Holding

The Court excluded the low‑priced sale deed, limited the development cost deduction to 40%, and enhanced compensation to Rs 2,87,200 per acre with statutory benefits.

Summary

The State acquired 38.48 acres of land in Jharsa, Gurgaon, Haryana for a jail under the Land Acquisition Act, 1894. The Land Acquisition Collector initially awarded compensation based on land categories, which the Reference Court enhanced uniformly to Rs 36.20 per square yard. The appellants challenged the award, arguing that a low‑priced sale deed relied upon by the Collector was a distress sale and should be excluded, and that the one‑third deduction for development cost was excessive and irrelevant to the purpose of acquisition. The Supreme Court held that the low‑priced deed must be excluded and that a 40% deduction for development cost was appropriate, leading to a compensation of Rs 59.34 per square yard (Rs 2,87,200 per acre) plus statutory benefits. The Court also clarified that the purpose of acquisition cannot be used to increase market value and that Section 24 bars consideration of future use. Consequently, the appeals were partly allowed and the compensation was enhanced.

Issues considered

The relevance of a low‑priced sale deed (potential distress sale) in determining market value under Section 23.
Whether a deduction for development cost should be made when market value is derived from small residential plots.
The appropriate percentage of deduction for development cost in this context.
Whether the purpose of acquisition (a jail) can affect the deduction or the market value.
The applicability of Section 24 in prohibiting consideration of future use or purpose in valuation.

Legislation cited

Land Acquisition Act, 1894s. 23, s. 24

Subjects

Land acquisitionCompensationDevelopment cost deductionSection 23Section 24Market valueDistress saleSolatiumInterest

Judgment

(2009] 15 (ADDL.) S.C.R. 287

SUBH RAM & ORS. A
v.
HARYANA STATE & ANR.
(Civil Appeal No. 5844 of 2004)
OCTOBER 20, 2009
B
[R.V. RAVEENDRAN AND G.S. SINGHVI, JJ.]

Land Acquisition Act, 1894:
' s. 23 - Compensation - Determination of - Deduction c
towards development cost - Large tracts of agricultural land
acquired for establishment of a jail - Land Acquisition
Collector awarded compensation ranging from 40, 0001- to
60, 0001- per acre according to category of land - Reference
court enhancing compensation to Rs. 36. 20 per sq. yd.
+ D
(Rs. 1, 75, 200 per acre) uniformly for all categories of land -
High Court declining to interfere - HELD: The sale-deed relied
on by State disclosing the price less than the rate awarded by
Land Acquisition Collector being grossly undervalued or a
distress sale has to be excluded from consideration - When
E
market value of large tract of land acquired are compared with
the instances of sale of small residential plots, it is necessary
to make an appropriate deduction towards development cost
~ ... - Concept of deduction of development cost explained - In
the instant case, instances of sale being of 1981-82 and the
land in question having been acquired under Notification F
dated 22. 11. 1984, adding 12% per annum cumulatively for two
years not challenged by State - It would be appropriate to limit
the deduction to 40% towards deveiopment cost - Thus,
compensation for acquired land enhanced to Rs.59.34 per sq.
yd.( Rs. 98.90 minus 40%) or Rs.2,87,2001- per acre - G
Claimants will also be entitled to all statutory benefits viz.
~
solatium of 30% u/s 23(2), additional amount of 12% from the
date of preliminary notification to date of award uls 23(1 )(a) -

287 H
288 SUPREME COURT REPORTS [2009] 15 (ADDL.) S.C.R.

A Interest on total compensation less the amount awarded by
LAC at 9% per annum for one year from the date of taking
possession and 15% per annum thereafter.

s. 24 - Matters to be neglected for determination of
compensation - Purpose of acquisition - Consideration of -
8 HELD: The Act prohibits the court from taking into
consideration any increased value of the land acquired likely
to accrue from the use to which it will be put when acquired.

