grievous error in placing reliance on a decision of the High Court in
A.S. No. 191of1967 dated November 11, 1970 awarding@ Rs.10 per
sq. yard in respect of 6, 209 sq. yards in T.S. No. 1008, Block No. 39,
Waltair Beach Road which was acquired under a notification datr;I
March 19, 1961 for the purpose of Caltex Oil Refinery. The price fixed D
therein does not reflect the correct market value while the bona fide
sale deed of purchase and sale by the respondents relating to the
acquired land are available on records and form correct basis. The
courts below committed grave error of law in completely excluding
those sale transactions and relying upon that judgment. We find force
in the contention, though Shri Subba Rao, learned counsel for the E
respondent vehemently resisted, it. It is settled law by catena of deci-
sions that the market value postulated in s. 23(1) of the Act designed
to award just and fair compensation for the lands acquired. The word
"market value" would i>ostulate price of the land prevailing on the
date of the publication of the notification under section 4(1). This
Court repeatedly laid the acid test that in determining the market F
value of the land, the price which a willing vendor might reasonably
expect to obtain from a willing purchaser would form the basis to fix
the market value. For ascertaining the markei rate, the Court can rely
upon such transactions which would offer a reasonable basis to fix the
price. The price paid in sale or purchase of the land acquired within a
reasonable time from the date of the acquisition of the land in question G
would be the best piece of evidence. In its absence the price paid for a
land possessing similar advantages to the land in the neighbourhood of
the land acquired in or about the time of the notification would supply
the data to assess the market value. It is not necessary to cite all the
decisions suffice to state that in a recent judgment in Periya &
Pareekanni Rubbers Ltd. v. State of Kera/a, [1990] Supp. 1 SCR H
476 SUPREME COURT REPORTS [1991] 3 S.C.R.

362 a bench of this Court, to which one of us K.R.S., J., was .a
A
m~mber surveyed all the relevant precedents touching the points.
In· the light of the settled legal position let us consider whether
the High Court and the Civil Court are justified in excluding the
sale deeds completely and to place reliance on another judgment
of the Division Bench of the High Court of A.P. Admittedly, the
B claimant is a vendee in Ex. B. 6 to B. 8 @ -0.42 paise. In a
span of one year and four months, they sold@ Rs.5 per sq. yard, It is
common knowledge that proposal for acquisition would be k11own to
everyone in the neighbourhood, in particular, to the owners of the
property and it is not uncommon that sale transactions would be
brought into existence before the publication of s. 4(1) notification so
as to form the basis to lay higher claim for compensation. We do
c assume that Ex. B. 10 is a genuine and bona fide sale transaction. In
respect of one acre of the land in the self-same land when sold at Rs.5
per sq. yard, would it fetch in a short period of nine months, double
the market value, namely.@ Rs.10 per sq. yard. We have no doubt
that it would not get that price for S acres and odd area. It is
D undoubted that in respect of a notification of 1961 in which another
T.S. number in the locality, namely, T.S. No. 1008, ultimately, the
High Court awarded @ Rs. JO per sq. yard. Perhaps had there been no
bona fide or genuine sale transaction relating to the self-same land, the
reliance placed on that judgment may be justified but exclusion of
bona fide and genuine sale transactions in respect of the same land
E under acquisition and to place reliance on the award of some other
land is obviously illegal. When the claimants themselves sold as a

-
willing seller of an acre of land@ Rs.5 per sq. yard large extent of five
acres and odd under acquisition, if it is offered to be sold as a block, it
would not fetch higher rate but surely be negotiated for a lesser rate if ,,
not the same market value@ Rs.5 due to time lag of nine months. No
F attempt was made by the respondent to explain under what circums-
tances they came to sell their lands @ Rs.5 per sq. yard when they
expect higher value @ Rs.10 per sq. yard. May be the payment of
Rs.10 per sq. yard, be wind fall to the owner of the land in T.S. No.
1008, Taking the totality of the facts and circumstance, we hold that
the High Court committed grave error to completely ignore the sale
G transactions of the lands under acquisition. In view of the time lag we
have no hesitation to conclude that the prevailing market value of the .....
land as on the date of the notification would be Rs.6 per sq. yard.

