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CIVIL APPEAL NOS. 2545-2546/2012 MAJ. GEN. KAPIL MEHRA & ORS. ..Appellants Versus UNION OF INDIA & ANR. ..Respondents

REPORTABLE
IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 2545-2546/2012
MAJ. GEN. KAPIL MEHRA & ORS. ..Appellants
Versus
UNION OF INDIA & ANR. ..Respondents

J U D G M E N T

R. BANUMATHI, J.

These appeals are directed against the impugned Orders dated
24.12.2010 and 13.10.2011 passed by Delhi High Court in L.A. Appeal
No.149/2007 and C.M. No.735/2011 in L.A. Appeal No.149/2007 respectively by
which High Court awarded compensation at the rate of Rs.14,974/- per sq.
yard for appellants’ land acquired by the Delhi Development Authority (DDA)
for development of Vasant Kunj Residential Scheme, Delhi along with
interest and proportionate costs.
2. Shorn of details of the previous notification in 1983 and the
earlier rounds of litigation, background facts in a nutshell are as
follows: On 19.2.1997, a fresh notification was issued by the Land and
Building Department, Govt. of NCT of Delhi under Sections 4 and 17 of the
Land Acquisition Act, 1894 (the Act) proposing to acquire the land of the
appellants measuring 12 Bigha (12096 sq. yards) for development of Vasant
Kunj under the planned development scheme of Delhi. Land Acquisition
Collector (LAC) by award No. 2/98-99 dated 18.9.1998 assessed the market
value of the land @ Rs.2,05,642.07 paise per bigha (Rs.205/-per
sq.yard), adding additional interest @ 12% per annum on the market value
of land and the solatium @ 30% on the market value of land and the
compensation was fixed @ Rs.37,21,180.05 paise per bigha.
3. Aggrieved by the award, the appellants filed Reference Petition
under Section 18 of the Act before the Additional District Judge (LAC),
Delhi. In the reference court, the appellants produced four documents Exs
A7 to A10-perpetual lease deeds of residential plots in Vasant
Kunj, executed between September 1995 to December 1996 at the rates ranging
from Rs.28,719/- to Rs.47,542/- per sq. yard. The reference court held that
the lease deeds of auction of a developed plot by a public authority are
not a proper guide for determining the fair market value of the acquired
lands and reference court discarded the exemplars- Exs A7 to A10 lease
deeds and rejected the claim of the appellants for enhancement of
compensation.
4. Aggrieved by the decision of the reference court, appellants
filed Land Acquisition Appeal No.149/2007 before High Court of Delhi. The
High Court had taken average of the exemplars- Exs A7 to A10 and deducted
40% from the average price towards smallness of the area and further
deducted one third towards development of land and fixed the market value
of the land at Rs.14,974/- per sq. yard. High Court held that the
appellants shall be entitled to 30% solatium on the above market value of
the land under Section 23(2) of the Act and 12% of the additional amount
under Section 23(1-A) of the Act. The High Court further ordered that
in terms of Section 28 of the Act on the enhanced market value, the
appellants shall be paid interest @ 9% per annum from 19.2.1997 i.e. date
of notification under Section 4 of the Act till 18.2.1998 and thereafter @
15% per annum till the date of deposit of compensation. It was also held
that interest shall also be paid on solatium and additional amount. The
appellants filed application C.M. No.735/2011 in L.A. Appeal No.149/2007
before the High Court under Sections 152 and 153 read with Section 151
C.P.C. to award Rs.48 lakhs which was paid as court fees and also prayed
for award of interest under Section 34 for the enhanced compensation. The
application was allowed in part by order dated 13.10.2011, granting
proportionate costs to the appellants over and above Rs.20,000/- as awarded
in High Court’s judgment dated 24.12.2010. Being aggrieved by the quantum
of compensation and award of proportionate cost, the appellants are before
us.
5. First appellant- Maj. Gen. Kapil Mehra, party in person,
contended that correct reckoning of market value is the highest price in
any sale deed of comparable instance and the High Court was not justified
in averaging the sale prices of the four perpetual lease deeds, Exs A7 to
A10 and the approach of the High Court in averaging the sale prices of
exemplars is erroneous. He further contended that the exemplars Exs A7 to
A10 relied upon by the appellants are perpetual lease deeds of residential
plots in Vasant Kunj and what was acquired was freehold lands of the
appellants and the price difference between the ‘leasehold’ and ‘freehold’
was not kept in view by the High Court for ascertaining the correct
market value. It was submitted that deductions made for development at one
third i.e. 331/3% and 40% for the smallness of area of exemplars as
compared to the largeness of the acquired lands are very much on the higher
side.
6. The judgment of the High Court was challenged by DDA in Special
Leave Petition (Civil) No.15272/2011 and the same was dismissed by the
Order dated 12.5.2011. Mr. Amarendra Sharan, learned Senior
Counsel appearing for the respondents submitted that in the Special Leave
Petition (Civil) No.15272/2011, Maj. Gen. Kapil Mehra appeared in person
and the said special leave petition was dismissed by a speaking order and
the said order merges with the High Court order and the same is binding
upon the appellant and in separate appeals, the appellants cannot challenge
the adequacy of the compensation and the present appeals are not
maintainable. Reliance was placed upon the judgment of this Court in
Kunhayammed and Ors. vs. State of Kerala and Anr. (2000) 6 SCC 359 and S.
Gangadhara Palo vs. Revenue Divisional Officer and Anr., (2011) 4 SCC 602.
7. Without prejudice to the above contention, Mr.
Amarendra Sharan, learned Senior Counsel appearing for the respondents
submitted that the land acquired is 12 bigha which is almost 12096 sq.
yards which is thousand times more than the area of the plots in Exs A7
to A10, that too, in fully developed commercial area and the sale price
of such a small area cannot be taken as the value for arriving at the
market value of large extent of area. It was submitted that it is not
safe to rely upon the allotment rates/auction rates in regard to the
commercial plots formed by DDA in a developed layout in determining the
market value of the adjoining large extent of undeveloped land. It was
further submitted that in case of Delhi Development Authority or any
statutory authority, 40% of the land area is to be deducted for formation
of roads, drains, parks and common amenities and further 35% deduction
ought to have been made towards the cost of leveling the land,
construction of sewerages, laying electricity lines etc. Learned Senior
Counsel submitted that deduction for development ought to have been made at
70-75% and the High Court was not justified in making nominal deduction of
331/3% of the area.
8. We have given our thoughtful consideration to the submissions
and perused the materials on record.
9. Before we proceed to consider the merits of the matter, let us
first examine the preliminary objections raised by the respondents as to
the maintainability of these appeals. Of course, Special Leave Petition
(Civil) No.15272/2011 filed by DDA was dismissed on 12.5.2011 by a speaking
order. It is well settled that when a special leave petition is dismissed
with reasons, there is a merger of the judgment of the High Court in the
order of the Supreme Court. Dismissal of special leave petition filed by
DDA only means that this Court felt that the quantum of Rs.14,974/- per
sq. yard fixed by the High Court need not be further reduced. In the
special leave petition, though first appellant appeared and resisted the
same, the first appellant could not have advanced his arguments seeking
enhancement of compensation. Dismissal of special leave petition has become
final as against DDA. When SLP filed by DDA was heard and disposed of by
this Court (vide Order dated 12.05.2011), the appellants were pursuing
their review petition before the High Court which came to be dismissed on
13.10.2011. So far as the appellants are concerned, the order was then res
subjudice. Order of this Court dismissing the special leave petition
preferred by DDA, in our view, is not an impediment to the appellants to
pursue their appeals and we proceed to consider merits of the rival
contentions.
10. Market Value: First question that emerges is what would be the
reasonable market value which the acquired lands are capable of fetching.
While fixing the market value of the acquired land, the Land Acquisition
Officer is required to keep in mind the following factors:- (i) existing
geographical situation of the land; (ii) existing use of the land; (iii)
already available advantages, like proximity to National or State Highway
or road and/or developed area and (iv) market value of other land situated
in the same locality/village/area or adjacent or very near to the acquired
land.
11. The standard method of determination of the market value of any
acquired land is by the valuer evaluating the land on the date of valuation
publication of notification under Section 4(1) of the Act, acting as a
hypothetical purchaser willing to purchase the land in open market at the
prevailing price on that day, from a seller willing to sell such land at a
reasonable price. Thus, the market value is determined with reference to
the open market sale of comparable land in the neighbourhood, by a willing
seller to a willing buyer, on or before the date of preliminary
notification, as that would give a fair indication of the market value.
12. In Viluben Jhalejar Contractor v. State of Gujarat (2005) 4 SCC
789, this Court laid down the following principles for determination of
market value of the acquired land: (SCC pp.796-97, paras 17-20)

