Holding

The Court held that market value must be determined by considering all relevant positive and negative factors, a one‑third deduction for development costs is appropriate, and a 10% per annum escalation should be added, fixing compensation at Rs 1,41,666.66 per acre for Pasupula and Rs 1,27,499.99 per acre for B. Thandrapadu.

Summary

The State acquired 87.96 acres of agricultural land in villages Pasupula and B. Thandrapadu, about 4 km from Kurnool district headquarters and abutting National Highway 18, for establishing Sri Krishna Devaraya University. The Collector initially awarded Rs 16,000 and Rs 15,000 per acre respectively; the lower courts enhanced the compensation to Rs 1,00,000 and Rs 90,000 per acre and later to Rs 1,90,000 per acre uniformly. The Revenue Divisional Officer‑cum‑LAO appealed, contending that the valuation was excessive. The Supreme Court examined the factors relevant to market value under the Land Acquisition Act, 1894, held that a one‑third deduction for development costs is appropriate for such agricultural lands, and that a 10% per‑year escalation should be added. Consequently, it fixed compensation at Rs 1,41,666.66 per acre for Pasupula and Rs 1,27,499.99 per acre for B. Thandrapadu, allowing the appeals in part.

Issues considered

How should market value of agricultural land acquired under the Land Acquisition Act, 1894 be determined, considering location, proximity to a highway and surrounding development?
Whether a deduction for development costs is permissible and, if so, at what percentage?
Whether a 10% per annum escalation factor should be applied to the market value
Whether the compensation awarded by the lower courts is justified

Legislation cited

Land Acquisition Act, 1894s. 18, s. 4(1)

Subjects

Land acquisitionCompensationMarket valueAgricultural landDevelopment cost deductionEscalation factorNational HighwaySupreme Court of India

Judgment

[2009] 1 S.C.R. 289

,,. REVENUE DIVISIONAL OFFICER-CUM-L.A.O. A
v.
SHAIK AZAM SAHEB ETC. ETC.
(Civil Appeal Nos. 8984-8985 of 2003)
JANUARY 13, 2009
B
[S.B. SINHA, LOKESHWAR SINGH PANTA AND
B. SUDERSHAN REDDY, JJ.]
--+

Land Acquisition Act, 1894:
c
Compensation for land acquired - Computation of -
Agricultural lands abutting National High way and nearby,
situated about 4 km. away from District Headquarters and
surrounded by educational institutions - Factors relevant for
determination of market value - Explained - Market value D
+ determined accordingly - One-third deduction allowed
towards development costs - 10% escalation per year added.

Agricultural lands of the respondents-claimants
abutting National Highway situate in village 'P' and
nearby village 'BT', both being about 4 km. away from the E
District Head Quarters and surrounded by educational
institutions including one Engineering College, were
acquired pursuant to a Notification uls.4(1) of the Land
Acquisition Act, 1894 published on 5.5.1994 for the
purpose of establishing Shri Krishna Devraya University. F
The Collector awarded compensation at the rate of
Rs.16,000/- for the lands in Village 'P' and Rs.15,000/- for
those in village 'BT'. The reference court enhanced the
compensation to Rs.1,00,000/- per acre and Rs.90-,000/-
per acre respectively, and the High Court further G
enhanced it to Rs.1,90,000/- uniformly for the lands situate
v
in both the villages. Aggrieved, the Revenue Divisional
Officer-cum-LAO filed the appeals.

289
H
290 SUPREME COURT REPORTS [2009] 1 S.C.R.

A Allowing the appeals in part, the Court

HELD: 1.1. Determination of market value of a land
acquired in terms of the provisions of the Land
Acquisition Act, 1894 depends upon a large number of
8 positive and negative factors, namely, whether the land
acquired is agricultural land or homestead land; in the
event the land being agricultural one, whether irrigated
or non-irrigated, extent of facilities available for irrigation,
location of the land, closeness thereof from any road or
C highway, the evenness of land, its position in different
seasons particularly in rainy season, existence of any
building or structure as also the development in and
around the area, sale exemplars and in their absence
whether claim can be determined on yield basis. [Para 11
D and 12] [296-E-G; 297-A-S]

Vi/uben Jha/ejar Contractor v. State of Gujarat (2005) 4
sec 789, relied on.
1.2. The acquired lands abut on National Highway No.
E 18, they are situated about 4 kilometers away from the
District Headquarter and have been held to have the
requisite potential value as building site as also for
constructing industrial complexes. The reference court
noticed that there are educational institutions
F surrounding the acquired lands including an Engineering
College. As on the date of acquisition, it was found that
the vicinity surrounding the land was well developed.
[Para 14] [298-B-D]
1.3. Indisputably, a big chunk of lands, namely, 87
G Acres 96 cents were acquired for the purpose of
establishing an institution known as Sri Krishna
Devaraya University. The award of the Land Acquisition Y
Collector was accepted by most of the persons. Only the
respondents objected thereto. The lands are situated in
H two different villages. The plan showing the location of
REVENUE DIVISIONAL OFFICER-CUM-LAO. v. SHAIK 291
AZAM SAHEB ETC. ETC.

