Holding

A 10 % per‑annum appreciation is not excessive, but the correct market value for the 1985 acquisition is Rs 5 per sq ft, and no deduction for development charges is allowed.

Summary

The State of Karnataka acquired agricultural plots in Bagalkot under the Land Acquisition Act, 1894, fixing a base market value of Rs 3 per sq ft based on a 1979 valuation. The Reference Court applied a 10 % per‑annum appreciation for subsequent years, arriving at Rs 6.85 per sq ft for 1985 and, after a 20 % deduction for development charges, fixed Rs 5.50 per sq ft. The State appealed, arguing the appreciation rate was excessive and the calculation erroneous. The Supreme Court held that a 10 % annual appreciation was reasonable given the developmental context, but the Court’s arithmetic was wrong; the correct market value for 1985 should be Rs 5 per sq ft (or Rs 5.10 per sq ft) and no deduction for development charges is permissible because the base price already incorporated them. For the 1991 acquisition, the Court found the previously fixed Rs 7 per sq ft reasonable. The appeals were partly allowed, fixing the 1985 value at Rs 5 per sq ft, while other appeals were dismissed.

Issues considered

Whether a 10 % per‑annum appreciation of market value is appropriate under the Land Acquisition Act.
Whether a deduction for development charges can be made when the base price already accounts for such charges.
The correct method of calculating the market value of land acquired in 1985.
The reasonableness of the Rs 7 per sq ft valuation for land acquired in 1991.

Legislation cited

Land Acquisition Act, 1894s. 18, s. 4(1), s. 6

Subjects

Land acquisitionMarket value determinationAppreciation of valueDevelopment chargesCompensationLand Acquisition ActValuationSolatiumInterest

Judgment

A THE SPECIAL LAND ACQUISITION OFFICER
BTDA,BAGALKOT
v.
MOHD. HANIF SAHIB BAWA SAHIB

MARCH 19, 2002
B
[DORAISWAMY RAJU AND ASHOK BHAN, JJ.]

Land Acquisition Act, 1894-Sections 4(1), 6 and 18-Land acquired-
C Market value-Determination of-Jn earlier acquisition cases market value of
adjacent land fixed at Rs. 3 per sq. ft.-ln the instant case determination on
base price of Rs. 3 after appreciation in the value of the land at 10% per
annum for every subsequent year-Held, the appreciation was appropriate-
However, factual error in calculation of the compensation corrected by the
Court.
D
CA. Nos. 12515/96, 13370-13371/96 and 2238-2242/2002, relate to the
land acquired by Notification in 1985 under Land Acquisition Act. The land
was treated as agricultural and accordingly market value was fixed.

In appeal under Section 18 of the Act, the Reference Court relying on .
E the witnesses and documentary evidence gave the finding that the land " was
w:~hin municipal limits and had a potential for further development. With
regard to fixation of market value of the land, the claimants relied on Exhibit
P-27 wherein market value of land in proximity of the land in question was
fixed at Rs:3 per sq.ft. in 1979 i.e. seven years before the present acquisition.
The Reference Court taking the base price at Rs. 3 per sq.ft. for t!te year
F 1979 granted an appreciation in the value of the land at 10% for every
subsequent year and fixed the value of the land at Rs. 6.85 per sq.ft. After
making a deduction of 20% towards development charges, the market value
was fixed at Rs. 5.50 per sq.ft. Appeal of the State against the order of
Reference Court was dismissed by High Court..
G
Civil Appeal Nos. 1152-54/2000, relate to lands acquired by Notification
in 1991. In this case, Reference Court granted appreciation of 10% for every
subsequent year taking the base price at Rs. 5.50 per sq.ft. which was fixed
for acquisition of the land in the year 1985. The market value was determined
at Rs. 7 per sq. ft. and the same was confirmed by High Court.
H 550
SPECIAL LAND ACQUISITION OFFICER'" MOHD HANIF SAHIB BAWA SAHIB [BHAN, J.) 55)

In appeal to this Court on behalf of the appellant it was contended that A
appreciation of the land at the rate of 10% for every subsequent year was
erroneous and that even if appreciation of value of the land was taken at 10%
the market value would come to Rs. 5.10 per sq.ft. and not Rs. 6.85 per sq. ft.

