Holding

The Court rejected the hypothetical layout method, upheld the parties' settlement, and fixed interest at 9% from the notification date for one year and 15% thereafter, ordering payment of rent without deduction of land revenue.

Summary

Around 300 acres of agricultural land in Belgaum were requisitioned in 1942 for an Air Force station. The acquisition notification was issued only in 1983 and the Land Acquisition Officer fixed compensation at Rs.6,000 per acre, which the civil court enhanced to Rs.70,400 per acre using a hypothetical layout method. The Karnataka High Court rejected the hypothetical layout, holding that the land was not available for open‑market sale and remanded the matter. The parties subsequently settled on Rs.45,000 per acre with a 30% solarium and an additional amount of 12% per annum under Section 23(1‑A) of the Land Acquisition Act, 1894. The Supreme Court affirmed the settlement, fixed interest at 9% from the date of notification (24‑Feb‑1983) for one year and 15% thereafter, ordered payment of rent without deducting land revenue, and directed the respondents to pay the balance amount within six months. The appeal was allowed.

Issues considered

Whether the hypothetical layout method can be employed to determine compensation when the land is not available for sale in the open market.
From what date the claimants are entitled to interest under Section 23(1‑A) of the Land Acquisition Act, 1894.
Whether land revenue can be deducted from the rent payable to the landowners.
Whether the parties' settlement on compensation and solarium is binding and enforceable by the court.

Legislation cited

Land Acquisition Act, 1894s. 23(1-A), s. 4(1)

Subjects

Land acquisitionCompensationHypothetical layoutInterest under Section 23Rent paymentSolariumSettlementSupreme Court

Judgment

A ASTEKAAR NAGANAATHA RAO AND ORS. ETC.
v.
THE ASSISTANT COMMISSIONER AND LAND ACQUISITION
OFFICER AND ORS. ETC.

JANUARY 5, 1996
B
[K. RAMASWAMY AND G.B. PATTANAIK, JJ.]

land Acquisition Act, 1894 :

lands acquired for establishment of Air Force Station-Civil Court
c enhancing conipensation adopting method of hypothetical lay out-High Court
rejecting the method adopted-Since the land other than the land acquired
were not available .for sale in open lrtarket, held High Court rightly rejected the
niethod--On appeal, in response to Supreme Coll.rt' s suggestion parties agreeing
for Rs. 45,000 per acre with solatium at 30% and additional amount at 12% per
(
a1ulu1n under S. 23( IA) from laking possession-Ordered according[~ Inter-
D
est entitlement at 9o/o from date o.fpublication of notification and 15% fron1 date
o.f expiry o.f 011e year thereo.f--Land revenue not to be deducted.from a1nount
payable as rent.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1616-25 of
1996.
E
From the Judgment and Order dated 12.11.91 of the Karnataka High
Court in M.F.A. Nos. 1821, 1769, 1772-73, 1775, 1797-99, 1815 and 1916 of
1989.

S.S. Javali R.K. Anand C.S. Kothwale, Ms. Kiran Suri, R.C. Mishra, Ms.
F Dr. Meera Aggarwal, Ms. Anil Katiyar, Ms. Sushma Suri, A.D.N. Rao, K.H.
Nobin singh and M. Veerappa for the appearing parties.

The following Order of the Court was delivered :

Leave granted.
G Around 300 acres of agricultural land situated in Sarnbre (Belgaum
Airport), Balekundri, Mutage were requisitioned in 1942, possession thereof
was taken in 1942 and the court below had put the date on December 31, 1942,
for the defence purposes, via., establishment of Air Force Station. The notifi-
cation under Section 4(1) of the Land Acquisition Act, 1894 (for short, "the
H Act") acquiring these lands was published on February 24, 1983. The Land

180
\
A.N. RAO v. ASSTT. COMMR. & LAND ACQUISITION OFFICER 181
Acquisition Officer (LAO) determined the compensation @ Rs. 6,000 per acre. A
On reference, the civil Court enhanced the compensation to Rs. 70,400 per acre
·"' adopting the method of hypothetical lay-out. The High Court in the impugned
judgment made in MFA Nos. 1821/89 & batch remanded the matters without
upholding the hypothetical lay-out giving reasons in support thereof. (When the
lands are frozen for open sale the hypothetical lay-out is an artificial embellish-
B
ment to award higher compensation). The question would arise : Whether the
lands other than the acquired land, were available for sale in the open market.
In 1942, when possession was taken as agricultural land for air field, the lands
could not have been sold in 1942 for building purposes as hypothetical for lay-
, out. The High Court was, therefore, right in rejecting the application of principle
of hypothetical lay-out which is but a figment. c
In view of the fact that cases are pending for a long time, we have
suggested to the counsel for the Union of India as well as for the claimants to
have a negotiation for settlement of the amount. We are informed that pursuant
to directions of this Court the parties have settled the amount at Rs. 45,000 per
D
acre with solarium at 30% and also entitlement of additional amount at 12% per
annum under Section 23(1-A) of the Act, p•yable from the date of taking
, possession. The only point on which the parties could not reach a consensus is
the entitlement to payment of interest. It is contended by Shri Javali, the learned
senior counsel that from 1942 no amount as rent has been paid and now stated
to have been paid partly a sum for 1975-76 to 1982 and it cannot be considered E
to be lease amount. In view of the settlement by the parties that the compensation
payable to the appellants is Rs. 45,000 per acre, the question of determination
of the compensation does not arise. Consequently, they are also entitled to the
compensation at that rate and solarium at 30% and also additioqal amount at
" 12% under Section 23(I-A) of the Act, as agreed upon by the parties, from the
F
date of taking possession which the Court has fixed viz., December 31, 1942.
In other words, the claimants would be entitled to the additional amount from
January l, 1943 till the date of publication of notification under Section 4(1).
The question that arises for consideration is from what date the appellants are
entitled to interest. The additional affidavit filed in this Court would show that
the Tehsildar had directed the Union of India payment of rent to the owners of G
the land and to send the same for the period from 1975-76 to 1981-82. In other
. .., words, upto December 31, 1982, he directed a sum of Rs. 2,60,683.98 to be
sent. Accordingly, a demand draft dated January 2, 1984 was sent to the
Tehlisdar. For the earlier period, no record was available in their office. Therefore,
no direction for payment for the said period was given. We agree that it would H
182 SUPREME COURT REPORTS [1996] l S.C.R.
A be difficult to decide whether payment of rent was paid for the earlier period.
It would appear that the Tehsildar deducted Rs. 1,99,815.07 towards land
revenue and a sum of Rs. 46,174.05 was paid to the claimants towards rent.
That appropriation appears to be obviously incorrect. They could not deduct the
land revenue from the amount payable to the appellants as rent. Consequently,
the respondents are liable to pay the rent payable to the tune of Rs. 2,60, 683 .98
B for the above period. The Tehsildar shall accordingly make over the payment.
Out of total amount, it is an admitted case, that Rs. 46,174.05 has already been
paid to the respective persons. Giving credit to the amount already received, the
balance amount shall be paid to the land owners.

C Since notification under Section 4( I) of the Land Acquisition was
published on February 24, 1983, the appellants are entitled to interest@ 9% for
one year from that date and on expiry thereof, they are entitled to the payment
of 15% from 25th February 1.984 till the date of deposit.

The appeals, accordingly, are allowed as indicated above. No costs. The
D respondent are directed to pay the amount without a period of six months from
the date of the receipt of this Order.

G.N. Appeal allowed.