K. Posayya And Others v. Special Tahsildar .

K. Ramaswamy, J.— Leave granted.

2. Jelluru and Yerrakaluva Reservoir to prevent inundation of agricultural lands and to control floods, was taken out and 500 acres of land was acquired as a part of Vengalrayasagar project for submersion. Notification under Section 4(1) of the Land Acquisition Act, 1894, (for short “the Act”) was published on 22-3-1979. Four hundred acres of land, as a part of that scheme situated in Alivelu Village in Polavaram Mandal in West Godavari District of Andhra Pradesh was acquired, out of which, we are concerned with about 163.80 acres in these appeals. The Land Acquisition Officer in his award dated 31-7-1980, fixed the market value of the lands at Rs 400 per acre. The lands are rain-fed in which dry crops were raised prior to acquisition. On reference under Section 18, the Subordinate Judge enhanced the compensation to Rs 22,000 per acre. The High Court in the impugned judgment in Appeal No. 1341 and batch of 1992 reduced the compensation to Rs 400 per acre. Thus these appeals by special leave.

3. Shri P.P Rao, learned Senior Counsel for the appellants, contended that Alivelu Village is situated in notified tribal area in which the Scheduled Areas Land Transfer Regulation Act, 1970 is in force which prohibits sale of the lands by the tribals to the non-tribals. The appellants being tribals could not secure any sale deed. In the neighbouring village under Ex. A-1 dated 12-10-1980 when one acre of land was sold for a sum of Rs 20,000, the High Court was not justified in refusing to act upon the same. Equally, it is contended that in another judgment and decree of the High Court, in relation to lands acquired for Vengalrayasagar project, determined the compensation at the rate of Rs 20,000 per acre, the appellants are entitled to at least to Rs 22,000 per acre. Being tribals, they cannot afford to purchase the lands elsewhere. The court, therefore, should grant compensation at “reinstatement value” for rehabilitation of the tribals under Exs. A-5 and A-6, the awards made by the reference court in OP Nos. 17-18/80, the Subordinate Judge awarded at the rate of Rs 22,000 per acre which became final. The High Court misapplied the principle laid by this Court in Administrator General of W.B v. Collector AIR 1988 SC 943 in reducing the price applying the principle of deduction of 50% to the agricultural lands. The High Court, therefore, erred in wrong application of the principles of law in determining the compensation to the agricultural land.

4. The question, therefore, is, what is the correct principle of law to be applied in determining the market value of vast extent of lands acquired for a project. Admittedly, Ex. A-1 dated 31-12-1980 is the torchlight for the claimants to lay higher claim. It is a post-notification sale of the land situated in Chakradevarapalli. According to the claimants, it is situated at a distance of 3 to 4 kms from Village Alivelu. According to Land Acquisition Officer, the distance between the two villages is 30 kms. Possession of these lands, admittedly, was taken between 15-4-1977 i.e prior to the notification under Section 4(1) and 14-7-1980, shortly after the notification under Section 4(1). It would, thus, be clear that the sale deed was brought into existence after the notification and possession was taken of the lands. This is the notorious document relied in all the subsequent references. Only the attestor was examined in proof of the documents. It would be obvious that it was a brought-up document to inflate the market value of the lands under acquisition not only in this village but in the surrounding villages. The High Court, therefore, was right in rejecting the said document and refusing to place reliance for determination of the compensation, Exhibit A-2, judgment of the Single Judge of the High Court in AS No. 2500 of 1986 arising out of OP No. 49 of 1984 of the same reference court. The lands therein were acquired for Vengalrayasagar project. They are the wet lands. Since the counsel for the Government did not appear and no material was placed on record and since in earlier cases, award was confirmed for a sum of Rs 22,000 per acre, the Single Judge enhanced the compensation to Rs 22,000. That is obviously an illegal approach adopted by the High Court in determining the market value of project area i.e large tracts of lands covered by the project. It would appear that the other references were not brought to the notice of the learned Judges. Therefore, it cannot be formed the basis to fix the market value at a higher rate, though the judgment may be wrong.