The respondent-claimants conceded that reference Court bad made
factual error in calculating the value of the land at Rs. 6.85 per sq. ft, however B
they contended that no deductions could be made for development of the land,
because the base price of Rs. 3 had been fixed after deduction of development
charges.

Partly allowing the appeals, the Court

HELD: 1.1. Taking an overall view of the matter, the value of the land
c
acquired by Notification in 1985 in fixed at Rs. 5 per sq. ft. instead of
Rs. 5.50 per sq.ft. which was fixed by the Reference Court and upheld by the
High Court It is in addition to the statutory benefits of solatium, interest etc.
Reference· court wrongly valued the land at Rs. 6.85 per sq.ft. for the year
1985. If the value is correctly calculated, the market value of the land under D
acquisition in the year 1985 would come to Rs. 5.10 paise.
[555-C-D; 555-A; SSS-BJ

1.2. In the facts and circumstances of the case the appreciation of 10%
per annum given for the subsequent years is neither excessive nor
unreasonable so as to call for interference. 1554-FJ E
1.3. Deduction on account of development charges from the price fixed
cannot be made, as the base price of Rs. 3 had been determined in the earlier
cases after taking into account the development charges. (555-B-CI

2. Since in the Notification for the year 1985 the market value of the F
land for the year 1985 is fixed at Rs. 5 per sq. ft., on giving an appreciation
of 10% in the value of the land for every subsequent year for a period of six
years the value of the land would come to Rs. 8/- per sq.ft. with regard to the
land acquired by Notification in 1991. As the claimants h&ve not filed either
cross appeals or cross objections, the overall value of Rs. 7 per sq. ft. fixed G
by the reference Court and confirmed by the High Court is thus reasonable
and does not call for any interference. [555-H; 556-A] .
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 12515 of
1996.
From the Judgment and Order dated 3.4.96 of the Karnataka High H
552 SUPREME COURT REPORTS [2002] 2 S.C.R.

.A Court in M.F.A. No. 1926 of 1995.

WITH

C.A. Nos. 13370-133.11/96, 2238-42/02 and 1552-54/02.

Sanjay R. Hegde, N. Ganpathy, S.K. Kulkarni, M. Gireesh Kumar Ankur
B S. Kulk~ni for Vijay Kumar, Mohan V. Katarki, Ashok K. Sharma, Ms.
Prachi Bajpai, K.C. Sudarshan, Jayanth Raj for K.K. Gupta and G.K. Bansal
(NP) for the appearing parties.

The Judgment of the Court. was delivered by

C BHAN, J. Leave granted in the special leave petitions.

This order shall dispose of CA No. 12515 of 1996, CA Nos. 13370-
13371/1996 and CA Nos. 2238-2242 of 2002 (@ SLP Nos. 21304-21308 of
1996) as common question of law and facts are involved in these appeals.
The facts of Civil Appeal Nos. 1552-1554 of 2000 being different would be
D referred to in_. the later part of this judgment.

For the disposal of Civil Appeal Nos. 12515 of 1996, Civil Appeal
Nos. 13370-71 of 1996 and CA Nos. 2238-2242 of 2002 (@ SLP Nos.
21304-21308of1996) the facts are referred to from Civil Appeal No. 12515
of 1996.
E
The brief facts are as follows:

The State of Kamataka issued a notification under Section 4 (1) of the
Land Acquisition Act, 1894 (hereinafter referr~d to as 'the Act') seeking to
acquire the plots belonging to the claimants of Village Muma! for a public
p purpose, namely; Bagalkot new township. The notification was published in
the Karnataka Gazette on. 19th July, 1985; The declaration under Section 6
was published in the Karnatalrn Gazette on 1_4th August, 1987. The Special
Land Acquisition Officer, BTDA, Bagalkot passed the award on 3rd June,
1988. He fixed the market value of the acquired plots at the rate 'Of Rs. 3,500
per acre treating the land as agricultural.
G
Aggrieved by the award the claimants submitted ·applications under
0
Section 18 of the Act seeking enhancement of the market value. In the
reference application under Section 18, it was alleged by the claimants that
before passing th~ award, the Land Acquisition Officer did not issue any
notice; the compensation awarded was too low, meagre and inadquate. The
H market value of the acquired property was more than Rs . 30 pet sq. ft., the
SPECIAL LAND ACQUISITION OFFICER''· MOHD HANIF SAHIB BA WA SAHIB [BHAN, J.) 553
method adopted for valuing the property was not proper and legal. The Land A
Acquisition Officer illegally treated the land to be agricultural. It was stated
that the land under acquisition fell within the municipal limits of Bagalkot.
On notice being served, respondents put an appearance through the AGP.

