Holding

Market value must be fixed based on bona‑fide comparable sales of similar land, rejecting small retail sales and mutation entries, with a uniform rate of Rs.1,000 per Biswa for frontage land and Rs.670 per Biswa for the rest after a one‑third deduction for development charges, and without belting.

Summary

The Supreme Court examined the method for fixing market value of 90 acres of land acquired under the Land Acquisition Act, 1984. The claimants relied on various sale deeds, including a recent high‑price transaction, while the State relied on mutation entries. The Court held that only bona‑fide sales of comparable land of similar size and characteristics can be used, rejecting small retail sales and mutation entries as irrelevant. It rejected the principle of belting and the use of the highest recent price, and affirmed a uniform market value of Rs.1,000 per Biswa for land abutting the village and Rs.670 per Biswa for the remaining land after a one‑third deduction for development charges. The appeal was allowed, directing the parties to bear their own costs.

Issues considered

How should market value be determined under Section 23(1) of the Land Acquisition Act, 1984?
Can sale deeds of small extents be used as comparable basis for compensation of a large land acquisition?
Should the highest recent sale price be fixed as market value?
Is the practice of belting (differential valuation for land abutting a road) justified in this case?
Is a deduction of one‑third of the market value for development charges appropriate?
Can mutation entries be considered as evidence for fixing market value?

Legislation cited

Land Acquisition Act, 1984s. 18, s. 23(1), s. 4

Subjects

Land acquisitionMarket valueCompensationSection 23BeltingDevelopment chargesSale deedsComparative valuation

Judgment

GULZARA SINGH AND ORS., ETC. A
v.

STATE OF PUNJAB AND ORS.
MAY 11, 1993
B
[K. RAMASWAMY AND R.M. SARAI, JJ.]
Land Acquisition Act, 1984: Section 23(1)-Acidetestfor Market Value of
acquired land-Rekvance.ofSale deeds mutation entries, Average price, Margin
for. wholesale price of large extent, Deduction for development charges.

Notification under section 4 for acquisition of 89 Acres 4 Kanals and 12 c
Marlas of land in a village in Punjab, published on January 27, 1978.
Appellants claimed compensation Rs. 30,000 per Bigha i.e. Rs. 1500 per
Biswa, on the ground that 15 Biswas ofland situated near the acquired land
had been sold on July 12, 1977, for Rs. 24,000 which works out to Rs; 1600 per
Biswa. Land Acquisition Collector classified the acquired land in 6 blocks and . D
awarded Market Value ranging between Rs. 30,000 to Rs~ 6000 per acre. In
reference under Section 18, the District Judge disagreed with.classification.
The learned Judge, relying on sale deeds dated September 4, 1972, June 14,
1976, February 23, 1977 and July 15, 1977, all for small extents, awarded
compensation @ Rs. 800 for the rest of land, besides solatium and interest.
Appeals filed in the High Court by State of Punjab and by one batch of E
claimants. Another batch of claimants filed· cross objections. The learned
Single Judge allowed appeals filed by the State and dismissed appeals and
cross-objections of the claimants. Market Value was determined, on working
out average price on the basis ofsale deeds dated September 4, 1972 and June
14, 1976 filed by claimants and mutation entries dated August 31, 1977 and
October 4, 1977 fded by the State. Belting was carved at depth oflOo Ft. from F
main road and deduction of 1 3rd was made towards development charges.
Consequently market value determined @ Rs. 750 per Biswa for land
abutting main road and @ Rs. 500 per Biswa for the rest of land. Judgment
and order of the learned Single Judge was conf1rmed by Division Bench.

G
Claimants, by special leave petition fded appeals for higher compensa·
tion. This court determined market vain~ at Rs.1000 per Biswa and allowing
the appeals to that extent,

HELD: It is settled law that to determine market value of the land, the
sales ofland under requisition if any or the sales in the neighborhood lands, H
645
646 SUPREME COURT REPORTS (1993] 3 S.C.R.

A that possessed of same or similar features or fertility or other advantageous
features would furnish basis to fix just and fair market value. (649-E)
---
The price for which the willing vender would offer the land and willing
vendee would agree to purchase it, as a prudent man in normal market
conditions, as on date of notification or near about the date, is acid test to fix
B
market value. Sales and purchases ofland. at throw away price at arms length
or depressed sales or facade of sales made in quick succession to inflate
market value do not offer any basis to determine just Market Value. (649-F) .
In order to adjudge, whether sales are bona.fide, whether consideration
c mentioned in the deed was infect and really passed, whether the lands covered
· by sale deeds and relied on possessed· of same or similar potentialities or
fertilities or advantageous features would be brought out <in record only by ·
examination of the vendor or the vendee or if neither of them ~ available, the
attesting witnes8, who has personal knowledge of the bargain and passing of
consideration. Hence it is mandatory. (650-A) •
D

Peri"yar & Pareekanni Rubbers Ltd. v. State f!f Kerala: [1991] 4 SCC 195.

