Holding

Rates of small plot sales are not a safe basis for market value determination in large area acquisitions, but may be used with appropriate adjustments; the Court fixed the market value at Rs 40 per square yard, upholding the High Court's compensation.

Summary

The appellants challenged the compensation awarded for land acquired under the Land Acquisition Act, 1894, arguing that the market value fixed by the Collector and affirmed by the High Court was too low. The High Court had fixed compensation by averaging rates of residential and shop plots and considering only plotted area, while also accounting for development and miscellaneous charges. The Supreme Court examined whether rates of small plot sales could be used to determine market value for a large area acquisition and outlined the principles for using comparable sales. It held that rates of small plots are not a safe criterion but may be considered with appropriate adjustments, and that comparable sales must be bona fide, recent, of the acquired or adjacent land, and possess similar advantages. Applying these principles, the Court fixed an average rate of Rs 61.50 per square yard for the plotted area and a final rate of Rs 40 per square yard, rejecting the appellants' claim for higher compensation. The appeals were dismissed and the compensation fixed by the High Court was upheld.

Issues considered

The appropriateness of using rates of sale of small plots to determine market value for large area land acquisition under the Land Acquisition Act, 1894.
The criteria for selecting comparable sales for market value fixation, including timing, bona fides, adjacency, and similar advantages.
Whether the High Court's method of averaging residential and shop plot rates and considering only plotted area was proper.
Whether compensation must be at least the amount awarded by the Collector under Section 11, as mandated by Section 25 of the Act.

Legislation cited

Land Acquisition Act, 1894s. 11, s. 18, s. 23, s. 24, s. 25, s. 4(1)

Subjects

Land acquisitionCompensationMarket value determinationComparable salesSection 23Section 24Section 25Large area acquisitionSupreme Court

Judgment

\

A RA VINDER NARAIN AND ANR.
v.
UNION OF INDIA

FEBRUARY 28, 2003

B [DORAISWAMY RAJU AND ARIJIT PASAYAT, JJ.]

Land Acquisition Act, 1894-Sections 23, 24 and 25-Acquisition of ·
Land-Compensation-Criteria for valuation ofland-Held, where large area
C is subject matter of acquisition, rates at which small plots are sold cannot be
said to be a safe criteria-The value of the potentiality of the land is to be
determined on such materials as are available and not under imagination-
Principle offixation of market value with reference to comparable sale is that
when sale is within reasonable time of the date of notification, it should be
bonafide transaction, value should be of land acquired or of the aqjacent
D land and it should possess similar advantages.

Lands were acquired under Land Acquisition Act, 1894. Land
Ac9uisition Officer fixed different market value for the land in different
areas and fixed the compensation. In reference and in appeal High Court '
enhanced the compensation. While fixing the market value of the lands
E references were made to several instances of sale contemporaneous to the
period. High Court felt that residential plots and shop plots had to be sold
at different rates and their average was worked out to fix the
compensation. High Court also made reference to various data provided
by way of evidence and concluded th'.:t the total plotable areas cannot be
F taken into account and only the plotted areas have to be reckoned. It also
took note of the development charges, miscellaneous charges on account
of brokerage, administration, interest on investment etc. and worked out
the net price to fix the market value. Hence the present appeal~.

Disposing of the appeals, the Court
G
HELD: 1.1. Where large area is the subject matter of acquisition,
rate at which small plots are sold cannot be said to be a safe criteria. It
cannot, however, be laid down as an absolute proposition that the rates
fixed for the small plots cannot be the bisis for fixation of the rate.
(428-A, C)
H 424
RAVINDER NARAIN v. U.0.1. 425
The Collector of Lakhimpur v. Bhuban Chandra Dutta, AIR (1971) SC A
2015; Prithvi Raj Taneja (dead) by Lrs. 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, referred to.

