UNION OF INDIA versus DYAGALA DEVAMMA & ORS. on 25 July 2018

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[2018] 7 S.C.R. 1118

SUPREME COURT REPORTS

[2018] 7 S.C.R.

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UNION OF INDIA

v.

DYAGALA DEVAMMA & ORS.

(Civil Appeal Nos. 6986-6987 of 2018)

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JULY 25, 2018

[ABHAY MANOHAR SAPRE ANDUDAY UMESH LALIT, JJ.]

Land Acquisition:CDeduction towards developmental charge – While determiningmarket value of acquired land – For the purpose of grantingcompensation – What should be rate of deduction – Held: Whiledetermining true market value of large chunk of undevelopedacquired land, it is just and reasonable to make appropriatededuction towards expenses for development of acquired land –DPercentage of deduction varies from 10% to 86% – Such deductionshould be made keeping in mind nature of land, area underacquisition, whether the land is developed or not and if so to whatextent, purpose of acquisition etc.– Courts can apply reasonableamount of guesswork to balance the equities in order to fix a justEand fair market value in terms of parameters specified under s. 23of Land Acquisition Act – In the facts of the present case ReferenceCourt was justified in making deduction of 50% towardsdevelopmental charges – High Court did not assign any good reasonin making such deduction @ 25% – Land Acquisition Act, 1894 –

s. 23.

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Allowing the appeals, the Court

HELD: 1. While determining the true market value of theacquired land especially when the acquired land is a large chunkof undeveloped land, it is just and reasonable to make appropriatededuction towards expenses for development of acquired land.GAt what percentage the deduction should be made varies from10% to 86% and, therefore, the deduction should be madekeeping 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 marketvalue of the large chunk of land, the value of smaller pieces ofH

land can be taken into consideration after making properdeduction in the value of lands especially when sale deeds oflarger parcel of land are not available. The Court should alsotake into consideration the potentiality of the acquired land apartfrom other relevant considerations. The Courts can always applyreasonable amount of guesswork to balance the equities in orderto fix a just and fair market value in terms of parameters specifiedunder 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 SCC558 : [2017] 6 SCR 335 – relied on.

Chimanlal Hargovinddas v. Special Land AcquisitionOfficer, Poona & Anr. (1988) 3 SCC 751 : [1988] 1Suppl. SCR 531 ; Union of India v. Raj Kumar BaghalSingh (Dead) Through Legal Representatives & Ors.(2014) 10 SCC 422 : [2014] 7 SCR 709 – referred to.

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 acresapprox.); Secondly, it is not fully developed; Thirdly, therespondents (landowners) have not filed any exemplar sale deedrelating to large pieces of land sold in acres to prove the marketvalue of the acquired land; Fourthly, exemplar relied on by therespondents, especially Ex.P-18 pertains to very small pieces ofland (19 guntas); Fifthly, the three distinguishing features noticedin the land in sale deed (Ex.P-18) are not present in the acquiredland. It was for the aforementioned reasons that the ReferenceCourt was justified in making deduction of 50% towardsdevelopmental charges from the market value. The High Court,did not assign any good reason as to why and on what basis, itconsidered proper to make deduction towards developmentalcharges at the rate of 25% in place of 50%. [Para 23, 24][1126-D-F]

Case Law Reference

[1988] 1 Suppl. SCR 531 referred to[2014] 7 SCR 709 referred to[2011] 8 SCR 520 relied on[2017] 6 SCR 335 relied on Para 19Para 21Para 22Para 22

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ACIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 6986-6987 of 2018.

From the Judgment and Order dated 08.08.2014 of the High Courtof Judicature at Hyderabad in Land Acquisition Appeal Suit No.762/2010and Cross Objections (SR) No.373 of 2011.BVikramjit Banerjee, ASG, B. Adinarayana Rao, Sr. Adv., Anish Vikramjit Banerjee, ASG, B. Adinarayana Rao, Sr. Adv., AnishKumar Gupta, Ms. Bhakti Pasrija Sethi, Ms. Shruti Agarwal, AnshulGupta, A. K. Gupta, Raj Bahadur, Chandra Shekhar Suman (for MukeshKumar Maroria, Adv.), P. Venkat Reddy, Vikram Reddy, Prashant Tyagi,Anil Kumar Tandale, Advs. for the appearing parties..

