Holding

When determining the market value of a large undeveloped parcel of land under Section 23 of the Land Acquisition Act, a higher deduction for developmental charges (such as 50%) is justified based on the land’s nature, size, and lack of comparable sale deeds, rendering the High Court's reduction to 25% unwarranted.

Summary

The State of Andhra Pradesh (now Telangana) acquired about 101 acres of land for a railway line under the Land Acquisition Act, 1894. The Land Acquisition Officer initially fixed a low per‑acre value, which was challenged, leading the Civil Court (Reference Court) to determine a market value of Rs 21,29,600 per acre and to deduct 50% as developmental charges, resulting in compensation of Rs 10,64,800 per acre. The High Court upheld the market value but reduced the deduction to 25%, increasing compensation to Rs 15,97,200 per acre. The Supreme Court examined whether such a reduction was justified, applying established principles that the deduction for developmental charges varies (10‑86%) based on the land’s size, development status, and comparable sales. Finding that the land was a large, largely undeveloped parcel with no comparable large sale deeds and that the exemplar deed used by the respondents was for a small, developed plot, the Court held that a 50% deduction was appropriate and that the High Court’s 25% deduction lacked reasoning. Consequently, the appeals were allowed, the High Court judgment was set aside, and the Reference Court’s award was restored.

Issues considered

Whether the High Court was justified in reducing the developmental charge deduction from 50% to 25% while determining market value under Section 23 of the Land Acquisition Act, 1894.
What principles govern the appropriate percentage of deduction for developmental charges when assessing market value of a large undeveloped parcel of land.
Whether the Reference Court's deduction of 50% from the market value was reasonable in the facts of the case.

Legislation cited

Land Acquisition Act, 1894s. 11, s. 18, s. 23, s. 4, s. 6

Subjects

land acquisitionmarket valuedevelopmental chargesdeduction percentageSection 23compensationlarge undeveloped landSupreme Court

Judgment

1118 [2018]REPORTS
SUPREME COURT 7 S.C.R. 1118 [2018] 7 S.C.R.

A UNION OF INDIA
v.
DYAGALA DEVAMMA & ORS.
(Civil Appeal Nos. 6986-6987 of 2018)
B JULY 25, 2018
[ABHAY MANOHAR SAPRE AND
UDAY UMESH LALIT, JJ.]
Land Acquisition:
C Deduction towards developmental charge – While determining
market value of acquired land – For the purpose of granting
compensation – What should be rate of deduction – Held: While
determining true market value of large chunk of undeveloped
acquired land, it is just and reasonable to make appropriate
deduction towards expenses for development of acquired land –
D Percentage of deduction varies from 10% to 86% – Such deduction
should be made keeping in mind nature of land, area under
acquisition, whether the land is developed or not and if so to what
extent, purpose of acquisition etc.– Courts can apply reasonable
amount of guesswork to balance the equities in order to fix a just
E and fair market value in terms of parameters specified under s. 23
of Land Acquisition Act – In the facts of the present case Reference
Court was justified in making deduction of 50% towards
developmental charges – High Court did not assign any good reason
in making such deduction @ 25% – Land Acquisition Act, 1894 –
s. 23.
F Allowing the appeals, the Court
HELD: 1. While determining the true market value of the
acquired land especially when the acquired land is a large chunk
of undeveloped land, it is just and reasonable to make appropriate
deduction towards expenses for development of acquired land.
G At what percentage the deduction should be made varies from
10% to 86% and, therefore, the deduction should be made
keeping in mind the nature of the land, area under acquisition,
whether the land is developed or not and, if so, to what extent,
the purpose of acquisition, etc. While determining the market
value of the large chunk of land, the value of smaller pieces of
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1118
UNION OF INDIA v. DYAGALA DEVAMMA & ORS. 1119