“17. Section 23 of the Act specifies the matters required to be considered
in determining the compensation; the principal among which is the
determination of the market value of the land on the date of the
publication of the notification under sub-section (1) of Section 4.

18. One of the principles for determination of the amount of compensation
for acquisition of land would be the willingness of an informed buyer to
offer the price therefor. It is beyond any cavil that the price of the
land which a willing and informed buyer would offer would be different in
the cases where the owner is in possession and enjoyment of the property
and in the cases where he is not.

19. Market value is ordinarily the price the property may fetch in the
open market if sold by a willing seller unaffected by the special needs of
a particular purchase. Where definite material is not forthcoming either
in the shape of sales of similar lands in the neighbourhood at or about
the date of notification under Section 4(1) or otherwise, other sale
instances as well as other evidences have to be considered.

20. The amount of compensation cannot be ascertained with mathematical
accuracy. A comparable instance has to be identified having regard to the
proximity from time angle as well as proximity from situation angle. For
determining the market value of the land under acquisition, suitable
adjustment has to be made having regard to various positive and negative
factors vis-à-vis the land under acquisition by placing the two in
juxtaposition.…..”
13. The courts adopt comparable sales method for valuation of land
while fixing the market value of the acquired land. Comparable sales method
of valuation is preferred rather than methods of valuation of land such as
capitalization of net income method or expert opinion method, because it
furnishes the evidence for determination of the market value of the
acquired land at which the willing purchaser would pay for the acquired
land if it had been sold in the open market at the time of issuance of
notification under Section 4 of the Act.
14. While taking comparable sales method of valuation of land for
fixing the market value of the acquired land, there are certain factors
which are required to be satisfied and only on fulfillment of those
factors, the compensation can be awarded according to the value of the land
stated in the sale deeds. In Karnataka Urban Water Supply and Drainage
Board and Ors. v. K.S. Gangadharappa & Anr., (2009) 11 SCC 164, factors
which merit consideration as comparable sales are, interalia, laid down as
under:-
“It can be broadly stated that the element of speculation is reduced to
minimum if the underlying principles of fixation of market value with
reference to comparable sales are made:

(i) when sale is within a reasonable time of the date of notification
under Section 4(1);
(ii) It should be a bona fide transaction;
It should be of the land acquired or of the land adjacent to the land
acquired; and
It should possess similar advantages.

It is only when these factors are present, it can merit a consideration as
a comparable case (See Special Land Acquisition Officer v. T. Adinarayan
Setty (AIR 1959 SC 429) These aspects have been highlighted in Ravinder
Narain v. Union of India (2003) 4 SCC 481.”

