VALLIYAMMAL AND ANOTHER v. SPECIAL TEHSILDAR (LAND ACQUISITION) AND ANOTHER ETC. (Civil Appeal Nos. 6127-6128 of 2011) AUGUST 01, 2011 [G.S. SINGHVI AND H.L. DATTU, JJ.] Land Acquisition Act, 1894 – ss. 4(1 ), 18(1) and 54 –
Compulsory acquisition of small parcels of land owned by C appellants by the State Government for construction of houses by State Housing Board …: Market value fixed as also compensation determined by the Reference Court – High
Court substantially reduced the compensation – On appeal, held: High Court while deducting 40% towards development charges, ignored its own finding that the acquired land was situated in the vicinity of the residential colonies developed by the Housing Board – Thus, the High Court could have at
best applied 1!3rd deduction towards development cost – The acquired land is a semi-urban land and has huge potential for being developed as housing site – High Court should have added 10% per annum escalation in the price specified in the sale deeds relied upon for fixing market value of the acquired land – Majority of the landowners have been deprived of their entire landholding and have waited for 14 to 20 years for
getting the compensation – It would be wholly unjust to deprive them of their legitimate right by approving the 20% deduction made by the High Court – Accordingly the market value of
the acquired land is fixed and the landowners would get solatium, interest and other statutory benefits in accordarice with the provisions of the Act. Various small parcels of land were acquired by
certain Notifications by the State Government for construction of houses by State Housing Board. The High Court reduced the market value fixed by the Reference Court and as such the amount of
compensation determined by the Reference Court was substantially reduced. Thus, the appellants-landowners filed the instant appeals. Allowing the appeals, the Court HELD: 1.1 In fixing market value of the acquired land,
which is undeveloped or under-developed, the courts have generally approved deduction of 1/3rd of the market c value towards development cost except when no development is required to be made for implementation
of the public purpose for which land is acquired. [Para 17] [309–F-G] Kasturi v. State of Haryana (2003) 1 SCC 354: 2002 (4) D Suppl. SCR 117 Tejumal Bhojwani v. State of UP. (2003) 10 · SCC 525:2003(2) Suppl. SCR 1044; V. Hanumantha Reddy
v. Land Acquisition Officer and Manda/ Revenue Officer (2003) 12 SCC 642; HP.Housing Board v. Bharat S. Negi (2004) 2 SCC 184; Kiran Tandon v. Allahabad Development Authority (2004) 10 sec 745: 2004 (3) SCR 467 – relied on. Shaji Kuriakose v. Indian Oil Corporation Limited (2001)
7 SCC 650: 2001 (1) Suppl. SCR 573; Viluben Jha/ejar Contractor v. State of Gujarat (2005) 4 SCC 789: 2005 (3) SCR 542; Atma Singh v. State of Haryana (2008) 2 SCC 568: 2007 (12) SCR 1120; Lal Chand v. Union of India (2009) 15
SCC 769: 2009 (13) SCR 622; A.P. Housing Board v. K.Manohar Reddy (2010) 12 SCC 707: 2010 (11 ) SCR 1107; Subh Ram v. State of Haryana (2010) 1 SCC 444: G 2009 (15 ) SCR 287 – referred to.
1.2 The impugned judgment suffer from multiple errors and call for interference by this Court. The first error committed by the High Court relates to deduction of 40% towards development charges. While doing so,
VALLIYAMMAL v. SPECIAL TEHSILDAR (LAND ACQUISITION) AND ANR. ETC. the High Court ignored its own finding that the acquired A land was situated in the vicinity of the residential colonies developed by the Board and other establishments as
also the fact that the respondents had not produced any evidence to show that they will have to start the development work from scratch. Therefore, the High Court could have, at best, applied 113rd deduction
towards development cost. [Paras 20 and 21] [312-H; 313- A-C] 1.3 The second error committed by the High Court is that while fixing market value, it did not take into C account the escalation in land prices. [Para 22] [313-D]
Ranjit Singh v. U. T. of Chandigarh (1992) 4 SCC 659; Land Acquisition Officer and Revenue Divisional Officer v. Ramanjulu (2005) 9 SCC 594; Krishi Utpadan Mandi Samiti D v. Bipin Kumar (2004) 2 SCC 283; Saidar Jogendra Singh
v. State of UP. (2008) 17 SCC 133; Revenue Divisional Officer-cum-LAO. v. Shaik Azam Saheb etc. (2009) 4 SCC 395; The General Manager, Oil and Natural Gas Corporation Ltd. v. Rameshbhai Jivanbhai Patel (2008) 14 SCC 745 –
referred to. 1.4 The acquired land is situated in the close vicinity of various residential colonies, educational institutions, hospitals etc. and is on the junction of two important
roads. Therefore, it can safely be concluded that the land is semi-urban and has huge potential for being developed as housing sites and the High Court should have added 10% per annum escalation in the price
specified in the sale deeds relied upon for fixing market value of the acquired land. The third error committed by G the High Court is that in fixing market value of the land acquired vide notifications issued in 1991, 1992 and 1995
with reference to sale deed dated 4.9.1990 vide which a piece of land was sold at the rate of Rs.201- per square feet, the High Court did not add 10% escalation per H (2011) 10 S.C.R.
A annum in the land prices. [Paras 23 and 24) [315-E-H; 316-A] 1.5 The deduction of 20% may have been sustained keeping in view the smallness of the plots which were 8 sold vide sale deeds dated 4.9.1990 and 8.2.1991, but, in the peculiar facts of the case, it will be wholly unjust to allow such deduction. Majority of the appellants have
been deprived of their entire landholding and they have waited for 14 to 20 years for getting the compensation. It C appears that in compliance of the interim orders passed by the Court, some of the appellants did get 25% and one
of them got 35% of the compensation, but majority of them have not received a single penny towards compensation and at this distant point of time, it will be wholly unjust to deprive them of their legitimate right by D approving the 20% deduction made by the High Court.