Viluben Jhalejar Contractor (d) by Lrs. Vs State of
C Gujarat 2005 (3) SCR 542; Nelson Fernandes and Ors.
vs Special Land Acquisition Officer South Goa & Ors. 2007
(3) SCR 563; Lal Chand vs. Union of India 2009 (11) Scale
627; Tarlochan Singh vs. State of Punjab 1994 (6) Suppl.
SCR 200; Raj Kumar vs. State of Punjab 1995 (1) SCR 184;
o Administration Genl. of WB. vs. Collector Varanasi 1988 (2) +
SCR 1025; Mirza Nausherwan Khan vs. Collector Land
Acquisition Hyderaf)ad 1975 (2) SCR 184; Padma Uppal
vs. State of Punjab 1977 (1) SCR 329; Chimanlal
Hargovinddas vs. Special Land Acquisition Officer Poona
E 1988(1) suppl. SCR 531, referred to.

Case Law Reference:
2005 (3) SCR 542 referred to para 6
2007 (3) SCR 563 referred to para 6
F
2009(11) Scale 627 referred to para 7
1994 (6) Suppl. SCR 200 referred to para 12
1995 (1) SCR 184 referred to para 12
G
1988 (2) SCR 1025 referred to para 12.1
1975 (2) SCR 184 referred to para 12.1

1977 (1) SCR 329 referred to para 12.1

H
SUBH RAM & ORS. v. HARYANA STATE & ANR. 289

1988 (1) Suppl. SCR 531 referred to para 12.2 A

CIVIL APPELLATE JURISDICTION : Civil Appeal No.
5844 of 2004.

From the Judgment & Order dated 31.3.2004 of the High
Court of Punjab & Haryana at Chandigarh in R.F.A. No. 904 of B
1989.

WITH

C.A. No. 1503-1504, 1505-1506 of 2005, 2893 of 2009 C
& 5226-5230 of 2007.

Gagan Gupta, Parmanand Gaur, L.R. Khatana, S.
Rajappa, Prashant Khatana for the Appellants.

Kamal Mohan Gupta for the Respondents. D
The Order of the Court was delivered by

ORDER

R.V. RAVEENDRAN J., 1. These appeals relate to E
determination of compensation for 38.48 acres of land in village
Jharsa, Tehsil & District Gurgaon, Haryana, acquired for
,. . . . establishment of a jail. The acquisition was initiated under
preliminary notification dated 22.11.1984, issued under section
4(1) of the Land Acquisition Act, 1894 ('Act' for short). Land F
Acquisition Collector CLAC' for short) by his award dated
22.8.1985, offered compensation at the rate of Rs.60,000/- per
acre for chahi land, Rs.50,000/- per acre for aabi land and
Rs.40,000/- per acre for gair mumkin land. The Reference
Court increased the compensation uniformly to Rs.36.20 per
sq.yd. (that is Rs.1,75,200/- per acre) by judgment and award G
41 dated 26.9.1989. The appeals filed by the land owners for
further enhancement were dismissed by the High Court, by the
impugned judgments dated 11.2.2004, 31.3.2004, 11.2.2004
and 7.11.2006.
H
.,_
\_

290 SUPREME COURT REPORTS [2009) 15 (ADDL.) S.C.R.

A 2. Before the Reference Court, claimants relied upon sale
deeds marked as Ex.P-1 to P-12 relating to the period 1981
and 1982 (except Ex.PB which was dated 28.7.1983) which
disclosed an civerage price of Rs.78/85 per sq.yd in Jharsa
village. The said sale deeds related to small residential plots
B varying in size between 167 sq.yards to 665 sq.yds. The
Reference Court deducted one-third of such price (that is
Rs.26.25) towards development cost and arrived at the market
value as Rs.52.60 per sq.yd.during 1981-82. As the market
value of the acquired lands had to be determined as on 'j

c 22.11.1984, the date of notification under section 4(1) of the
Act, the reference court increased the said market value of
Rs.52/60, at the rate of 12% per annum, for two years (that is,
by Rs.12/62) and ·arrived at a market value of Rs.65/22. The
Reference Court was of the view that it should also take note
of the sale deed relied on by the LAC, namely Ex. R-2 dated
D
27.11.1984 which related to sale of one acre of land for +
Rs.30000/- which worked out to Rs.6.19 per sq.yd. The
Reference Court took the ayerage of Rs.65.22 which was the
rate disclosed by-theSale deeds relied on by the claimants and
Rs.6.19 being the rate disclosed by the sale deed relied on by
E the LAC and awarded the same as compensation. Though the
average works out to Rs.35/70, the compensation awarded
was Rs.36/20 per sq.yd. This determination was affirmed by
the High Court. ...JJ