In support of their case, the claimants examined PW! and PW2. Exhibits
Pl to P29 were got marked. Respondents did not produce any evidence. B
The reference Court on appreciation of the evidence came to the
conclusion that the acquired plots were on the southern side of the Belgaum-
Raichur road at a distance of 200 feet. On one side of the Belgaum-Bagalkot
road, plots were situated and on the other side there was engineering college C
campus and K.l.D. Colony staff quarters etc .. The plots were adjacent to the
engineering college. Near about the acquired plots some other persons had
carved out plots on which construction was going on. PW!· stated that he was
preparing to put up the building on the plot but in the meanwhile the
Government acquired the land. Vidhyagiri Housing Colony, BTDA Office,
new Circuit House, engineering college hostel and staff quarters were adjacent D
to the land acquired. From this it was concluded by the Reference Court that
the land under acquisition was surrounded on all four sides by buildings and
had a lot of potential for further development. A finding was recorded that
the land under acquisition was within the municipal limits.
E
No evidence was produced by the parties by way of comparable sale
transactions to prove the market value. Evidence was also not forthcoming
for adoption of the capitalisation method. On behalf of the claimants, reliance
was placed on Ex. P.27, a notification issued under section 4 dated 19th
January, 1978 by the Housing Urban Development Corporation and the
judgment in Land Acquisition Case No. 240 of 1981 relating thereto which F
was later confirmed in appeal by the High Court.

It was noticed by the Reference Court that the notification, Ex. P.27,
was dated 19th January, 1978. The land under acquisition under that
G
-.
notification was in close proximity of the land under acquisition in these
. appeals. The Reference Court had determined the market value of the land
in LAC No. 240 of 1981 at Rs. 3 per sq. ft. which was later confirmed by
the High Court in MFA No. 929 of 1987. Notification under Section 4, in the
present case, is of 19th July, 1985. Keeping in view that there was a distance
of seven years in the earlier acquisition and the subsequent acquisition and
the fact that lot of.development had already taken place and was continuing H
554 SUPREME COURT REPORTS (2002] 2 S.C.R.

A to take place, the Reference Court taking the base price of the land in that ·
area at Rs. 3 per sq. ft. for the year 1979 granted an appreciation in the value
of land at 10% for every subsequent year. While giving the appreciation of
the value @ 10% for the next seven years the Reference Court fixed the
value of the land at Rs. 6.85 per sq. ft. After making a deduction of 20%
towards development charges the payable market value was fixed at Rs. 5.50
B per sq. ft. which comes to Rs. 2,39,580 per acre. Statutory benefits of solatium
and interest, as applicable, were ordered to be paid over and above the market
value.

The State of Karnataka filed appeals before the High Court which have
C been dismissed by the impugned judgment.

Counsel for the appellant strenuously contended that the reference Court
as well as the High Court have erred in giving an appreciation at the rate of
10% per annum for every subsequent year. That the reference Court committed
a factual error in calculating the value of the land at Rs. 6.85 per sq. ft ..
D According to him, even if, appreciation of value of land is taken at 10% on
the base price of Rs. 3 for the year 1979, for the next seven years, then the
market value of the land in the year 1985 would come to Rs. 5.10 per sq. ft.
and not Rs. 6.85 per sq. ft.

Counsel for the respondents fairly conceded that the Reference court
E made a factual error in arriving at the value of the land at the rate of Rs. 6.85
per sq. ft. for the year 1985 even taking the appreciation at I 0% for the
subsequent years. There was no error in giving an appreciation of 10% per
year as lot of developmental activities were going on in and around Bagalkot ·
In fact a new township for Bagalkot was being built as the old area of
F Bagalkot had sub-merged in water. But according to him no deduction could
be made for development of the land as the base price of Rs. 3 had been fixed
by the High Court in MF A 929 of 1987 after making deductions for the
development charges.