In such matters, the Court cannot be oblivious of the fact that the landowners have been deprived of the only source of livelihood, the cost of living has gone up manifold and the purchasing power of rupee has
E substantially declined. [Para 25) [316-A-D] 2. The market value of the acquired land is fixed as under: (i) For the acquisition made vide notification dated 9.10.1990, the base document will be .sale deed dated
4.9.1990 vide which land was sold at the rate of Rs.20/ – per square feet. One-third of Rs.20/- comes to Rs.6.6 per square feet. After deducting Rs.6.6 from R.s.20/-, market value of the acquired land will be Rs.13.4 per
square feet which is rounded off to Rs.14/- per square feet. (ii) For the acquisitions made by the notifications issued on 15.4.1991, 16.4.1991 and 27.5.1991, the base document will be sale deed dated 8.2.1991 vide
VALLIYAMMAL v. SPECIAL TEHSILDAR (LAND ACQUISITION) AND ANR. ETC. which land was sold at the rate of Rs.30/- per square feet. One-third of Rs.30/- is equal to Rs.10/- per square feet. After deducting Rs.10/- from Rs.30/-, market
value will be Rs.20/- per square feet. (iii) For the acquisition made vide notification dated 08.4.1992, the base document will be sale deed dated 8.2.1991 vi de which land was sold at the rate of Rs.30/
– per square feet. By adding 10% per annum in lieu of escalation in the land prices and deducting 1/3rd towards development cost, market value of the acquired land will be Rs.29.2 per square feet which
is rounded off to Rs.30/- per square feet. (iv) For the acquisition made vide notification dated 15.3.1995, the base document will be sale deed dated· 8.2.1991 vide which land was sold at the rate of Rs.30/
– per square feet. By adding 10% per annum in lieu of escalation in the land prices and deducting 1/3rd towards development cost, market value of the acquired land will be Rs.29.2 per square feet which
is rounded off to Rs.30/- per square feet. (v) For the acquisitions made by the notifications issued on 17.1.1997 and 19.3.1997, the base document will be sale deed dated 8.2.1991 vide which
land was sold at the rate of Rs.30/- per square feet. If 10% per annum is added in lieu of escalation in the land prices and 1/3rd is deducted towards development charges, market value of the acquired
land will be Rs.35.3 per square feet which is rounded off toRs.36/- per square feet. The appellants shall get solatium, interest' and other statutory benefits in G accordance with the provisions of the Act. [Para 26]
[316-E-H; 317-A-F] 3. With a view to ensure that the landowners are not fleeced by the middleman, it is directed that within one [2011) 10 S.C.R. month from the date of receipt of copy of this judgment,
the Land Acquisition Officer shall depute an officer subordinate to him not below the rank of Naib Tehsildar or an equivalent rank, who shall get in touch with the landowners and/or their legal representatives and inform
s them about their entitlement to receive enhanced compensation. The concerned officers shall instruct the landowners and/or their legal representatives to open savings bank account in a nationalized or scheduled
bank, in case they already do not have such account. The c account numbers of the landowners and/or their legal representatives should be furnished by the concerned officer to the Land Acquisition Officer within a period of two months. Withi'! next one month, the Land Acquisition
.Officer shall deposit the amount of compensation along with other statutory benefits in the bank accounts of the landowners and/or their legal representatives by way of cheques. [Para 27] [317-G-H; 318-A-D]
State of Uttar Pradesh v. Ram Kumari Devi (1996) 8 SCC 577: 1996 (2) SCR 749; Faridabad Gas Power Project, NTPC v. Om Prakash (2009) 4 SCC 719 – cited. Case Law Reference: 1996 (2) SCR 749
Cited Para 9 (2009) 4 sec 119 Cited Para 9 2001 (1) Suppl. SCR 573 Referred to Para 14 2005 (3 ) SCR 542 Referred to Para 15 2007 (12) SCR 1120 Referred to Para 16 2002 ( 4 ) Suppl. SCR 117 Relied on
Para 17 2003 (2 ) Suppl. SCR 1044 Referred to Para 18 (2003) 12 sec 642 Relied on Para 18 (2004) 2 sec 1s4 Relied on Para 18 VALLIYAMMAL v. SPECIAL TEHSILDAR (LAND ACQUISITION) AND ANR. ETC.
2004 (3 ) SCR 467 Relied on Para 18 2009 (13 ) SCR 622 Referred to Para 18 2010 (11 ) SCR 1107 Referred to Para 19 2009 (15 ) SCR 287 Referred to Para 19 (1992) 4 sec 659 Referred to
Para 22 (2005) 9 sec 594 Referred to Para 22 (2004) 2 sec 283 Referred to Para 22 (2008) 11 sec 133 Referred to Para 22 (2009) 4 sec 395 Referred to Para 22 (2008) 14 sec 145 Referred to
Para 22 CIVIL APPELLATE JURISDICTION : Civil Appeal No. 6127-6128 of 2011. From the Judgment & Order dated 02.03.2009 of the High Court of Judicature at Madras in A.S. No. 759 to 764 of 1999. WITH
C.A. Nos. 6132-6133, 6134, 6135-6138, 6139-6140, 6141- 6146,6147,6148-6154,6155,6156,6157,6158,6159,6160, 6161,6162,6163,6164,6165,6166,6167,6168,6169,6170, 6171 of 2010. V. Giri, S. Ravi Shankar, V.P. Sengottuvel, Mohammed
Sadique T.A., M.A. Chinnasamy, K. Krishna Kumar, Preetam Shah, P. Soma Sundaram for the Appellants. c Gurukrishna Kumar, AAG, Anesh Paul, Prasannan, Subramonium Prasad, R. Nedumaran for the Respondents.
The Judgment of the Court was delivered by G.S. SINGHVI, J. 1. Delay in fiiing Special Leave Petition (2011) 10 S.C.R. A (Civil) Nos.33777-33782/2009, 22831/2010, 23641/2010, 23643/2010 and 1961/2011 is condoned.
2. Leave granted. 3. These appeals filed against the judgments/orders B passed by different Division Benches of the Madras High Court substantially reducing the amount of compensation determined by Additional District Judge, Erode and Principal Subordinate Judge, Erode (hereinafter referred to as, "the Reference Court") are illustrative of the plight of the owners of small parcels of land, C who are deprived of the only source of livelihood and who have to spend substantial amount in litigation and wait for years together to get just and reasonable compensation in lieu of the compulsory acquisition of their land by the State.
