KARNATAKA URBAN WATER SUPPLY & DRAINAGE BOARDversusK.S. GANGADHARAPPA & ANR.

                        [2009) 6 S.C.R. 250


A     KARNATAKA URBAN WATER SUPPLY & DRAINAGE
                          BOARD
                              v.
              K.S. GANGADHARAPPA & ANR.
           (Civil Appeal Nos. 2547-2553 of 2009)
B                          APRIL 15, 2009
      [DR. ARIJIT PASAYAT, LOKESHWAR SINGH PANTA                        •
                  AND P. SATHASIVAM, JJ.]

c      Land Acquisition Act, 1894 - ss. 23, 24 and 25 -
  Compensation for land acquisition - Value of the potentiality
  of the land acquired - Determination of - Held : Generally
                                                                            \•
  rates fixed for small plots cannot be the basis for fixation of
  rate for large area - But when there is no material available,
0 such comp.9rison can be done by the court - However, in
  such cases necessary deductions/adjustments have to be
  made - While determining potentiality there is bound to be
  some guess work - Market value has a definite concept and
  cannot be EWaluated without any foundation or basis - On
E facts, High Court has determined the compensation, without
  any basis, hence directed to decide the matter afresh and
  indicate a basis for fixation of market value at a definite figure.

        In land acquisition proceedings, appeals were filed
   by the respondent- claimants (Land owners) seeking
F'
   enhancement of compensation awarded by Reference
   Court. Appeal was also filed by the appellant-State
   challenging the award of Reference Court. High Court
   dismissed the appeal of the State, while it allowed those
   filed by the claimants.
G
        In appeal to this Court, appellants contended that
   High Court did not indicate any basis for determining the
   value at Rs. 4,00,0001- per acre; and that small plots of
   land could not provide a foundation for determining the
H                             250
            KARNATAKA URBAN WATER SUPPLY & DRAINAGE BOARD v. 251
                       K.S. GANGADHARAPPA & ANR.
        i
             market value of large ·area.                                   A
"
                 Partly allowing the appeals, the Court
                 HELD: 1. It is a trite proposition that prices fetched
            for small plots cannot form safe basis for valuation of
            large tracts of land as the two are not comparable B
            properties. It cannot be laid down as an absolute
    ...     proposition that the rates fixed for the small plots cannot
            be the basis for fixation of the rate. For example, where
            there is no other material it may in appropriate cases be
            open to the adjudicating court to make comparison of the ,C
            price paid for small plots of land. However, in such caseJt ·'
            necessary deductions/adjustments have ~ be made
            while determining the prices. [Para 6 and 9] [256-A~B;
            257-F-H]
                                                                           D
                Sahib Singh Ka/ha v. Amritsar Improvement Trust
            1982(1) sec 419, relied on.
                 Bombay Improvement Trust v. Mervanji Manekji Mistry
            AIR 1926 Born 420; The Collector of Lakhimpur v. Bhuban
            Chandra Dutta AIR 1971 SC 2015; Prithvi Raj Taneja (dead)       E
            by Lis. v. The State of Madhya Pradesh and Anr., AIR 1977
            SC 1560; Smt. Kausa/ya Devi Bogra and Ors. etc. v. Land
            Acquisition Officer, Aurangabad and Anr. AIR 1984 SC 892;
            Vyricherla Narayana Gajapatiraju v. Revenue Divisional
            Officer, Vizagapatam, AIR 1939 P.C. 98 and Suresh Kumar         F
            v. Town Improvement Trust, Bhopal, 1989 (1) SVLR (C) 399,
            referred to
                 2. Section 23 of Land Acquisition Act enumerates the
            matters to be considered in determining compensation.
            The first criterion to be taken into consideration is the       G
    )
            market value of the land on the date of the publication of
            the notification u/s. 4 (1). Similarly, Section 24 of the Act
            enumerates the matters which the Court shall not take
            into consideration in determining the compensation: A
            safeguard is provided in Section 25 of the Act that the         H
    252     SUPREME COURT REPORTS                 [2009) 6 S.C.R.

A amount of compensation to be awarded by the court shall
  not be less than the amount awarded by the Collector
  under Section 11. Value of the potentiality is to be
  determined on such materials as are available and without
  Indulgence in any fits of imagination. Impracticability of
B determining the potential value is writ large in almost all
  cases. There is bound to be some amount of guess work
  involved while determining the potentiality. [Para 10] (258-
  0-G]

        3. The element of speculation is reduced to minimum
C if the underlying principles of fixation of market value with
  reference to comparable sales are made : (i) when sale
  is within a reasonable time of the date of notification uls
  4 (1); {ii) it should be a bona fide transaction; (iii) it should
  be of the land acquired or of the land adjacent to the land
D acquired; and (iv) it should possess similar advantages.
  It is only when these factors are present, can it merit a
  consideration as a comparable case. [Paras 11 and 12]
  [258-G-H; 259-A-C]

E       The Special land Acquisition Officer, Bangalore v. · T.
    Adinarayan Setty AIR 1959 SC 429, relied on.
        Ravinder Narain and Anr. v Union of India, 2003 (4) SCC
    481, referred to.