Sale de.eds of small extents being retail price do not offer comparable
basis to fix comp~nsation, when. large block is acquired. If sale transactions
E
relate to the lands under acquisition and if found to be genuine and bonafule
·transactions, then it may be considered but reasonable margin must be given
in fixing wholesale price. (650-E)

Collector of Lakhimpur v. Bhuban Chandra Dutta AIR 1971 SC 2015; Mirza
F Na us herwoan Khan & Anotherv. Collector (Land Acquisition) Hyderabad [197SJ
2SCR184; Ram Rattan & Others v. State of Uttar Pradesh [1977) 2 SCR184; ·
Smt. Kaushalya Devi Bogra & Others v. Land Acquisition Officer, Aurangabad
& Another (1984) 2 SCR 900; Padma Uppal v. Stare of Punjab & Others (1977)
l SCR 329; Administrator General of West Bengal v. Collector Varanasi AIR
1988 SC 943 and Special Tehsildar Land Acquisition v. AMangal Gowri (1991)
G
4SCC218.

Court in the first instance has to determine·as to which of the sale deeds
are releyant, proximate in point of time and offer .comparable base to ---
H
GULZARA SINGH v. STATE OF PUNJAB
647 .

determine market value.The after average price has to be wot}ced out and the A
contention that highest value should be fixed cannot be accepted. (651-D)

State of Madras v. A.M. Ranjan & Another (1976] ·3 SCR 356; Collector of
Lakhimpur v. Bhuban Chandra Dutta AIR 1971SC2015; Smt. Kaushalva Devi ·
Bogra & Others v. Land Acquisition Officer, Aurangabad & Another (1984] 2
SCR 900 andAdministraror General of West Bangal v. Collector, Varanasi AIR B
1988SC 943.

The Principle of belting is perfectly legal and unexceptionable, as the
lands abutting the main road up to a specified depth depending on fat:tual
material on record, would fetch higher market value than lands situated in C
interior area. (652-A)

If the acquired land is undeveloped, deduction of at least l/ 3rd, is
necessary towards deveh>pment charges. (652-F)

Brig. Sahib Singh Kalha & Others v. Amritsar Improvement Trust & Others D
[1982) 1SCC419; Administrator General of West Bengal v. Collector Varanasi
AIR 1988 SC 943; Special Tehsildar, Land Acquisition v. A. Mangat Gowri
{1991) 4 SCC 218; and Bhagwathula Swamnanna & Others v. Special Tehsildar
Land Acquisition Visakhapatnam [1991) 4 SCC 506. (535-D-E)
E
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 8670 of 1983.

From the Judgment and Order dated 3. 9. 1982 of the Punjab and Haryana
High Court in Regular First Appeal No. 1105 of 1981.

WITH F

C.A. Nos. 8634 to 8658/83 and 8660-62/83, 8665 to 8669/83 and8671-72/
83 I

.
Prem Prasad Juneja and R.S.. Sodhi for the Appellants. G

H.M. Singh for G.K. Bansal for the Respondents.