F 3. The claimants have filed these appeals aggrieved by
the said juagments. contending that the compensation awarded
is inadequate. The appellants have urged the following two
contentions:

(i) that EA.R2 dated 27.11.1984 relied on by the LAC •'
G ought to have been excluded from consideration,
while determining the market value; and
~
(ii) that the deduction of one-third of the market value
of small plots, towards development cost, is
H
SUBH RAM & ORS. v. HARYANA STATE & ANR. 291
[RV. RAVEENDRAN, J.]
erroneous and no deduction ought to have been A
t made.

The appellants submit that if these two corrections were made,
the market value would have been Rs.98/91 per sq.yd (that is
Rs. 78/85 plus 12% per year cumulatively for two years) to be
I

rounded off to Rs.100/- per sq.yd. B

Re : First Contention
~
_.... 4. Ex. R.2 dated 27.11.1984 relied on by the LAC relates
, to sale of one acre of land for a price of Rs.30,000/- per acre. c
This is far less than the compensation that was offered by the
LAC. Having regard to the large variance between the market
value disclosed by the twelve sale deeds exhibited and relied
upon by the Oclaimants (average of which is Rs. 78/85) and
the market value disclosed by Ex R2 (Rs.6/19 per sq.yd) relied
D
upon by LAC and having regard to the fact that the value
disclosed by Ex. R2 was even less than what was offered by
the LAC, it has to be inferred that Ex R2 was either grossly
undervalued or was a distress sale and has to be excluded from
consideration, as being unreliable.
E
5. If Ex R2 is excluded, the average of the prices disclosed
by the twelve sale deeds relied on by the claimants, that is
Rs.78/85 per sq.yd, would be indicative of the market value in
-'!---
1981-82. The addition of 12% per annum for two years was
not challenged by the respondents. By adding 12% per annum F
cumulatively for two years, the market value of small residential
plots in the area neighbouring the acquired lands of that village,
as on 22.11.1984, can be taken as Rs.98/90 per sq.yd. To
determine the value of large tract of acquired land, it is
necessary to make an appropriate deduction therefrom G
towards development cost. Having regard to the fact that all the
acquired lands adjoin a State Highway (Gurgaon Alwar Road)
and the proximate availability of facilities which can be easily
accessed for development, it would be appropriate to limit the
deduction to 40% towards development cost, instead of the
H
292 SUPREME COURT REPORTS [2009] 15 (ADDL.) S.C.R.

A usual higher percentage of deduction ranging from 50% to 67%.
· Thus, the market value would work out to be Rs.59/34 per sq.yd
(Rs.98/90 minus 40%) or Rs.2,87,200/- per acre.

Re : Second Contention

B 6. We will now deal with the contention of the appellants
that no deduction need be made towards development cost,
from the market value of residential plots, for the purpose of
determining the market value of the acquired lands in this case.
It is noydisputed by appellants that usually a deduction towards
c development cost is necessary when the 'wholesale' market
value of large undeveloped land is determined with reference
to ·retail'· market value of small developed plots. But their
contention is that having regard to the purpose of acquisition
(construction of a jail), which does not involve any development
o activity, no deduction should be made from the market value
of small developed plots. The said contention is bpsed on the
premises that the purpose for which the land is acquired is a
relevant factor to decide whether any deduction should be
made towards development cost or not. The appellants
E contend that as the acquisition was for construction of a jail,
there will be no need set apart any part of the land for formation
of roads, drains, parks etc. nor spend any amount for
development of the land into a layout. They submitted that the
observation of this Court in Viluben Jha/ejan 0 Contractor VS.
State of Gujarat [2005 (4) SCC 789] and ·Nelson Fernandes
F vs. Special Land Acquisition Officer [2007 (9) SCC 447] that
the purpose for which acquisition is made, is also a relevant
factor for dec.1rllng the compensation, lends support to thefr
contention. The contention of the appellants proceeds on a
misunderstandi' ig cind misconstruction of the legal position
G relating to deductions.

