TMI Blog2009 (10) TMI 940X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be appropriate to limit the deduction to 40% towards development cost, instead of the usual higher percentage of deduction ranging from 50% to 67%. Thus, the market value would work out to be ₹ 59/34 per sq.yd (Rs.98/90 minus 40%) or ₹ 2,87,200/- per acre. The percentage of deduction (development cost factor) will be applied fully where the acquired land has no development. But where the acquired land can be considered to be partly developed (say for example, having good road access or having the amenity of electricity, water etc.), then the development cost (that is percentage of deduction) will be modulated with reference to the extent of development of the acquired land as on the date of acquisition. But under no circumstances, the future use or purpose of acquisition will play a role in determining the percentage of deduction towards development cost. Therefore, we allow these appeals in part and increase the compensation for the acquired lands to ₹ 2,87,200/- per acre. The appellants will also be entitled to all statutory benefits, that is solatium at 30% u/s 23(2), additional amount at 12% from the date of preliminary notification to date of award ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sale deeds relied on by the claimants and ₹ 6.19 being the rate disclosed by the sale deed relied on by the LAC and awarded the same as compensation. Though the average works out to ₹ 35/70, the compensation awarded was ₹ 36/20 per sq.yd. This determination was affirmed by the High Court. 3. The claimants have filed these appeals aggrieved by the said judgments, contending that the compensation awarded is inadequate. The appellants have urged the following two contentions: (i) that Ex.R2 dated 27.11.1984 relied on by the LAC ought to have been excluded from consideration, while determining the market value; and (ii) that the deduction of one-third of the market value of small plots, towards development cost, is erroneous and no deduction ought to have been made. The appellants submit that if these two corrections were made, the market value would have been ₹ 98/91 per sq.yd (that is ₹ 78/85 plus 12% per year cumulatively for two years) to be rounded off to ₹ 100/- per sq.yd. Re : First Contention 4. Ex. R.2 dated 27.11.1984 relied on by the LAC relates to sale of one acre of land for a price of ₹ 30,000/- per acre. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of small developed plots. The said contention is based on the premises that the purpose for which the land is acquired is a relevant factor to decide whether any deduction should be made towards development cost or not. The appellants contend that as the acquisition was for construction of a jail, there will be no need set apart any part of the land for formation of roads, drains, parks etc. nor spend any amount for development of the land into a layout. They submitted that the observation of this Court in Viluben Jhalejan Contractor vs. State of Gujarat [2005 (4) SCC 789] and Nelson Fernandes vs. Special Land Acquisition Officer [2007 (9) SCC 447] that the purpose for which acquisition is made, is also a relevant factor for deciding the compensation, lends support to their contention. The contention of the appellants proceeds on a misunderstanding and misconstruction of the legal position relating to deductions. 7. What is the concept of deduction of development cost to arrive at market value? If the market value of a large tract of agricultural and or undeveloped non-agricultural land possessing potential for development is to be determined with reference to the market value o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... city, water, sewage removal. The development will also involve the service of surveyors, engineers and developers. All these involve considerable expenditure. Further, as there will be a time gap between the expenditure for development and the actual sale of plots, the cost of development will also have an element of interest on investment. The developer who undertakes the development and invests the monies for evelopment would also expect a reasonable profit when the plots are sold. All these expenditure and factors are standardised into another one-third (33%) deduction towards expenses of development. Thus, if the valuation of a large extent of agricultural or undeveloped land is to be based on the sale price of a small developed plot in a private layout, then the standard deductions should be one-third (for roads etc.) plus one-third (for expenditure of development) in all two thirds (or 67%), as development cost from the value of small plot. The percentage of deduction may however vary between 20% to 75% depending on several circumstances (See : Lal Chand vs. Union of India - 2009 (11) SCALE 627, paras 8 and 9 for illustrations of such circumstances). 8. Therefore, when d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bservation may not apply in all cases and all circumstances as the general rule is that the land owner is being compensated for what he has lost and not with reference to the purpose of acquisition. 