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Special Tehsildar Land Acquisition v. A. Mangala Gowri (Smt)
Factual and Procedural Background
An acquisition under Section 4(1) of the Land Acquisition Act, 1894 was notified on November 21, 1963 to acquire 5 acres and 589 1/3 square yards in T.S. No. 981, Block No. 34 of Waltair Ward, Visakhapatnam, for a housing scheme. The Collector awarded compensation at Rs 1.58 per square yard. On reference, the civil court enhanced the compensation to Rs 10 per square yard with 15% solatium and 4% interest. The respondent had claimed Rs 12 per square yard.
On appeal and cross-appeals, the Andhra Pradesh High Court affirmed the civil court’s award of Rs 10 per square yard and dismissed the respondent’s cross-objections seeking Rs 12 per square yard. The present appeal by special leave challenges the High Court’s judgment dated November 24, 1975 in A.S. No. 691 of 1972.
Legal Issues Presented
- Whether the market value of the acquired land should be determined on the basis of sale transactions relating to the very land (Exhibits B-6 to B-8 and B-10) rather than relying on a prior High Court award concerning a different survey number and earlier notification.
- Whether, and to what extent, a deduction from market value is required towards development (roads, drainage, parks and amenities) for a large tract acquired for a housing scheme—specifically, whether a one-third deduction is warranted.
Arguments of the Parties
Appellant's Arguments
- Genuine sale transactions of the same land are available: the respondent’s purchases under Ex. B-6 (August 3, 1961), Ex. B-7 (September 5, 1961), and Ex. B-8 (September 8, 1961) at 0.42 paise per square yard, and a sale by the respondent under Ex. B-10 (January 24, 1963) at Rs 5 per square yard. These reflect prevailing market value and should guide valuation.
- The courts below erred in ignoring these transactions and instead relied on a High Court decision in A.S. No. 191 of 1967 (November 11, 1970) awarding Rs 10 per square yard for T.S. No. 1008 (a different parcel) under a 1961 notification for a Caltex Oil Refinery; that award is not a reliable proxy when bona fide sales of the very land exist.
- For a large acquisition for a housing scheme, at least one-third of the land’s value must be deducted towards roads, parks, drainage, and other developmental amenities; the High Court committed error by omitting such deduction.
Respondent's Arguments
- The High Court recognized the need for developmental deductions by reasoning that the land’s market value was Rs 12 per square yard and, after one-third deduction, effectively upheld Rs 10; this approach warrants no interference.
- Relied on Spl. Tehsildar, Visakhapatnam v. Rednam Dharma Rao (C.A. No. 4187 of 1982), where a deduction of one-fifth was upheld, to support a lower-than-one-third deduction in appropriate circumstances.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Periyar & Pareekanni Rubbers Ltd. v. State of Kerala (1991) 4 SCC 195 | Market value under Section 23(1) is what a willing seller would receive from a willing buyer; comparable sales close in time to Section 4(1) notification are the best evidence. | Used to prioritize genuine sales of the very land over unrelated awards, leading to fixation of Rs 6 per sq. yd. as market value. |
| Spl. Tehsildar, Visakhapatnam v. Rednam Dharma Rao, C.A. No. 4187 of 1982 | Deduction towards development may be less (e.g., one-fifth) where the owner has already set apart land for roads and drainage while obtaining layout. | Noted as an exception justifying lower deduction; distinguished while affirming that generally one-third is reasonable. |
| Spl. Land Acquisition Officer, Bangalore v. T. Adinarayan Setty, 1959 Supp 1 SCR 404; AIR 1959 SC 429 | (i) Supreme Court may correct misapplication of valuation principles under Article 136; (ii) Deduction of 25% can be reasonable. | Cited to justify interference with the High Court’s approach and to support the development-deduction framework. |
| Dattatrayaya Shankarbhat Ambalgi v. Collector of Sholapur (1971) 3 SCC 43; AIR 1970 SC 850 | Supreme Court can correct errors where valuation principles are overlooked or misapplied. | Invoked to support corrective intervention. |
| Dollar Company, Madras v. Collector of Madras (1975) 2 SCC 730; 1975 Supp SCR 403; AIR 1975 SC 1670 | Authority for Supreme Court’s corrective role under Article 136 when valuation principles are misapplied. | Reinforced basis for interference. |
| Padma Uppal v. State of Punjab (1977) 1 SCC 330; (1977) 1 SCR 329 | Same corrective principle under Article 136 concerning valuation errors. | Supported the Court’s decision to rectify the High Court’s approach. |