7. What is the concept ct c1eduction of development cost
to arrive at market value? If the market value of a large tract of
agricultural and or undeveloped non-agricultural land
H
SUBH RAM & ORS. v. HARYANA STATE & ANR. 293
[RV RAVEENDRAN, J.]

possessing potential for development is to be determined with A
f reference to the market value of a small residential plot situated
in a neighbouring residential layout, it becomes necessary to
work back the market value of the large tract of undeveloped
land from the market value of the small residential plot. This is
because the value of one square yard of undeveloped land is 8
not the same as one square yard of developed residential plot.
If there is a large tract of agricultural or undeveloped land,
obviously the entire extent cannot be sold as residential plots .
• ., If the agricultural or undeveloped land has to be sold as
residential plots, it is first necessary to make a layout of plots c
in such land. This would mean that a provision will have to be
made for roads to provide access to each plot in the layout. In
a standard layout with plots measuring say 2500 sq.ft. (50'x 50')

-
each, to provide road access to each plot, it will be necessary
to provide a road after every two rows of plots. If the depth of
D
~
each plot is 50', and if the road width is 25 feet, then for every
two strips of plots~lhere will have to be a strip of road of 25
feet. This means a minimum of 25% of the total land area will
be utilised for roads. A typical layout will also have cross-roads,
and areas earmarked for park, and/or community areas.
Consequently non-saleable area (area which cannot be sold as E
plots) would be around 3°0% to 40% of the total area. Therefore,
in the hypothetical layout method of determination of market
'- ...- value, as a first step, the areas that will be used up for roads,
drains, parks/playgrounds and community areas, will have to
be excluded from the total extent of the acquired land. The F
standard deduction in this behalf is one-third (33%). But merely
deducting the areas required for roads, drains, parks and
community areas, will not convert a large tract of agricultural or
undeveloped land into a developed residential layout. For that,
considerable financial outlay has to be made. The land will have G
to be levelled. The land will have to be converted from
agricultural use to non-agricultural residential use by paying
necessary fees/fine to the Revenue/development authorities.
Then the roads will have to be asfJhalted or concreted. Drains
H

....
294 SUPREME COURT REPORTS [2009] 15 (ADDL.) S.C.R.

A will have to be dug and lined with reinforced cement concrete
or stone, for drainage of rain water. Electricity, water, and \
sewage lines will have to be laid. Deposits will have to be made
to the Authorities dealing with electricity, water, sewage
removal. The development will also involve the service of
B surveyors, engineers and developers. All these involve
considerable expenditure. Further, as there will be a time gap

-
between the expenditure for development and the actual sale
of plots, the cost of development will also have an element of
interest on investment. The developer who undertakes the ...,
c development and invests the monies for evelopment would also
expect a reasonable profit when the plots are sold. All these
expenditure and factors are standardised into another one-third
(33%) deduction towards expenses of development. Thus, if the

D
valuation of a large extent of agricultural or undeveloped land
is to be based on the sale price of a small developed plot in a
private layout, then the standard deductions should be one-third
(for roads etc.) plus one-third (for expenditure of development)
+
-
in all two thirds (or 67%), as 'development cost' from the value
of small plot. The percentage of deduction may however vary
between 20% to 75% depending on several circumstances
E (See : Lal Chand vs. Union of India - 2009 (11) SCALE 627,
paras 8 and 9 for illustrations of such cfrcumstances) .
.-
8. Therefore, when deduction is made from the.value of a
--4..,
small residential plot towards the development cost, to arrive
'F at the value of a large tract of agricultural or undeveloped land
with development potential, the deduction has nothing to do with
the purpose for which the land is acquired. The deduction is
with reference to the price of the small residential plot, to work
back the value of the 'large tract of undeveloped land. On the
~

G other hand, where the value of acquired agricultural land is
determined with reference to the sale price of a neighbouring
agricultural land, no deduction peed be made towards
'development cost'.

