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TMI Blog2009 (10) TMI 940X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.2004, 31.3.2004, 11.2.2004 and 7.11.2006. 2. Before the Reference Court, claimants relied upon sale deeds marked as Ex.P-1 to P-12 relating to the period 1981 and 1982 (except Ex.P8 which was dated 28.7.1983) which disclosed an average price of Rs. 78/85 per sq.yd in Jharsa village. The said sale deeds related to small residential plots varying in size between 167 sq.yards to 665 sq.yds. The Reference Court deducted one-third of such price (that is Rs. 26.25) towards development cost and arrived at the market value as Rs. 52.60 per sq.yd.during 1981-82. As the market value of the acquired lands had to be determined as on 22.11.1984, the date of notification under section 4(1) of the Act, the reference court increased the said market value of Rs. 52/60, at the rate of 12% per annum, for two years (that is, by Rs. 12/62) and arrived at a market value of Rs. 65/22. The Reference Court was of the view that it should also take note of the sale deed relied on by the LAC, namely Ex. R-2 dated 27.11.1984 which related to sale of one acre of land for Rs. 30000/- which worked out to Rs. 6.19 per sq.yd. The Reference Court took the average of Rs. 65.22 which was the rate disclosed by the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the acquired lands adjoin a State Highway (Gurgaon Alwar Road) and the proximate availability of facilities which can be easily accessed for development, it would 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 Rs. 59/34 per sq.yd (Rs.98/90 minus 40%) or Rs. 2,87,200/- per acre. Re : Second Contention 6. We will now deal with the contention of the appellants that no deduction need be made towards development cost, from the market value of residential plots, for the purpose of determining the market value of the acquired lands in this case. It is not disputed by appellants that usually a deduction towards development cost is necessary when the 'wholesale' market value of large undeveloped land is determined with reference to 'retail' market value of small developed plots. But their contention is that having regard to the purpose of acquisition (construction of a jail), which does not involve any development activity, no deduction should be made from the market value of small developed plots. The said contention is based on the premises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ea which cannot be sold as plots) would be around 30% to 40% of the total area. Therefore, in the hypothetical layout method of determination of market value, as a first step, the areas that will be used up for roads, drains, parks/playgrounds and community areas, will have to be excluded from the total extent of the acquired land. The standard deduction in this behalf is one- third (33%). But merely deducting the areas required for roads, drains, parks and community areas, will not convert a large tract of agricultural or undeveloped land into a developed residential layout. For that, considerable financial outlay has to be made. The land will have to be levelled. The land will have to be converted from agricultural use to non-agricultural residential use by paying necessary fees/fine to the Revenue/development authorities. Then the roads will have to be asphalted or concreted. Drains will have to be dug and lined with reinforced cement concrete or stone, for drainage of rain water. Electricity, water, and sewage lines will have to be laid. Deposits will have to be made to the Authorities dealing with electricity, water, sewage removal. The development will also involve the servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed land. When different categories of lands (or lands with different situational advantages) are acquired for the same purpose, say for forming of a residential layout, courts have sometimes felt that determination of their value with reference to previous status or situation should be avoided and a uniform rate of compensation should be awarded for all lands acquired under the same notification. The logic employed by the court is that categorising the lands acquired for a common purpose, say for a residential colony, into high value irrigated land and low value dry lands is meaningless, as all lands are to be levelled and used for the same purpose that is for formation of a residential layout and once the layout is formed, it makes no difference whether the land was previously a land with irrigation facilities or a dry land. It is in this context, in some cases, to avoid the need to differentiate the lands acquired under a common notification for a common purpose, and to extend the benefit of a uniform compensation, courts have observed that the purpose of acquisition is also a relevant factor. The said observation may not apply in all cases and all circumstances as the general ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose of the acquisition; and that compensation will be less if the acquisition is for a sewage treatment plant, more if the acquisition is for an industrial layout, much more if acquisition is for residential layout and highest if the acquisition is for commercial value. The purpose of acquisition cannot therefore be a factor to increase the compensation. 11. Deduction of 'development cost' is the concept used to derive the 'wholesale price' of a large undeveloped land with reference to the 'retail price' of a small developed plot. The difference between the value of a small developed plot and the value of a large undeveloped land is the 'development cost'. Two factors have a bearing on the quantum (or percentage) of deduction in the 'retail price' as development cost. Firstly, the percentage of deduction is decided with reference to the extent and nature of development of the area/layout in which the small developed plot is situated. Secondly, the condition of the acquired land as on the date of preliminary notification, whether it was undeveloped, or partly developed, is considered and appropriate adjustment is made in the percentage of deduction to take note of the developed st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng lots that could be laid out on the land would be good selling propositions and that valuation on the basis of the method of hypothetical lay out could with justification be adopted, then in valuing such small, laid out sites the valuation indicated by sale of comparable small sites in the area at or about the time of the notification would be relevant. In such a case, necessary deductions for the extent of land required for the formation of roads and other civil amenities; expenses of development of the sites by laying out roads, drains, sewers, water and electricity lines, and the interest on the outlays for the period of deferment of the realisation of the price; the profits on the venture etc. are to be made. In Sahib Singh Kalha v. Amritsar Improvement Trust [1982 (1) SCC 419], this Court indicated that deductions for land required for roads and other developmental expenses can, together, come up to as much as 53 per cent. But the prices fetched for small plots cannot directly be applied in the case of large areas, for the reasons that the former reflects the 'retail' price of land and the latter the 'wholesale' price. (emphasis supplied) This Court referred to and relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the owner to hand over the land to the City Improvement Trust for roads and for other amenities and his requirement to expend money for laying the roads, water supply mains, electricity etc., the deduction of 53% and further deduction towards development charges @ 33-1/3%, as ordered by the High Court, was not illegal." (12.4.) In Atma Singh vs. State of Haryana 2008 (2) SCC 568 this Court reiterated the settled principles regarding deductions thus : "The reasons given for the principle that price fetched for small plots cannot form safe basis for valuation of large tracks of land, according to cases referred to above, are that substantial area is used for development of sites like laying out roads, drains, sewers, water and electricity lines and other civic amenities. Expenses are so incurred in providing these basic amenities. That apart it takes considerable period in carving out the roads making sewers and drains and waiting for the purchasers. Meanwhile the invested money is blocked up and the return on the investment flows after a considerable period of time. In order to make up for the area of land which is used in providing civic amenities and the waiting period durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cquired land is contributing to production of goods yielding good profit, it would not be proper to make a deduction in the price of land shown by the exemplars of small plots as the reasons for doing so assigned in various decisions of this Court are not applicable in the case under consideration." The above observations no doubt seem to suggest that where the acquisition is for a residential lay out, deduction towards development cost is a must, but if the acquisition is for an industry which does not require forming a layout of sites, the market value of small residential plots may be adopted without any cuts towards development cost. The said observations are made with reference to the special facts of that case. If they are read out of context to support a contention that the purpose of acquisition is a relevant factor to avoid the deduction of development cost in valuation, it may then be necessary to consider the said observations as having been made per incuriam, as they overlook a mandatory statutory provision -- section 24 (clause fifthly) of the Act and the series of decisions of larger benches of this Court which hold that when value of large tracts of undeveloped land ..... X X X X Extracts X X X X X X X X Extracts X X X X
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