H
•c-

648 SUPREME COURT REPORTS [1993} 3 S.C.R.

A The Judgment of the Court was delivered by

K.. RAMASWAMY, J. The common questions of law arose for decision in
these appeals. Hence they are disposed of together. Notification under s. 4 (1) o(
the Land Acquisition Act 1of1984 was published in the Punjab State Gazette on
January 27, 1978 acquiring 89 acres 4 canals and 12. marlas of land situated in
B Dhuri village for public purpose. namely to set up new Mandi Township. The .
appellants claimed at therate ofRs. 30.000 per Bigha but Land Acquisition Officer
after classifying the lands into six blocks A to F, awarded market value ranging
between Rs. 3Q,OOO to Rs. 6,000 acre. On reference under s. 18 of the Act, the
District Judge, Sangrur in his judgment dated May 13, 1981 disagreed with the
C classification and found that all the lands are possessed of the same quality.
Relying on sale-deeds, Ex. p-3 datedSeptember4, 1972, p-5 dated June 14, 1976,
p-2 dated February 23, 1977 and p-4 dated July 15, 1977, all small extents, he
calculated at an average of Rs.BOO per Biswa and awarded to the lands belonging
to Jaswant Kaur, Baldev Singh and Gurdev Singh at the rate of Rs. 1,000 per Biswa
finding that their lands are abutting Abadi (village) and for the rest awarded at the
D rate of Rs. 800 per Blswa with statutory solatium at 15% and interest of 6% per
annum on enhanced compensation. Dissatisfied therewith the State filed the
appeals and against disallowed claims, the claimants in one batch filed appeals and
in another batch filed cross-objections. The learned Single Jridge relied on Ex. p-
3 and p-5 filed by the claimants and Ex. R-4 and R-6 filed by the State as
comparable instances and calculated the average which worked out at Rs. 750 per
E Biswa. He found that the lands are possessed of potential value for further building
purposes. Therefore, he carved out belting at a depth of 100 ft. from the main road
td~iose lands, deducted 1/3rd towards developmental charges and awarded the
market value at the rate of Rs. 750 to the land situated abutting to the main road
to the depth of 100 ft. and for the balance lands at the rate ofRs.500 per Biswa.)'he
State appeals were allowed and of the claimants and cross objection were
F dismissed. The Division Bench confirmed the judgment of the learned Single
Judge. The claimants filed these appeals by special leave. In the first batch no
witness has been examined, but in the second batch witnesses were said to have
been examined in proof of these documents but their evidence was not made part
of the record. Equally of the sale deeds.
G
It is seen that the documents in the second batch p-4 to p-10 include those
filed in the first batch. Ex. p-5 is dated Sept. 4, 1972, in which 20 Biswas ofland
was sold for Ice Factory. It was situated in the town itself. The price fetched therein
was Rs. 20,000Therefore, it worked out at the rate of Rs. 1,000per Biswa Ex. p-
10 is dated August 25. 1975, 7 Biswas of land in Dhaula village was s9ld for Rs.
H
GULZARASINGH v. STAIB OF PUNJAB [RAMASWAMY,J.] 649

75,000 which works out at rate of Rs. 1071 per Biswa. Ex. p-7 is dated June 14, A
1976, 3 Bighas 16 Biswas ofland situated at Dhularoad side was sold for Rs.4,500
which works out at the rate of Rs. 1285 per Biswa. Ex.p-8 dated June 15, 1977 is
for 4 Biswas ofland at Dhularoad sold for Rs. 4,000 which works out at Rs. 1,000
per Biswa. Ex. p-4 is dated Feb. 23, 1977, 3 Biswas oflandin the heart of the town
Dhuri was sold for Rs. 6,000 which works out to Rs. 2,000 per Biswa. Ex. p-6 is
dated May 18, 1977, one Bigha 7 Bis was were sold for Rs. 1,000, which works out B
to Rs. 370 per Biswa. This land is away from the town and also from the acquired
land. Ex. p-9 is dated July 12, 1977, 15 Biswas of land were sold for Rs. 24,000
working out at the rate of Rs. 1,600 per Biswa. Based thereon it was contended that
Ex·. p-9 fetches the highest market value and is nearer to the date of notification and
would offer comparable price. The High Court ought to.have fixed market value
at that rate. The High Court committed illegality in relying on two sale-deeds bf C ·
the claimants and two mutation entries on behalf of the state in working out the
average. Therefore, fixation of the market value is illegal. The mutations are not
admissible as neither sale deeds were filed not any body connected with them are
examined.
D
The question, therefore, is whether these sale transactions would reflect the
prevailing market value of the land of the total extent of 90 acres. It is seen that in
the first batch no-one was examined to prove the documents. In the second batch
though witnesses were said lo have been examined, the evidence is not on record.
Neither the reference court nor the High Court discussed the evidence and no
finding was given. So we do not have the advantage of any findings in that behalf. E
The state filed 5 mutation entries which were marked. The sale entries Ex.R-6 is
of0ctober4, 1977 and Ex. R-5 of November 13, 1977. The rates of lands in Sale-
deeds executed between March 7, 1977 to November 13, 1977, i.e. R-2 on 7.3.77,
R-3 on 8.6.77, R-4on 31.8.77 and R-5 on 30.l l.77workoutbetween Rs. 83 to Rs.
450 per Biswa. It is settled law that to determine the market value of the land under
s. 23( 1) of the Act the sales of the land under requisition, if any, or the sales in the F
neighbourhood lands that possessed of same or similar potentialities or fertility or
other advantageous features would furnish basis to determine just and fair market
value on the premise of hypothetical willing vendor and willing vendee. The
willing vendor who would offer the land and willing vendee who would agree to
purchase the land as a prudent man in normal market conditions as on the date of G
the notification or near about the date of the notification is the acid test. It is also
settled law that the sale and purchase oflands at a throw away price at arm's length
or depressed sales or fecal of sales brought into existence in quick succession to
inflate the market value would not offer any basis to determine just market value.
In order to adjudge whether sales are bonafide sales between willing vendor and
H
,.

