Holding

The sale of land after a Section 4(1) notification is void against the State; compensation is to be determined on the market value as of the notification date, without reliance on basic‑valuation registers, and subsequent development is irrelevant.

Summary

The Uttar Pradesh Jal Nigam acquired 0.23 acres of land for a pumping station by publishing a Section 4(1) notification on 8 March 1973, taking possession on 5 July 1973 and issuing a Section 6 declaration on 9 October 1973. The respondent, Kalra Properties, purchased the land in 1989 after the acquisition and sought compensation, relying on a High Court order that fixed compensation at Rs 200 per square foot based on the Collector’s valuation using the basic valuation register. The Supreme Court held that the sale was void against the State, the purchaser acquired no title, and therefore could not challenge the acquisition but could claim compensation as a person interested. It ruled that compensation must be based on the market value as of the date of the Section 4(1) notification, not on later basic‑valuation circulars, and that subsequent development of the area is irrelevant under Section 24. The Court found the Collector’s reliance on the basic valuation register illegal and determined compensation of Rs 25,000 plus 6% interest and a 15% solatium. Accordingly, the appeal was allowed and the writ petition disposed.

Issues considered

The acquisition lapsed under Section 11‑A because possession was taken before the Section 6 declaration.
Whether a purchaser who bought land after a Section 4(1) notification acquires any title or interest.
Whether the purchaser can claim compensation as a person interested under Section 23(1).
The proper method for determining market value for compensation – can the basic valuation register be used?
The effect of subsequent development of the land on compensation under Section 24.
The appropriate basis (per square foot vs. acreage) for assessing compensation for a large parcel of land.

Legislation cited

Amendment Act 68 of 1984
Land Acquisition Act, 1894s. 11-A, s. 17(2), s. 17(4), s. 23(1), s. 24, s. 4(1), s. 48(1), s. 5A, s. 6, s. 9

Subjects

Land acquisitionCompensationMarket valueBasic valuation registerSection 11‑AVoid saleSolatiumInterestState acquisition

Judgment

\ '

THE U.P. JAL NIGAM, LUCKNOW THROUGH A
ITS CHAIRMAN AND ANR.
v.
MIS KALRA PROPERTIES (P) LTD., LUCKNOW AND ORS.

JANUARY 17, 1996
B
[K. RAMASWAMY AND G.B. PATTANAIK, JJ.]

Land Acquisition Act, 1894 : Sections 4( 1), SA, 6, 11-A, 17(2), 17(4),
23(1), 24 and 48(1).
c
Land Acquisition-Notification and Declaration-Possession of land
taken by State before publication of declaration-Purchase of land there-
afte~laim of compensation by purchase,-Held sale was void against
Stat&-Purchaser acquired no interest in land-Cannot challenge the notifica-
tion-But can claini compensation as a person interested.
D
~ Compensation-Determination of-Land acquired in undeveloped
area-Subsequent development held i1relevant for determination of compen-
sation.

Compensation-Circulars issued by State Govemment-Dete1mination E
of compensation on the basis of Basic . Valuation Registe,-Hefd illegal.

_. Proceedings for acquisition of land which is the subject matter of
appeal were initiated to enable the Appellant-Nigam to set up a pumping
station to drain out flood water from low lying areas. While the Notifica-
tions under sections 4(1), 17(4) and 5-A of the Land Acquisition Act, 1894 F
were published on 8th March, 1973, the declaration under section 6 was
published on October 9, 1973. However, the possession of land was taken
before publication of the declaration. Subsequent thereto the respondent
purchased the acquired land under a sale deed for a consideration of Rs.
60,000 and filed a writ claiming compensation for the acquired land. A G
Division Bench of the High Court directed that compensation should be
paid @ Rs. 200 per square foot as determined by the Collector. The
Collector had determined the compensation as per basic valuation cir-
culars issued by the Government of U.P.

In appeal to this Court it was contended for the appellant that in H
683
(
684 SUPREME COURT REPORTS [1996] 1 S.C.R.