CThe Judgment of the Court was delivered by ABHAY MANOHAR SAPRE, J. 1. Leave granted.

2. These appeals are filed against the final judgment and orderdated 08.08.2014 passed by the High Court of Judicature at Hyderabadfor the State of Telangana and the State of Andhra Pradesh in LAASDNo.762 of 2010 and CO(SR) No.373 of 2011 whereby the High Courtdismissed the appeal filed by the appellant herein and partly allowed thecross objections filed by the respondents herein and enhanced thecompensation as mentioned in detail infra.

3. We herein set out the facts, in brief, to appreciate the issuesEinvolved in these appeals.

4. On 12.11.2003, the State of Andhra Pradesh issued a notificationunder Section 4 of the Land Acquisition Act, 1894 (hereinafter referredto as “the Act”) and acquired the land measuring about 101-00 acres(SY No.398/3 and other connected survey numbers) situated at JagitialMunicipality, District Karimnagar (AP). The acquisition of land was forFa public purpose, namely, “laying new broad gauge single railwayline from Karimnagar to Jagitial Phase –II by the appellant-Railways”. This was followed by issuance of notification under Section6 of the Act and then possession on 02.12.2003.

5. The Land Acquisition Officer (LAO) started proceedings underGSection 11 of the Act for determination of the compensation payable tothe 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 acrefor dry lands”. The LAO also awarded compensation for structures,Hwells etc. to some landowners.

6. The claimants (landowners) felt aggrieved and sought referenceunder Section 18 of the Act to the Civil Court in OP No.27/2007. Byaward dated 23.07.2010, the Civil Court (Sr. Civil Judge, Jagitial)re-determined the market value of the land in question. The ReferenceCourt determined the market value of the acquired land at Rs.21,29,600/-per acre uniformly. However, having regard to the totality of facts ofthe case, the Reference Court considered it just and proper to deduct50% towards developmental charges and accordingly worked out themarket value of the land at “Rs.10,64,800/- per acre” for being paid tothe landowners.

7. The appellant-Railways felt aggrieved and filed appeal beforethe High Court of Andhra Pradesh whereas the landowners also feltaggrieved and filed cross objections claiming enhancement of the marketvalue determined by the Reference Court.

8. By impugned judgment, the High Court dismissed the appealfiled by the appellant-Railways and partly allowed the cross objectionsfiled by the landowners and enhanced the compensation to Rs.15,97,200/-per acre. The High Court, upheld the market value determined by theReference Court i.e. Rs.21,29,600/- per acre but reduced the deductiontowards developmental charges from 50% to 25% and accordinglyworked out the compensation “at the rate of Rs.15,97,200/- per acre”.It is against this judgment, the appellant-Railways felt aggrieved andfiled the present appeals by way of special leave before this Court.

9. Heard Mr. Vikramjit Banerjee, learned Additional SolicitorGeneral for the appellant-UOI and Mr. B. Adinarayana Rao, learnedsenior counsel for the respondents.

10. Mr. Vikramjit Banerjee, learned Additional Solicitor Generalappearing for the appellant while assailing the legality and correctnessof the impugned judgment essentially made two submissions.

11. In the first place, learned ASG contended that the High Courterred in further enhancing the compensation at Rs.15,97,200/- per acre.

12. According to him the compensation determined by theReference Court payable at the rate of Rs.10,64,800/- per acre wasjust, legal and proper and, therefore, it did not call for any furtherenhancement.

13. In the second place, learned ASG urged that having placedreliance on exemplar Sale Deed (Ex-P-18) for determining the market AB

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Avalue, the Reference Court rightly deducted 50% towards developmentcharges, whereas the High Court erred in deducting 25% towardsdevelopmental charges.

14. According to learned ASG, the High Court ought to haveappreciated that there were three distinguishing factors appearing fromBthe exemplar sale deed (Ex.P-18). Due to these three factors, deductionof 50% towards developmental charges from the market value was calledfor. These factors are, First, Sale Deed (Ex.P-18) was for a very smallpiece of land (19 Guntas=1/2 acre); Second, the land which was thesubject matter of Ex-P-18 had a peculiar site because it was situatedfacing two roads - one on the east side and other on the north side; andCThird, it was a developed land.

