THE SPECIAL LAND ACQUISITION OFFICER, BANGALOREversusV.T. VELU AND ORS.

A           THE SPECIAL LAND ACQUISITION OFFICER, BANGALORE
                                                                                       \
                                    v.
                           V.T. VELU AND ORS.

                                 JANUARY 16, 1996

B                  [K. RAMASWAMY AND G.B. PATTANAIK, JJ.]


          Land Acquisition Act, 1Ei94/Requisitioning and Acquisition of Immov-
    able Property Act, 1952 :

C         Sections 4( 1), 11, 1817.B~ward qf compensation-Determination qf
    compensation on sq. ft basis-Held : Wrong principle of law especially when
    large extents of lands sought to be acquired for public purposes-Deduction
    towards developmental charges~ot to be refused merely because there is a
    connecting road to the lands~lso taking into account the potentiality of land
    for building purposes, compensation enhanced.
D
            CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 2526-27 of
    1996.

          From the Judgment and Order dated 27.8.91 of the Karnataka High
    Court in M.F.A. No. Ill to 112 of 1983.
E
            M. Veerappa for the appellant.

            V.A. Bobde and K. J. John for the Respondent.

            A.D.N. Rao for the Respondent No. 5.
F
            The following Order of the Court was .delivered :

            Leave granted.

          Notification under Section 4( I) of the Land Acquisition Act I of 1894
G   (for short, 'the Act') was published in the State Gazette on April 27, 1972
    acquiring I acre 6 guntas of land for defence purpose. It is not in dispute that
    the property was requisitioned under Section 8 of the Acquisition and
    Requisition of Immovable Property Act 1952 (for short, 'the Property Act')
    on 29.3.1965 and possession thereof was taken. Subsequently, under Section
H   7 of the Property Act, for determination of the rentals payable to the
                                          566
       SPL. LAND ACQUISITION OFFICER BANGALORE v. V.T. VELU                 567
requisitioned property, market value of the property was fixed at Rs. 4 per         A
sq. ft. and rents were paid on that basis. After notification under Section 4(1)
was published, the Collector made his award on 31.1.1976 under Section 11
of the Act determining the compensation at Rs. 24,250 p~r acre.- Dissatisfied
there with, on reference under Section 18, the Court enhanced the compen-
sation by its award and decree made under Section 26 of the Act on June             B
30, 1982 at Rs. 75,000 per_ acre. On appeal by the State as well as by the
claimants, the High Court in the impugned judgment dated 27.8.1991 made
in M.F.A. Nos. 111 and 112 of 1983 dismissed the State appeal and enhanced
the compensation in the claimants' appeal to Rs. 5 per sq. ft.

       The High Colirt proceeded on the finding that the lands were well            c
developed as on the date of the requisition as well as on the date of publishing
the notification under Section 4( I) of the ~ct. When the rentals under Section
7 of the Property Act was determined at the rate of Rs. 4 per sq. ft., the
determination of the compensation, after 8 years in 1972 at the rate of 5 per
sq. ft. would be just, fair and adequate. As regards the deduction of 53%           D
towards developmental charges,. the High Court found that since the lands
were situated already in developed area, deduction was not warranted.
Therefore, no deduction was made. Thus these appeals by special leave and
the cross objections filed by the respondents.
                                                                                    E
       Shri Veerappa, the learned counsel for the State, contended that the
view of the High Court is wholly unreasonable. As on the date of requisition,
the lands were only agricultural lands and that after the establishment of the
Defence Establishment, the lands were bound to be developed and that will
not be a relevant circumstance in enhancing the compensation. The lands
are yet to be required for development and that, therefore, deduction of 53%        F
as held by this Court would be proper deduction and that the High Court
was not right in holding that the compensation at 5 per sq. ft. and without
deduction, is arbitrary. On the other hand, it has been contended by Shri
Bobde, the learned senior counsel for the claimants/respondents that there
is a steep gradual increase in prices every year; when the Court had                G
determined the compensation at Rs. 4 per sq. ft., as early as in 1965, taking
gradual rise in prices the claimants are entitled at least to Rs. I 0 per sq. ft.
It is further contended that the High Court has determined the value at Rs.
5 · per sq. ft. and the finding of the High Court is not unreasonable or
arbitrary. It is also contended that since the lands have already been              H
    568                      SUPREME COURT REPORTS                  [ 1996] I S.C.R.
A   developed, there is no need for deduction of I/3rd or 53% as contended for
    and that, therefore, the High Court was right in its conclusion that the lands
    command market value at Rs. 5 per sq. ft. without deduction.

