Holding

The market value of land acquired under the Land Acquisition Act must be determined based on genuine, bona‑fide sale transactions proximate to the acquisition, not by averaging disparate sale prices.

Summary

The State of Punjab acquired land under the Land Acquisition Act, 1894 and the Land Acquisition Officer initially awarded Rs.29.46 per marla as compensation. The District Judge enhanced this to Rs.50 per marla, and the High Court single judge further raised the market value to Rs.375 per marla and allowed Rs.17,000 for a super‑structure, prompting the State to file a Letters Patent Appeal. The Supreme Court held that the High Court erred by averaging prices from disparate sale deeds, a method that does not reflect the true market value. It clarified that valuation must be based on genuine, bona‑fide sale transactions proximate to the acquisition date, and the parties agreed that the sale deed dated 4 August 1965 (Rs.78 per marla) was appropriate. Considering the three‑year lapse and surrounding development, the Court fixed the market value at Rs.100 per marla, awarded a 15% solatium and 6% interest, and confirmed the Rs.17,000 valuation for the super‑structure. The State's appeal was partly allowed, reducing the compensation.

Issues considered

Whether the averaging of prices from multiple sale deeds is a permissible method for determining market value under the Land Acquisition Act, 1894.
What constitutes a bona‑fide sale transaction proximate to the date of acquisition for valuation purposes.
Whether solatium and interest are payable on the enhanced compensation.
How the value of super‑structures on acquired land should be determined.

Legislation cited

Land Acquisition Act, 1894s. 18, s. 4(1), s. 54

Subjects

Land acquisitionCompensationMarket value determinationAveraging methodBona fide saleSolatiumInterestSuper‑structure valuationLand Acquisition Act 1894

Judgment

A STATE OF PUNJAB AND ANR.
v.
HANS RAJ (DEAD) BY LRS./SOHAN SINGH AND ORS.

FEBRUARY 15, 1994

B [K RAMASWAMY AND N. VENKATACHALA, JJ.)

Land Acquisition Act, 1894: Compensation for land acquirea-:.working
out of-Method of averaging the prices fetched by sales of different kinds and ..-...{
different times-Not to be resorted to since it is not reflective of the correct
c position.

Certain lands belonging to the Respondents were acquired and the

..
Land Acquisition Officer awarded compensation @ Rs.29.46 per maria.
On reference, the District Judge enhanced the compensation to Rs.SO per
maria. On further appeal, Single Judge of the High Court enhanced the
D market value of the acquired land to Rs.375 per maria. He also awarded
Rs.17,000 for the super-structure constructed by the respondents on the ~

land. State filed Letters Patent Appeal and the respondents filed cross-ob-
jections. The Division Bench of the High Court confirmed the decree
_,,
appealed against. The State preferred appeals to this Court questioning
E the enhanced compensation.
;
Partly allowing the appeals, this Court

HELD: 1. The Single Judge of t.he High Court committed a grave
error in working out average price paid under the sale transactions to ....
F determine the market value of the acquired land on that basis. As the
method of averaging the prices fetched by sales of different lands of
different. kinds at different times, for fixing the market value of the
acquired land, if follow_:ed, could bring about a figure of price which may
~-,

not at all be regarded as the price to be fetched by sale of acquired land.
One should not have, ordinarily recourse to such method. It is well settled
G that genuine and bona fide sale transactions in respect of the land under
acquisition or in its absence the bona fide sale transactions proximate to
>
the point of acquisition of the· land situated in ti,e neighbourhood of the ]>-
acquired lands possessing similar value or utility taken place between a
. willing vendee and the willing vendor which could be expected to reflect the
H true value, as agreed between reasonable prudent persons acting in the
1008
STATE OF PUNJAB v. HANS RAJ 1009

normal market conditions are the real basis to determine the market value. A
The Single Judge did not adopt that method. (1011-B, DJ

2. It is agreed between the counsel appearing for contesting parties
that R-5 the sale deed dated August 4, 1965 which works out to Rs.78 per
maria, could form the basis for the fixation of the market value of acquired
land. Having regard to lapse of three years time between the date of the B
purchase under Ex.R-5 in August 1965 and the date of acquisition and
sudden developmental activities in and around the acquired land, fixation
)r- of the market value of acquired land @ Rs.100 per maria would be just
and reasonable. The respondent-claimants would be entitled to the propor-
tionate solatium on the enhanced market value of land @ 15% and interest
@ 6% on the enhanced compensation from the date of taking possession
c
of the land till payment. (1011-E-F]

.. - 3. The deterD)ination of the market value of structure on the acquired
land at Rs.17,000 does require interference and is confirmed. [1011-G]

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 4218-19
D
of 1982.

From the Judgment and Order dated 31.5.82 of the Punjab and
Harayna High Court in L.P.A. Nos. 307 and 310 of 1979.
E
Ranbir Yadav for G.K. Bansal for the Appellants.