15. It was, therefore, urged that so far as the land in question isconcerned, the same did not have these factors and, therefore, theReference Court rightly considered it proper to deduct 50% towardsdevelopmental charges from the market value which was worked outDon the basis of Sale Deed (Ex.P-18). It was urged that the High Courtwithout assigning any reasons much less cogent reasons erred in reducingdevelopmental charges from 50% to 25% from the market value. LearnedASG, therefore, prayed for restoration of the award of the ReferenceCourt in place of impugned judgment of the High Court.

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16. Per contra, learned senior counsel for the respondents(landowners) supported the impugned judgment and contended that itdoes not call for any interference and hence the appeals deserve to bedismissed.

17. The question arises for consideration in these appeals is whetherFthe High Court was justified in deducting 25% towards developmentalcharges from the market value of the land in question against 50%deduction made by the Reference Court. In other words, having regardto the facts and circumstances of the case, whether the Reference Courtwas justified in deducting 50% from the market value of the land orwhether the High Court was justified in deducting 25%.G

18. Before we examine the facts of this case, it is necessary totake note of general principles of law on the subject in question whichare laid down by this Court in several cases and some of which werealso cited at the Bar by the learned counsel for the parties. Indeed, if wemay say so, law on the several issues urged herein by the learned counselH

for the parties is already settled by this Court and what has varied in itsapplication depends on the facts of each case.

19. In Chimanlal Hargovinddas vs Special Land AcquisitionOfficer, Poona & Anr. (1988) 3 SCC 751, this Court dealt with thequestion as to how the Court should determine the valuation of the landsunder acquisition and what broad principle of law relating to acquisitionof land under the Act should be kept in consideration to determine theproper market value of the acquired land.

20. In Para 4 of the judgment, this Court laid down as many as 17principles, which are reproduced below for perusal:

“(1) to (4)………………………………….

(5) The market value of land under acquisition has to bedetermined as on the crucial date of publication of thenotification 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 thedate line of valuation (date of publication of notificationunder Section 4) as if the valuer is a hypothetical purchaserwilling to purchase land from the open market and isprepared to pay a reasonable price as on that day. It hasalso to be assumed that the vendor is willing to sell theland at a reasonable price.

(7) In doing so by the instances method, the court has tocorrelate the market value reflected in the most comparableinstance which provides the index of market value.

(8) Only genuine instances have to be taken into account.(Sometimes instances are rigged up in anticipation ofacquisition of land.)

(9) Even post-notification instances can be taken intoaccount (1) if they are very proximate, (2) genuine and (3)the acquisition itself has not motivated the purchaser topay a higher price on account of the resultant improvementin development prospects.

(10) The most comparable instances out of the genuineinstances have to be identified on the followingconsiderations:

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A(i) proximity from time angle,

(ii) proximity from situation angle.

(11) Having identified the instances which provide theindex of market value the price reflected therein may betaken as the norm and the market value of the land underBacquisition may be deduced by making suitable adjustmentsfor the plus and minus factors vis-à-vis land underacquisition by placing the two in juxtaposition.

(12) A balance-sheet of plus and minus factors may bedrawn for this purpose and the relevant factors may beCevaluated in terms of price variation as a prudent purchaserwould do.

(13) The market value of the land under acquisition hasthereafter to be deduced by loading the price reflected inthe instance taken as norm for plus factors and unloading itfor minus factors.

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(14) The exercise indicated in clauses (11) to (13) has tobe undertaken in a common sense manner as a prudentman of the world of business would do. We may illustratesome such illustrative (not exhaustive) factors:

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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 from the road

3. frontage on a road

3. narrow strip of land with very small frontage compared to depth F

4. nearness to developed area

4. lower level requiring the depressed portion to be filled up

5. regular shape

5. remoteness from developed locality

6. level vis-à-vis land under Gacquisition

6. some special disadvantageous factor which would deter a purchaser

7. special value for an owner of an adjoining property to whom it may have some very special advantage H