A determining the compensation the Collector had committed an obvious
error on the face of record and conse11uently the directions issued by the ,.(
High Court were vitiated by manifest error of law.

For the respondent it was contended that (i) the notification under
section 4(1) and the declaration under section 6 stood lapsed by operation
B of section 11-A because possession of the land was not valid as it was taken
before publication of declaration. Therefore, the respondent was entitled
to compensation on the basis of prevailing market value; and (ii) as the
circulars issued by the U.P. Government accepted the position that the
basic valuation would form the basis for determination of compensation
C under section 23(1), the High Court was right in accepting the valuation
made by the Collector.

Allowing the appeal, this Court

HELD: 1. After the notification under Section 4(1) is published in the
D Gazette any encumbrance created by the owner does not bind the Govern- •
ment and the purchaser does not acquire any title to the property. In this r
case, notification under Section 4(1) was published on March 24, 1973.
Possession of the land was taken on July 5, 1973 but declaration under
Section 6 was published later. Power under Section 17(4) was exercised
E dispensing with the enquiry under Section SA and on service of the notice
under Section 9 possession was taken, siilce urgency was acute viz., pump·
ing station house was to be constructed to drain out flood water. Conse ..
quently, the land stood vested in the State under Section 17(2) free from all
encumbrances. Once possession is taken, by operation of Section 17(2), the
land vests in the State free from all encumbrances unless a notification
F under Section 48(1) is published in the Gazette withdrawing from the
acquisition. Section 11-A, as amended by Act 68 of 1984, therefore, does not
apply and the acquisition does not lapse. The notification under Section
4(1) and the declaration under Section 6, therefore, remain valid. (688-B-F]

G 2. Since the respondent had purchased the lanrl after the notification
under Section 4(1) was published, the sale is void against the State and it
ae<1uired no right, title or interest in the land. Consequently, it cannot
challenge the validity of the notification or the regularity in taking posses-
sion of the land. (688-F-G]

H 3. The instructions issued by the Government for determination of
U.P.JALNIGAMv. KALRAPROPERTIES(P)LTD. 685

the market value on the basis of basic valuation register were illegal. The A
Collector was obviously wrong in determining the compensation under
Section 23(1) on the basis of prevailing rates in 1992 as per basic valuation
circulars. [689-H, 690-H]

Jawajee Nagnathan v. Revenue Divisional Officer Adilabad, A.P. &
Ors., (1994] 4 SCC 595, relied on B

State of U.P. & Ors. v. Shau Singh, (1995) HVD Vol. I 191, approved.

4. The original owner has the right to compensation under Section
23(1) of the Act. Consec1uently, though the respondent acquired no title to C
the land, at best he would be entitled to step into the shoes of the owner
and claim payment of the compensation as a person interested, but,
according to the provisions of the Act. [688-H, 689-A]

5. The price prevailing as on the date of the publication of the notifica- D
ti on under Section 4(1) is the price to which the owner or person who has an
interest in the land is entitled to. Accordingly, the compensation should be
determined on the basis of the market value of the acquired land prevailing
as on March 1973. During that period the lands were not in a developed
condition. In course of time, the area might have been fully developed. But
by operation of Section 24 of the Act, the subsequent development is ir- E
relevant for determination of the compensation. [689-A-B, 690-B-D]

6. When a large extent of land is acquired, it cannot be determined
rm square foot basis. Therefore, it should be determined only on the basis
of acreage. If the principle of determination of compensation on acreage F
basis is adopted, at least I/3rd of the land required should be deducted
towards developmental purposes, namely, providing roads, electricity,
drainage facilities and other betterment developments. Considered from
this perspective and in the facts and circumstances, the respondents would
be entitled to a total compensation of Rs. 25,000 along with interest @ 6%
from the date of taking possession till the date of deposit of the amount G
in the Court. He is also entitled to 15% solatium on the amount of
compensation. [690-D-G, 691-A-B]

CIVIL APPELLATE JURISDICTION: Contempt Petition (C) No.
188 of 1994. H
686 SUPREME COURT REPORTS
(
[1996] 1 S.C.R.