... the land vis-a-vis the National Highway No. 18 was not A
placed before the Court. From the award of the reference
/

\
court, it appears that the lands situated in village 'P' are
better placed than the lands situated in village 'BT'. Such
a distinction was also kept in mind by the Land
Acquisition Collector. The market value of the land would B
also depend upon the situation thereof. [Paras 15, 16 and
17] [298-E-H; 299-A]
1.4. Indisputably while comparing the market value of
developed lands with that of undeveloped lands, the
court has to make suitable deductions towards the cost c
of development. [Para 19] [299-D]
P.S. Krishna and Co. Pvt. Ltd. v. The Land Acquisition
Officer, (Deputy Collector) Hyderabad (1991) 2 SCALE 1186;
Mummidi Apparao v. Nagarjuna Fertilizers and Chemicals
'
_,. Ltd. (2008) 16 SCALE 226 and Viluben Jhalejar Contractor D
(DJ v. State of Gujarat (2005) 4 SCC 789, referred to.
1.5. In the facts and circumstances of the case, one-
third deduction should be made towards development·
costs for the lands situated both in village 'P' as also
E
village 'BT'. Keeping in view the fact that the lands are
abutting National Highway and are near the district town,
where a large number of educational institutions have
'!' come up, 10 % escalation per year has to be added. Thus,
Rs. 1,41,666.66 per acre may be fixed for the lands in
village 'P'. The lands in another village 'BT being situated F
away from the NH 18, 10% from the amount fixed for the·
lands in village 'P' must be deducted. Thus, Rs.
1,27,499.99 per acre may be fixed for the lands in village
'BT'. The Court has adopted the same method as was
adopted by the reference court which fixed market value G
for the lands situated in village 'P' at Rs. 1,00,000/- per
acre and Rs.90,000/- per acre in respect of village 'BT'.
[Para 20] [300-D-G]

H
292 SUPREME COURT REPORTS [2009] 1 S.C.R.

A Case Law Reference:
(2005) 4 sec 789 relied on Para 13
(1991) 2 SCALE 1186 referred to Para 19

B (2008) 16 SCALE 226 referred to Para 19
(2005) 4 SCC 789 referred to Para 19
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.
8984-8985 of 2003.
c From the final Judgment dated 28.3.2003 of the High Court
of Judicature, Andhra Pradesh at Hyderabad in AS. Nos.
2175, 2177, 2191 of 2001 with cross-objections (SR) Nos.
21434, 21100 and 21101 of2003 respectively.
WITH
D C.A. No. 8733-8736/2003, C.A.No. 8987-9001/2003, 108-115,
116-121, 122-129 and 130 of 2009.
R. Sundarvardhan, Manoj Saxena, Rajneesh Kumar Singh,
Rahul Shukla and T.V. George, for the Appellant.
E K. Amareswari, P. Venkat Reddy and Anil Kumar Tandale,
for the Respondents.
The Judgment of the Court was delivered by
5.B. SINHA, J. 1. Leave granted in Special Leave Petition
F (Civil) Nos. 4463-4470 of2004, 12200-12205 of2007, 12215
of 2007 and 12206-12213 of 2007.
2. These appeals by special leave involving common
questions of law and fact were taken up for hearing together
and are being disposed of by this common judgment.
G 3. The basic fact of the matter is not in dispute.
A notification under Section 4(1) of the Land Acquisition
Act, 1894 was issued (hereinafter referred to for the sake of
brevity as, "the said Act") expressing the intention of the State
to acquire land to the extent of 87 Acres 96 cents situated in
H Pasupula and B. Thandrapadu villages for the purpose of
\
I

REVENUE DIVISIONAL OFFICER-CUM-L.A.0. v. SHAIK 293
AZAM SAHEB ETC. ETC. [S.S. SINHA, J.]

.... establishing a Post Graduation Centre of Sri Krishna Devaraya A
University.
•
4. Out of the said 87 Acres 96 cents of land, we are
concerned only with 25 acres of land of which respondents
were owners. The Land Acquisition Officer made an award on
B
or about 20.12.1995 fixing the market value of the lands at the
rate of Rs.15,000/- per acre for the lands situated in B.
Thandrapadu village and Rs.16,000/- per acre for the lands
situated in Pasupula village.