4. For the sake of convenience, we shall first advert to the factual matrix of the appeals arising out of SLP (C) Nos.25581- 82 of 2009 – Jaganatha Gounder v. Special Tahsildar (Land
Acquisition), Erode and another because learned counsel for the parties made submissions keeping in view the factual matrix E of those cases. 5. In exercise of the powers vested in it under Section 4(1) of the Land Acquisition Act, 1894 (for short, "the Act"), the Government of Tamil Nadu issued notification dated 17 .1.1997 for the acquisition of 55.89 acres land comprised in different F survey numbers of village Erode for construction of houses by the Tamil Nadu Housing Board (for short, "the Board").
6. By an award dated 3.3.2000, the Land Acquisition Officer fixed market value of the acquired land at the rate of G Rs.50,000/- per acre. This did not satisfy the appellants who filed applications under Section 18(1) of the Act and claimed compensation at the rate of Rs.50/- per square yard by
asserting that the acquired land is situated nea~ Erode- Perundurai and Sennimalai Road junction and residential H colonies like Anna Nagar, Sri Nagar, Bharthi Nagar, Rail Nagar, VALLIYAMMAL v. SPECIAL TEHSILDAR (LAND
ACQUISITION) AND ANR. ETC. [G.S. SINGHVI, J.] Jeeva Nagar, Subramania Nagar, Kalaigner Karunanidhi Nagar, Arts College, Women's College, Kongu Higher Secondary School, St. Joseph Clinic, Hospitals
etc. and was having potential for being used for housing and business purposes. Thereupon, the Collector made reference to the Court for the determination of the compensation payable to the appellants. The Reference Court considered the pleadings of the parties and evidence produced by them and concluded that the appellants are entitled to compensation at the rate of Rs.28/ – per square feet.
7. Both, the appellants and the respondents challenged the judgment of the Reference Court by filing appeals under Section 54 of the Act. They also filed applications under Order XU Rule 27 of the Code of Civil Procedure for permission to adduce additional evidence. The High Court allowed the applications and directed the Reference Court to give opportunity to the parties to adduce additional evidence and make fresh
determination of the compensation payable to the appellants and remit its findings along with the documents. 8. In compliance of the direction given by the High Court, the Reference Court considered the additional evidence
produced by the parties and opined that the appellants are entitled to compensation at the rate of Rs.19.28 per square feet. 9. After receiving the report of the Reference Court, the
High Court considered the evidence produced by the parties and. held that valuation of the land, which was made basis by the Land Acquisition Officer for fixing market value cannot be relied upon because that land was situated far away from the acquired land. The High Court noted that there was a steady increase of property value in the area because of repeated acquisitions made on behalf of the Board, referred to the topo- sketch and sale deed Exhibit C.8 dated 8.2.1991 and
observed: " …………. The said property is in a housing colony by c name K.K.Nagar and the area is considered to be a developed area. Therefore we are of the opinion that the valuation as found mentioned in Ex.C.8 could be taken as
Bench Mark for the purpose of fixing the market rate. In fact we have taken a document of the year 1989 showing the market rate at Rs.20/- per sq.ft. for arriving at the market rate in respect of the property acquired as per the notification issued in the year 1991.
Even though as per Ex.C.8 dated 8.2.1991 the property was sold at the rate of Rs.30/- per sq.ft., the said transaction relates to a smaller extent. However as per the subject notification larger extent of property was acquired and as such the value as shown in Ex.C.8 cannot be taken
in its entirety for arriving at the market rate. The Housing Board has to develop the property for housing purposes. It is in evidence that the acquired property was only an agricultural property and it has no potential as a housing site. No evidence was placed on the side of the claimants
, to show that they have been getting substantial income from the property or it has got high potential as a house- site. Therefore we are of the view that necessary deduction has to be made towards development charges."
The High Court then adverted to the principles laid down by this Court in State of Uttar Pradesh v .. Ram Kumari Devi (1996) 8 SCC 577, Viluben Jhalejar Contractor v. State of Gujarat (2005) 4 SCC 789, Atma Singh v. State of Haryana
(2008) 2 SCC 568, The General Manager, Oil and Natural Gas Corporation Ltd. v. Rameshbhai Jivanbhai Patel (2008) 14 SCC 7 45, Revenue Divisional Officer-cun:i-L.A. 0. v. Shaik G Azam Saheb etc. (2009) 4 SCC 395, Faridabad Gas Power
Project, NTPC v. Om Prakash (2009) 4 SCC 719 for determination of market value of the acquired land as also the rule of deduction towards development cost and held: "The acquired property is a manwari land and even
according to the claimants it was not a house-site VALLIYAMMAL v. SPECIAL TEHSILDAR (LAND ACQUISITION) AND ANR. ETC. [G.S. SINGHVI, J.] developed by them. The acquisition was only for
construction of residential houses and therefore necessarily the Housing Board has to spend considerable amount for development and to make it fit for construction of residential units. On the other hand, the property in
Ex.C.8 is a developed site and the same was sold only as a house-site. Therefore considering the advantages, development and potential of the property in Ex.C.8 vis-a- vis the disadvantages, undeveloped state and lack of
potential of the acquired property, we are of the view that deduction at the rate of 40% has to be given towards c development charges. n The High Court also took cognizance of the fact that the
sale instance Exhibit C.8 relied upon for fixing market value was in respect of a small piece of land and held: "While fixing the market rate, very often, documents of smaller extent would be taken as the basis. The normal rule in fixing compensation for large extent of land with
reference to the value shown in the sale document of lesser extent is that there must be suitable deduction. It is common knowledge that larger extent of property invariably fetch less when compared to smaller extent. No prudent
buyer would buy large extent of land by quoting the price prevailing in the market for a small piece of land. The document in Ex.C.8 is in respect of a property having only 1200 sq.ft. However as per the present notification,
large extent of property was acquired. Therefore we are . of the considered opinion that necessary deduction on account of small size of the property retained for fixing the market value has to be given. On an overall consideration
of the matter, we fix the deduction on account of small size of the plot taken as the basic document at 20%. Taking an overall view of the matter we are of the opinion that 40% deduction should be made towards development
costs and 20% on account of small size of the plot taken as the basis to arrive at the market value. Accordingly, while retaining Ex.C.8 dated 8.2.1991 (Rate Rs.30/- per sq.ft.) as the basic document for arriving at the market rate, we deduct 40% by way of development charges and 20%
by way of small size of the plot and arrive at the market rate at Rs.5,22,720/- per acre." 10. The facts of the other appeals have been incorporated in a statement, which is marked as Schedule 'A' and shall be treated as part of this judgment. A perusal of the statement C shows that various parcels of land were acquired by the State Government vide notifications dated 9.10.1990, 15.4.1991,
16.4.1991, 22.5.1991, 27.5.1991, 8.4.1992, 15.3.1995, 17.1.1997, 12.2.1997 and 19.3.1997 and the High Court reduced the market value fixed by the Reference Court from D Rs.19.28 to Rs.12/- and from Rs.20/- to Rs.8/- per square feet. 11. Shri V. Giri, learned senior counsel appearing for the appellants in some of the cases criticized the impugned
judgments/orders primarily on the ground that while reducing E market value fixed by the Reference Court, the High Court . completely ignored the settled rule that the landowner is entitled to the benefit of escalation in land prices. Learned senior counsel then argued that the High Court was not at all justified in making 40% deduction towards the cost of development and F 20% further deduction on account of smallness of the size of plot, which was taken as basis for arriving at the market value ignoring that the appellants had suffered huge monetary loss on account of non-payment of compensation for years together. The other learned counsel appearing for the appellants adopted G the arguments of Shri Giri.