15. Appellants have produced Exs A7 to A10-four perpetual lease
deeds of residential plots in Pocket C of Vasant Kunj Area between
September 1995 to December 1996, the details of which are as under:
|Exh. |Sale Date|Plot |Size |Sale Price |Rate |
| | |No. |(Sq.Mtr.)|(Rs.) |(Rs. per |
| | | | | |sq.yd.) |
|A-7 |22.09.95 |59C |218 |5,75,05,000/-|28,719/- |
|A-8 |02.02.96 |5C |220 |96,55,000/- |36,695/- |
|A-9 |02.02.96 |8C |231 |1,01,61,000/-|36,779/- |
|A-10 |10.12.96 |13C |242 |1,37,60,000/-|47,542/- |

16. Exs A7 to A10 are lease deeds of small plots executed by DDA.
Plots in the above lease deeds are in the same vicinity of the acquired
land and High Court had taken the same as comparable sales. The size of
the plots covered in the exemplars are smaller. If there is a
dissimilarity in regard to the area, it is open to the court to make proper
deduction towards smallness of area. We find no error in the approach of
the High Court taking Exs A7 to A10 as comparable sales for fixation of
market value.
17. The High Court has taken average of sale price of Exs A7 to A10
and deducted 40% towards smallness of the plot taken for comparison,
further deducted one third towards development. Though we may finally
affirm the rate fixed by the High Court, for the reasons stated infra we
fix the market value in accordance with the well settled principles laid
down by this Court.
18. Determination of Market Value on the basis of average price paid
under sale transactions: For ascertaining the fair market value of the
acquired land, High Court adopted the ‘average method’ by averaging the
sale price of Exs A-7 to A-10 and calculated the rate at Rs.37,433.75 paise
per sq. yard. The appellants contend that when land is being compulsorily
taken away, the landholder is entitled to claim the highest value which
similar land in the locality is shown to have fetched in a bonafide
transaction and High Court was not justified in averaging the sale prices
of four perpetual lease deeds. Appellants placed reliance upon the
judgments of this Court in M. Vijayalakshmamma Rao Bahadur vs. Collector
(1969) 1 MLJ SC 45 and State of Punjab and Anr. vs. Hans Raj (D) by Lrs.
And Ors., (1994) 5 SCC 734. In Hans Raj case (supra) it was held as under:
“4. Having given our anxious consideration to the respective
contentions, we are of the considered view that the learned Single Judge
of the 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 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 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 true value, as
agreed between reasonable prudent persons acting in the normal market
conditions are the real basis to determine the market value.”

19. Referring to Hans Raj’s case in Anjani Molu Dessai vs. State
of Goa And Anr., (2010) 13 SCC 710, this Court held as under:-
“20. The legal position is that even where there are several exemplars
with reference to similar lands, usually the highest of the exemplars,
which is a bonafide transaction, will be considered. Where however there
are several sales of similar lands whose prices range in a narrow
bandwidth, the average thereof can be taken, as representing the market
price. But where the values disclosed in respect of two sales are markedly
different, it can only lead to an inference that they are with reference to
dissimilar lands or that the lower value sales is on account of
undervaluation or other price depressing reasons. Consequently, averaging
cannot be resorted to. We may refer to two decisions of this Court in this
behalf.”

20. Where the lands acquired are of different type and different
locations, averaging is not permissible. But where there are several
sales of similar lands, more or less, at the same time, whose prices have
marginal variation, averaging thereof is permissible. For the purpose of
fixation of fair and reasonable market value of any type of land,
abnormally high value or abnormally low value sales should be carefully
discarded. If the number of sale deeds of the same locality and the same
period with short intervals are available, the average price of the
available number of sale deeds shall be considered as a fair and reasonable
market price. Ultimately, it is in the interest of justice for the land
losers to be awarded fair compensation. All attempts should be taken to
award fair compensation to the extent possible on the basis of their
accessibility to different kinds of roads, locational advantages etc.
Four perpetual lease deeds A-7 to A-10 relied upon by the appellants are of
the same locality – Vasant Kunj Residential Scheme and relate to the period
ranging from September 1995 to December 1996, but they are just prior to
Section 4(1) notification. In our view, the High Court was justified in
taking the average of the said four exemplars and approach adopted by the
High Court in averaging the sale prices of Exs A7 to A10 cannot be said to
be perverse.
21. Freehold vis-a-vis Leasehold Price – Market Value: Contention of
the appellants is that Exs A7 to A10 relate to long term perpetual
leasehold deeds and what was acquired was appellants’ freehold property and
freehold property has higher value than the leasehold plot and suitable
addition should have been made. The appellant contends that the terms
stipulated in perpetual leasehold are extremely stringent and in such
cases, no sale is permitted without the permission of DDA and there are
many other uncomfortable clauses in the terms of the perpetual lease
deeds and all these ‘stringent conditions’ increase the gap between
‘freehold’ price and ‘leasehold’ price. It is submitted that market value
of ‘freehold property’ is much higher than the value of ‘leasehold
property’ and this was not taken into consideration by the High Court.
22. In M.B. Gopala Krishna & Ors. vs. Special Deputy Collector,
Land Acquisition, (1996) 3 SCC 594, as relied upon by the appellants, it
was held as under:-

“It is further contended by Shri Mudgal that value of the land does not get
pegged down on account of the land being in occupation of a tenant and
the circumstances in this behalf taken into account by the High Court, is
irrelevant. We find no force in the contention. A freehold land and one
burdened with encumbrances do make a big difference in attracting
willing buyers. A freehold land normally commands higher compensation
while the land burdened with encumbrances secures lesser price. The fact
of a tenant in occupation would be an encumbrance and no willing purchaser
would willingly offer the same price as would be offered for a freehold
land. Under those circumstances, the High Court would be right in its
conclusion that the land burdened with encumbrances takes lesser price
than the freehold land. The encumbrances would operate as a disabling
factor to peg down the price when we compare the same with freehold land.”