5. Dissatisfied with the quantum of compensation awarded c
by the Land Acquisition Officer, the respondents sought for
reference from the Collector before the Civil Court in terms of
Section 18 of the said Act.
,,, The learned Principal Senior Civil Judge, Kurnool by a D
;'-
judgment and award dated 28.03.2001 enhanced the market
value thereof from Rs.15,000/- to Rs.90,000/- per acre for the
lands situated in B. Thandrapadu village and from Rs.16,000/
- to Rs.1,00,000/- per acre for the lands situated in Pasupula
village. Appeals and cross-objections were filed thereagainst
E
by the parties hereto.

6. By reason of judgments and orders dated 18.3.2002
and 28.3.2003, a Division Bench of the Andhra Pradesh High
Court enhanced the market value of the land to Rs.1,90,000/-
per acre uniformly for the lands situated in both the villages. F

7. Parties thereto are, thus, before us.

8. The High Court in support of its judgment, inter a/ia,
relied upon a registered deed of sale dated 12.11.1987, which
was marked as Exhibit B-3 whereby and whereunder four cents G
~· of land was said for a sum of Rs.10,000/-. On that premise, it
was contended that the value of the land per acre would be
Rs.2,50,000/-. The High Court furthermore relied on its earlier
judgment and order passed in A.S. No. 1095 of 1996 (8xhibit
B-6) wherein market value of the lands acquired therein was H
~

294 SUPREME COURT REPORTS [2009] 1 S.C.R.

A fixed at the rate of Rs.2,70,000/- per acre. :14t,

In respect of the land covered by Exhibit B-6, a notification
under Section 4( 1) of the Act was issued on 30. 06 .1992 for the
purpose of establishing Bharat Gas Power Station. It was
B
noticed that the lands which were acquired for the said Bharat
Gas Power Station being situated at a distance of about 8
..
kilometers from Kumool Town whereas the acquired lands were
situated about 4-5 kilometers away from Kurnool Town.

It was stated:
c
"As can be seen from Ex.B6, this court has fixed the rate
of compensation at Rs.2,70,000/- and the notification was
issued in June 1992 whereas in the present cases
notification was issued in May 1995. In such an event, if
escalation is given at 10% on the value fixed by this Court, ...
D ¥
it would be around Rs.3,24,000/- per acre. Let us test the
value from the other angle. Ex. 83 is a small extent of 4
cents and the purchase took place in the year 1997. The
reference court correctly observed that as the purchase
was made about 7 years earlier to the notification, the
E
purchase was not made with a view to have an undue
advantage of higher compensation. As per Ex. B3 the
value per acre is Rs.4,00,000/- if 10% escalation is given
for 7 years, the same comes to Rs.6,80,000/- and even if
we take 60% of the amount by keeping in view the small
F extent sold under Ex.B3 and also giving discount for
developmental activities, it would be Rs.2, 72,000/- per
acre. Therefore, we follow the safest method for arriving
at the compensation with reference to Ex.B6 which is in
an extent of 27 and the area covered by the batch of
G appeals is also almost same, and the notification was
issued for 87.96 cents, granting of escalation by deduction ,, 1-
40% of the amount and fixing the compensation at
" Rs.1,90,000/- would be just and reasonable. Therefore, we
have taken the course of resorting to 40% of the amount
H as the land acquired was for the University Buildings,
REVENUE DIVISIONAL OFFICER-CUM-L.A.O. v. SHAIK 295
AZAM SAHEB ETC. ETC. [S.B. SINHA, J.]
~~-"- wherein internal roads have to be laid and other open A

- spaces have to be left out. Thus, keeping in view the above
facts, we feel that granting compensation at Rs.1,90,000/
- is just and reasonable."

9. Mr. R. Sundarvardhan, learned Senior Counsel
8
1 appearing on behalf of appellant would contend:
'
... i. As this Court in Civil Appeal No. 5206-5228 of
1997 (AP. Industrial Infrastructure Corporation
Limited v. G. Mohan Reddy & Ors.) interfered with
... the judgment and order passed in A.S. No. 1095 c
of 1996 and batch to hold that the market value of
the land in question should be fixed at Rs.1,35,000/
-, Rs.90,000/- and Rs.70,000/- per acre for different
=1
survey nos. on the premise that the situation of the
... land keeping in view their distance from the D
National Highway play a vital role as the land which
is near the Highway would definitely get a higher
price than the land which fs away therefrom, the
impugned judgment cannot be sustained.
E
ii. Exhibit B-3 being the registered sale deed dated
12.11.1987 could not have been relied upon as only
4 cents of land was the subject matter of transfer in
~
terms thereof whereas the notification had been
issued for acquisition of land measuring 87 Acres
96 cents. F