9. It is not doubt true that this Court !n some decisions has
H

·"'
SUBH RAM & ORS. v. HARYANA STATE & ANR. 295
[RV RAVEENDRAN, J.]
observed that purpose of acquisition will also be relevant. But A
.., it is made in a different context. The Land Acquisition Collectors
in some cases adopt belting methods for valuation of land, with
reference to a focal point, that is either with reference to the
distance from the main road, or distance from a developed
area. Lands that adjoin a developed area or a main road is B
given a higher value than a land farther away from the road or
the developed area. The Land Acquisition Collectors also award
.., different compensation depending upon whether the acquired
• land is a dry land or wet/irrigated land. When different
categories of lands (or lands with different situational c
advantages) are acquired for the same purpose, say for
forming of a residential layout, courts have sometimes felt that
determination of their value with reference to previous status
or situation should be avoided and a uniform rate of
- '"(·
compensation should be awarded for all lands acquired under
the same notification. The logic employed by the court is that
D
categorising the lands acquired for a common purpose, say for
a residential colony, into high value irrigated land and low value
dry lands is meaningless, as all lands are to be levelled and
used for the same purpose that is for formation of a residential
layout and once the layout is formed, it makes no difference E
whether the land was previously a land with irrigation facilities
or a dry land. It is in this context, in some cases, to avoid the
-·)--- need to differentiate the lands acquired under a common
notification for a common purpose, and to extend the benefit
of a uniform compensation, courts have observed that the F
purpose of acquisition is also a relevant factor. The said
observation may not apply in all cases and all Circumstances
as the general rule is that the land owner is being compensated
for what he has lost and not with reference to the purpose of
acquisition. G

10. The purpose of acquisition can never be a factor to
increase the market value of the acquired land. We may give
two examples. Where irrigated land belonging to 'A' and dry
land of 'B' and waste land of ·c·
are acquired for purpose of
H
296 SUPREME COURT REPORTS [2009) 15 (ADDL.) S.C.R.

A submergence in a dam project, neither ·s· nor ·c· can contend
~
that they are entitled to the same higher compensation which
was awarded for the irrigated land, on the ground that all the ,.:
lands were acquired for the same purpose. Nor can the Land
Acquisition Collector tiold that in case of acquisition for
B submergence in a dam project, irrigated land should be
awarded lesser compensation equal to the value of waste land,
on the ground that purpose of acquisition is the same in regard
to both. The principle is that the quality (class) of land, the
situation of the land, the access to the land are all relevant .. 1!-

c factors for determination of the market value. But in certain
acquisitions, in certain circumstances, for lack of detafled or
clear evidence, courts have chosen to ignore the difference in
the quality/situational advantages and treat all lands equally for
awarding uniform compensation having regard to the common ...
purpose of acquisition. How far such a course is proper or valid
D t
may be debatable. Whether such a procedure is legally valid
or proper or not, may have to be decided in the context of the
respective acquisitions. All that has to be noticed in the context
of the i~ue before us, is that the use to which the acquired land
may be put, can have no bearing upon the deduction to be
E made towards development cost. Nor can the purpose of
acquisition be used to increase the compensation awardable
with reference to the expected profits'from the future user. The
observation that purpose of acquisition is a relevant factor, i-'
unless properly understood and carefully applied with reference
F to special circumstances, may lead to absurd or unjust results.
It is accepted generally that residential plots are costlier than
industrial plots, and commercial plots are costlier than
residential plots. If the purpose of acquisition is a relevant factor
in determining compensation, then it would lead to the absurd .....
G and unjust situation, that the compensation payable for the same
land will be different, depending upon the purpose of the
acquisition; and that compensation will be less if the acquisition
is for a sewage treatment plant, more if the acquisition is for
an industrial layout, much more if acquisition is for residential
H layout and highest if the acquisition is for commercial value. The
...
'
SUBH RAM & ORS. v. HARYANA STATE & ANR. 297
[R.V. RAVEENDRAN, J.]
purpose of acquisition cannot therefore be a factor to increase A
i the compensation.
',J
11. Deduction of 'development cost' is the concept used
to derive the 'wholesale price' of a large undeveloped land with
reference to the ·retail price' of a small developed plot. The
B
difference between the value of a small developed plot and the
value of a large undeveloped land is the 'development cost'.
.. Two factors have a bearing on the quantum (or percentage) of
deduction in the ·retail price' as development cost. Firstly, the
"" percentage of deduction is decided with reference to the extent
and nature of development of the area/layout in which the small c
developed plot is situated. Secondly, the condition of the
acquired land as on the date of preliminary notification, whether
it was undeveloped, or partly developed, is considered and
.... Dappropriate adjustment is made in the percentage of
deduction to take note of the developed status of the acquired D
~
land. The percentage of deduction (development cost factor)
will be applied fully where the acquired land has no
development. But where the acquired land can be considered
to be partly developed (say for example, having good road
access or having the amenity of electricity, water etc.), then the E
development cost (that is percentage of deduction) will be
modulated with reference to the extent of development of the
~ .. acquired land as on the date of acquisition. But under no
circumstances, the future use or purpose of acquisition will play
a role in determining the percentage of deduction towards F
development cost.