land can be taken into consideration after making proper A
deduction in the value of lands especially when sale deeds of
larger parcel of land are not available. The Court should also
take into consideration the potentiality of the acquired land apart
from other relevant considerations. The Courts can always apply
reasonable amount of guesswork to balance the equities in order
B
to fix a just and fair market value in terms of parameters specified
under Section 23 of the Act. [Para 22] [1125-G, H; 1126-A-C]
Trishala Jain & Anr. v. State of Uttaranchal & Anr.
(2011) 6 SCC 47 : [2011] 8 SCR 520 ; Vithal Rao &
Anr. v. Special Land Acquisition Officer (2017) 8 SCC
558 : [2017] 6 SCR 335 – relied on. C
Chimanlal Hargovinddas v. Special Land Acquisition
Officer, Poona & Anr. (1988) 3 SCC 751 : [1988] 1
Suppl. SCR 531 ; Union of India v. Raj Kumar Baghal
Singh (Dead) Through Legal Representatives & Ors.
(2014) 10 SCC 422 : [2014] 7 SCR 709 – referred to. D
2. It is evident from the facts of the present case that firstly,
the land acquired in question is a large chunk of land (101 acres
approx.); Secondly, it is not fully developed; Thirdly, the
respondents (landowners) have not filed any exemplar sale deed
relating to large pieces of land sold in acres to prove the market E
value of the acquired land; Fourthly, exemplar relied on by the
respondents, especially Ex.P-18 pertains to very small pieces of
land (19 guntas); Fifthly, the three distinguishing features noticed
in the land in sale deed (Ex.P-18) are not present in the acquired
land. It was for the aforementioned reasons that the Reference
Court was justified in making deduction of 50% towards F
developmental charges from the market value. The High Court,
did not assign any good reason as to why and on what basis, it
considered proper to make deduction towards developmental
charges at the rate of 25% in place of 50%. [Para 23, 24]
[1126-D-F] G
Case Law Reference
[1988] 1 Suppl. SCR 531 referred to Para 19
[2014] 7 SCR 709 referred to Para 21
[2011] 8 SCR 520 relied on Para 22
[2017] 6 SCR 335 relied on Para 22 H
1120 SUPREME COURT REPORTS [2018] 7 S.C.R.

A CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 6986-
6987 of 2018.
From the Judgment and Order dated 08.08.2014 of the High Court
of Judicature at Hyderabad in Land Acquisition Appeal Suit No.762/2010
and Cross Objections (SR) No.373 of 2011.
B Vikramjit Banerjee, ASG, B. Adinarayana Rao, Sr. Adv., Anish
Kumar Gupta, Ms. Bhakti Pasrija Sethi, Ms. Shruti Agarwal, Anshul
Gupta, A. K. Gupta, Raj Bahadur, Chandra Shekhar Suman (for Mukesh
Kumar Maroria, Adv.), P. Venkat Reddy, Vikram Reddy, Prashant Tyagi,
Anil Kumar Tandale, Advs. for the appearing parties..
C The Judgment of the Court was delivered by
ABHAY MANOHAR SAPRE, J. 1. Leave granted.
2. These appeals are filed against the final judgment and order
dated 08.08.2014 passed by the High Court of Judicature at Hyderabad
for the State of Telangana and the State of Andhra Pradesh in LAAS
D No.762 of 2010 and CO(SR) No.373 of 2011 whereby the High Court
dismissed the appeal filed by the appellant herein and partly allowed the
cross objections filed by the respondents herein and enhanced the
compensation as mentioned in detail infra.
3. We herein set out the facts, in brief, to appreciate the issues
E involved in these appeals.
4. On 12.11.2003, the State of Andhra Pradesh issued a notification
under Section 4 of the Land Acquisition Act, 1894 (hereinafter referred
to as “the Act”) and acquired the land measuring about 101-00 acres
(SY No.398/3 and other connected survey numbers) situated at Jagitial
Municipality, District Karimnagar (AP). The acquisition of land was for
F
a public purpose, namely, “laying new broad gauge single railway
line from Karimnagar to Jagitial Phase –II by the appellant-
Railways”. This was followed by issuance of notification under Section
6 of the Act and then possession on 02.12.2003.
5. The Land Acquisition Officer (LAO) started proceedings under
G Section 11 of the Act for determination of the compensation payable to
the landowners for their lands. By award No.26/2006 dated 14.07.2006,
the LAO determined the market value of the acquired land at the rate of
“Rs.1,30,000/- per acre for wet lands” and “Rs.1,24,000/- per acre
for dry lands”. The LAO also awarded compensation for structures,
H wells etc. to some landowners.
UNION OF INDIA v. DYAGALA DEVAMMA & ORS. 1121
[ABHAY MANOHAR SAPRE, J.]