The above observations were made in the aforesaid decision while upholding
the compensation that was payable to the landlord without reference to the
tenant’s rights. The above principle will apply only where a property
subject to encumbrances is to be sold to a private purchaser or is acquired
subject to the tenancy.
23. ‘Freehold land’ and ‘leasehold land’ are conceptually
different. If a property subject to a lease and in the possession of a
lessee is offered for sale by the owner to a prospective private
purchaser, the purchaser being aware that on purchase he will get only
title and not possession and that the sale in his favour will be subject to
encumbrance namely, the lease, he will offer a price taking note of the
encumbrances. Naturally, such a price would be less than the price of a
property without any encumbrance. But when a land is acquired free from
encumbrances, the market value of the same will certainly be higher.
24. Exs A7 to A10 are the perpetual lease deeds relating to the
period from September 1995 to December 1996 and to get the perpetual lease
deeds converted as freehold, the holder of perpetual leasehold has to pay
further amount to DDA. Having regard to the period of Exs A7 to A10 and
the date of issuance of Section 4 notification dated 19.2.1997, in our
view, addition of 20% is to be added for arriving at the value of
‘freehold’ property. Adding 20% to Rs.37,433.75 per sq. yard which comes
to Rs.7,486.75, the value is calculated at Rs.44,920.50 rounded off to Rs.
44,921/- per sq. yard.
25. Deduction Towards Competitive Bidding: Exs A7 to A10 exemplars are
perpetual lease deeds of commercial plots auctioned in Vasant Kunj area.
Learned senior counsel for the respondents contended that this auctioned
commercial site can never be equated to the value of large extent of
agricultural land like the land acquired in the present case and those
plots auctioned are developed plots on which the Government had spent a
considerable amount. It is contended that the auction prices of commercial
plots in exemplars are not true index of a fair market value of the land
at the relevant time because elements of speculation and unfair
competition in such auctions and suitable deduction ought to have been
made for competitive bidding.
26. While considering the competition involved in auction sales of
commercial/residential plots and observing that the element of competition
in auction sales make them unsafe guides for determining the market value
of the acquired lands, in Executive Engineer, Karnataka Housing Board v.
Land Acquisition Officer, Gadag And Ors., (2011) 2 SCC 246 paras 6 & 7,
this Court held as under:-

“6. But auction-sales stand on a different footing. When purchasers start
bidding for a property in an auction, an element of competition enters
into the auction. Human ego, and desire to do better and excel over other
competitors, leads to competitive bidding, each trying to outbid the
others. Thus in a well advertised open auction-sale, where a large number
of bidders participate, there is always a tendency for the price of the
auctioned property to go up considerably. On the other hand, where the
auction-sale is by banks or financial institutions, courts etc. to
recover dues, there is an element of distress, a cloud regarding title,
and a chance of litigation, which have the effect of dampening the
enthusiasm of bidders and making them cautious, thereby depressing the
price. There is therefore every likelihood of auction price being either
higher or lower than the real market price, depending upon the nature of
sale. As a result, courts are wary of relying upon auction-sale
transactions when other regular traditional sale transactions are available
while determining the market value of the acquired land. This Court in Raj
Kumar v. Haryana State (2007) 7 SCC 609 observed that the element of
competition in auction-sales makes them unsafe guides for determining the
market value.

7. But where an open auction-sale is the only comparable sale
transaction available (on account of proximity in situation and proximity
in time to the acquired land), the court may have to, with caution, rely
upon the price disclosed by such auction-sales, by providing an
appropriate deduction or cut to offset the competitive hike in value. In
this case, the Reference Court and the High Court, after referring to the
evidence relating to other sale transactions, found them to be
inapplicable as they related to far away properties. Therefore we are left
with only the auction-sale transactions. On the facts and circumstances, we
are of the view that a deduction or cut of 20% in the auction price
disclosed by the relied upon auction transaction towards the factor of
“competitive price hike” would enable us to arrive at the fair market
price.” (Underlining added)

27. The above principle was reiterated in Raj Kumar And Ors. v.
Haryana State And Ors., (2007) 7 SCC 609 where in para 16, this Court has
held as under:-
“16. All the relevant aspects have been taken into consideration and we do
not find any error in principle committed by the High Court justifying our
interference in appeal. An argument was raised that the prices of lands
fetched in auction had been ignored on the basis that prices fetched in
auction-sales cannot form the basis. It was submitted that there was no
general rule that such prices cannot be adopted. On considering the
relevant facts disclosed, it cannot be said that the High Court has
committed any error in discarding those auction-sales while determining the
compensation payable. The element of competition in auction-sales does not
make them safe guides. Similarly, the argument that when a compact piece
of land is acquired there cannot be adoption of separate rates, cannot be
accepted in the light of the decision of this Court in Union of India vs.
Mangatu Ram (1997) 6 SCC 59. That case related to acquisition of lands in
the vicinity of the present properties. The ratio of that decision also
supports the distinction made by the Awarding Officer and the High Court in
the matter of fixing the land value for the lands in Satrod Khurd and
Satrod Khas.”
28. The general rule that the sale prices of the comparable sales
should be relied upon for calculating the market value will not apply when
the sale transactions relied upon are auction sales. As per the decision
in Karnataka Housing Board’s case (2011) 2 SCC 246, in our view, 20%
deduction is to be made for competitive bidding. Deducting 20% i.e.
Rs.8,984/- from Rs.44,921/-, balance arrived at Rs.35,937/- per sq. yard
is fixed as the value for the acquired land.
29. Deduction Towards the Development: The High Court has deducted 40%
from the average price to equalize the factor of the market value of a
small plot of land as compared to large area of land acquired and the
figure works out to Rs.22,460.25. High Court has also deducted one third
towards development cost and determined the market value of the acquired
land at Rs.14,974/- per sq. yard.
30. Appellants contend that the rate of deduction as applied by the
High Court was highly excessive as the acquired lands are situated in the
area already developed and have all potential for development. It is
submitted that the Court repeatedly held that in assessing the compensation
payable in respect of lands which had the potential for housing or
commercial purposes, normally 20% of the assessed value of the land is
deducted, depending on the nature of the land, its location, extent of
expenditure involved for development and the land required for roads and
other civic amenities etc. and while so, thumb rule of 331/3% or one
third cut on development cost cannot be used in a situation when the exact
development cost has been established through evidence. The appellants
rely upon the documents issued by Executive Engineer (Annexure P-5) to
contend that the cost of development of Vasant Kunj is only Rs.330/- per
Sq. Yard.
31. Mr. Amarendra Sharan, learned Senior Counsel appearing for the
respondents contended that in forming a lay out by Delhi Development
Authority or any statutory authority, 40% of the land area is to be
deducted for formation of roads, drains, parks and other civic amenities
and further 35% is to be deducted towards development cost for forming the
lay out, levelling the road, construction of drainage and erection of
electricity lines etc. It was submitted that deduction for development on
both the components worked out to 70-75% and the High Court was not
justified in making standard deduction of one third. It was further
submitted that if a suitable deduction is made, the compensation awarded by
the High Court seems to be excessive and prayer for suitable reduction of
the award is made.
32. While making one third deduction towards development cost, the
learned single Judge did not keep in view the two essential components of
deduction for development. Deduction for development consists of two
components:- firstly, appropriate deduction to be made towards the area
required to be utilized for roads, drains and common facilities like parks
etc.; secondly, further deduction to be made towards the cost of
development, that is cost of levelling the land, cost of laying roads
and drains, erection of electrical poles and water lines etc. For
deduction of development towards land and development charges, the nature
of development, conditions and nature of the land, the land required to be
set apart under the Building Rules for roads, sewerage, electricity,
parks, water supply etc. and other relevant circumstances involved are
required to be considered.
33. In Haryana State Agricultural Market Board And Anr. vs.
Krishan Kumar And Ors., (2011) 15 SCC 297, it was held as under:
“10. It is now well settled that if the value of small developed plots
should be the basis, appropriate deductions will have to be made therefrom
towards the area to be used for roads, drains, and common facilities like
park, open space, etc. Thereafter, further deduction will have to be
made towards the cost of development, that is, the cost of leveling the
land, cost of laying roads and drains, and the cost of drawing electrical,
water and sewer lines.”
34. Consistent view taken by this Court is that one third
deduction is made towards the area to be used for roads, drains, and other
facilities, subject to certain variations depending upon its nature,
location, extent and development around the area. Further, appropriate
deduction needs to be made for development cost, laying roads, erection of
electricity lines depending upon the location of the acquired land and the
development that has taken place around the area.
35. Reiterating the rule of one third deduction towards
development, in Sabhia Mohammed Yusuf Abdul Hamid Mulla (Dead) by Lrs. and
Ors. vs. Special Land Acquisition Officer and Ors., (2012) 7 SCC 595,
this Court in paragraph 19 held as under:-
“19. In fixing the market value of the acquired land, which is
undeveloped or underdeveloped, the courts have generally approved
deduction of 1/3rd of the market value towards development cost except
when no development is required to be made for implementation of the
public purpose for which land in acquired. In Kasturi vs. State of
Haryana (2003) 1 SCC 354) the Court held: (SCC pp. 359-60, para 7)