12. Shri Gurukrishna Kumar, Additional Advocate General, Tamil Nadu fairly stated that the appellants are entitled to the benefit of escalation in land prices but argued that the deduction of 40% towards development cost and 20% due to
VALLIYAMMAL v. SPECIAL TEHSILDAR (LAND ACQUISITION) AND ANR. ETC. [G.S. SINGHVI, J.] smallness ofthe size of the plots sold vide Exhibit c.a· cannot be termed as excessive. 13. We have considered the respective arguments and
carefully perused the record. At the threshold, it will be useful to notice some of the judgments in which the Court has laid down guiding principles for determination of market value of the acquired land.
14. In Shaji Kuriakose v. Indian Oil Corporation Limited (2001) 7 SCC 650, this Court held: "It is no doubt true that courts adopt comparable sales method of valuation of land while fixing the market value
c of the acquired land. While fixing the market value of the acquired land, comparable sales method of valuation is preferred than other methods of valuation of land such as capitalisation of net income method or expert opinion
method. Comparable sales method of valuation is preferred because it furnishes the evidence for determination of the market value of the acquired land at which a willing purchaser would pay for the acquired
land if it had been sold in the open market at the time of issue of notification under Section 4 of the Act. However, comparable sales method of valuation of land for fixing the market value of the acquired fand is not always
conclusive. There are certain factors which are required · to be fulfilled and on fulfilment of those factors the compensation can be awarded, according to the value of the land reflected in the sales. The factors laid down inter a/ia are: (1) the sale must be a genuine transaction, (2)
that the sale deed must have been executed at the time proximate to the date of issue of notification under G Section 4 of the Act, (3) that the land covered by the sale must be in the vicinity of the acquired land, (4) that the land covered by the sales must be similar to the acquired
land, and (5) that the size of plot of the land covered by the sales be comparable to the land acquired. If all these factors are satisfied, then there is no reason why the sale value of the land covered by the sales be not given for
the acquired land. However, if there is a dissimilarity in regard to locality, shape, site or nature of land between land covered by sales and land acquired, it is open to the court to proportionately reduce the compensation for
acquired land than what is reflected in the sales depending upon the disadvantages attached with the acquired land." c (emphasis supplied) 15. In Viluben Jhalejar Contractor v. State of Gujarat
(supra), this Court laid down the following principles for determination of market value of the acquired land: "Section 23 of the Act specifies the matters required to be considered in determining the compensation; the principal
among which is the determination of the market value of the land on the date of the publication of the notification under sub-section (1) of SectiJ'l 4. One of the principles for determination of the amount of
compensation for acquisition of land would be the willingness of an informed buyer to offer the price therefor. It is beyond any cavil that the pricf:! of the land which a willing and informed buyer would offer would be different
in the cases where the owner is in possession and enjoyment of the property and in the cases where he is not. Market value is ordinarily the price the property may fetch in the open market if sold by a willing seller unaffected by the special needs of a particular purchase. Where definite material is not forthcoming either in the shape of sales of similar lands in the neighbourhood at or about the date of notification under Section 4(1) or otherwise, other sale
instances as well as other evidences have to be considered. VALLIYAMMAL v. SPECIAL TEHSILDAR (LAND ACQUISITION) AND ANR. ETC. [G.S. SINGHVI, J.] The amount of compensation cannot be ascertained with
mathematical accuracy. A comparable instance has to be identified having regard to the proxiQlity from time angle as well as proximity from situation angle. For determining the market value of the land under acquisition, suitable
adjustment has to be made having regard to various positive and negative factors vis-a-vis the land under acquisition by placing the two in juxtaposition. The positive and negative factors are as under:
Positive factors Negative factors (i) smallness of size (ii) proximity to a road (iii) frontage on a road (i) largeness of area (ii) situation in the interior at a distance from the road
c (iii) narrow strip of land with very small frontage compared to depth (iv) nearness to developed (iv) lower level requiring the area · depressed portion to be filled (v) regular shape
(vi) level vis-a-vis land under acquisition (vii) special value for an owner of an adjoining property to whom it may have some very special advantage up (v) remoteness from developed locality
(vi) some special disadvantageous factors which would deter a purchaser Whereas a smaller plot may be within the reach of many, a large block of land will have to be developed preparing
a layout plan, carving out roads, leaving open spaces, plotting out smaller plots, waiting for purchasers and the hazards of an entrepreneur. Such development charges may range between 20% and 50% of the total price."