A AND

I.A. No. 3 of 1994.

IN

B Review Petition No. 1983 of 1993.

IN

Civil Appeal No. 3207 of 1993.

C From the Judgment and Order dated 17.11.92 of the Allahabad High
Court in W.P. No. 3518 (MB) of 1992.

WITH

I.A. Nos. 4 & 7 in Contempt Petition No. 188 of 1994.
D •
Gopal Subramaniam and S. Murlidhar for the Appellants.

Milan Banergee, Attorney General, A.B. Rohtagi, M.K. Roy, Sud-
hanshu Kamlendra Misra and R.B. Misra for the Respondents.

E The Judgment of the Court was delivered by

K. RAMASWAMY, J. We have heard the learned counsel on both
sides in the Contempt Petition as well as in I.A. No. 3/94 to review order
passed in dismissing the appeal with directions and also the order dated
May 5, 1994 passed in the Review Petition. In view of the facts that have
.•
F been brought to our notice, we directed that the main matter should be
disposed of on merits. Accordingly the review petition, Interlocutory Ap-
plication, contempt petition and the civil appeal have been posted together.
After hearing the counsel on both sides, we are satisfied that manifest
errors of law have been committed in this case. Consequently, all the orders
G passed by this Court are set aside; contempt petition and the interlocutory
applications are dismissed; and the main appeal is revived.

We have heard the counsel on both sides on merits. Notification
under Section 4(1) of the Land Acquisition Act, 1894 (for short, "the Act")
and Section 17(4), dispensing with the enquiry under Section 5A was
H published on March 8, 1973 acquiring land measuring 0.23 acres for setting
U.P. JAL NIGAM v. KALRA PROPERTIES (P) LID. [K. RAMASWAMY, J.l 687

up a pumping station to drain out flood water from low lying areas of A
Buster Palace, Ziamou. The acquired lands bear plot Nos. 97 to 100.
\ Declaration under Section 6 was published on October 9, 1973. Possession
• of the land was taken on July 5,_ 1973 and no award came to be passed.
M/s. Karla Properties (P) Ltd., the respondent in the main case, had
purchased the acquired land by sale deed dated February 3, 1989 for a
B
total consideration of Rs. 60,000. He filed a writ petition in the High Court
for mandamus commanding the appellants to pay compensation in respect
of the lands in question on the basis of the market value fixed by the
District Magistrate, Collector, Lucknow (Annexure No. 6) filed in the High
Court. The Division Bench by order dated November 17, 1992, allowed the
writ petition, issued mandamus and directed that the compensation should c
be paid to the respondents in accordance with the market value assessed
by the Collector at the rate of Rs. 200 per square foot with all consequential
benefits of solatium and interest under the Act as amended by Amendment
Act 68 of 1984.