“7… It is well settled that in respect of agricultural land or
undeveloped land which has potential value for housing or commercial
purposes, normally 1/3rd amount of compensation has to be deducted out
of the amount of compensation payable on the acquired land subject to
certain variations depending on its nature, location, extent of
expenditure involved for development and the area required for road and
other civic amenities to develop the land so as to make the plots for
residential or commercial purposes. A land may be plain or uneven, the
soil of the land may be soft or hard bearing on the foundation for the
purpose of making construction; may be the land is situated in the midst
of a developed area all around but that land may have a hillock or may
be low-lying or may be having deep ditches. So the amount of expenses
that may be incurred in developing the area also varies. A claimant who
claims that his land is fully developed and nothing more is required to be
done for developmental purposes, must show on the basis of evidence that
it is such a land and it is so located. In the absence of such
evidence, merely saying that the area adjoining his land is a developed
area, is not enough, particularly when the extent of the acquired land is
large and even if a small portion of the land is abutting the main road in
the developed area, does not give the land the character or a developed
area. In 84 acres of land acquired even if one portion on one sides
abuts the main road, the remaining large area where planned development is
required, needs laying of internal roads, drainage, sewer, water,
electricity lines, providing civic amenities, etc. However, in cases of
some land where there are certain advantages by virtue of the developed
area around, it may help in reducing the percentage of cut to be
applied, as the developmental charges required may be less on that
account. There may be various factual factors which may have to be taken
into consideration while applying the cut in payment of compensation
towards developmental charges, may be in some cases it is more than 1/3rd
and in some cases less than 1/3rd. It must be remembered that there is
difference between a developed area and an area having potential value,
which is yet to be developed. The fact that an area is developed or
adjacent to a developed area will not ipso facto make every land situated
in the area also developed to be valued as a building site or plot,
particularly when vast tracts are acquired, as in this case, for
development purpose.” (emphasis supplied)

The rule of 1/3rd deduction was reiterated in Tejumal Bhojwani v. State of
U.P. ((2003)10 SCC 525, V. Hanumantha Reddy v. Land Acquisition Officer,
(2003) 12 SCC 642, H.P. Housing Board v. Bharat S. Negi (2004) 2 SCC 184
and Kiran Tandon v. Allahabad Development Authority. (2004)10 SCC 745”
36. While determining the market value of the acquired land,
normally one third deduction i.e. 331/3% towards development charges is
allowed. One third deduction towards development was allowed in Special
Tehsildar, L.A. Vishakapatnam vs. Smt.A. Mangala Gowri, (1991) 4 SCC 218;
Gulzara Singh & Ors. vs. State of Punjab & Ors., (1993) 4 SCC 245; Santosh
Kumari & Ors. vs. State of Haryana, (1996) 10 SCC 631; Revenue Divisional
Officer-cum-LAO vs. Shaik Azam Saheb etc., (2009) 4 SCC 395; A.P. Housing
Board vs. K. Manohar Reddy, (2010)12 SCC 707; Ashrafi & Ors. vs. State of
Haryana & Ors., (2013) 5 SCC 527 and Kashmir Singh vs. State of Haryana &
Ors., (2014) 2 SCC 165.
37. Depending on nature and location of the acquired land, extent
of land required to be set apart and expenses involved for development, 30%
to 50% deduction towards development was allowed in Haryana State
Agricultural Market Board and Anr. vs. Krishan Kumar and Ors. (2011) 15 SCC
297; Deputy Director Land Acquisition vs. Malla Atchinaidua And Ors. AIR
2007 SC 740; Mummidi Apparao (Dead by LR) vs. Nagarjuna Fertilizers &
Chemical Ltd., AIR 2009 SC 1506; and Lal Chand vs. Union of India and Anr.
(2009) 15 SCC 769.
38. In few other cases, deduction of more than 50% was upheld. In
the facts and circumstances of the case in Basavva (Smt.) And Ors. v. Spl.
Land Acquisition Officer And Ors., (1996) 9 SCC 640, this Court
upheld the deduction of 65%. In Kanta Devi & Ors. vs. State of Haryana
And Anr., (2008) 15 SCC 201, deduction of 60% towards development charges
was held to be legal. This Court in Subh Ram & Ors. vs. State of Haryana &
Anr., (2010) 1 SCC 444, held that deduction of 67% amount was not
improper. Similarly, in Chandrasekhar (dead) by L.Rs. and Ors. vs. LAO &
Anr., (2012) 1 SCC 390, deduction of 70% was upheld.
39. We have referred to various decisions of this Court on
deduction towards development to stress upon the point that deduction
towards development depends upon the nature and location of the acquired
land. The deduction includes components of land required to be set apart
under the building rules for roads, sewage, electricity, parks and other
common facilities and also deduction towards development charges like
laying of roads, construction of sewerage. 40.
Rule of one third deduction towards development appears to be the general
rule. But so far as Delhi Development Authority is concerned, or similar
statutory authorities, where well planned layouts are put in place, larger
land area may be utilized for forming layout, roads, parks and other
common amenities. Percentage of deduction for development of land to be
made in DDA or similar statutory authorities with reference to various
types of layout was succinctly considered by this Court in Lal Chand vs.
Union of India & Anr. (2009) 15 SCC 769 and observing that the deduction
towards the development range from 20% to 75% of the price of the plots, in
paras 13 to 22, this Court held as under:-
“13. The percentage of “deduction for development” to be made to arrive
at the market value of large tracts of undeveloped agricultural land
(with potential for development), with reference to the sale price of
small developed plots, varies between 20% to 75% of the price of such
developed plots, the percentage depending upon the nature of development
of the layout in which the exemplar plots are situated.