c 16. In Atma Singh v. State of Haryana (supra), the Court held: "In order to determine the compensation which the tenure- holders are entitled to get for their land which has been
acquired, the main question to be considered is what is the market value of the land. Section 23(1) of the Act lays down what the court has to take into consideration while Section 24 lays down what the court shall not take into
consideration arid have to be neglected. The main object of the enquiry before the court is to determine the market value of the land acquired. The expression "market value" has been the subject-matter of consideration by this Court in several cases. The market value is the price that a
willing purchaser would pay to a willing seller for the property having due regard to its existing condition with all its existing advantages and its potential possibilities when led out in most advantagecus manner excluding any
advantage due to carrying out of the scheme for which the property is compulsorily acquired. In considering market value disinclination of the vendor to part with his land and the urgent necessity of the purchaser to buy should be
disregarded The guiding star would be the conduct of hypothetical willing vendor who would offer the land and a purchaser in normal human conduct would be willing to buy as a prudent man in normal market conditions but not an
anxious dealing at arm's length nor facade of sale nor fictitious sale brought about in quick succession or otherwise to inflate the market value. The determination of market value is the prediction of an economic event viz. a price outcome of hypothetical sale expressed in terms of
probabilities. See Kamta Prasad Singh v. State of Bihar, Prithvi Raj Taneja v. State of M.P., Administrator General VALLIYAMMAL v. SPECIAL TEHSILDAR (LAND ACQUISITION) AND ANR. ETC. [G.S. SINGHVI, J.]
of W.B. v. Collector, Varanasi and Periyar Pareekanni Rubbers Ltd. v. State of Kera/a. For ascertaining the market value of the land, the potentiality of the acquired land should also be taken into consideration. Potentiality means capacity or possibility for changing or developing into state of actuality. It is well settled that market value of a property has to be
determined having due regard to its existing condition with all its existing advantages and its potential possibility when led out in its most advantageous manner. The question whether a land has potential value or not, is primarily one of fact depending upon its condition, situation, user to
which it is put or is reasonably capable of being put and proximity to residential, commercial or industrial areas or institutions. The existing amenities like water, electricity, possibility of their further extension, whether near about town is developing or has prospect of development have
to be taken into consideration. See Collector v. Dr. Harisingh Thakur, Raghubans Narain Singh v. U.P. Govt. and Administrator General, WB. v. Collector Varanasi. It has been held in Kausalya Devi Bogra v. Land
Acquisition Officer and Suresh Kumar v. Town Improvement Trust that failing to consider potential value of the acquired land is an error of principle." 17. In fixing market value of the acquired land, which is
undeveloped or under-developed, the Courts have generally approved deduction of 1/3rd of the market value towards development cost except when no development is required to be made for implementation of the public purpose for which land is acquired. In Kasturi v. State of Haryana (2003) 1 SCC 354, the Court held:
·: ……….. It is well settled that in respect of agricultural land or undeveloped land which has potential value for housing or commercial purposes, normally 1/3rd amount of c
compensation has to be deducted out of the amount of compensation payable on the acquired land subject to certain variations depending on its nature, location, extent of expenditure involved for development and the area
required for roads and. other civic amenities to develop the land so as to make the plots for residential or commercial purposes. A land may be plain or uneven, the soil of the land may be soft or hard bearing on the foundation for the purpose of making construction; may be the land is
situated in the midst of a developed area all around but that land may have a hillock or may be low-lying or may be having deep ditches .. So the amount of expenses that may be incurred in developing the area also varies. A
claimant who claims that his land is fully developed and nothing more is required to be done for developmental purposes, must show on the basis of evidence that it is such a land and it is so located. In the absence of such
evidence, merely saying that the area adjoining his land is a developed area, is not enough particularly when the extent of the acquired land is large and even if a small portion of the land is abutting the main road in the
developed area, does not give the land the character of a developed area. In 84 acres of land acquired even if one portion on one side abuts the main road, the remaining large area where planned development is required, needs
laying of internal roads, drainage, sewer, water, electricity lines, providing civic amenities, etc. However, in cases of some land where there are certain advantages by virtue of the developed area around, it may help in reducing
the percentage of cut to be applied, as the developmental charges required may be less on that account. There may be various factual factors which may have to be taken into consideration while applying the cut in
payment of compensation towards developmental charges, may be in some cases it is more than 1!3rd and in some cases less than 1!3rd. It must be remembered that there is difference between a developed area and an
VALLIYAMMAL v. SPECIAL TEHSILDAR (LAND ACQUISITION) AND ANR. ETC. [G.S. SINGHVI, J.] area having potential value, which is yet to be developed. The fact that an area is developed or adjacent to a
developed area will not ipso facto make every land situated in the area also developed to be valued as a building site or plot, particularly when vast tracts are acquired, as in this case, for development purpose."
s (emphasis supplied) 18. The rule of 1 /3rd deduction was reiterated in Tejumal Bhojwani v. State of UP. (2003) 10 SCC 525, V. Hanumantha Reddy v. Land Acquisition Officer & Manda/ Revenue Officer C (2003) 12 SCC 642, H.P. Housing Board v. Bharat S. Negi
(2004) 2 SCC 184 and Kiran Tandon v. Allahabad Development Authority (2004) 10 SCC 745. In Lal Chand v. Union of India (2009) 15 SCC 769, the Court indicated that percentage of deduction for development to be made for
arriving at market value of large tracts of undeveloped agricultural land with potential for development can vary between 20 and 75 per cent of the price of developed plots and observed:
"The 'deduction for development' consists of two components. The first is with reference to the area required to be utilised for developmental works and the second is the cost of the development works ….
Therefore the deduction for the 'development factor' to be made with reference to the price of a small plot in a developed layout, to arrive at the cost of undeveloped land, will be for more than the deduction with reference to the
price of a small plot in an unauthorised private layout or an industrial layout. It is also well known that the development cost incurred by statutory agencies is much higher than the cost incurred by private developers, having regard to higher overheads and expenditure."