| Tribeni Devi v. Collector of Ranchi (1972) 1 SCC 480; (1972) 3 SCR 208 | At least one-third of the land value should be deducted for roads, drainage and other amenities in development. | Applied to hold that a one-third deduction is reasonable in this housing-scheme acquisition. |
| Kaushalya Devi Bogra (Smt) v. Land Acquisition Officer, Aurangabad (1984) 2 SCC 324; (1984) 2 SCR 900 | Deduction of one-third for development is reasonable. | Relied upon to affirm one-third deduction. |
| Vijay Kumar Moti Lal v. State of Maharashtra (1981) 2 SCC 719 | One-third deduction towards developmental charges in undeveloped areas. | Supported the general rule of one-third deduction. |
| Vijaysingh Liladhar v. Special Land Acquisition Officer (1988) 3 SCC 760 | Deduction of one-fourth upheld; demonstrates variability based on circumstances. | Used to explain that deduction depends on development context. |
| Tehsildar, Land Acquisition, Visakhapatnam v. P. Narasing Rao (1985) 1 APLJ 99 (AP) | A.P. High Court upheld one-third deduction in Visakhapatnam housing scheme acquisitions. | Cited to support adopting a one-third deduction in this case. |
| A.S. No. 191 of 1967 (AP High Court, Nov 11, 1970) | Awarded Rs 10 per sq. yd. for T.S. No. 1008 under a 1961 notification. | Held not a proper basis for valuation here given the availability of bona fide sales of the very land under acquisition. |
Court's Reasoning and Analysis
The Court reiterated that Section 23(1) of the Land Acquisition Act mandates fair compensation measured by market value as on the date of the Section 4(1) notification. The governing test is what a willing seller would obtain from a willing buyer, and the best evidence is bona fide sale transactions of the very land (or, absent that, of comparable neighbouring land) within a reasonable time of the notification.
Applying this, the Court found it erroneous for the courts below to disregard the respondent’s own transactions concerning the same property: purchases in 1961 at 0.42 paise per sq. yd. (Ex. B-6 to B-8) and a sale on January 24, 1963 at Rs 5 per sq. yd. (Ex. B-10). While acknowledging that acquisition proposals are often known locally and that some pre-notification transactions may be engineered to bolster claims, the Court assumed Ex. B-10 to be genuine and bona fide. Given the nine-month interval between Ex. B-10 and the November 21, 1963 notification, the Court held it implausible that the market value would have doubled to Rs 10 per sq. yd., especially since selling a large block of over five acres would typically not fetch a higher rate than a smaller parcel; if anything, it would command the same or a lower rate. The respondent provided no explanation for selling at Rs 5 per sq. yd. while asserting a value of Rs 10 per sq. yd.
The High Court’s reliance on its earlier award for a different survey number (T.S. No. 1008) under a different notification (1961) was deemed improper when reliable, contemporaneous sales of the very land were available. Considering the brief time lag and the totality of circumstances, the Court fixed the prevailing market value as Rs 6 per sq. yd. as of the notification date.
On developmental deductions, the Court surveyed binding authorities and explained that for large tracts acquired for housing schemes, it is necessary to deduct a portion of the market value to account for land to be set aside for roads, parks, drainage, and other amenities. While the quantum depends on the development context (e.g., lower deductions where the owner has already reserved land or where the locality is already fully developed), the general and reasonable deduction is one-third. The Court therefore rejected the High Court’s “curious” reasoning that postulated a Rs 12 value reduced by one-third to uphold Rs 10, despite having determined market value at Rs 10; instead, it applied a one-third deduction to the correctly ascertained market value of Rs 6 per sq. yd.
Holding and Implications
APPEAL ALLOWED. The Court determined the market value at Rs 6 per square yard as on the date of the Section 4(1) notification and directed a deduction of one-third towards development, resulting in a payable market value of Rs 4 per square yard. The respondents are entitled to 15% solatium on the market value and 4% interest from the date of dispossession. Parties shall bear their own costs.
Implications: The decision reduces the compensation payable to the respondent and reaffirms two settled principles: (i) genuine, proximate sales of the very land are the best guide to market value and should not be displaced by awards relating to other parcels; and (ii) in housing-scheme acquisitions, a one-third deduction for development is generally reasonable, subject to contextual variation. No new legal rule was created; the Court applied and clarified existing principles to the facts.