1.2. While considering the market value disinclination of the vendor
to part with his land and the urgent necessity of the purchaser to buy it B
must alike be disregarded. 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 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 C
compulsion may always be taken into consideration for what it is worth.
Section 23 of Land Acquisition Act, 1894 enumerates the matters to be
considered in determining compensation. The first criteria 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 D
in determining the compensation. A safeguard is provided in Section 25
ofthe Act that the amount of compensation to be awarded b~ 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. E
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. [428-F-H; 429-A, BJ

Vyricherla Narayana Gajapatiraju v. Revenue Divisional Officer,
.... Vizagapatam, AIR (1939) P.C. 98, relied on. F
Suresh Kumar v. Town Improvement Trust, Bhopal, (1989) 1 SVLR (C)
399, referred to.

1.3. The element of speculation is reduced to minimum if the
underlying principles of fixation of market value with reference to G
comparable sales are made when sale is within a reasonable time of the
date of notification under Section 4(1) of the Act, it should be a bona fide
transaction; it should be of the land acquired or of the land adjacent to
the land acquired; and it should possess similar advantages. [429-C, DJ

The Special Land Acquisition Officer, Bangalore v. /. Adinarayan Setty, H
426 SUPREME COURT REPORTS [2003) 2 S.C.R ..

A AIR (1959) SC 429, referred to.

2. On the basis Qf the instances pressed into service by the acquiring
authority and the land owner-appellants, the average can be fixed @ Rs.
61.50 per sq. yd. for both the notifil'ations in question by adopting the
extent of plotted area as done by the High Court which appears to be
B ' appropriate in the circumstances of the case. Therefore, the rate per sq.
yard can be fixed @ Rs. 40. Though it was contended that there was
marked variation in price relating to the instances of sale, vis-a-vis second
notification, it does not appear, on the basis of evidence on record, that
the fluctuation was of very high magnitude, the marginal differences
C noticed do not warrant any higher fixation of price. The entitlements of
the appellants be accordingly worked out in addition to statutory
entitlements, if any. [429-F-G)

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 11733-11734
of 1995.
D
From the Judgment and Order dated 14.8.1987 of the Delhi High Court
in R.F.A. Nos. 3370 and 269 of 1976.

WITH

C.A. No. 11735 of 1995
E
Ashok H. Desai, Pallav Shishodia and D.N. Mishra, for the Appellants.

H.L. Agrawal and Y:P. Mahajan, for the Respondent.

The Judgment of the Court was delivered by
F
ARIJIT PASAYAT, J. In these three appeals, the controversy lies
_within a very narrow compass relating to the valuation of lands acquired
under the Land Acquisition Act, 1894 (in short 'the Act').

As the points in issue are common they are dealt with together.
G Notifications under Section 4 of the Act were issued on 13.11.1959 and
15.7.1960 in the two cases. The acquired lands according·t.o the appellants
are situated on the main road known as the Mall or Delhi Kamal Road near
to National Highway No.I. They claimed Rs.60 per sq. yard along with
interest and solatium. So far as the acquisitions covered by the Notification
H dated 13 .11.J 959 is concerned, the Land Acquisition Collector divided the
\

RAVINDERNARAINv. U.0.1. [ARIJITPASAYAT,J.] 427
· acquired land into two blocks and fixed the market value of land in these A
blocks separately. As regards Bagh Nehri land, the rate was fixed at Rs.4,000
per bigha and Gair Mumkin land @ Rs.3,500 per bigha in respect of block
A. In respect Qf Block B, he fixed the market value of garden land @ Rs.
3,500 per bigha and for other land @ Rs. 3,000 per bigha. So far as the
acquisition relating to Notification dated 15.7.1980 is concerned, the Land B
Acquisition Collector fixed the compensation at the flat rate of Rs. 3,400 per
bigha.

References were made under Section 18 of the Act. In the first case, the
reference Court fixed the compensation at Rs. 26,000 per bigha and in the
second case also similar rate was fixed. Matter was carried in appeals before C
the Delhi High Court which by the impugned judgment fixed the compensation
@ Rs. 30,000 per bigha, While fixing the value, references were made to
several instances of sale contemporaneous to the period. The High Court felt
that the residential plots and the shop plots had to be sold at different rates
and their average was worked out to fix the compensation. The High Court
made reference tq ·the instances cited by the appellants to hold that they D
related to smaller plots and do not provide a reasonable comparison. High
Court also made reference to various data provided by way of evid....1ce and
came to conclude that the total plotable areas cannot be taken into account
and only the plotted areas have to be reckoned. It was hypothetically noted
that if the total plotable area was 1000 sq.yds, plotted area on the basis of E
materials on record, would come to 637 sq. yds. It also took note of the
development charges, miscellaneous ·charges on account of brokerage,
administration, interest on investment etc. and worked out the net price to fix
the market value.