A
650 SUPREME COL'RT REPORTS [1993) 3 S.C.R.

willing vendee and whether the consideration mentioned in deed was, in fact and
-
really passed on under transaction: whether the lands covered by sale-deeds and
relied on, possessed of same or similar potentialities or fertilities or advantageous
features would be brought on record only by examining the vendor or the vendee
or if neither of them is available, the attesting witness who has personal knowledge
of the bargain and passing of the consideration are mandatory. Vide Periyar &
B Pareekanni Rubbers Ltd. v. State of Kera/a [1991] 4 SCC 195 wherein this court
surveyed the entire case Law in that respect. Since none has been examined in the
first batch the sale transactions referred to either by the state or by the claimants
cannot be relied upon. In the second batch since the evidence has not been referred
to by the courts below nor discussed by them nor we have the ad\'antage to go
through the same, we cannot rely on the same to further enhance the market value.
c Therefore, we are left with no option. but to reject those sale-deeds. Moreover,
except Ex. p-9 all other sale-deeds are of very small extents. This court consis-
tently has taken the view in Collectoroflakhi111purv. Bhitban Chandra Dutta AIR
1971SC2015;Mirza Nausllenvoan Khan &Anr. v. Collector(land Acquisition).
Hyderbad [1975] 2 SCR 184; Ram Rattan & Ors. v. State ofU.P. [1977] 2 SCR
D 184; Smt. Kaushalya Devi Bogra & Ors. v. Land Acquisition Officer, A11ra11gabad
&Anr. [1984] 2 SCR 900; Padma. Uppalv. State of Punjab & Ors. ll977] l SCR
329; Administrator General of West Bengal v. Collector. Varanasi AIR 1988 SC
943 and Special Tehsildar, Land Acquisition v.A. Mangala G.'owri [1991]4 SCC.
218 that sale deeds of small extents being retail price do not offer comparable basis
to fix compensation when large.block ofland is acquired. To an intending bonajide
E ·purchaser if such block of 90 acre is offered for sale, would he agree to purchase
at retail price or far less value? Under no circumstance he would agree to purcha~e
at retail prices mentioned above. In view ofthe settled legal position the sale-
deeds, sought to be relied upon. do not give us any basis to determine the market
value. Every endeavour would be made to fix fair and reasonable market value. If
sale transactions relate to the lands under acquisition and if found to tie genuine
F and bonaftde transaction between willing vendor and vendee then it may be
considered but reasonable margin must be given in fixing whole sale price.
Therefore, all the documents except p-9 are rejected.

The next contention is that the sale-deed Ex. p-9 by which 15
G Bis was were sold for Rs. 24,000 which works out at the rate of Rs. 1,600
per Biswa and whether this highest price should be given to the appel-
lants. As stated earlier we have no evidence before us as to under what
circumstances this document came to be executed and what is the distance
between the lands and for what purpose the land was sold and what is the

H
GULZARA SINGH l'. STATE OF PUNJAB [RAMASWAMY,J.] 651

comparable nature of the land, fertility and potentialities of the land, etc. The A
contention relying on State of Madras v. A.M. Ranjan & Anr. [1976] 3 SCR 356
that highest value should be fixed cannot be accepted in view of the consistent later
view of this court. In Collector of Lakhimpur's case (supra), this .court accepted
the principle of average, but however, rejected the small extent of the lands and
enhancement based on the average at Rs. 15,000 per Bigha was reduced to Rs.
10.000 per Bigha. In Smt. Kausalya Devi's case (supra), this court noted that large B
extent of land in the developed Aurangabad town was acquired for Medical
College, accepted the principle of average worked out by the reference court,
varying between Rs. 2.25 to Rs. 5.00 per sq. yard and this court ultimately fixed
the market value at the rate of Rs. 1.50 per sq. yard. In Administrator General of
West Bengal's case (supra) this co_urt upheld rejection of the small plots of lands
and accepted two sale-deeds oflarge extent working out the average rate at Rs. 500 c
per Decimal and ultimately reference court fixed the market value at the rate of
Rs.200 per Decimal. It is, therefore, clear that the court in the first instance has to
determine as to which of the sale deeds are relevant, proximate in point of time and
offer comparable base to determine market value. Thereafter the average price has ·
to be worked out. It would be seen that this court has taken consistent view of D
working out average and further deductions have been made in fixing just and fair
market value when large chunk of the land was acquired. We respectfully agree
and adhere to the principle and we find no compelling reason to divert the stream
or arrest the consistence.