10. The purpose of acquisition can never be a factor to increase the market value of the acquired land. We may give two examples. Where irrigated land belonging to A and dry land of B and waste land of C are acquired for purpose of submergence in a dam project, neither B nor C can contend that they are entitled to the same higher compensation which was awarded for the irrigated land, on the ground that all the lands were acquired for the same purpose. Nor can the Land Acquisition Collector hold that in case of acquisition for submergence in a dam project, irrigated land should be awarded lesser compensation equal to the value of waste land, on the ground that purpose of acquisition is the same in regard to both. The principle is that the quality (class) of land, the situation of the land, the access to the land are all relevant factors for determination of the market value. But in certain acquisitions, in certain circumstances, for lack of detailed or clear evidence, courts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... djustment is made in the percentage of deduction to take note of the developed status of the acquired land. The percentage of deduction (development cost factor) will be applied fully where the acquired land has no development. But where the acquired land can be considered to be partly developed (say for example, having good road access or having the amenity of electricity, water etc.), then the development cost (that is percentage of deduction) will be modulated with reference to the extent of development of the acquired land as on the date of acquisition. But under no circumstances, the future use or purpose of acquisition will play a role in determining the percentage of deduction towards development cost. 12. Section 24 of Land Acquisition Act prohibits the court from taking into consideration any increase to the value of the land acquired, likely to accrue from the use to which it will be put when acquired. A three-judge Bench of this Court in Tarlochan Singh vs. State of Punjab 1995 (2) SCC 424 held : Section 24 of the Land Acquisition Act expressly prohibits and puts an embargo on the Court in taking the factors mentioned in section 24 as relevant in determining the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land and the latter the wholesale price. (emphasis supplied) This Court referred to and relied upon several earlier decisions including three Judge Bench decisions in Mirza Nausherwan Khan v. The Collector (Land) Acquisition, Hyderabad [1975 (1) SCC 238] and Padma Uppal v. State of Punjab [1977 (1) SCC 330]. (12.2.) In Chimanlal Hargovinddas vs. Special Land Acquisition Officer 1988 (3) SCC 751, this Court held : ..... a large block of land will have to be developed by preparing a lay out, carving out roads, leaving open space, plotting out smaller plots, waiting for purchasers (meanwhile the invested money will be blocked up) and the hazards of an entrepreneur. The factor can be discounted by making a deduction by way of an allowance at an appropriate rate ranging approx, between 20% to 50% to account for land required to be set apart for carving out lands and plotting out small plots. The discounting will to some extent also depend on whether it is a rural area or urban area, whether building activity is picking up, and whether waiting period during which the capital of the entrepreneur would be locked up, will be longer or shorter and the attendant hazards . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od of time. In order to make up for the area of land which is used in providing civic amenities and the waiting period during which the capital of the entrepreneur gets locked up a deduction from 20% onward, depending upon the facts of each case, is made. 13. The legal position is therefore clear and well settled. But in Atma Singh, after reiterating the said principle regarding deduction of development cost, this Court made an observation that no deduction need be made having regard to the purpose of acquisition, which requires to be clarified. We extract the relevant portion below: 15. The question to be considered is whether in the present case those factors exist which warrant a deduction by way of allowance from the price exhibited by the exemplars of small plots which have been filed by the parties. The land has not been acquired for a Housing Colony or Government Office or an Institution. The land has been acquired for setting up a sugar factory. The factory would produce goods worth many crores in a year. A sugar factory apart from producing sugar also produces many by-product in the same process. One of the by-products is molasses, which is produced in huge quant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act and the series of decisions of larger benches of this Court which hold that when value of large tracts of undeveloped lands is sought to be determined with reference to small residential plots in developed area, it is mandatory to deduct an appropriate percentage towards development cost. But it may be unnecessary to consider whether the observations are per incuriam as para 15 of the decision makes it clear that what is stated therein, is with reference to the special facts of that case, with a view not to disturb the smaller deduction of 10% by the High Court, and not intended to be statement of law. Relevancy of other acquisitions in the same village 14. Learned counsel for the appellants lastly contended that having regard to two judgments of Punjab Haryana High Court relating to acquisition in the same village in Azad Singh vs. State of Haryana Anr. (RFA No.2 of 1991 decided on 30.9.1997) and Kabul Singh Ors. vs. Haryana State Anr. (RFA No.556 of 1994 decided on 13.5.1999) the compensation to be awarded should not be less than ₹ 68/- (plus 25%) per sq.yd. In both cases ₹ 68/- per sq. yard was awarded as compensation for acquisitions of lan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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