10. Mrs. K. Amareswari, learned Senior Counsel appearing
on behalf of the respondents, on the other hand, would contend:

i. It is not correct to contend that an exemplar in terms G
whereof only a small portion of land had been
transferred can never be taken into consideration.

ii. Keeping in view the fact that the market rate in
terms of Exhibit B-3 would come to Rs.2,50,000/-
per acre, even if 50 per cent is deducted therefrom, H
296 SUPREME COURT REPORTS [2009r 1 S.C.R.

A the market value may be determined at
Rs.1,25,000/- to which increase therein at the rate
of 10 per cent per year should be added and as
the lands in question were acquired on 5.5.1994,
that is, 7 years after the said deed of sale was
8 executed, the market value thereof would come to
Rs.2, 12,500/- per acre.
T
iii. So far as the judgment of this Court passed in Civil
Appeal No. 5206-5228 of 1997 (A.P. Industrial
Infrastructure Corporation Limited v. G. Mohan
c Reddy & ors.) is concerned, the notification therein
having been issued on or about 30.6.1992 whereas
the notification in the instant case having been
-
published on 5.5.1994, no reliance can be placed
thereupon as admittedly the lands were situated 8
D kilometers away from the National Highway
whereas the lands in question are situated only 4
kilometers away from the Highway.

11. Determination of market value of a land acquired in
E terms of the provisions of the said Act depends upon a large
number of factors; the first being the nature and quality of the
land, i.e., whether agricultural land or homestead land. Apart
from nature and quality of land in the event the agricultural lands
are acquired the other factors relevant therefor are also
F required to be considered, namely, as to whether they are
irrigated or non-irrigated, extent of facilities available for
irrigation, location of the land, closeness thereof from any road
or highway, the evenness of land, its position in different
seasons particularly in rainy season, existence of any building
G or structure as also the development in and around the area.
A host of other factors will also have a bearing on determining
the valuation of land.

12. The mode and manner in which determination of such
valuation are to be carried out would also depend upon the
H facts and circumstances of each case, namely, whether any
REVENUE DIVISIONAL OFFICER-CUM-LAO. v. SHAIK 297
AZAM SAHEB ETC. ETC. [S.B. SINHA, J.]

{ "·""- deed of sale executed in respect of similarly situated land near A
about the date of issuance of notification under Section 4(1) of
,,
4
the Act is available, or in absence of any such exemplars
whether the claim can be determined on yield basis or in case
of an orchard on the basis of the number of fruit bearing trees
and the yield therefrom. B
13. One other important factor which also should be borne
-~ · in mind is that it may not be safe to rely only on an award
involving a neighbouring area irrespective of the nature and
quality of the land. For determination of market value again,
the positive and negative factors germane therefor should be c
taken into consideration, as laid down by this Court in Viluben
Jhalejar Contractor v. State of Gujarat [(2005) 4 SCC 789],
namely:

' -i- Positive factors Negative factors D
(i) Smallness of size (i) Largeness of area

(ii) proximity to a road (ii) situation in the interior at a
distance from the road
E
(iii) frontage on a road (iii) narrow strip of land with
very small frontage compared
to depth
...
(iv) Nearness to developed (iv) lower level requiring the
F
area depressed portion to be
filled up

(v) regular shape (v) Remoteness from
developed locality
G
(vi) Level vis-a-vis land (vi)Some special
under acquisition disadvantageous factors
which would deter a
purchaser
H
298 SUPREME COURT REPORTS (2009] 1 S.C.R.

A (vii)Special value for an owner of ~.~ ',

an adjoining property to whom I
it may have some very special JI

advantage.

14. Before determination of the market value of the land,
B
we may notice that the town of Kurnool is the District
Headquarter of Kurnool district. The acquired lands are
situated about 4 kilometers away from the said town abutting "r-

National Highway No. 18. The lands in question have been held
to have the requisite potential value as building site as also
c for constructing industrial complexes. The learned Reference
Judge noticed that there are educational institutions like Pulla
Reddy Engineering College, Don Bosco School, St. Mary's
Residential School etc. surrounding the acquired lands. G. Pulla
Reddy Engineering Ccllege is said to be situated just on the
D other side of the road of the lands acquired. As on the date of ,._
'
acquisition, it was found that the vicinity surrounding the land
was well developed.