6. The claimants (landowners) felt aggrieved and sought reference A
under Section 18 of the Act to the Civil Court in OP No.27/2007. By
award dated 23.07.2010, the Civil Court (Sr. Civil Judge, Jagitial)
re-determined the market value of the land in question. The Reference
Court determined the market value of the acquired land at Rs.21,29,600/-
per acre uniformly. However, having regard to the totality of facts of
B
the case, the Reference Court considered it just and proper to deduct
50% towards developmental charges and accordingly worked out the
market value of the land at “ Rs.10,64,800/- per acre” for being paid to
the landowners.
7. The appellant-Railways felt aggrieved and filed appeal before
the High Court of Andhra Pradesh whereas the landowners also felt C
aggrieved and filed cross objections claiming enhancement of the market
value determined by the Reference Court.
8. By impugned judgment, the High Court dismissed the appeal
filed by the appellant-Railways and partly allowed the cross objections
filed by the landowners and enhanced the compensation to Rs.15,97,200/- D
per acre. The High Court, upheld the market value determined by the
Reference Court i.e. Rs.21,29,600/- per acre but reduced the deduction
towards developmental charges from 50% to 25% and accordingly
worked out the compensation “at the rate of Rs.15,97,200/- per acre”.
It is against this judgment, the appellant-Railways felt aggrieved and
E
filed the present appeals by way of special leave before this Court.
9. Heard Mr. Vikramjit Banerjee, learned Additional Solicitor
General for the appellant-UOI and Mr. B. Adinarayana Rao, learned
senior counsel for the respondents.
10. Mr. Vikramjit Banerjee, learned Additional Solicitor General F
appearing for the appellant while assailing the legality and correctness
of the impugned judgment essentially made two submissions.
11. In the first place, learned ASG contended that the High Court
erred in further enhancing the compensation at Rs.15,97,200/- per acre.
12. According to him the compensation determined by the G
Reference Court payable at the rate of Rs.10,64,800/- per acre was
just, legal and proper and, therefore, it did not call for any further
enhancement.
13. In the second place, learned ASG urged that having placed
reliance on exemplar Sale Deed (Ex-P-18) for determining the market
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1122 SUPREME COURT REPORTS [2018] 7 S.C.R.

A value, the Reference Court rightly deducted 50% towards development
charges, whereas the High Court erred in deducting 25% towards
developmental charges.
14. According to learned ASG, the High Court ought to have
appreciated that there were three distinguishing factors appearing from
B the exemplar sale deed (Ex.P-18). Due to these three factors, deduction
of 50% towards developmental charges from the market value was called
for. These factors are, First, Sale Deed (Ex.P-18) was for a very small
piece of land (19 Guntas=1/2 acre); Second, the land which was the
subject matter of Ex-P-18 had a peculiar site because it was situated
facing two roads - one on the east side and other on the north side; and
C Third, it was a developed land.
15. It was, therefore, urged that so far as the land in question is
concerned, the same did not have these factors and, therefore, the
Reference Court rightly considered it proper to deduct 50% towards
developmental charges from the market value which was worked out
D on the basis of Sale Deed (Ex.P-18). It was urged that the High Court
without assigning any reasons much less cogent reasons erred in reducing
developmental charges from 50% to 25% from the market value. Learned
ASG, therefore, prayed for restoration of the award of the Reference
Court in place of impugned judgment of the High Court.
E 16. Per contra, learned senior counsel for the respondents
(landowners) supported the impugned judgment and contended that it
does not call for any interference and hence the appeals deserve to be
dismissed.
17. The question arises for consideration in these appeals is whether
F the High Court was justified in deducting 25% towards developmental
charges from the market value of the land in question against 50%
deduction made by the Reference Court. In other words, having regard
to the facts and circumstances of the case, whether the Reference Court
was justified in deducting 50% from the market value of the land or
G whether the High Court was justified in deducting 25%.
18. Before we examine the facts of this case, it is necessary to
take note of general principles of law on the subject in question which
are laid down by this Court in several cases and some of which were
also cited at the Bar by the learned counsel for the parties. Indeed, if we
may say so, law on the several issues urged herein by the learned counsel
H
UNION OF INDIA v. DYAGALA DEVAMMA & ORS. 1123
[ABHAY MANOHAR SAPRE, J.]