· 19. In A.P. Housing Board v. K. Manohar Reddy (2010) [2011) 10 S.C.R. 12 SCC 707, the rule of 1/3rd deduction towards development cost was invoked while determining market value of the
acquired land. In Subh Ram v. State of Haryana (2010) 1 SCC 444, this Court held as under: c "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 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
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 appropriate adjustment is made in the
percentage of deduction to take note of the developed status of the acquired 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 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, will the future use or purpose of acquisition play a role in determining the percentage of deduction towards
development cost." (emphasis supplied) 20. If the impugned judgment is considered in the light of VALLIYAMMAL v. SPECIAL TEHSILDAR (LAND ·ACQUISITION) AND ANR. ETC. [G.S. SINGHVI, J.]
the principles laid down in the aforesaid cases, there is no escape from the conclusion that the same suffer from multiple 1 errors and call for interference by this Court. 21. The first error committed by the High Court relates to deduction of 40% towards development charges. While doing
so, the High Court ignored its own finding that the acquired land was situated in the vicinity of the residential colonies developed by the Board and other establishments as also the fact that the respondents had not produced any evidence to show that they will have to start the development work from scratch. Therefore, the High Court could have, at best, applied 1/3rd deduction towards development cost.
22. The second error committed by the High Court is that while fixing market value, it did not take into account the escalation in land prices. In Ranjit Singh v. U. T. of Chandigarh . D (1992) 4 SCC 659, Land Acquisition Officer and Revenue
Divisional Officer v. Ramanjulu (2005) 9 SCC 594, Krishi Utpadan Mandi Samiti v. · Bipin Kumar (2004) 2 SCC 283, Sardar Jogendra Singh v. State of U.P. (2008) 17 SCC 133, Revenue Divisional Officer-cum-LA. 0. v. Shaik Azam Saheb
(supra) and Oil and Natural Gas Corporation Ltd. v. Rameshbhai Jivanbhai Patel (supra), this Court has repeatedly held that the exercise undertaken for fixing market value and determination of the compensation payable to the landowner should necessarily involve consideration of
escalation in land prices. In the last mentioned judgment, the Court noticed the earlier pre9edents and observed as under: "We have examined the facts of the three decisions relied
on by the respondents. They all related to acquisition of lands in urban or semi-urban areas. Ranjit Singh related to acquisition for development of Sector 41 of Chandigarh. Ramanjulu related to acquisition of the third phase of an
existing and established industrial estate in an urban area. Bipin Kumar related to an acquisition of lands adjoining Badaun-Delhi Highway in a semi-urban area where c (2011] 10 S.C.R
building construction activity was going on all around the acquired lands. Primarily, the increase in land prices depends on four factors: situation of the land, nature of development in
surrounding area, availability of land for development in the area, and the demand for land in the area. In rural areas, unless there is any prospect of development in the vicinity, increase in prices would be slow, steady and gradual,
without any sudden spurts or jumps. On the other hand, in urban or semi-urban areas, where the development is faster, where the demand for land is high and where there is construction activity all around, the escalation in market price is at a much higher rate, as compared to rural areas. In some pockets in big cities, due to rapid development
and high demand for land, the escalations in prices have touched even 30% to 50% or more per year, during the nineties. On the other extreme, in remote rural areas where there was no chance of any development and hardly any buyers,
the prices stagnated for years or rose marginally at a nominal rate of 1 % or 2% per annum. There is thus a significant difference in increases in market value of lands in urban/semi-urban areas and increases in market value
of lands in the rural areas. Therefore, if the increase in market value in urban/semi-urban areas is about 10% to 15% per annum, the corresponding increases in rural areas would at best be only around half of it, that is, about 5% to 7.5% per annum. This rule of thumb refers to the
general trend in the nineties, to be adopted in the absence of -clear and specific evidence relating to increase in prices. Where there are special reasons for applying a higher rate of increase, or any specific evidence relating to the actual increase in prices, then the increase to be
. applied woul.d depend upon the same. VALLIYAMMAL v. SPECIAL TEHSILDAR (LAND ACQUISITION) AND ANR. ETC. [G.S. SINGHVI, J.] Normally, recourse is taken to the mode of determining the market value by providing appropriate escalation over the
proved market value of nearby lands in previous years (as evidenced by sale transactions or acquisitions), where there is no evidence of any contemporaneous sale transactions or acquisitions of comparable lands in the
neighbourhood. The said method is reasonably safe where the relied-on sale transactions/acquisitions precede the subject acquisition by only a few years, that is, up to four to five years. Beyond that It may be unsafe, even if it
relates to a neighbouring land. What may be a reliable c standard if the gap is of only a few years, may become unsafe and unreliable standard where the gap is larger. For example, for determining the market value of a land
acquired in 1992, adopting the annual increase method with reference to a sale or acquisition in 1970 or 1980 may have many pitfalls. This is because, over the course of years, the "rate" of annual increase may itself undergo drastic change apart from the likelihood of occurrence of
varying periods of stagnation in prices or sudden spurts in prices affecting the very standard of increase." 23. Though it may appear repetitive, we deem it necessary to mention that the acquired land is situated in the close vicinity of various residential colonies, educational institutions, hospitals etc. and is on the junction of two important roads. Therefore, it can safely be concluded that the land is semi- urban and has huge potential for being developed as housing sites and the High Court should have added 10% per annum
escalation in the price specified in the sale deeds relied upon for fixing market value of the acquired land. 24. The third error committed by the High Court is that in fixing market value of the land acquired vide notifications issued in 1991, 1992 and 1995 with reference to sale deed dated
4.9.1990 vide which a piece of land was sold at the rate of Rs.20/- per square feet, the High Court did not add 10% [2011) 10 S.C.R. A escalation per annum in the land prices. 25. We may have sustained 20% deduction keeping in
view the smallness of the plots which were sold vide sale deeds dated 4.9.1990 and 8.2.1991, but, in the peculiar facts of the B case, we think that it will be wholly unjust to allow such deduction. Majority of the appellants have been deprived of their entire landholding and they have waited for 14 to 20 years for getting the compensation. It appears that in compliance of the interim orders passed by the Court, some of the appellants C did get 25% and one of them get 35% of the compensation, but majority of them have not received a single penny towards compensation and at this distant point of time, it will be wholly unjust to deprive them of their legitimate right by approving the 20% deduction made by the High Court. In such matters, the Court cannot be oblivious of the fact that the landowners have D been deprived of the only source of livelihood, the cost of living has gone up manifold and the purcha.sing power of rupee has substantially declined.
26. In the result, the appeals are allowed and market value E of the acquired land is fixed as under: (i) For the acquisition made vide notification dated 9.10.1990, the base document will be sale deed dated
4.9.1990 vide which land was sold at the rate of Rs.20/- per square feet. One-third of Rs.20/- comes to Rs.6.6 per square feet. After deducting Rs.6.6 from Rs.20/-, market value of the acquired land will be Rs.13.4 per square feet which is rounded off to Rs.14/- per square feet.