F      4. It is right that deductions can be made for
  development. But the deductions have to be made from
  some definite figure. In the instant case the High Court
  has not indicated any basis but has come to an abrupt
  conclusion that the claim of the owners for enhancement
G has to be accepted but not for Rs. 9,00,0001- per acre as
  claimed but at Rs. 4,00,000/- per acre. Market value has a
  definite concept and it cannot be evaluated without any
  foundation or basis. In the circumstances judgment of the
  High Court is set aside to decide the matter afresh and
H indicate a basis for fixation of market value at a definite
    KARNATAKA URBAN WATER SUPPLY & DRAINAGE BOARD v. 253
               K.S. GANGADHARAPPA & ANR.
1
    figure. (Paras 15 and 16] [259-E-G]                                A

                          Case Law Reference:

         1982 (1)   sec 419        Relied on             Para 1

         AIR 1926 Born 420         Referred to           Para 7        B
         AIR 1971 SC 2015          Referred to           Para 8
         AIR 1977 SC 1560          Referred to           Para 8
         AIR 1984 SC 892           Referred to           Para 8
                                                                       c
         1989 (1) SVLR (C) 399 Referred to               Para 10
         AIR 1939 P.C. 98          Referred to           Para 10
         AIR 1959 SC 429           Relied on             Para 3
                                                                       D
         2003 (4)   sec 481        Referred to           Para13
        CIVIL APPELLATE JURISDICTION : Civil Appeal No.
    2549-2553 of 2009.
        From the Judgment & Order dated 15.12.2006 of the High
    Court of Karnataka at Banglore in MFA No. 6582/2005 C/W.           E
    CROB No. 211/2006, MFA Nos. 1339/2003, 1549/2003 and
    1396/2003.
        P.R. Ramasesh for the Appellant.
        S.S. Javali, Arjun Krishnan, Chiraranjan Addey, Anitha         F
    Shenoy and Gaurav Kejriwal for the Respondents.
        The Judgment of the Court was delivered by

        DR. ARIJIT PASAYAT, J. 1. Leave granted.
                                                                       G
)        2. Challenge in these appeals is to the judgment of a
    Division Bench of the Karnataka High Court dismissing the
    appeals filed by the appellant, while allowing the appeals filed
    by the respondents. While the appellants had questioned the
    correctness of the Award made by the Reference Court in            H
    254          SUPREME COURT REPORTS               [2009) 6 S.C.R.


A proceedings under the Land Acquisition Act, 1894 (in short the
  'Act'), the land owners i.e. respondents herein filed the appeals
  for enhancement of the compensation.
          3. Background facts in a nutshell are as follows:
B         On 15.5.1985 the Govt. of Karnataka issued a preliminary
    notification under Section 4 of the Act in respect of land situated
    In the city of Shimoga for the purpose of underground drainage
    scheme for tha city.
C       On 24.9. 1986 the final notification under Section 6 of the
    Act was Issued.
       On 9.2.1988 the Land Acquisition Officer determined
    compensation @ Rs. 12,500 per acre.
       The claimants sought reference under Section 18 of the
D Act for determination of compensation by the Civil Court.
      On 29.10.2001, Civil Court enhanced the compensation
  to Rs.54,500/- per acre and the same was set aside by the
  High Court in MFA No.750 of 1999 and the matters were
E remanded to the Civil Court.
       On 31.10.2002 the Principal Judge, Senior Division,
  Shimoga, after remand in LAC No.10 of 1989, determined the
  compensation payable in respect of land in Survey No.24
  measuring 5 acres 5 guntas at Rs.1,35,000/- per acre on the
F following findings:
           (a)    the land was agricultural land at the time of
                  notification;
          (b)     P3,P4 and PS, which were the sale deeds of
G                 municipal sites in Survey No. 13 cannot be taken
                  into consideration while determining the
                  compensation of a larger area;
          (c)     evidence of PW 1 was not sufficient to arrive at the
H                 compensation for the lands.
          KARNATAKA URBAN WATER SUPPLY & DRAINAGE BOARD v. 255
            K.S. GANGADHARAPPA & ANR. [DR. ARIJIT PASAYAT, J.)
-1             It is to be noted that the learned Civil Judge permitted the   A
          production of the judgment of the High Court of Karnataka in
          MFA No. 348 of 1995 in respect of Survey No.77, wherein the
          compensation was determined at Rs.1,60,000/- per acre and
          placed reliance on the said judgment on the ground that the
          lands are similarly situated.                                       B
              In this view the Civil Judge determined the compensation
          at Rs.1,35,000/- per acre.
               Feeling aggrieved by the said order, the claimants therein
          preferred Misc. First Appeal before the High Court of Kamataka      c
          in MFA No.1396 of 2003,
               The Principal Judge, Senior Division, Shimoga In LAC No.
          6 of 1989, dealing with the land in Survey No.23 to the extent
          of 3 acres 20 guntas determined the compensation at
          Rs.1,50,000/- per acre.                                             D