~ D
The learned Attorney General for the appellants contended that
~
~ after the judgment, it has come to light that in respect of the self-same
lands, the market value as per the guidelines issued by the Government
was determined for stamp duty at Rs. 80 per square yard in Ziamou area
and the respondent himself had purchased the land for Rs. 60,000 in 1989.
The determination of the compensation by the Collector @ Rs. 200 per E
square foot is an obvious error apparent on the face of the record and the
~
directions issued by the Divisions Bench are vitiated by manifest error of
law. Shri Gopal Subramanyam, the learned senior counsel, who has sought
for and granted 15 adjourments on the ground that matter is being settled,
has informed the Court that the settlement has not been reached and it is F
under process. He has sought further extension of time. Since the case has
been adjourned several times, we are not inclined to adjourn the case. In
his usual fairness, he has stated that he does not stand on technicalities.
The respondent has purchased the land in question. The acquisition
covered about 10,000 square feet in addition, the respondent had pur-
chased another 5,000 square feet which was also taken possession of by G
the respondent under the notification but the same does not from part of
the acquisition. He contended that since possession was taken before
declaration under Section 6 was published, it was not validly taken. Admit-
tedly, the award was not made even after two years of the coming into force
of the Amern,lment Act. Therefore, the notification under Section 4(1) and H
688 SUPREME COURT REPORTS [1996] 1 S.C.R.
(
A the declaration under Section 6 shall stand lapsed by operation of Section
llA of the Act. Thereby the respondent is entitled· to the compensation on
the basis of prevailing market value. The District Collector had assessed
the market value at Rs. 200 per square foot and, therefore, there is no
illegality in the order of the Division bench in directing payment of the
.
B compensation @ Rs. 200 per square foot and also the consequential
solatium and interest. Having regard to the facts of this case, we were not
inclined to further adjourn the case nor to remit the case for fresh con-
sideration by the High Court. It is settled law that after the notification
under Section 4(1) is published in the Gazette any encumbrance created
by the owner does not bind the Government and the purchaser does not
C acquire any title to the property. In this case notification under Section
4(1) was published on March 24, 1973, possession of the land admittedly
was taken on July 5, 1973 and pumping station house was constructed. No
doub~ declaration under Section 6 was published later on July 8, 1973.
Admittedly power under Section 17(4) was exercised dispensing with the
D enquiry under Section 5A and on service of the notice under Section 9
possession was taken, since urgency was acute, viz., pumping station house
was to be constructed to drain out flood water. Consequently, the land
stood vested in the State under Section 17 (2) free from all encumbrances.
It is further settled law that once possession is taken, by operation of
Section 17(2), the land vests in the State free from all encumbrances unless
E a notification under Section 48(1) is published in the Gazette withdrawing
from the acquisition. Section HA, as amended by Act 68 of 1984, therefore,
does not apply and the acquisition does not lapse. The notification under
Section 4(1) and the declaration under Section 6, therefore, remain valid.
..
There is no other provision under the Act to have the acquired land
F divested, unless, as stated earlier, notification under Section 48(1) was
published and the possession are surrendered pursuant thereto. That apart,
since Mis. Kalra Propertie~, respondent had ·purchased the land after the
notification under Section 4(1) was published, its sale is void against the
State and it acquired no right, title or interest in the land. Consequently,
it is settled law that it cannot challenge the validity of the notification or
G the regularity in taking possession of the land before publication of the
declaration under Section 6 was published.

The next question is: whether the respondent is entitled to compen-
sation and, if so, from what date and at what rate? The original owner has
H the right to the compensation under Section 23(1) of the Act. Consequent-
U.P.JALN!GAMi·. KALRAPROPERT!ES (P) LTD. [K. RAMASWAMY,l.l 689

ly, though the respondent acquired no title to the land, at best he would A
be entitled to step into the shoes of the owner and claim payment of the
compensation, but according to the provisions of the Act. It is settled law
that the price prevailing as on the date of the publication of the notification
under Section 4(1) is the price to which the owner or person who has an
interest in the land is entitled to. Therefore, the purchaser as a person
B
interested in the compensation, since he steps into the shoes of erstwhile
owner, is entitled to claim compensation.

This Court in Jawajee Nagnatham v. Revenue Divisional Officer,
Adilabad, A.P. & Ors., [1994] 4 SCC 595, had considered whether market
value of the acquired land would be determined on the basis of basic C
valuation register maintained by the Collector for the purpose of levy of
stamp duty under the Stamps Act and the method of valuation on that basis
is valid in law. This question was considered in extenso in the context of
the power of the State under Section 47A of the Stamps Act to fix the basic
valuation for stamp duty. After elaborate survey of the amendments made D
by the State legislature by local amendment to the Stamps Act under
Section 47A, this Court had held that the market value shall be determined
only on the basis of the evidence adduced by the claimant and in rebuttal
thereof by the Staie, as to the prevailing market value of that particular
land. The basic valuation is only for the purpose of collecting the stamp