12. Section 24 of Land Acquisition Act prohibits the court
from taking into consideration any increase to the value of the
land acquired, likely to accrue from the use to which it will be
put when acquired. A three-judge Bench of this Court in G
Tarlochan Singh vs. State of Punjab - 1995 (2) SCC 424 held

"Section 24 of the Land Acquisition Act expressly prohibits
and puts an embargo on the Court in taking the factors H
...
298 SUPREME COURT REPORTS [2009) 15 (ADDL.) S.C.R.

A mentioned in section 24 as relevant in determining the
market value. Under these circumstances, the future t
development and potential prospective use of the -.,·
acquisition etc., are not relevant circumstances. Even the
purpose of acquisition is not relevant."
B
(emphasis supplied)

The above position was reiterated in Raj Kumar vs. State of
Punjab - 1995 (3) SCC 121. This Court led : ,.. ......
~

c "..... The purpose of acquisition i.e. to establish market and
on its account the lands are possessing potential value,
is irrelevant by operation of section 24 of the Act."

(12.1.) Administrator General of West Bengal vs. ....
Collector, Varanasi, [1988 (2) SCC 150] contains a precise
D statement as to. the concept of deducting development cost. -)-
This Court stated:

"It is trite proposition that prices fetched for small plots
cannot form safe bases for valuation ot large tracts of
E land as the two are not comparable properties. ..... The
principle that evidence of market value of sales of small,
developed plots is not a safe guide in valuing large extents
of land has to be understood in its proper perspective. The -;~

principle requires that prices fetched for small developed
F plots cannot directly be adopted in valuing large extents. """;
However, if it is shown that the large extent to be valued
............. .is ripe for use for building purposes; that building
lots that could be laid out on the land would be good selling
propositions and that valuation on the basis of the method
of hypothetical lay out could with justification be adopted,
G
then in valuing such small, laid out sites the valuation
·~
indicated by sale of comparable small sites in the area at
or about the time of the notification would be relevant. In
such a case, necessary deductions for the extent of land
required for the formation of roads and other civil
H
...
SUBH RAM & ORS. v. HARYANA STATE & ANR. 299
[R.V. RAVEENDRAN, J.]
amenities; expenses of development of the sites by laying A
out roads, drains, sewers, water and electricity lines, and
the interest on the outlays for the period of deferment of
the realisation of the price; the profits on the venture etc.
are to be made. In Sahib Singh Ka/ha v. Amritsar
Improvement Trust [1982 (1) SCc 419J, this Court 8
indicated that deductions for land required for roads and
other developmental expenses can, together, come up to
as much as 53 per cent. But the prices fetched for small
plots cannot directly be applied in the case of large areas,
for the reasons that the former reflects the ·retail' price of c
land and the latter the 'wholesale' price.