           Having given our consideration to the respective contentions, the
    question that arises for consideration is : what would be the reasonable
B
    compensation for the acquired lands? It is true that rentals were determined
    for the lands requisitioned as on 29.3.1965 at.Rs. 4 per sq. ft. It would be
    appropriate to consider at this stage that there is a distinction between the
    determination of rentals and determination of compensation ultimately to be
    paid to the land. As far as the scope for determination of rentals is concerned,
c   it would be appropriate to proceed on the basis of sq. ft.; perhaps that
    principle was rightly applied and rentals determined. But the said principle
    will not hold good to determine compensation for the acquired land. The
    question is : whether a normal, ordinary and prudent man, in given
    circumstances, would be willing to purchase I acre and 6 gunthas of land
D   when offered in normal market conditions on sq. ft. basis? If the property
    is situated in well developed cities like Nariman Point in Bombay and
    Connaught Place in Delhi or other similar industrially well developed areas,
    the offer for sale on sq. ft. basis may be understandable. One would, as a
    prudent purchaser, shudder to purchase lands on sq. ft. basis. Determination
E   of market value on sq. ft. basis would be arbitrary and is an irrational
    principle of law. It is now settled by series of judgments of this Court that
    determination of the compensation on sq. ft. basis is a wrong principle of Jaw,
    particularly when large extents of lands are sought to be acquired for public
    purpose. Therefore, the High Court has proceeded on a wrong premise to
    determine the compensation on the basis of sq. ft.
F
           The next question is : whether the lands are possessed of potential
    value? It is true that in the year 1965, when the lands were acquired, they were
    agricultural lands though they were converted into non-agricultural lands. But
    due to the establishment of defence establishment, the lands were converted
G   into residential purpose. But as in 1972 the lands were possessed of potential
    value for building purpose. It may be legitimate to determine market value on
    the square yard basis. When that is done reasonably certain amount has to be
    deducted towards developmental charges. When such large extent of land is
    sought to be used for building purposes, necessarily internal roads are to be
H   laid and drainage and other civic amenities are required to be provided. On
        I           SPL. LAND ACQUISITION OFFICER BANGALORE v. V.T. VELU                 569
            that premise at least 1/3 of the land acquired is to be set part for road purpose,   A
            developmental purpose and other civic amenities. Only when genuine sale
            deeds of small extent were the basis to determine compensation, 53% and
            in some cases 60% deduction was upheld by this Court. The mere fact that
            there is a connecting road to the lands by itself is not· a correct principle of
            law in refusing to deduct towards developmental charges. Considered from             B
            this perspective and considered from the point of potentiality, we think that
        '   the· reasonable and adequate compensation to which the lands would be
    "       possessed would be Rs. 1,50,000 per acre. This amount would be just, fair
            and adequate compensation.

                    The claimants are, therefore, entitled to compensation at Rs. 1.50           C
            lakhs per acre with interest at 9% per annum on the enhanced compensation
            for one year from the date of Section 4(l)"notification and 15% per annum
            till date of deposit into Court. They are also entitled to solatium at 30% on
    .,      the enhanced compensation. The High Court has committed grievous error
            in granting additional amount @ 12% per annum under Section 23(1A) of                D
            the Act since the award of the Collector was made as early as. on January
            31, 1976.

                   The· appeals are accordingly allowed but, in the circumstances, without
            costs. The cross objections are dismissed. No costs.

            G.N.                                                           Appeals allowed .

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