•. duty and that, therefore, it cannot form foundation to determine the market
value .
E

The finding of the Court that the concession that the market value
determined by the Collector on the basis of basic valuation would be
properly applied, is obviously illegal. Shri Gopal Subramaniam contended F
that the Government of U.P. had issued three different circulars accepting
the position that the basic valuation would form basis for determination of
the compensation under Section 23 (1) and that, therefore, the High Court
was right in accepting the valuation made by the Collector and in directing
to pay the compensation on that basis. After the Judgment in Nagnathan's
case (supra}, the Division Bench of the High Court of Allahabad in State G
of U.P. & Ors. v. Shau Singh, (1995} HVD Vol. I 191 had held that the
rates fixed for the collection of stamp duty cannot be relied upon to
determine market value. Therefore, the instructions issued by the Govern-
ment for determination of the market value on the basis of basic valuation
register were held illegal. The Collector, therefore, was obviously wrong in H
(
690 SUPREME COURT REP OR TS [1996] 1 S.C.R.

A determining the compensation under Section 23(1) on the basis of prevail- x'
ing rates in 1992 as per basic valuation circulars.

Jn view of the settled legal position that the compensation should be
determined on the basis of the market value of the acquired land prevailing
as on March 1973, though the Attorney General repeatedly argued that the
B
acquired land was not situated in a developed area, while Shri Gopal
Subramaniam contended that it is at the corner of a developed area and
that, therefore, the land commands higher market value. Even the conten-
tion of Shri Gopal Subramaniam of the situation of the land is accepted,
the admitted circumstance that can be taken into consideration, is that the
C land was acquired to establish pump station to drain out flood water in the
low-lying area. Jn other words, as on 1973, the lands were not in a
developed condition and that the lands are near the submerged area and
the acquisition is to set up pump station to drain out flood water. It would
be obvious that in course of time, there would be development and as in •
D 1992, the area might have been fully developed. But by operation of Section
24 of th.e Act, the subsequent development is irrelevant for determination
of the compensation. Though the Attorney General repeatedly referred to
the statistical data of the market value in 1980-82 at Rs. 10 to 15 per square
foot, it is equally settled law that the data is not evidence unless evidence
is adduced. It is equally settled law that when a large extent of land is
E acquired, it cannot be determined on square foot basis. Therefore, it
should be determined only on the basis of acreage. If the principle of ..
determination of compensation on acreage basis is adopted, it is equally .,
settled law that at least 1/3rd of the land required should be deduction
towards developmental purposes, namely, providing roads, electricity,
F drainage facilities and other betterment developments. Jn 1989, when the
respondent himself had purchased property, it had valued the market value
at Rs. 60,000. Therefore, it is further settled law that the same would torm
basis, provided the sale is a bona fide sale between willing parties in nor.ma!
market conditions and it was not intended to inflate the market value of
the land under acquisition. As found earlier, in 1973 there was no develop-
G ment since the very acquisition was for draining out flood water in that
area. It obviously does not command large market value but in due course,
neighbouring area might have developed. Considered from this perspective
and in the facts and circumstances, we are of the considered view that no
useful purpose would be served by remitting the case to the High Court or
H by directing the Land Acquisition officer to determine compensation. We
\ '

U.P. JAL NIGAM v. K.ALRA PROPERTIES (P) LTD. fK RAMASWAMY, J.J 691

are of the view that the respondents would be entitled to a total compen- A
sation of Rs. 25,000. The respondent is also entitled to interest @ 6% from
the date of taking possession till the date of deposit of the amount in the
Court. The respondent is also entitled to 15% solatium on Rs. 25,000
determined as compensation. The appellant is directed to deposit the said
amount within six months from the date of the receipt of this order. If B
possession of any land in excess of the land covered by Section 4(1) has
been taken, our order would not cover it and appropriate action according
to law should be taken.

The appeal is accordingly allowed and the writ petition stands dis-
posed of but, in the circumstances, without costs. C
T.N.A. Appeal allowed .

•.