After due deliberations on the contentions raised by the counsel for the
G parties, we are of the opinion that on the given facts and circumstances of the
present case the appreciation of I 0% per annum given for the subsequent > •
years is neither excessive nor unreasonable so as to call for our interference.
Counsel for the parties did not dispute that after the sub-mersion of the old
township area of Bagalkot in water, a new township was being built up. For
this lot of developmental activities are taking place. This is evident from the
H fact that number of acquisitions have been made for the development of the
'
SPECIAL LAND ACQUISITION OFFICER 1•. MOHD HANIF SAHIB BAWA SAHIB [BHAN, J.] 555

new township of Bagalkot. In this order, refereace has been made to the A
earlier acquisition of 1979. In Civil Appea! Nos. 1552-54 of 2000 as well
acquisition of the land was made for fonnation of a link road to the new
town. We agree with the counsel for the appellant that the Reference Court
wrongly valued the land at Rs. 6.85 per sq. ft. for the year 1985 taking the
base price of the land at Rs. 3 per sq. ft. for the year 1979 on an appreciation B
of I 0% per annum for every subsequent years. The appreciation of value of
land at I 0% on the base price of Rs. 3 per sq. ft. would increase the value
of the land @ 0.30 paise per year. 0.30 paise multiplied by 7 would come
.. to Rs,. 2.10 paise. If the appreciation in value of the land for the next seven
years is taken at Rs. 2.10 paise and added to the base value of Rs. 3, the
market value of the land under acquisition in the year 1985 would come to C
Rs. 5.10 paise. We agree with the counsel for the respondents that deduction
on account of development charges from the price fixed cannot be made as
the base price of Rs. 3 had been detennined in the earlier cases after taking
into account the development charges.

Taking an overall view of the matter, we fix the value of the land at D
Rs. 5 per sq. ft. instead of Rs. 5.50 per sq. ft. which was fixed by the
reference Court and upheld by the High Court. The appeal is partly accepted.
The market value is fixed at Rs. 5 per sq. ft. In addition, the claimants would
be entitled to the statutory benefits of solatium and interest etc. These group
of appeals before us shall stand allowed to that extent in view of the notification E
made in the market value to be adopted.

CA Nos. 1552-1554 of 2000

In these appeals the land was acquired by issuing a notification under
section 4 dated 22nd August, 1991, for a public purpose, namely, the fonn&tion F
of link road to the new town, Bagalkot Township. It is not disputed that the
land under acquisition is adjacent to the land in Civil Appeal No. 12515 of
1996 and other connected cases. The potential value of the land under
acqubition in these appeals is the same as in the earlier cases. The reference
Court granted an appreciation of 10% for every subsequent year. Taking the G
' ·>- base price at Rs. 5.50 per sq.ft. fixed for acquisition of the land in the year
1985, as in the earlier cases, at the rate of 10% in the value of the land for
every subsequent year. As the earlier acquisition was of 1985 and this
acquisition is of the year 1991, appreciation for six years was granted. The
Reference Court determined the payable market value at Rs. 7 per sq. ft.
which was later confinned by the High Court. In addition statutory benefits H
556 SUPREME COURT REPORTS [2002] 2 S.C.R.

A of solatium and interest etc. were also granted. In the earlier notification for
the year 1985 we have fixed the market value of the land for the year 1985
at Rs. 5 per sq. ft. Oh giving an appreciation of 10% in the value of the land
for every subsequent year for a period of six years the value of the land
would come to Rs. 8 per sq.ft. The claimants have not filed either cross
appeals or cross objections. The overall value of Rs. 7 per sq. ft. fixed by the
·B Reference Court and confinned by the High Court is thus reasonable and
does not call for any interference.

For the reasons stated above, the Civil Appeal No. 12515 of 1996, Civil
Appeal Nos. 13370-71of1996 and CA Nos. 2238-2242of2002@ SLP Nos.
C 21394-21308 of 1996 are partly allowed to the extent indicated in this
.judgment. Civil Appeal Nos. 1552 - 1554 of 2000 are dismissed. Parties shall
bear their own costs.

K.K.T. Appeals partly allowed.