K. Ramaswamy, J.— This appeal by special leave arises against the Division Bench judgment dated November 24, 1975 in A.S No. 691 of 1972 of the A.P High Court fixing the market value @ Rs 10 per square yard. The facts lie in a short compass are stated thereunder. A notification under Section 4(1) of the Land Acquisition Act, 1894 (in short ‘the Act’) was published in the State Gazette on November 21, 1963 to acquire 5 acres-589 1/3 sq. yards in T.S No. 981, Block No. 34 of Waltair Ward, Vishakapatnam for a housing scheme. The Collector awarded at Rs 1.58 per sq. yard and on reference, the civil court enhanced the compensation to Rs 10 per sq. yard with solatium at 15 per cent and interest at 4 per cent. The respondent claimed @ Rs 12 per sq. yard. On appeal and cross appeals the High Court confirmed the award and dismissed the appeal as well as cross-objections for enhancement to Rs 12 per sq. yard. Two contentions have been raised by Shri Narsimahachari, the learned counsel for the appellant. Under Ex. B-6 dated August 3, 1961; under Ex. B-7, dated September 5, 1961 and Ex. B-8, dated September 8, 1961 the respondent purchased one acre-1986 sq. yards in each documents in the same T.S No. 981 @-0.42 p. per sq. yard. He sold on January 24, 1963 an extent of one acre under Ex. B-10 @ Rs 5 per sq. yard. Therefore, the aforesaid sale deeds, Ex. B-6, B-7, B-8 and B-10 will reflect the prevailing market value of the land in question. The trial court and the High Court committed grievous error in placing reliance on a decision of the High Court in A.S No. 191 of 1967 dated November 11, 1970 awarding @ Rs 10 per sq. yard in respect of 6209 sq. yards in T.S No. 1008, Block No. 39, Waltair Beach Road which was acquired under a notification dated March 19, 1961 for the purpose of Caltex Oil Refinery. The price fixed therein does not reflect the correct market value while the bona fide sale deed of purchase and sale by the respondents relating to the acquired land are available on records and form correct basis. The courts below committed grave error of law in completely excluding those sale transactions and relying upon that judgment. We find force in the contention, though Shri Subba Rao, learned counsel for the respondent vehemently resisted it. It is settled law by catena of decisions that the market value postulated in Section 23(1) of the Act designed to award just and fair compensation for the lands acquired. The word “market value” would postulate price of the land prevailing on the date of the publication of the notification under Section 4(1). This Court repeatedly laid the acid test that in determining the market value of the land, the price which a willing vendor might reasonably expect to obtain from a willing purchaser would form the basis to fix the market value. For ascertaining the market rate, the court can rely upon such transactions which would offer a reasonable basis to fix the price. The price paid in sale or purchase of the land acquired within a reasonable time from the date of the acquisition of the land in question would be the best piece of evidence. In its absence the price paid for a land possessing similar advantages to the land in the neighbourhood of the land acquired in or about the time of the notification would supply the data to assess the market value. It is not necessary to cite all the decisions suffice to state that in a recent judgment in Periyar & Pareekanni Rubbers Ltd. v. State of Kerala (1991) 4 SCC 195, a bench of this Court, to which one of us K. Ramaswamy, J., was a member surveyed all the relevant precedents touching the points. In the light of the settled legal position let us consider whether the High Court and the civil court are justified in excluding the sale deeds completely and to place reliance on another judgment of the Division Bench of the High Court of A.P Admittedly, the claimant is a vendee in Ex. B-6 to B-8 @ 0.42 paise. In a span of one year and four months, they sold @ Rs 5 per sq. yard. It is common knowledge that proposal for acquisition would be known to everyone in the neighbourhood, in particular, to the owners of the property and it is not uncommon that sale transactions would be brought into existence before the publication of Section 4(1) notification so as to form the basis to lay higher claim for compensation. We do assume that Ex. B-10 is a genuine and bona fide sale transaction. In respect of one acre of the land in the selfsame land when sold at Rs 5 per sq. yard, would it fetch in a short period of nine months, double the market value, namely, @ Rs 10 per sq. yard? We have no doubt that it would not get that price for 5 acres and odd area. It is undoubted that in respect of a notification of 1961 in which another TS number in the locality, namely, T.S No. 1008, ultimately, the High Court awarded @ Rs 10 per sq. yard. Perhaps had there been no bona fide or genuine sale transaction relating to the selfsame land, the reliance placed on that judgment may be justified but exclusion of bona fide and genuine sale transactions in respect of the same land under acquisition and to place reliance on the award of some other land is obviously illegal. When the claimants themselves sold as a willing seller of an acre of land @ Rs 5 per sq. yard large extent of five acres and odd under acquisition, if it is offered to be sold as a block, it would not fetch higher rate but surely be negotiated for a lesser rate if not the same market value @ Rs 5 due to time lag of nine months. No attempt was made by the respondent to explain under what circumstances they came to sell their lands @ Rs 5 per sq. yard when they expect higher value @ Rs 10 per sq. yard. May be the payment of Rs 10 per sq. yard, be windfall to the owner of the land in T.S No. 1008. Taking the totality of the facts and circumstance, we hold that the High Court committed grave error to completely ignore the sale transactions of the lands under acquisition. In view of the time lag we have no hesitation to conclude that the prevailing market value of the land as on the date of the notification would be Rs 6 per sq. yard.