It is next contended by Shri Narsimahachari that when a large
extent of land was acquired for a housing scheme, at least 1/3 of the
H land should be deducted towards laying the roads, setting up parks,
TEHSILDAR v. A.M. GOWRI [RAMASWAMY, J.] 477

drainage and other amenities. The High Court committed manifest A
error in omitting to deduct 1/3 of the land.

Shri Subba Rao, the learned counsel for the respondent con-
tended that the High Court had noted this contention of the appellant
and considered that the market value of the land would be Rs.12 per
sq. yard and after giving the deduction of 1/3 it would come to Rs: 10. B
The reasoning of the High Court is proper and warrants no interfe-
rence. In support thereof he placed reliance in Sp/. Tehsildar,
Vishakapatnam v. Rednam Dharma Rao & Ors., C.A. No 4187 of
1982, dated July 17, 1990 wherein this Court had upheld the deduction
of 1/5 from the market value towards developmental charges. It is
settled law that the High Court and the Reference court when made C
wrong application of a principle or important points effecting valua-
tion has been over looked or misapplied, this Court would under Art.
136 correct the same, vide The Sp/. Land Acquisition Officer, Banga-
lore v. T. Adinarayan Setty, [1959] Suppl. 1 S.C.R. 404; Dattatrayaya
Shankarbhat Ambalgi and Ors. v. The Collector of Sholapur and Anr.,
AIR 1970 SC 850=[1971] 3 S.C.C. 431; The Dollar Co., Madras v. D
Collector of Madrl11', [1975] Supp. SCC 403 and Padma Uppal Etc. v.
State of Pun1ab & Ors., [197711SCR329.

In Tribeni Devi & Ors. v. Collector of Ranchi, [1972] 3 S.C.R.
208 at 213, this Court held that "in order to develop that area at least
the value of 1/3 of the land will have to be deducted for roads, drainage E
and other amenities". On this basis the value of the land at
Rs.2,08,135.70 per acre would, after the deduction of 1/3 come to
Rs.1,38,757 per acre. In Smt. Kaushalya Devi Bogre & Ors. etc. v. The
Land Acquisition Officer, Aurangabad, [1984] 2 S.C.R. 900 this Court
held that deduction of 1/3 was held to be reasonable. In Vijay Kumar
Motilal v. State of Maharashtra, [1981] 2 SCC 719 !/3rd was deducted F
towards developmental charges in undeveloped area. In Vijaysingh
Liladhar v. Special Land Acquisition Officer, [ 1988] 3 SCC 760 the
deduction of !/4th by the High Court which was not challenged in this
court was upehld. In Sp/. Land Acquisition Officer, Bangalore v. T.
Adinarayan Setty, supra, deduction of 25 per cent was held to be
reasonable. It is to be noted that in building Regulations, setting apart G
the lands for development of roads, drainage and other amenties like
electricity etc. are condition precedent to approve lay out for building
colonies. Therefore, based upon the situation of the land and the need
for development the deduction shall be made. Where acquired land is
in the midst of already developed land with amenities of roads, drain-
age, electricity etc. then deduction of 1/3 would not be justified. In the H
'
478 SUPREME COURT REPORTS ( 1991] 3 S.C.R.

A rural areas housing schemes relating to weaker sections deduction 1/4
may be justified. On that basis, this court in R. Dharma Rao's case
upheld deduction of 1/5 because the owner while obtaining the lay out
had already set apart lands for road and drainage. Therefore, deduc-
tion of 1/3 would be reasonable. In fact in The Tehsi/dar, Land Acquis-
ition, Vishakapatnam v. P. Narasing Rao & Ors., I 1985] l A.P.L.J. 99,
B
a Division Bench of the High Court surveyed judgments of the High
Court relating to housing schemes of Vishakapatnam upholding
deduction of 1/3 to be reasonable. Accordingly we hold that 1/3 of the
market value should be deducted for development of the lands. The
High Court committed greivous error in giving a curious reasoning of
valuing at Rs. 12 and upholding Rs.10 to be the market value after
c deduction, though the market value was determined at Rs.10. Accord-
ingly the appeal is allowed. The market value is determined at Rs.6 per
sq. yard and after deducting 1/3 the market value is Rs.4 per sq. yard.
The respondents are entitled to 15 per cent Solatium on market value
and 4 per cent interest thereon from the date of dispossession. But in
the circumstances parties are directed to pay and receive their own
0
costs.

N.P.V. Appeal allowed.

... '