for the parties is already settled by this Court and what has varied in its A
application depends on the facts of each case.
19. In Chimanlal Hargovinddas vs Special Land Acquisition
Officer, Poona & Anr. (1988) 3 SCC 751, this Court dealt with the
question as to how the Court should determine the valuation of the lands
under acquisition and what broad principle of law relating to acquisition B
of land under the Act should be kept in consideration to determine the
proper market value of the acquired land.
20. In Para 4 of the judgment, this Court laid down as many as 17
principles, which are reproduced below for perusal:
“(1) to (4)…………………………………. C
(5) The market value of land under acquisition has to be
determined as on the crucial date of publication of the
notification under Section 4 of the Land Acquisition Act
(dates of notifications under Sections 6 and 9 are irrelevant).
(6) The determination has to be made standing on the D
date line of valuation (date of publication of notification
under Section 4) as if the valuer is a hypothetical purchaser
willing to purchase land from the open market and is
prepared to pay a reasonable price as on that day. It has
also to be assumed that the vendor is willing to sell the E
land at a reasonable price.
(7) In doing so by the instances method, the court has to
correlate the market value reflected in the most comparable
instance which provides the index of market value.
(8) Only genuine instances have to be taken into account. F
(Sometimes instances are rigged up in anticipation of
acquisition of land.)
(9) Even post-notification instances can be taken into
account (1) if they are very proximate, (2) genuine and (3)
the acquisition itself has not motivated the purchaser to
G
pay a higher price on account of the resultant improvement
in development prospects.
(10) The most comparable instances out of the genuine
instances have to be identified on the following
considerations:
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1124 SUPREME COURT REPORTS [2018] 7 S.C.R.

A (i) proximity from time angle,
(ii) proximity from situation angle.
(11) Having identified the instances which provide the
index of market value the price reflected therein may be
taken as the norm and the market value of the land under
B acquisition may be deduced by making suitable adjustments
for the plus and minus factors vis-à-vis land under
acquisition by placing the two in juxtaposition.
(12) A balance-sheet of plus and minus factors may be
drawn for this purpose and the relevant factors may be
C evaluated in terms of price variation as a prudent purchaser
would do.
(13) The market value of the land under acquisition has
thereafter to be deduced by loading the price reflected in
the instance taken as norm for plus factors and unloading it
for minus factors.
D
(14) The exercise indicated in clauses (11) to (13) has to
be undertaken in a common sense manner as a prudent
man of the world of business would do. We may illustrate
some such illustrative (not exhaustive) factors:
E Plus factors Minus factors
1. smallness of size 1. largeness of area
2. proximity to a road 2. situation in the interior at a distance
fromthe road
3. frontage on a road 3. narrow strip of land with very small
F frontage compared to depth
4. nearness to developedarea 4. lower level requiring the depressed
portionto be filled up
5. regular shape 5. remoteness fromdevelopedlocality
6. level vis-à-vis land under 6. some special disadvantageous factor
G acquisition which would deter a purchaser
7. special value for an owner of an
adjoining property to whomit may
have some very special advantage

H
UNION OF INDIA v. DYAGALA DEVAMMA & ORS. 1125
[ABHAY MANOHAR SAPRE, J.]