(15) The evaluation of these factors of course dependson the facts of each case. There cannot be any hard and fastor rigid rule. Common sense is the best and most reliableguide. For instance, take the factor regarding the size. Abuilding plot of land say 500 to 1000 sq. yds. cannot becompared with a large tract or block of land of say 10,000sq. yds. or more. Firstly while a smaller plot is within thereach of many, a large block of land will have to be developedby preparing a lay out, carving out roads, leaving openspace, plotting out smaller plots, waiting for purchasers(meanwhile the invested money will be blocked up) andthe hazards of an entrepreneur. The factor can bediscounted by making a deduction by way of an allowanceat an appropriate rate ranging approximately between 20per cent to 50 per cent to account for land required to beset apart for carving out lands and plotting out small plots.The discounting will to some extent also depend on whetherit is a rural area or urban area, whether building activity ispicking up, and whether waiting period during which thecapital of the entrepreneur would be locked up, will belonger or shorter and the attendant hazards.

(16) Every case must be dealt with on its own fact patternbearing in mind all these factors as a prudent purchaser ofland in which position the judge must place himself.

(17) These are general guidelines to be applied withunderstanding informed with common sense.”

21. These principles are invariably kept in mind by the Courtswhile determining the market value of the acquired lands (also see Unionof India vs. Raj Kumar Baghal Singh (Dead) Through LegalRepresentatives & Ors., (2014) 10 SCC 422).

22. In addition to these principles, this Court in several caseshave laid down that while determining the true market value of theacquired land especially when the acquired land is a large chunk ofundeveloped land, it is just and reasonable to make appropriate deductiontowards expenses for development of acquired land. It has also beenconsistently held that at what percentage the deduction should be madevaries from 10% to 86% and, therefore, the deduction should be made AB

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Akeeping in mind the nature of the land, area under acquisition, whetherthe land is developed or not and, if so, to what extent, the purpose ofacquisition, etc. It has also been held that while determining the marketvalue of the large chunk of land, the value of smaller pieces of land canbe taken into consideration after making proper deduction in the value oflands especially when sale deeds of larger parcel of land are not available.BThis Court has also laid down that the Court should also take intoconsideration the potentiality of the acquired land apart from otherrelevant considerations. This Court has also recognized that the Courtscan always apply reasonable amount of guesswork to balance the equitiesin order to fix a just and fair market value in terms of parameters specifiedCunder Section 23 of the Act. (See Trishala Jain & Anr. Vs. State ofUttaranchal & 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 takenote of the facts of the case at hand, we find that firstly, the land acquiredDin question is a large chunk of land (101 acres approx.); Secondly, it isnot fully developed; Thirdly, the respondents (landowners) have notfiled any exemplar sale deed relating to large pieces of land sold in acresto prove the market value of the acquired land; Fourthly, exemplar reliedon by the respondents, especially Ex.P-18 pertains to very small piecesof land (19 guntas); Fifthly, the three distinguishing features noticed inEthe land in sale deed (Ex.P-18) are not present in the acquired land.

24. It was for the aforementioned reasons, in our opinion, theReference Court was justified in making deduction of 50% towardsdevelopmental charges from the market value. The High Court, in ouropinion, did not assign any good reason as to why and on what basis, itFconsidered proper to make deduction towards developmental charges atthe rate of 25% in place of 50%.

25. This Court has held in Trishala Jain’s case (supra) that itdepends upon the facts of each case to decide for determination of themarket value of the land as to what percentage should be adopted forGdeduction. In our opinion, the reasons mentioned above were rightlymade basis by the Reference Court to support the deduction of 50%.

26. So far as the determination of market value made by theReference Court is concerned, i.e., Rs.21,29,600/- per acre, the samehaving been upheld by the High Court, we do not find any justification toH

examine this issue again. Even the learned ASG did not challenge thisfinding and confined his submissions only relating to the issue ofpercentage of the deduction only.

27. Learned counsel for the respondents was not able to point outany fact/evidence which could persuade us to uphold the reasoning andconclusion arrived at by the High Court in the impugned judgment.

28. In view of the foregoing discussion, we are inclined to upholdthe reasoning and the conclusion arrived at by the Reference Courtinstead of the High Court.

29. As a consequence of the foregoing discussion, the appealssucceed and are accordingly allowed. Impugned judgment is set asideand that of the Reference Court (Civil Court) dated 23.07.2010 in OPNo.27/2007 is restored.

Kalpana K. Tripathy

Appeals allowed.

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