15. Indisputably, a big chunk of lands, namely, 87 Acres
E 96 cents were acquired for the purpose of establishing an
institution known as Sri Krishna Devaraya University. The
award of the Land Acquisition Collector was accepted by most
of the persons. Only the respondents before us objected
thereto.
F 16. The lands are situated in two different villages. The plan
showing the location of the land vis-a-vis the National Highway
No. 18 had not been placed before us. From the award of the
learned Reference Judge, it appears that the lands situated in
Pasupula village are better placed than the lands situated in
G B. Thandrapadu village. Such a distinction had also been kept
in mind not only by the Land Acquisition Collector but also by
the Reference Court.

17. We agree with the judgment of this Court in Civil
H Appeal No . 5206-5228 of 1997 (A.P. Industrial Infrastructure
REVENUE DIVISIONAL OFFICER-CUM-L.A.0. v. SHAIK 299
AZAM SAHEB ETC. ETC. [S.B. SINHA, J.]

.... Corporation Limited v. G. Mohan Reddy & ors.) that the A
market value of the land would also depend upon the situation
thereof.

18. Applying the said formula, if we rely on Exhibit B-3, the
market value of the land in question would come to about
Rs.1,25,000/- per acre. It is, however, not possible to agree with
8
the submissions of Mrs. Amareswari that we should determine
the market value only on that basis upon addition of 10 per cent
enhancement of the market value each year. It must be bear in
mind that the lands in question were agricultural lands whereas
the lands which were the subject matter of the said deed of sale C
was a homestead land, thus, some amount, therefore, will have
to deducted towards the development cost.

19. Indisputably while comparing the market value of
developed lands with that of undeveloped lands, the court has D
to make suitable deductions towards the cost of development.

We, however, may notice that this Court, at different times,
has spoken in different voices.

In P.S. Krishna and Co. Pvt. Ltd. v. The Land Acquisition E
Officer, (Deputy Collector) Hyderabad [( 1991) 2 SCALE
1186], this Court refused to interfere with the judgment.of the
High Court which had given a deduction of 20% towards
development charges. Recently, a Division Bench of this Court
in Mummidi Apparao v. Nagarjuna Fertilizers and Chemicals F
Ltd. [2008 (16) SCALE 226] did not interfere with the decision
of the High Court which had given a direction for deduction of
50% as development charges. However, we are not oblivious
of the fact that this Court had observ~d in Vi/uben Jha/ejar ·
Contractor (D) v. State of Gujarat [(2005) 4 SCC 789]: G
"28. In Hasanali Khanbhai & Sons v. State of Gujarac
[(1995) 5 SCC 422] and Land Acquisition Officer v.
Nooka/a Rajamal/u (2003) 12 SCC 334: (2003) 10
SCALE 307 it has been noticed that where lands are
H
300 SUPREME COURT REPORTS [2009] 1 S.C.R.

A acquired for specific purposes deduction by way of
development charges is permissible.

29. We are not, however, oblivious of the fact that normally
one-third deduction of further amount of compensation has
been directed in some cases. (See Kasturi v. State of
8
Haryana [(2003) 1 SCC 354], Tejumal Bhojwani v. State
of U.P., [(2003) 10 SCC 525], V. Hanumantha Reddy v.
Land Acquisition Officer & Manda/ R. Officer (2003) 12
SCC 642, H.P. Housing Board v. Bharat S. Negi (2004)
2 SCC 184 and Kiran Tandon v. Allahabad Development
c Authority and Anr. (2004) 10 SCC 745)."

20. In the facts and circumstances of the present case,
one-third deduction, in our opinion, should be made towards
development costs for the lands situated both in Pasupala
o village as also 8. Thandrapadu village. Keeping in view the fact
that the lands are abutting National Highway and near the district
town, where a large number of educational institutions have
come up, 10 per cent escalation per year has to be added.
Thus, Rs. 1,41,666.66 per acre may be fixed for the lands in
E Pasupala village.

The lands in another village 8. Thandrapadu Village being
situated away from the NH 18, another 10 per cent from the
amount fixed for the lands in Pasupala village must be
deducted. Thus, Rs. 1,27,499.99 per acre may be fixed for the
F lands in 8. Thandrapadu village.

We have adopted the same method which had been
adopted by the Reference Judge inasmuch as the Reference
Judge had fixed market value for the lands situated in Pasupala
G village at Rs. 1,00,000/- per acre and Rs.90, 000/- per acre in
respect of 8. Thandrapadu village.

21. The appeals are allowed to the aforementioned extent
No costs.
H R.P. Appeal partly allowed.