The question then is whether the reduction of the market value by the learned E
Single Judge is warranted on facts and under law. In his judgment ·the learned
Judge found that the acquired lands are situated between railway line on the one
side and link road going from Dhuri to Sarona on the other side. On the third side
it is surrounded by the inhabited area ofDhuri town. A small portion in KhasraNo.
2585 was abutting the Dhola road and the rest of the acquired land is just behind
the inhabited area. While acquiring these lands the Govt. have excluded the built F
up area.

He also found that there is tendency of extension of Abadi village towards
acquired lands. Therefore, he found that the lands are possessed of"potential value
for being housed for urban purpose in the near future and, therefore, had to be G
valued as such"

Thus we have the evidence that the lands are possessed of potential value for
being used for building purposes. In fact, the acquisition itself is for construction
of Mandi Township. The principle of belting is perfectly legal and unexception-
H
652 SUPREME COURT REPORTS (1993] 3 S.C.R.

A able as the lands abutting the main road upto a specified depth, depending on
factual material on record, would fetch higher market rate than the lands situated
in interior area. However, on facts of this case the belting is not warranted for the
reason that as seen on three sides there exist roads and abutting the village. As per
the plan as found by the High Court there exists a road cutting across the acquired
lands. Therefore, there is not only access on three sides but also to interior lands.
B Thus in our view belting and fixation of differential rates of value is not justified.

The next question is what would be the reasonable and just market value the
lands were likely to fetch. In view of the fact that there is no evidence available and
since the High Court found that the lands are possessed of potential value the rate
C of Rs. 1,000 per Biswa as awarded by civil court to the lands abutting abadi and
the lands upto a depth of IOOft.is upheld. In view of the preceding finding we hold
that the fixation of uniform rate of Rs. 1,000 per Biswa is legal.

It is seen that this acquired land of90acres is undoubtedly undeveloped area
D and necessarily requires development by laying the roads, parks, drainage,
lighting and other civic amenities. In Brig. Sahib Singh Kalila & Ors. v. Amritsar
Improvement Trust & Ors. [1982] l SCC 419 andAdministratorGeneralofWest. .....
Bengal's case (supra) this court deducted 53% of the undeveloped lands towards
developmental charges while fixing market value at decimal rate etc. to.wards
amenities. In Special Tehsildar Land Acquisition, Vishakapatnam 's case.(supra)
E this court made deduction at l/3rd. The appellant placed reliance on Blzagwatlzula
Swamnana & Ors. v. Special Tahsildar Land Acquisition. VisaklzapalJ!am [1991)
4 sec 506 where this court did not deduct any land towards developmental
charges. But in that case it was found that the lands acquired are situated in fully
I •
developed area: On those circumstances this court did not deduct any land towards
F developmental charges. It is seen that the consistent view of this court now is that
deduction of at least I/3rd is necessary towards developmental charges. Therefore,
we uphold deduction of I/3rd towards development charges from the market value
and determine the market value at Rs. 670 per Biswa. The learned judge while
deducting I 3rd fixed market value at Rs. 759 of frontage lands and Rs. 500 to
interior land. Rs. 750 is obvious mistake, but the ~tate did not take any action to
G have it corrected not filed appeals. Fixation of Rs. 7'.50 per Biswaoflands from road
. upto a depth of JOO ft. became final. So we cannot interfere or correct it in
claimants' appeal. But for the rest of the lands we award.~s. 670 per Biswa. with
solatium at 15% and interest at 6% on the enhanced market value from the date of
taking possession till date of payment.

H
- GULZARA SINGH v. STAIB.OF PUNJAB [RAMASWAMY.J.]
653

The appeals are accordingly allowed to the above extent. In the circum-
A

stances parties are directed to bear their own costs.

l.S.G. Appeal allowed.