(ii) For the acquisitions made by the notifications issued on 15.4.1991, 16.4.1991 and 27.5.1991, the base document will be sale deed dated 8.2.1991 vide which land was sold at the rate of Rs.30/- per square feet. One- third of Rs.30/- is equal to Rs.10/- per square feet. After deducting Rs.10/- from Rs.30/-, market value will be Rs.20/ – per square feet.
VALLIYAMMAL v. SPECIAL.TEHSILDAR (LAND ACQUISITION) AND ANR. ETC. [G.S. SINGHVI. J.] (iii) For the acquisition made vide notification dated A 08.4.1992, the base document will be sale deed dated
8.2.1991 vide which land was sold at the rate of Rs.30/- per square feet. By adding 10% per annum in lieu of escalation in the land prices and deducting 1/3rd towards development cost, market value of the acquired land will . B be Rs.29.2 per square feet which is rounded off to Rs.30/
– per square feet. (iv) For the acquisition made vide notification dated 15.3.1995, the base document will be sale deed dated c 8.2.1991 vide which land was sold at the rate of Rs.30/-
per square feet. By adding 10% per annum in lieu of escalation in the land prices and deducting 1 /3rd towards development cost, market value of the acquired land will be Rs.29.2 per square feet which is rounded off to Rs.30/ D – per square feet.
(v) For the acquisitions made by the notifications issued on 17.1.1997 and 19.3.1997, the base document will be sale deed dated 8.2.1991 vide which land was sold at the rate of Rs.30/- per square feet. If 100/o per annum is added E in lieu of escalation in the land prices and 1/3rd is deducted towards development charges, market value of the
acquired land will be Rs.35.3 per square feet which is rounded off toRs.36/- per square feet. The appellants shall get solatium, interest and other statutory benefits in accordance with the provisions of the Act. 27. With a view to ensure that the landowners are not
fleeced by the middleman, we deem it proper to issue the following further directions: (i) Within one month from the date of receipt of copy of this. judgment, the Land Acquisition Officer shall depute an
officer subordinate to him not below the rank of Naib Tehsildar or an equivalent rank, who shall get in touch with H SUPREME COURT .REPORTS [2011) 10 S.C.R. the landowners and/or their legal representatives and
inform them about their entitlement to receive enhanced compensation. (ii) The concerned officers shall instruct the landowners and/or their legal representatives to open savings bank
account in a nationalized or scheduled bank, in case they already do not have such account. (iii) The account numbers of the landowners and/or their legal representatives should be furnished by the concerned c
officer to the Land Acquisition Officer within a period of two months. (iv) Within next one month, the Land Acquisition Officer shall deposit the amount of compensation along with other
statutory benefits in the bank accounts of the landowners and/or their legal representatives by way of cheques. N.J. Appeal allowed. SCHEDULE 'A' s. SLP(C) Nos. & Name Date of Date of
No. of Parties Section 4(1) award by Notification 'LAO and compensation 1. 22086-22087/2009- 19.3.1997 21.6.2000 & Valliyammal and another Rs.50,000/- v. Special Tahsildar (Land per acre
Acquisition), Erode and another 2. 25591/2009-Thangamuthu 17.1.1997 3.3.2000 & Gounder v. Special Rs.50,000/- Tahsildar (Land Acquisition), per acre Erode and another 3. 25587-90/2009- Mohan
15.4.1991 10.06.1994& and others etc v. Special Rs.37,500/- Tahsildar (Land Acquisition), per acre Erode and another 4. 25596-97/2009- K.R. 9.10.1990/ 28.9.1994, Palaniappan v. Special
16.4.1991. 10.6.1994 & Date of Reference Court order and Amount fixed. 4. 7.2003 and Rs.28/- per square feet 24.3.2005 and Rs.30/- per square feet 27.11.2002 and Rs.20/- per square feet
30.03.2001 and Rs.16/- per Date of High Court Judgment in Appeal Suit Nos. and rate fixed 28.4.2009 in AS. Nos. 200 & 201/2009 and Rs.12/- per square feet. 2.3.2009 in AS. No. 706/2006 and Rs.12/-
per square feet 2.3.2009 in AS. Nos. 813, 820, 821 and 822/ 2003 and Rs.8/- per square feet (Rs.3,48,480/- per acre) 2.3.2009 in AS. Nos. 170/2003 and 87112006 )> < (') )> Or Cr w-
-1~ oS: zS: )> r Z:<:: 0 )> U> z -0 ::o m . (') m )> -I r (') -I ·m ~ :r: U> – r ooO z ::0 G>_ r < )> .:-z ..t: 0 Tahsildar (Land Acquisition), Rs.37,500/- Erode and another per acre
5. 33777-82/2009 – Ramayam- 15.4.1991 10.6.1994 & mal and others v. Special Rs.37.500/- Tahsildar (Land Acquisition), per acre Erode and another 6. 33808/2009 – Vishwanatha 27.5.1991
03.7.1994 & Gounder v. Special Tahsildar Rs.37,500/- (Land Acquisition) Erode per acre 7. 2194-2200/2010-Veerasa- 19.2.1997 31.6.2000 & my and others v. Special Rs.50,000/- Tahsildar (Land Acquisition),
per acre Erode and another 8. 12581/2010 – N. Pazhanis- 12.2.1997 3.3.2000 & amy Gounder v. Special Rs.50,000/- Tahsildar (Land Acquisition), per acre Erode and another (Rs.1.15 per
9. 22831/2010 -Arumugha 15.4.1991 10.6.1994 & Gounder and another v. Rs.37,500/- Special Tahsildar (Land per acre square feet 16.4.1999 and Rs.2, 18,500/- per acre 27.11.2006 and Rs.20/-per
square feet 29.11.2002 and Rs.28/- per square feet 2.3.2006 and Rs.30/-per square feet 25.10.1999 and Rs.17/- per square feet and Rs.8/- per square feet 2.3.2009 in A.S. Nos. 759 to 764/1999 and.