(15) The evaluation of these factors of course depends A
on the facts of each case. There cannot be any hard and fast
or rigid rule. Common sense is the best and most reliable
guide. For instance, take the factor regarding the size. A
building plot of land say 500 to 1000 sq. yds. cannot be
compared with a large tract or block of land of say 10,000
B
sq. yds. or more. Firstly while a smaller plot is within the
reach of many, 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 hazards of an entrepreneur. The factor can be C
discounted by making a deduction by way of an allowance
at an appropriate rate ranging approximately between 20
per cent to 50 per cent to account for land required to be
set apart for carving out lands and plotting out small plots.
The discounting will to some extent also depend on whether
D
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.
(16) Every case must be dealt with on its own fact pattern
bearing in mind all these factors as a prudent purchaser of E
land in which position the judge must place himself.
(17) These are general guidelines to be applied with
understanding informed with common sense.”
21. These principles are invariably kept in mind by the Courts F
while determining the market value of the acquired lands (also see Union
of India vs. Raj Kumar Baghal Singh (Dead) Through Legal
Representatives & Ors., (2014) 10 SCC 422).
22. In addition to these principles, this Court in several cases
have laid down that while determining the true market value of the G
acquired land especially when the acquired land is a large chunk of
undeveloped land, it is just and reasonable to make appropriate deduction
towards expenses for development of acquired land. It has also been
consistently held that at what percentage the deduction should be made
varies from 10% to 86% and, therefore, the deduction should be made
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1126 SUPREME COURT REPORTS [2018] 7 S.C.R.

A keeping in mind the nature of the land, area under acquisition, whether
the land is developed or not and, if so, to what extent, the purpose of
acquisition, etc. It has also been held that while determining the market
value of the large chunk of land, the value of smaller pieces of land can
be taken into consideration after making proper deduction in the value of
lands especially when sale deeds of larger parcel of land are not available.
B
This Court has also laid down that the Court should also take into
consideration the potentiality of the acquired land apart from other
relevant considerations. This Court has also recognized that the Courts
can always apply reasonable amount of guesswork to balance the equities
in order to fix a just and fair market value in terms of parameters specified
C under Section 23 of the Act. (See Trishala Jain & Anr. Vs. State of
Uttaranchal & Anr., (2011) 6 SCC 47 and Vithal Rao & Anr. Vs.
Special Land Acquisition Officer, (2017) 8 SCC 558)
23. Keeping in mind the aforementioned principles, when we take
note of the facts of the case at hand, we find that firstly, the land acquired
D in question is a large chunk of land (101 acres approx.); Secondly, it is
not fully developed; Thirdly, the respondents (landowners) have not
filed any exemplar sale deed relating to large pieces of land sold in acres
to prove the market value of the acquired land; Fourthly, exemplar relied
on by the respondents, especially Ex.P-18 pertains to very small pieces
of land (19 guntas); Fifthly, the three distinguishing features noticed in
E the land in sale deed (Ex.P-18) are not present in the acquired land.
24. It was for the aforementioned reasons, in our opinion, the
Reference Court was justified in making deduction of 50% towards
developmental charges from the market value. The High Court, in our
opinion, did not assign any good reason as to why and on what basis, it
F considered proper to make deduction towards developmental charges at
the rate of 25% in place of 50%.
25. This Court has held in Trishala Jain’s case (supra) that it
depends upon the facts of each case to decide for determination of the
market value of the land as to what percentage should be adopted for
G deduction. In our opinion, the reasons mentioned above were rightly
made basis by the Reference Court to support the deduction of 50%.
26. So far as the determination of market value made by the
Reference Court is concerned, i.e., Rs.21,29,600/- per acre, the same
having been upheld by the High Court, we do not find any justification to
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UNION OF INDIA v. DYAGALA DEVAMMA & ORS. 1127
[ABHAY MANOHAR SAPRE, J.]

examine this issue again. Even the learned ASG did not challenge this A
finding and confined his submissions only relating to the issue of
percentage of the deduction only.
27. Learned counsel for the respondents was not able to point out
any fact/evidence which could persuade us to uphold the reasoning and
conclusion arrived at by the High Court in the impugned judgment. B
28. In view of the foregoing discussion, we are inclined to uphold
the reasoning and the conclusion arrived at by the Reference Court
instead of the High Court.
29. As a consequence of the foregoing discussion, the appeals
succeed and are accordingly allowed. Impugned judgment is set aside C
and that of the Reference Court (Civil Court) dated 23.07.2010 in OP
No.27/2007 is restored.

Kalpana K. Tripathy Appeals allowed.
D

E

F

G

H