(emphasis supplied)

This Court referred to and relied upon several earlier decisions
including three Judge Bench decisions in Mirza Nausherwan D
Khan v. The Collector (Land) Acquisition, Hyderabad [1975
(1) SCC 238] and Padma Uppal v. State of Punjab [1977 (1)
sec 330J.
(12.2.) In Chimanlal Hargovinddas vs. Special Land E
Acquisition Officer - 1988 (3) SCC 751, this Court held :

" ..... a large block of land will have to be developed by
+- preparing a lay out, carving out roads, leaving open space,
plotting out smaller plots, waiting for purchasers
(meanwhile the invested money will be blocked up) and the F
hazards of an entrepreneur. The factor can be discounted
by making a deduction by way of an allowance at an
appropriate rate ranging approx, between 20% to 50% to
account for land required to be set apart for carving out
lands and plotting out small plots. The discounting will to G
some extent also depend on whether it is a rural area or
urban area, whether building activity is picking up, and
whether waiting period during which the capital of the
entrepreneur would be locked up, will be longer or shorter
and the attendant hazards". H
300 SUPREME COURT REPORTS [2009] 15 (ADDL.) S.C.R.

A It should be noted that deduction of 20% to 50% referred to
therein is only in regard to the land to be earmarked for roads,
community areas etc. and does not refer to the further deduction
towards the expenses of development.

(12.3.) In KS. Shivadevamma vs. Asstt. Commissioner
B
& Land Acquisition Officer [1996 (2) SCC 62], this Court held

"It is then contended that 54% is not automatic but
depends upon the nature of the development and the
c stage of development. We are inclined to agree with the
learned counsel that the extent of deduction depends upon
developm~nt need in each case. Under the Building Rules
53% of land is required to be left out. This Court has laid
as a general rule that for laying the roads and other
D amenities 33-1/3% is required to be deducted. Where the
development has already taken place, appropriate
deduction needs to be made. In this case, we do not find
any development had taken place as on that date. When
we are determining compensation under Section 23(1), as
E on the date of notification under Section 4(1 ), we have tO
consider the situation of the land development, if already
made, and other relevant facts as on that date. No doubt,
the land possessed potential value, but no development '1
had taken place as on the date. In view of the obligation
F on the part of the owner to hand over the land to the City
Improvement Trust for roads and for other amenities and
his requirement to expend money for laying the roads,
water supply mains, electricity etc., .the deduction of 53%
and further deduction towards development charges @ 33-
1/3%, as ordered by the High Court, was not illegal."
G
(12.4.) :In Atma Singh vs. State of Haryana .: 2008 (2)
SCC 568 this Court reiterated the settled principles regarding
deductions thus :

H "The reasons given for the principle that price fetched for small
SUBH RAM & ORS. v. HARYANA STATE & ANR. 301
[R.V. RAVEENDRAN, J.]

plots cannot form safe basis for valuation of large tracks of A
1
land, according to cases referred to above, are that substantial
area is used for development of sites like laying out roads,
drains, sewers, water and electricity lines and other civic
amenities. Expenses are so incurred in providing these basic
amenities. That apart it takes considerable period in carving 8
out the roads making sewers and drains and waiting for the
purchasers. Meanwhile the invested money is blocked up and
. the return on the investment flows after a considerable period
of time. In order to make up for the area of land which is used
in providing civic amenities and the waiting period during which c
the capital of the entrepreneur gets locked up a deduction from
20% onward, depending upon the facts of each case, is made."

13. The legal position is therefore clear and well settled.

·• But in Atma Singh, after reiterating the said principle regarding
deduction of development cost, this Court made an observation
that no deduction need be made having regard to the purpose
of acquisition, which requires to be clarified. We extract the
D

relevant portion below:

"15. The question to be considered is whether in the E
present case those factors exist which warrant a deduction
by way of allowance from the price exhibited by the
.... _,. exemplars of small plots which have been filed by the
parties. The land has not been acquired for a Housing
Colony or Government Office or an Institution. The land has F
been acquired for setting up a sugar factory. The factory
would produce goods worth many crores in a year. A sugar
factory apart from producing sugar also produces many by-
product in the same process. One of the by-products is
molasses, which is produced in huge quantity. E~rlier, it
G
had no utility and its disposal used to be a big problem.