14. The “deduction for development” consists of two components. The
first is with reference to the area required to be utilized for
developmental works and the second is the cost of the development works.
For example, if a residential layout is formed by DDA or similar statutory
authority, it may utilize around 40% of the land area in the layout, for
roads, drains, parks, playgrounds and civic amenities (community
facilities), etc.
15. The development authority will also incur considerable expenditure
for development of undeveloped land into a developed layout, which includes
the cost of leveling the land, cost of providing roads, underground
drainage and sewage facilities, laying water lines, electricity lines and
developing parks ands civil amenities, which would be about 35% of the
value of the developed plot. The two factors taken together would be the
“deduction for development” and can account for as much as 75% of the cost
of the developed plot.

16. On the other hand, if the residential plot is in an unauthorized
private residential layout, the percentage of “deduction for development”
may be far less. This is because in an unauthorized layout, usually no
land will be set apart for parks, playgrounds and community facilities.
Even if any land is set apart, it is likely to be minimal. The roads and
drains will also be narrower, just adequate for movement of vehicles.
The amount spent on development work would also be comparatively less and
minimal. Thus the deduction on account of the two factors in respect of
plots in unauthorized layouts, would be only about 20% plus 20% in all 40%
as against 75% in regard to DDA plots.

17. The “deduction for development” with reference to prices of plots in
authorized private residential layouts may range between 50% to 65%
depending upon the standards and quality of the layout.

18. The position with reference to industrial layouts will be different.
As the industrial plots will be large (say of the size of one or two acres
or more as contrasted with the size of residential plots measuring 100 sq.
m to 200 sq m), and as there will be very limited civic amenities and no
playgrounds, the area to be set apart for development (for roads, parks,
playgrounds and civic amenities) will be far less; and the cost to be
incurred for development will also be marginally less, with the result the
deduction to be made from the cost of an industrial plot may range only
between 45% to 55% as contrasted from 65% to 75% for residential plots.
19. If the acquired land is in a semi-developed urban area, and not an
undeveloped rural area, then the deduction for development may be as much
less, that is, as little as 25% to 40%, as some basic infrastructure will
already be available. (Note: The percentages mentioned above are tentative
standards and subject to proof to the contrary.

20. Therefore the deduction for the “development factor” to be made with
reference to the price of a small plot in a developed layout, to arrive
at the cost of undeveloped land, will be far more than the deduction with
reference to the price of a small plot in an unauthorized private layout
or an industrial layout. It is also well known that the development cost
incurred by statutory agencies is much higher than the cost incurred by
private developers, having regard to higher overheads and expenditure.

21. Even among the layouts formed by DDA, the percentage of land
utilized for roads, civic amenities, parks and playgrounds may vary with
reference to the nature of layout-whether it is residential , residential-
cum-commercial or industrial; and even among residential layouts, the
percentage will differ having regard to the size of the plots, width of
the roads, extent of community facilities, parks and playgrounds provided.