Mr. Ashok Desai, learned senior counsel appearing for the appellants F.
submitted that the High court erred in not taking note of comparable cases
and placed reliance on instances of sale which cannot be termed to be
contemporaneous. With reference to the location of the acquired land, it was
submitted that the market value as fixed is certainly on the lower side. Judicial
notice can be taken note of rapid upward trend in prices and, therefore, for
the subsequent notification, higher rates were fixed. G
Per contra, Mr. H.L. Agrawala, learned senior counsel appearing for
the respondent submitted that the High Court made detailed analysis of the
factual position and has rightly fixed the market value. There is no material
to substantiate the plea of upward trend in prices.
H
428 SUPREME COURT REPORTS [2003] 2 S.C.R.

A Where 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, Prith~i Raj
Taneja (dead) by Lrs. v. The Stale of Madhya Pradesh and Anr., AIR (1977)
B SC 1560 and Sm/. Kausalya Devi Bogra and Ors. etc. v. Land Acquisition
Officer, Aurangabad and Anr., AIR (1984) SC 892.

It cannot, however, 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 b1: open
C to the adjudicating Court to make comparison of the prices paid for small
plots of land. However, in such cases necessary deductions/adjustments have
to be made while detennining the prices.

In the case of Suresh Kumar v. Town Improvement Trust, Bhopal,
(1989) I SVLR (C) 399 in a case under the Madhya Pradesh Town
D Improvement Trust Act, 1960 this Court held that the rates paid for small
parcels of land do not provide a useful guide for detennining the market
value of the land acquired. While detennining the market value of the land
acquired it has to be correctly detennined and paid so that there is neither
unjust enrichment on the part of the acquirer nor undue deprivation on the
part of the owner. It is an accepted principle as laid down in the case of
E Vyricherla Narayana Gajapatiraju 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 ·
receive from the willing purchaser. While considering the market value

F
disinclination of the vendor to part with his land and the urgent necessity of
the purchaser to buy it must alike be disregarded. 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 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
G the Act enumerates the matters to be considered in detennining compensation.
The first criteria 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 detennining the compensation. A safeguard is provided
H in Section 25 of the Act that the amount of compensation to be awarded by
RAVINDER NARAIN v. U.O.L [ARIJIT PASAYAT, J.] 429
the Court shall not be less than the amount awarded by the Collector under A
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 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.
B
It can be broadly stated that the element of speculation .js reduced to
minimum 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
under Section 4(1 ); C
(ii) it should be a bona fide transaction;
(iii) it should be of the land acquired or of the land adjacent to the
land acquired; and
(iv) it should possess similar advantages. D
It is only when these factors are present, it can merit a consideration as
a comparable case (See The Special Land Acquisition Officer, Bangalore v.
T. Adinarayan Setty, AIR (1959) SC 429.

Keeping the aforesaid principles in view we feel that on the basis of the E
instances pressed into service by the acquiring authority and the land owner-
appellants, the average can be fixed @ Rs. 61.50 for both the notifications
in question by adopting the extent of plotted area as done by the High Court
which appears to be appropriate in the circumstances of the case. Therefore,
the rate per sq. yard can be fixed @ Rs.40. Though it was contended that
there was marked variation in price relating to the instances of sale, vis-a-vis F
second notification, it does not appear, on the basis of evidence on record,
that the fluctuation was of very high magnitude. The marginal differences
noticed do not warrant any higher fixation of price. The entitlements of the
appellants be accordingly worked out in addition to statutory entitlements, if
any. The appeals are accordingly disposed of. No costs. G
K.K.T. Appeals disposed of.