------· But now molasses is used for production of alcohol and
ethanol which yield lot of revenue. Another by product
degases is now used for generation of power and press
mud is utilized in manure. Therefore, the profit from a sugar
H
302 SUPREME COURT_REPORTS [2009] 15 (ADDL.) S.C.R

A factory is substantial. Moreover, it is-not confined to one
year but will accrue every year so long as the factory runs. t
A housing board does not run on business lines. Once
plots are carved out after acquisition of land and are sold
to public, there is no scope for earning any money ir:i future.
8 An industry established on acquired land, if run efficiently,
earns money or makes profit every year. The return from
the land acquired for the purpose of Housing Colony, or
Offices, or Institution cannot even remotely be compared
with the land which has been acquired for the purpose of
,,
c setting up a factory or industry: After all the factory cannot
be set up without land and if such land is giving substantial
return, there is no justification for making any deduction
from the price exhibited by the exemplars even if they are
of small plots. It is possible that a part of the acquired land
D
might be used for construction of residential colony for the
staff working in the factory. Nevertheless where the
.., \

remaining part of the acquired land is contributing to
production of goods yielding good profit, it would not be
proper to make a deduction in the price of land shown by
the exemplars of small plots as the reasons for doing so
E assigned in various decisions of this Court are. not
applicable in the case under consideration."

The· above observations no doubt seem to suggest that where y
the acquisition is for a residential lay out, deduction towards
F development cost is a must, but if the acquisition is for an
industry which does not require forming a layout of sites, the
market value of small residential plots may be adopted without
any cuts towards development cost. The said observafr:.; 1s are
made with refere nee to the special facts of that case. If they
G are read out of context to support a c0ntention that the purpose
of acquisition is a relevant factor to avoid the deduction of
development cost in valuation, it may then be necessary to
consider the said observations as having been made per
incuriam, as they overlook a mandatory statutory provision --
·---
section 24 (clause fifthly) of the Act and the series of decisions
H
f
SUBH RAM & ORS. v. HARYANA STATE & ANR. 303
[R.V. RAVEENDRAN, J.]

of larger benches of this Court which hold that when value of A
large tracts of undeveloped lands is sought to be determined
with reference to small residential plots in developed area, it
is mandatory to deduct an appropriate percentage towards
development cost. But it may be unnecessary to consider
whether the observations are per incuriam as para 15 of the s
decision makes it clear that what is stated therein, is with
reference to the special facts of that case, with a view not to
disturb the smaller deduction of 10% by the High Court, and
not intended to be statement of law.

Relevancy of other acquisitions in the same village
c
14. Learned counsel for the appellant3 lastly contended that
having regard to two judgments of Punjab & Haryana High Court
relating to acquisition in the same village in Azad Singh vs.
State of Haryana & Anr. (RFA No.2 of 1991 decided on D
30.9.1997) and Kabul Singh & Ors. vs. Haryana State & Anr.
(RFA No.556 of 1994 decided on 13.5.1999) the
compensation to be awarded should not be less than Rs.68/-
(plus 25%) per sq.yd. In both cases Rs.68/- per sq. yard was
awarded as compensation for acquisitions of land in village E
Jharsa in the years 1982 and 1983. It was also submitted that
as the subject acquisition was two years later in 1984, at least
25% should be added to Rs.68/- per sq.yd. But the map of the
area produced by the appellants show that the lands which
are the subject matter of those two decisions are more F
advantageously situated as they adjoin National Highway No.8
and are· next to well developed areas (like Hidayatpur
Cantonment, etc.) whereas the acquired lands are farther away
from National Highway No.8 and any developed area. Hence,
the said decisions, though relating to Jharsa village, are not of G
any assistance.

Conclusion

15. In view of the above, we allow these appeals in part
and increase the compensation for the acquired lands to H
304 SUPREME COURT REPORTS [200~] 15 (ADDL.) S.C.R.

A Rs.2,87,200/- per acre. The appellants will also be entitled to
all statutory benefits, that is solatium at 30% under section 23(2)
of the Act, additional amount at 12% from the date of
, preliminary notification to date of award under section 23( 1A)
of the Act, and interest on the total compensation less the
s amount awarded by the LAC, at 9% per annum for·one~year
from the date of taking possession and 15% PA thereafter.
Parties to bear respective costs.

R.P. Appeals partly allowed.