22. Some of the layouts formed by the statutory development authorities
may have large areas earmarked for water/sewage treatment plants, water
tanks, electrical substations, etc. in addition to the usual areas
earmarked for roads, drains, parks playgrounds and community/civic
amenities. The purpose of the aforesaid examples is only to show that
the “deduction for development” factor is a variable percentage and the
range of percentage itself being very wide from 20% to 75%.”
Lal Chand’s case deals with acquisition of lands by DDA under the Rohini
Residential Housing Scheme where 40% deduction was made towards the land
area to be utilized for laying down of roads, drains etc. Further
deduction of 35% of the value of the developed plot towards cost of
levelling the land, cost of providing roads, underground drainage, laying
down water lines, electricity lines was made.
41. In the instant case, having regard to the extent of the land
acquired and the development in and around Vasant Kunj area, in our view,
it is appropriate to make 35% deduction towards utilization of the land
area in the layout for roads, drains, parks, playgrounds and civic
amenities. So far as the expenditure for development of the large extent
of land into a developed area by construction of proper roads,
underground drainage, sewerage and erection of electricity lines, it is
appropriate to make further deduction of 25%, though 35% of the value was
deducted in Lal Chand case (supra) towards development charges. Two
components taken together, the total deduction to be made would be 60%.
60% of Rs.35,937/- works out to Rs.21,562/- and deducting the same, the
value of the land would be Rs.14,375/- per sq. yard. What was awarded by
the High Court was Rs.14,974/- per sq. yard. Since the SLP (Civil)
No.15272/2011 filed by DDA was dismissed by this Court on 12.5.2011 and the
sale has become final as against the appellants, we are not inclined to
further reduce the value of the acquired land from Rs.14,974/- per sq. yard
as determined by the High Court and the compensation awarded by the High
Court at Rs.14974/- per sq. yard is maintained.
42. INTEREST: Contention of the appellants is that on the enhanced
compensation, the mandatory interest under Section 34 of the Act has not
been awarded to them. Placing reliance upon Commissioner of Income Tax,
Faridabad vs. Ghanshyam (HUF), (2009) 8 SCC 412, it is contended that the
impugned judgment is silent on granting statutory interest under Section 34
of the Land Acquisition Act and the appellants pray for award of interest
on the enhanced compensation. The appellants filed C.M. No.735/2011 before
the High Court seeking review for payment of interest which according to
the appellants was omitted to be included and the said application was
dismissed by the High Court.
43. Land Acquisition Act, 1894, provides for payment of interest to
the claimants either under Section 34 or under Section 28 of the Act.
Section 34 of the Act fastens liability on the Collector to pay interest on
the amount of compensation to be worked out in accordance with provisions
of Section 23(1) and the sub-section thereof, at the rate of 9% per annum
from the date of taking possession until the amount is paid or deposited.
As per proviso to Section 34, if the compensation amount or any part
thereof is not paid or deposited within a period of one year from the date
of taking over possession, interest shall be payable at the rate of 15% per
annum from the date of expiry of the said period of one year on the amount
of compensation or part thereof which has not been paid or deposited before
the date of such expiry.
44. Section 28 empowers the courts, if it was enhancing the
compensation awarded by the Collector, to award interest on the sum in
excess of what the Collector had awarded as compensation. Both in terms of
Section 34 and Section 28, interest at 9% per annum is payable for the
first year of taking possession and 15% per annum thereafter, if the amount
of compensation was not paid or deposited within a period of one year or
deposited thereafter.
45. Award of interest under Section 34 is mandatory in as much the
word used in the Section is ‘shall’. The scheme of the Act and the express
provisions thereof establish that the interest payable under Section 34 is
statutory. The claim for interest under Section 28 of the Act proceeds on
the basis that due compensation not having been paid, the claimant should
be allowed interest on the enhanced compensation amount. The award of
interest under Section 28 is discretionary power vested in the Court and it
has to be exercised in a judicious manner and not arbitrarily. The use of
the word “may” in Section 28 does not confer any arbitrary discretion on
the Court to disallow interest for no valid or proper reasons. Normally,
Court awards interest if it enhances the compensation in excess of the
amount awarded by the Collector, unless there are exceptional
circumstances.
46. A Constitution Bench of this Court in Gurpreet Singh vs. Union
of India, (2006) 8 SCC 457, considering the scope of Section 34 and
Section 28 of the Act, has held as under:-
“44. Section 34 of the Act fastens liability on the Collector to pay
interest on the amount of compensation determined under Section 23(1) with
interest from the date of taking possession till date of payment or deposit
into the court to which reference under Section 18 would be made. On
determination of the excess amount of compensation, Section 28 empowers the
court, if it was enhancing the compensation awarded by the Collector, to
award interest on the sum in excess of what the Collector had awarded as
compensation. The award of the court may also direct the Collector to pay
interest on such excess or part thereof from the date on which he took
possession of the land to the date of payment of such excess into court at
the rates specified thereunder. The Court stated: [Prem Nath Kapur vs.
National Fertilizers Corporation of India Ltd., (1996) 2 SCC 71, SCC p. 77,
para 10]
“In other words, Sections 34 and 28 fasten the liability on the State to
pay interest on the amount of compensation or on excess compensation under
Section 28 from the date of the award and decree but the liability to pay
interest on the excess amount of compensation determined by the Court
relates back to the date of taking possession of the land to the date of
the payment of such excess ‘into the court’.”
45. The Court concluded: (Prem Nath Kapur case, SCC p. 78, para 12)
“12. It is clear from the scheme of the Act and the express language used
in Sections 23(1) and (2), 34 and 28 and now Section 23(1-A) of the Act
that each component is a distinct and separate one. When compensation is
determined under Section 23(1), its quantification, though made at
different levels, the liability to pay interest thereon arises from the
date on which the quantification was so made but, as stated earlier, it
relates back to the date of taking possession of the land till the date of
deposit of interest on such excess compensation into the court. … The
liability to pay interest is only on the excess amount of [pic]compensation
determined under Section 23(1) and not on the amount already determined by
the Land Acquisition Officer under Section 11 and paid to the party or
deposited into the court or determined under Section 26 or Section 54 and
deposited into the court or on solatium under Section 23(2) and additional
amount under Section 23(1-A).”
47. In the scheme of the Act, considering the different stages at
which interest is payable on the compensation amount/enhanced compensation,
the Constitution Bench of this Court in Gurpreet Singh’s case further held
as under:-
“32. In the scheme of the Act, it is seen that the award of compensation
is at different stages. The first stage occurs when the award is passed.
Obviously, the award takes in all the amounts contemplated by Section
23(1), Section 23(1-A), Section 23(2) and the interest contemplated by
Section 34 of the Act. The whole of that amount is paid or deposited by
the Collector in terms of Section 31 of the Act. At this stage, no
shortfall in deposit is contemplated, since the Collector has to pay or
deposit the amount awarded by him. If a shortfall is pointed out, it may
have to be made up at that stage and the principle of appropriation may
apply, though it is difficult to contemplate a partial deposit at that
stage. On the deposit by the Collector under Section 31 of the Act, the
first stage comes to an end subject to the right of the claimant to notice
of the deposit and withdrawal or acceptance of the amount with or without
protest.