              Feeling aggrieved by the said judgment the petitioner
         herein filed Misc. Appeal in MFA No. 658 of 2005 before the
         High Court of Karnataka. The claimant therein had filed cross
         objection in CROB No,211/06.                                         E
              State of Karnataka filed Misc. Appeal in MFA No. 1339
         of 2003 before the High Court from the judgment and decree
         in LAC No. 10 of 1989.
    >
             All the Misc. Appeals and Cross Objections were heard            F
         and disposed of by a common judgment in the High Court of
         Karnataka.
               4. The basic stand of the appellants is that no basis has
          been indicated by the High Court to determine the value at
        l Rs.4,00,000/- per acre. It is pointed out that Exhs. P4 and PS      G
)         were small plots of land measuring about 30' x 50' and cannot
          provide a foundation for determination of the market value.
              5. Learned counsel for the respondent on the other hand
        · supported the judgment of the High Court contending that
                                                                              H
    256      SUPREME COURT REPORTS                    [2009] 6 S.C.R.

                                                                           f-
A though the price paid in respect of small plots of land may not
  provide a foundation but it can be taken note of and after
  making adjustments for development the same can provide
  such a foundation.
        6. It is a trite proposition that prices fetched for small plots
B cannot form safe bases for valuation of large tracts of land as
  the two are not comparable properties. The principle that
  evidence of market value of sales of small, developed plots is
  not a safe guide in valuing large extents of land has to be
  understood in its proper perspective. The principle requires that
c prices fetched for small developed plots cannot directly be
  adopted in valuing large extents. However, if it is shown that
  the large extent to be valued does not admit of and is ripe for
  use for building purposes; that building lots that could be laid
  out on the land would be good selling propositions and that
D valuation on the basis of the method of hypothetical lay out
  could with justification be adopted, then in valuing such small,
  laid out sites the valuation indicated by sale of comparable small
  sites in the area at or about the time of the notification would
  be relevant. In such a case, necessary deductions for the extent
E of land required for the formation of roads and other civil
  amenities; expenses of development of the sites by laying out
  roads, drains, sewers, water and electricity lines. and the
  interest on the outlays for the period of deferment of the
  realisation of the price; the profits on the venture etc. are to be      ..
F made. In Sahib Singh Katha v. Amritsar Improvement Trust
  [1982 (1) SCC 419} this Court indicated that deductions for land
  required for roads and other developmental expenses can,
  together, come up to as much as 53 per cent. But the prices
  fetched for small plots cannot directly be applied in the case
G of large areas, for the reason that the former reflects the "retail"
  price of land and the latter the "wholesale" price.
       7. What is to be estimated therefrom is the "wholesale"
  price of land. In Bombay Improvement Trust v. Mervanji
  Manekji Mistry [AIR 1926 Born 420] Macleod, C.J. suggested
H a simple rule:
        KARNATAKA URBAN WATER SUPPLY & DRAINAGE BOARD v. 257
          K.S. GANGADHARAPPA & ANR. [DR. ARIJIT PASAYAT, J.)