Rs.8/- per square feet (Rs.3,48,480/- per acre) 2.3.2009 in A.S. Nos. 72112003 and Rs.Si- per square feet (Rs.3,48,480/- per acre) 2.3.2009 in A.S. Nos. 727, 729, 730, 731, 732, 733 and 73412003 and
Rs.12/- per square feet 8.7.2009 in A.S. No. 854/2006 and Rs.12/- per square feet (Rs.5,22,720/- per acre) square feet) 2.3.2009 in A.S. No. 32512000 and Rs.8/- per square feet c '"O
::0 m s: m 0 c ::0 m ""CJ 'i\3 …… …… …… …… en h :0 Acquisition), Erode and another 10. 23654/2010 – Kulanthais- 08A1992 22.5.1995 & wamy and another v. Rs.37,500/- .
Special Tahsildar (Land per acre Acquisition) Erode and another 11. 23655/2010 ~KB. 08.4.1992 22.5.1995 & Dakhinamoorthy and others Rs.37,500/- v. Special Tahsildar (Land per acre
Acquisition) Erode and another 12. 23656/2010 – P. Chandras- 08.4.1992 22.5.1995 & ekar and others v. Special Rs.37,500/- Tahsildar (Land Acquisition) per acre Erode and another 13.
23657/2010- Pavayammal 15.4.1991 10.6.1994 & and others v. Special Rs.37,500/- Tahsildar (Land Acquisition) per acre Erode and another 14. 23658/2010- Lakshmi & 15.3.1995 25.3.1998 &
Anr. v. Special Tahsildar Rs.39,220/- (Rs.3,48,480/- per acre) 26.3.2007 and 11.12.2009 in AS. No. Rs.20/- per 428/2008 and Rs.8/- per square feet square feet 26.3.2007 and 11.12.2009 in AS. No.
Rs.20/- per 543/2008 and Rs.8/- per square feet square feet 26.3.2007 and 11.12.2009 in AS. No. Rs.20/- per 610/2008 and Rs.8/- per square feet square feet 4. 1.2006 and 11.12.2009 inAS. No.
Rs.20/- per 1002/2007 and Rs.8/- square feet per square feet 6.2.2006 and 11.12.2009 in AS. No. Rs.22/- per 356/2007 and Rs.8/- per )> < () )> Or Cr en – -I :s:: 0 :s:: 3)> )> r Z:<::
o en )> iJ Zm ::u () ~ )> -I r () -I . m ~I 0 (/) en – r en o z ::u G') _ .:-z c:….o .:….. (Land Acquisition) Erode and another 15. 23659/2010-Kannammal 15.4.1991 and others v. Special
Tahsildar (Land Acquisition) Erode and another 16. 23666/2010-Kannammal@ 15.3.1995 Rajeshwari & another v. Special Tahsildar (Land Acquisition) Erode & another 17. 23669/2010 – Kannammal
27.5.1991 and others v. Special Tahsildar (Land Acquisition) Erode and another 18. 23641/2010-Chinnasamy 27.5.1991 and others v. Special Tahsildar (Land Acquisition) Erode and another
19. 23643/2010-K.N. Arumug- 09.10.1990 ham v. Special Tahsildar (Land Acquisition) Erode and another per acre square feet 10.6.1994 & 29.11.2005 and Rs.37,500/- Rs.20/- per per acre
square feet 25.3.1998 & 29.11.2002 and Rs.50,000/- Rs.28/- per per acre square feet 10.6.1994 & 29.11.2005 and Rs.37,500/- Rs.20/- per per acre square feet 3.7.1994 23.3.2001 and 'l-. Rs.37,500/-
Rs.17/- per per acre square feet 28.9.1994& 17.01.2005 and Rs.37,500/- Rs.75,000/- per acre per acre square feet 11.12.2009 in AS. No. 74812008 and Rs.8/- per square feet 11.12.2009 in AS. No.
77012004 and Rs.8/- per square feet 11.12.2009 in AS. No. 760/2008 and Rs.8/- per square feet 2.3.2009 in AS. No. 618/2003 and Rs.8/- per square feet 2.3.2009 in AS. No. 756/2008 and Rs.8/- per
square feet (Rs.3,48,480/- per acre) (..) en c ""O :::0 m :s::: m 0 c :::0 m ""O _. en :::0 20. 26825/2010 -Thambusamy 27.5.1991 {Dead by LRs.) v. Special Tahsildar {Land Acquisition)
Erode and another 21. 1961/2011 -Nachimuthu v. 19.2.1997 Special Tahsildar {Land Acquisition) Erode and another 22. 2187/2011- Kannaki & 19.3.1997 another v. Special Tahsildar {Land Acquisition)
Erode and another 23. 1147/2011 -Jayalakshmi and 19.3.1997 others v. Special Tahsildar {Land Acquisition) Erode and another 24. 3520/2011-P.Subbarayan 22.5.1991 and others v. Special
Tahsildar (Land Acquisition) Erode and another 03.08.1994 27.3.2008 and & Rs.37,500/- Rs.9/- per per acre square feet 31.6.2000 & 31.3.2004 and Rs.50,000/- Rs.28/- per per acre square feet
21.06.2000 & 29.2.2005 and Rs.50,000/- Rs.30/- per per acre square feet 21.6.2000 & 4.4.2006 and Rs.50,000/- Rs.25/- per per acre square feet 10.8.1994 & 21.11.2005 and Rs. 37,500/-
Rs.17/- per per acre · square feet Rs. 0.86 per sq. ft.) 19.12.2009 in A.S. No. 835/2008 and Rs.8/- per square feet 2.3.2009 in AS. No. 544/2005 and Rs.12/- per square feet {Rs.5,22,720/- per acre)
8.7.2009 in AS. No.141/ 2006 and Rs.12/- per square feet (Rs.5,22,720/- per acre) 8.7.2009 in AS. No. 181/2007 and Rs.12/- per square feet (Rs.5,22,720/- per acre) 8.7.2009 in AS. No.
392/2007 and Rs. 8/- per square feet (Rs.3,48,480/- per acre) )> < () )> Or Cr en~ -I :s:: 0 :s:: 3)> )>r Z:<:: Oen )> -0 Zm ;o () m )> -I r ()-I ·m ~I Pen en – r enO Z;o Q_ Ir < )>
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