Dr. Meera Aggarwal and R.C. Mishra for the Respondents.
•
The following Order of the court was deliv~red
F
1. The notification under s.4(1) of the Land Acquisition Act, 1894,
('the Act' for short) was published in the State Gazette of Haryana on
January 3, 1967, proposing acquisition of land for construction of
Panchayat Offic~ building _at Tanda. Later on, due to consolidation
proceedings, without withdrawing earlier notification, another notification
dated August 28, 1968 was published under s.4(1) of the Act, to acquire G
,.. 25 Kanals 2 marlas of land for the same purpose leaving apart the residue
·\
for the Civil Hospital. The Land Acquisition Officer awarded compensa-
tion for the acquired land @ Rs. 29.46 per marla on May 30, 1973. On
reference under s.18 of the Act the District Judge, Hoshiarpur enhanced
the market value of acquired l~nd to Rs.50 per marla. On further appeal H
1010 SUPREME COURT REPORTS (1994) 1 S.C.R.

A under s. 54 of the Act, a learned single Judge of the High Court enhanced
the market value of the acquired land to Rs. 375 per maria. He also
awarded Rs.17,000 for super-structures shops constructed by the respon-
dents on the acquired land. Thereafter, L.P.A. was filed by the State and
also cross-objections by the respondents. The Division Bench confirmed
the decree of the learned single Judge by its judgment dated 21.9.79. Thus
B these appeals by special leave are filed by the State questioning the
enhanced compensation.

2. The learned single Judge, apart from relying on sale deeds A-4
dated December 16, 1968 and A-5 dated April 18, 1966 of two marlas
C relating to lands in the neighbourhood, relied on additional evidence
adduced, namely, mutation proceedings of the sale deeds R-3 dated March
20, 1965, R-4 dated April 15, 1965 and R-5 dated August 4, 1965 relating
to 9 Kanals 12 marlas purchased by Hans Raj one of the respondents
herein which formed part of the acquired land for Rs. 4,000 and 7 Marlas
D for Rs. 4000 by another witnesses and 10 marlas for Rs. 780 which worked
out@ Rs. 20-83, Rs. 57, Rs.78 per maria respectively. The learned single
Judge having given the finding that there is no development between the
dates of the purchase by the respondent Hans Raj on March 20, 1965 till
date of acquisition, making an average of all the prices of sale transactions
worked out @ Rs.375 per maria.
E
3. It is contended for the appellants that Hans Raj, one of the
claimant-respondents in these appeals purchased the same land which is
under acquisition in 1965 @ Rs.20.83 per maria and when the notification
was issued in 1967, thereafter several sale deeds were brought into exist-
F ence and, therefore, they are not bona fide transactions and they cannot
form any basis. It is contended for the respondents that they have also filed
cross-objections in this Court after the purchase made by Hans Raj in 1965
and before the date of notification under s.4 (l)large colonies/abadi have
come into existence. in and around the acquired land. Hans Raj himself
constructed shops in the acquired land. The lands are situated close to the
G bus stand and several developments have taken place. Therefore, the lands
possessed of potential value for building purpose and were also adjacent
to the main road. Thereby the fixation of the market value @ Rs.375 per
maria by the learned single Judge was not high. On the other hand they
were entitled to the market value @ Rs.3,000 per maria. However, in the
H course of arguments before us, learned counsel appearing for contesting
STATEOFPUNJAB v. HANS RAT 1011

parties agreed that the market value of the acquired land may be deter- A
mined on the basis of R-5 dated August 4, 1965 which worked out@ Rs.78
per maria and compensation may be given on that basis.

4. Having given our anxious consideration to the respective conten-
tions, we are of the considered view that the learned single Judge of the B
High Court committed a grave error in working out average price paid
under the sale transactions to determine the market value of the acquired
land on that basis. As the method of averaging the prices fetched by sales
of different lands of different kinds at different times, for fixing the market
value of the acquired land, if followed, could bring about a figure of price
which may not at all be regarded as the price to be fetched by sale of C
acquired land. One should not have, ordinarily recourse to such method.
It is well settled that genuine and bona fide sale transactions in respect of
the land under acquisition or in its absence the bona fide sale transactions
proximate to the point of acquisition of the lands situated in the neighbour-
hood of the acquired lands possessing similar value of utility taken place
between a willing vendee and the willing vendor which could be expected D
to reflect the true value, as agreed between reasonable prudent persons
acting in the normal market conditions are the real basis to determine the
market viµue. The learned single Judge did not adopt that method. As
stated earlier, it is agreed between learned counsel appearing for contest-
ing parties that R-5 dated August 4, 1965 which works out to Rs.78 per
maria, could form the basis for the fixation of the market value of acquired E
land. On the basis of the said agreement and having regard to lapse of
three years time between the date of the purchase under Ex. R-5 in August
1965 and the date of acquisition and sudden developmental activities in
and around the acquired land, we are of the view that fixation of the market
value of acquired land @ Rs.100 per maria would be just and reasonable. p
The respondent-claimants would be entitled to. the proportionate solatium
on the enhanced market value of land @ 15% and interest @ 6% on the
enahnced compensation from the date of taking possession of the land till
payment. We do not propose to interfere with the determination of the
market value of structure on the acquired land at Rs.17,000 made by the
learned single Judge. It is accordingly confirmed. G

The appeals of the State are, therefore, partly allowed, but in the
circumstances without costs.

G.N. Appeals allowed.