1            "Valuation cases must be dealt with just as much from the A
             point of view of the hypothetical purchase as of the
             claimant. The valuation itself must often be more or less a
             matter of guesswork. But it is obviously wrong to fix upon
             a valuation which, judged by everyday principles, no
             purchaser would be likely to give .... I have always been B
             adverse to elaborate hypothetical calculations which are
             no more likely to lead to a fair conclusion than far simpler
)            methods. But, in any event, no harm can be done by testing
             a conclusion arrived at in one way by a conclusion arrived
             at in another.... A very simple method of valuing land c
             wholesale from retail prices is to take anything between
             one and half one-third, according to circumstances, of the
             expected gross valuation, as the wholesale price."
                                                  (emphasis supplied)
                                                                           D
             8. Where a large area is the subject matter of acquisition,
        rate at which small plots are sold cannot be said to be a safe
        criteria. Reference in this context may be made to three
        decisions of this Court in The Collector of Lakhimpur v.
        Bhuban Chandra Dutta (AIR 1971 SC 2015), Prithvi Raj
                                                                           E
        Taneja (dead) by Lrs. v. The State of Madhya Pradesh and
        Anr. (AIR 1977 SC 1560) and Smt. Kausalya Devi Bogra and
        Ors. etc. v. Land Acquisition Officer, Aurangabad and Anr.
        (AIR 1984 SC 892).
    >
             9. It cannot, however, be laid down as an absolute F
        proposition that the rates fixed for the small plots cannot be the
        basis for fixation of the rate. For example, where there is no
        other material it may in appropriate cases be open to the
        adjudicating Court to make comparison of the prices paid for
        small plots of land. However, in such cases necessary G
        deductions/adjustments have to be made while determining the
        prices.
             10. In the case of Suresh Kumar v. Town Improvement
        Trust, Bhopal (1989 (1) SVLR (C) 399) in a case under the
        Madhya Pradesh Town Improvement Trust Act, 1960 this Court         H
    258      SUPREME COURT REPORTS                  [2009] 6 S.C.R.


A held that the rates paid for small parcels of land do not provide
                 '
  a useful guide    for determining the market value of the land
  acquired. While determining the market value of the land
  acquired it has to be correctly determined and paid so that there
  is neither unjust enrichment on the part of the acquirer nor undue
B deprivation on the part of the owner. It is an accepted principle
  as laid down in the case of Vyrioherfa Narayana Gajapatlraju
  v. Revenue Divisional Officer, Vizagapatam (AIR 1939 P.C.
  98) that the compensation must be determined by reference
  to the price which a willing vendor might reasonably expect to             ·-
c receive from the willing purchaser. Whlle considering the
  market value, dlsincllnatlon of the vendor to part with his land
  and the urgent necessity of the purchaser to buy It must be
  disregarded alike; neither must be considered as acting under
  any compulsion. The value of the land is not to be estimated
  as its value to the purchaser. But similarly this does not mean
D
  that the fact that some particular purchaser might desire the land
  more than others is to be disregarded. The wish of a particular       ..
  purchaser, though not his compulsion may always be taken into
  consideration for what it is worth. Section 23 of the Act
  enumerates the matters to be considered in determining
E compensation. The first criterion to be taken into consideration
  is the market value of the land on the date of the publication of
  the notification under Section 4(1). Similarly, Section 24 of the
  Act enumerates the matters which the Court shall not take into
  consideration in determining the compensation. A safeguard            ~
F is provided in Section 25 of the Act that the amount of
  compensation to be awarded by the Court shall not be less than
  the amount awarded by the Collector under Section 11. Value
  of the potentiality is to be determined on such materials as are
  available and without indulgence in any fits of imagination.
G Impracticability of determining the potential value is writ large
  in almost all cases. There is bound to be some amount of guess
  work involved while determining the potentiality.
         11. It can be broadly stated that the element of speculation
    is reduced to minimum if the underlying principles of fixation of
H
            KARNATAKA URBAN WATER SUPPLY & DRAINAGE BOARD v. 259
              K.S. GANGADHARAPPA & ANR. [DR. ARIJIT PASAYAT, J.]

            market value with reference to comparable sales are made:              A
                 (i) when sale is within a reasonable time of the date of
                 notification under Section 4(1);
                 (ii) it should be a bona fide transaction;
                                                                                   B
                 (iii) it should be of the land acquired or of the land adjacent
                 to the land acquired; and
                 (Iv) It should possess similar advantages.
                12. It Is only when these factors are present, can It merit a
            consideration as a comparable case (See The Special Land
                                                                                   c
            Acquisition Officer, Bangalore v. T. Ad/narayan Setty (AIR
            1959 SC 429).
                13. These aspects have been highlighted in Ravinder
-)
            Narain and Anr. V. Union of India (2003 (4) SCC 481).   D
     ,.         14. The deduction to be made towards development
            charges cannot be proved in any strait-jacket formula. It would
            depend upon the facts of each case.
                   15. It is right as contended by learned counsel for the         E
             respondents that deductions can be made for development. But
             the deductions have to be made from some definite figure. In
             the instant case the High Court has not indicated any basis but
     ...     has come to an abrupt conclusion that the claim of the owners
             for enhancement has to be accepted but not for Rs.9,00,000/-          F
             per acre as claimed but at Rs.4,00,000/- per acre. Market value
             has a definite concept and it cannot be evaluated without any
           · foundation or basis.
                 16. In the circumstances we set aside the impugned
            judgment of the High Court to decide the matter afresh and             G
      )     indicate a basis for fixation of market value at a definite figure.
                 17. The appeals are allowed to the aforesaid extent.

            K.K.T.                                    Appeal partly allowed.
                                                                                   H