5. Equally the judgment in Ex. A-3 dated 14-2-1985 in AS No. 232 of 1982 and batch arising out of OP No. 111 of 1980 and batch of the land situated in Tadavai Village, the Division Bench determined market value at the rate of Rs 20,000 per acre. The foundation for the said determination was the notorious sale deed Ex. A-1 which was marked therein as A-3. Equally, Ex. A-4 in OP No. 57 of 1984 of the reference court is founded upon the earlier decision. Exs. A-5 and A-6, namely, OP Nos. 17-18 of 1989 dated 29-11-1990 were founded on the judgments — Ex. A-2 etc. in which Subordinate Judge granted at the rate of Rs 22,000 per acre. Since the very basis of determination of the compensation is clearly erroneous, Exs. A-5 and A-6 cannot form any basis for determination of the compensation. The Division Bench of the High Court in this appeal, placing reliance on Exs. A-5 and A-6 which arose from the same Village Alivelu, reduced the market value to Rs 12,000 per acre on the ratio in Administrator General of W.B case AIR 1988 SC 943. It is true, as rightly contended by Shri Rao, that the ratio therein relates to the urban lands fit for building purpose and the same principle cannot be applied in determination of the market value of agricultural land. The contention that the doctrine of reinstatement value in determination of the market value to the lands of depressed value due to operation of the Andhra Pradesh Scheduled Areas Land Transfer Regulation Act, 1970 prohibiting alienation of the land between the tribals and non-tribals, though, prima facie appears to be alluring but on deeper consideration, it cannot commend acceptance. What is relevant in fixation of the market value of the land under Section 23(1) is prevailing price as on the date of notification under Section 4(1). The reasoning of the High Court that since the tribals have no capacity to purchase the land and the lands, therefore, are not possessed of market value also is not a correct approach.

6. It is settled law that market value is to be determined either on the basis of the prevailing prices of sale and purchase between willing vendor and willing vendee or value of the crops realised applying suitable 10 years' multiplier or in case of land valued by expert valuer like urban properties could be considered for determination of the compensation. Market value cannot be fixed with mathematical precision but must be based on sound discretion exercised by the reference court in arriving at a just and reasonable price. It should not be based on feats of imagination or flight of fancy. Determination of compensation for compulsory acquisition involves consideration of the price which a hypothetical willing purchaser can be expected to pay for the lands in the existing use as well as relatable potentialities. The acid test is the arm chair of the willing vendor would offer and a prudent willing buyer, taking all relevant prevailing conditions of the normal market, fertility of the land, location, suitability of the purpose for which it was purchased, its existing potentialities and likely use to which the land is capable of being put in the same condition would, offer to pay the price, as on the date of the notification. In case of acquisition of large tracts of lands for projects situated in several villages, stray sale deed of small extent here and there would not form the basis to determine the compensation. The reference court should be circumspect, pragmatic and careful in analysing the evidence and arriving at just and fair market value of the lands under acquisition which could be fetched on the date of the notification. The nature of the land, the crops raised and the nature of the income likely to be derived from the lands, the expenditure to be incurred for raising the crops and the net profits etc. would be the relevant factors in arriving at the net market value and if evidence is produced in that behalf on its basis applying the suitable 10 years' multiplier, the market value need to be determined. The owner or claimant should not be put to loss by undervaluation. But, at the same time public exchequer should not be put to undue burden by excess valuation. It is the statutory duty of the court to maintain the balance between diverse interests.

7. Claimant stands in the position of plaintiff and the onus is on him to adduce necessary and relevant evidence in proof of the objection for higher compensation. The court is also enjoined to carefully scrutinise and analyse the evidence and applying the acid test of a prudent purchaser and a willing vendor or the realised income on the crops, the true, correct and fair market value should be arrived at. The reference court has absolutely failed to apply these tests in determining the compensation. Rejecting the evidence relied on by the claimants under Exs. A-1 to A-6, there is no other evidence to enhance the compensation. The doctrine of reinstatement value cannot be applied in determining the market value under Section 23(1) of the Act. The reason is obvious. There will always be a gap between the date of the notification and the date of payment. To recompensate the loss, payment of interest under Section 28, solatium under Section 23(2) and appropriate cases after the Amendment Act 68 of 1984 has come into force, 12% per annum of the additional amount under Section 23(1-A) are provided for. It would, therefore, be illogical and unrealistic to apply the doctrine of reinstatement value in determination of the compensation under Section 23(1).

8. In this view, though the High Court has applied wrong principle but the conclusion reached by the High Court in determining the compensation at Rs 12,000 per acre cannot be said to be illegal warranting interference. Before parting with the case, we express hope that the State Government should settle all the claims in a Lok Adalat as was done in respect of acquisition of lands for Srisailam Project and Vishakhapatnam Steel Project. The appeals are accordingly dismissed. No costs.