2. It is next contended by Shri Narsimahachari that when a large extent of land was acquired for a housing scheme, at least 1/3 of the land should be deducted towards laying the roads, setting up parks, drainage and other amenities. The High Court committed manifest error in omitting to deduct 1/3 of the land.
3. Shri Subba Rao, the learned counsel for the respondent contended that the High Court had noted this contention of the appellant and considered that the market value of the land would be Rs 12 per sq. yard and after giving the deduction of 1/3 it would come to Rs 10. The reasoning of the High Court is proper and warrants no interference. In support thereof he placed reliance in Spl. Tehsildar, Vishakapatnam v. Rednam Dharma Rao C.A No. 4187 of 1982 wherein this Court had upheld the deduction of 1/5 from the market value towards developmental charges. It is settled law that the High Court and the reference court when made wrong application of a principle on important points affecting valuation has been overlooked or misapplied, this Court would under Article 136 correct the same, vide Spl. Land Acquisition Officer, Bangalore v. T. Adinarayan Setty 1959 Supp 1 SCR 404, AIR 1959 SC 429, 1959 Cri LJ 526, Dattatrayaya Shankarbhat Ambalgi v. Collector of Sholapur (1971) 3 SCC 43, AIR 1970 SC 850, Dollar Co., Madras v. Collector of Madras (1975) 2 SCC 730, 1975 Supp SCR 403, AIR 1975 SC 1670 and Padma Uppal v. State of Punjab (1977) 1 SCC 330, (1977) 1 SCR 329.
4. In Tribeni Devi v. Collector of Ranchi (1972) 1 SCC 480, (1972) 3 SCR 208 this Court held that “in order to develop that area at least the value of 1/3 of the land will have to be deducted for roads, drainage and other amenities”. On this basis the value of the land at Rs 2,08,135.70 per acre would, after the deduction of 1/3 come to Rs 1,38,757 per acre. In Kaushalya Devi Bogra (Smt) v. Land Acquisition Officer, Aurangabad (1984) 2 SCC 324, (1984) 2 SCR 900 this Court held that deduction of 1/3 was held to be reasonable. In Vijay Kumar Moti Lal v. State of Maharashtra (1981) 2 SCC 719 one-third was deducted towards developmental charges in undeveloped area. In Vijaysingh Liladhar v. Special Land Acquisition Officer (1988) 3 SCC 760 the deduction of one-fourth by the High Court which was not challenged in this Court was upheld. In Spl. Land Acquisition Officer, Bangalore v. T. Adinarayan Setty 1959 Supp 1 SCR 404, AIR 1959 SC 429, 1959 Cri LJ 526 deduction of 25 per cent was held to be reasonable. It is to be noted that in building regulations, setting apart the lands for development of roads, drainage and other amenities like electricity etc. are condition precedent to approve layout for building colonies. Therefore, based upon the situation of the land and the need for development the deduction shall be made. Where acquired land is in the midst of already developed land with amenities of roads, drainage, electricity etc. then deduction of 1/3 would not be justified. In the rural areas housing schemes relating to weaker sections deduction of 1/4 may be justified. On that basis, this Court in R. Dharma Rao case C.A No. 4187 of 1982 upheld deduction of 1/5 because the owner while obtaining the layout had already set apart lands for road and drainage. Therefore, deduction of 1/3 would be reasonable. In fact in Tehsildar, Land Acquisition, Vishakapatnam v. P. Narasing Rao (1985) 1 APLJ 99 (AP) a Division Bench of the High Court surveyed judgments of the High Court relating to housing schemes of Visakhapatnam upholding deduction of 1/3 to be reasonable. Accordingly we hold that 1/3 of the market value should be deducted for development of the lands. The High Court committed grievous error in giving a curious reasoning of valuing at Rs 12 and upholding Rs 10 to be the market value after deduction, though the market value was determined at Rs 10. Accordingly the appeal is allowed. The market value is determined at Rs 6 per sq. yard and after deducting 1/3 the market value is Rs 4 per sq. yard. The respondents are entitled to 15 per cent solatium on market value and 4 per cent interest thereon from the date of dispossession. But in the circumstances parties are directed to pay and receive their own costs.
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