33. The second stage occurs on a reference under Section 18 of the Act.
When the Reference Court awards enhanced compensation, it has necessarily
to take note of the enhanced amounts payable under Section 23(1), Section
23(1-A), Section 23(2) and interest on the enhanced amount as provided in
Section 28 of the Act and costs in terms of Section 27. The Collector has
the duty to deposit these amounts pursuant to the deemed decree thus
passed. This has nothing to do with the earlier deposit made or to be made
under and after the award. If the deposit made, falls short of the
enhancement decreed, there can arise the question of appropriation at that
stage, in relation to the amount enhanced on the reference.

34. The third stage occurs, when in appeal, the High Court enhances the
compensation as indicated already. That enhanced compensation would also
bear interest on the enhanced portion of the compensation, when Section 28
is applied. The enhanced amount thus calculated will have to be deposited
in addition to the amount awarded by the Reference Court if it had not
already been deposited.

35. The fourth stage may be when the Supreme Court enhances the
compensation and at that stage too, the same rule would apply.”
48. By going through the judgment of reference court as well as the
High Court, we find that the appellants were awarded interest in terms of
Section 34 and Section 28 of the Act. Section 4(1) notification was
issued on 19.02.1997. The reference court has not enhanced the
compensation amount; but has only confirmed the award passed by the
Collector. However, while dismissing the reference, reference court held
that the appellant shall be entitled to get interest in terms of the
provisions of the Act for the period from 19.02.1997 till the date of
payment, meaning thereby that the statutory interest in terms of Section 34
of the Act is payable.
49. When the High Court enhanced the compensation, the High Court
held that the appellants shall be paid interest in terms of Section 28 of
the Act. On the enhanced compensation, High Court ordered payment of
interest at the rate of 9% from 19.02.1997 to 18.2.1998 and thereafter at
the rate of 15% per annum till the date of payment. The relevant portion
of the judgment of the High Court reads as under:-

“On the enhanced market value, the appellant shall be paid interest under
Section 28 of the Act @ 9% per annum from 19.02.1997, the date of issuance
of Section 4 notification for the first year ending on 18.02.1998 and
thereafter, @ 15% per annum till the date of tender of compensation.
Interest shall also be paid on the solatium and the additional amount in
view of the judgment of the Supreme Court in the case of Sunder Vs. UOI
reported as 93(2001) DLT 569 (SC).”

Since the statutory interest under Section 34 and also the interest in
terms of Section 28 of Act had been awarded to the appellants, we find no
merit in the grievance of the appellants as to the payment of interest.
50. COSTS: By its judgment dated 24.12.2010, the High Court enhanced
the compensation at the rate of Rs.14,974/- per sq. yard, but the High
Court had then awarded only costs of Rs.20,000/-.
Thereafter, the appellants filed C.M. No. 735/2011, interalia,
contending that they ought to have been awarded entire costs at the rate of
Rs. 50,000/- per sq. yard, enhanced compensation as claimed by the
claimants. Appellants also claimed that the entire court fees of Rs.48
lakhs affixed on the memo of appeal be included in the costs. High Court
rejected the plea of the appellants for inclusion of the entire court fees
and costs at the rate of enhanced compensation for the acquired land at
Rs.50,000/- per sq. yard as claimed by the appellants. But the High Court
modified its order by awarding proportionate costs in favour of the
appellants over and above the sum of Rs.20,000/-.
51. The appellant, party-in-person, contended that they have paid
court fees of Rs.48 lakhs and High Court ignored the mandatory provisions
of law in awarding costs and that court fees is an integral part of costs.
It was submitted that the impugned order dated 13.10.2011 awarding “grant
of proportionate costs” is not in accordance with well settled principle of
law. Appellants further contended that being partly successful before the
High Court, they cannot be deprived of their claim of entire court fees and
the costs.
52. The learned Senior Counsel for respondents submitted that as
per the well settled principle, the High Court has awarded proportionate
costs and there is no improper exercise of discretion warranting
interference by this Court.
53. Section 27 of the Act deals with costs. Section 27 reads as
under:
“27. Costs:- (1) Every such award shall also state the amount of
costs incurred in the proceedings under this Part, and by what persons and
in what proportions they are to be paid.
(2) When the award of the Collector is not upheld, the costs shall
ordinarily be paid by the Collector, unless the court shall be of opinion
that the claim of the applicant was so extravagant or that he was so
negligent in putting his case before the Collector that some deduction from
his costs should be made or that he should pay a part of the Collector’s
costs.”

54. The language of Section 27(1) is clear and very wide and it
gives power to the courts to order costs to be paid by what persons and in
what proportions they are to be paid. In making order for costs under
Section 27(1), the court may have regard to the provisions of Section 35
C.P.C. Analysing sub-section (2) of Section 27, it appears to consist of
three parts, viz., (i) When the award of the Collector is not upheld, the
costs shall ordinarily be paid by the collector as directed by the Court;
(ii) the court is not bound to do so in every case. If the court forms
opinion that the claim of the claimant is extravagant or that he was so
negligent in putting his case before the Collector, then the court may make
a different order as regards costs and (iii) the court may in such cases
direct, that some deduction be made from the costs of the claimant or that
he should pay a part of the Collector’s costs.
55. Ordinarily, when a litigant succeeds in part and fails in part,
the equitable order made is that he should receive proportionate costs.
When considering the appellants’ claim in C.M. No. 735 of 2011, in exercise
of its discretion, the High Court rightly awarded proportionate costs and
accordingly directed payment of such proportionate costs of over and above
Rs.20,000/- as originally ordered. Merely because the appellants claimed
compensation at the rate of Rs.50,000/- per sq.yard, the respondents cannot
be saddled with the liability of paying the entire costs and the court fees
paid by the appellants. There is no improper exercise of discretion by the
High Court in awarding proportionate costs and we find no merit in the
claim of the appellants claiming full costs.
56. We may incidentally refer to the statement of learned Senior
Counsel for the respondents that compensation amount of about Rs.40 crores
has already been paid to the appellants.
57. We, therefore, do not find any merit in these appeals and the
appeals are dismissed accordingly. Parties are to bear their respective
costs.

…………………………..J
(T.S. Thakur)

…………………………..J
(R. Banumathi)
New Delhi;
October 17, 2014

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