Nos 661 1380 1885  1886 of 1967
209 Appeal from the judgment and order dated February 25 1965 of the Patna High Court in First Appeals Nos 437 and 438 of 1959
section V Gupte B P Rajgarhia and U P Singh for the appellants in CA Nos 661 and 1380 of 1967 and for respondent No 1 CA Nos
1885 and 1886 of 1967
D Goburdhun for the respondent in CA Nos 661 and 1380 if 1967 and for the appellant in CA Nos 1885 and 1886 of 1967
The Judgment of the Court was delivered by P laganmohan Reddy J
These appeals are by certificate against the judgment of the Patna High Court in land acquisition appeals
Two notifications dated 7 7 1954 under section 4 of the
Land Acquisition Act 1894 Act 1 of 1894 hereinafter called the Act  were issued one in respect of a portion of Plot Nos 178 and 1784 admeasuring 265 acres and the other in respect of the whole of the plot No 1783 admeasuring 2 acres situated in Ward No 3 of Ranchi Municipality
Section 6 notification in respect of these lands was published on 7 9 1954 and possession was taken on 23 9 1954 under section 171 after making a declaration under section 174 that the provisions of section 5A shall not apply
The Collector awarded compensation of Rs 120419 6 11 in respect of the first acquisition and Rs 47648 13 6 in respect of the second
Thereafter at the instance of the claimant a reference under section 18 of the Act was made to the Judicial Commissioner of Chhota Nagpur Ranchi who
while maintaining the market value of the land awarded by the Collector gave further compensation for severance at the rate of 5 and 10 in respect of potential value of the land
The Judicial Commissioner however did not grant the 15 solatium under section 232 of the Act
Being dissatisfied the claimants preferred appeals to the High Court
The High Court revised the compensation and awarded Rs 90000 per acre and 15 as solatium on the market value under section 232 of the Act but did not grant them the 5 towards severance
Interest at 6 per annum on the amount of enhanced compensation from 23 9 1954 together with costs was also decreed
Against the judgment and decree the claimants have filed Civil Appeals 661  138067 while the State has filed Civil Appeals 1885 8667
The lands in question which have been acquired were earlier leased on 22 9 1944 to the Military authorities on a rent of Rs 600 per month for a period of 6 months under a registered deed with option Lo renew for a maximum period of 10 years 2lO which period expired on 21 9 1954
One of the conditions of the lease was that on the termination of the lease the lessor would exercise the option given under the lease to purchase all buildings structures gardens and any other structures constructed by the lessee during their occupation of the leased property at 75 per cent of the valuation that would be determined by the Superintending Engineer Chhota Nagpur Circle and in case the lessors refused to purchase the lessee was entitled to dismantle and take away the materials
Towards the end of the lease period the Govern ment of Bihar decided to acquire the property for the State Soldiers Sailors and Airmen s Board and initiated proceedings as aforesaid
In these appeals the only question that has to be determined is  What is the market value of the property as on the date of section 4 notification  In the valuation report given by the Land Acquisition Officer Ranchi Ex 1 the principle of capitalisation on the basis of 20 times the annual rental of Rs 7200 at the rate of Rs 600 pm was adopted as the price of the lands
In that report it was also pointed out that the sale price of 1085 acres out of the premises of the Ranchi Club as per registered sale deed exhibit C 1 dated 1 4 1953 was Rs 41470 per acre
which was not fair
Apart from these 25 other sale transactions in respect of portions of Plot No 1789 between 1952 and 1953 were also referred in that report
Some of these lands were situated opposite to the Ranchi Club and the sale price came to Rs 1092 per katha which is about Rs 60000 per acre
He was further pointed out that some other lands a little further away from the main road but belonging to the same Plot No 1789 were sold at the rates between Rs 250   to Rs 800 per katha
This report formed the basis of the award made by the Collector
The High Court took judicial notice and in our view rightly so that after the termination of the Second World War in 1945 there was a rise in land values due to the increased demand of homestead lands for building purposes
It also considered various sale deeds produced and proved on behalf of the claimants along with the oral evidence to determine the market value of the land
The objections from both the appellant and the respondent were taken into account in respect of each of these and most of them were considered as not furnishing a proper or adequate valuation either having regard to the distance of the lands which were the subject matter of the sale or the inadequacy of the information pertaining thereto
The High Court however adopted the price in the sale deed Ex C 1 executed on 6 5 1953 by the Ranchi Club Ltd in favour of the President of India in respect of 1085 acres 3 bighas 5 kathas 10 chhataks in Plot No 1221 for Rs 45000as the basis for arriving at the market value of the acquired land
211 Though the land in question was situated on the main Ranchi Chaibasa Road a strong objection was taken against adopting the price as a basis because it was not only 12 mile away from the land under acquisition but what was sold was only the leasehold right in the land
These objections were rejected on the ground that for allpractical purposes the interest that was held or sold by the Ranchi Club under Ex
C 1 was not inferior to an absolute title
The area of the land the subject matter of the sale was considered to be fairly large being more than 1 acre and the situation was also the same as the land under acquisition except that it was farther away from it
In these circumstances the High Court thought after a proper allowance is made for the difference in distance the transaction yields a more acceptable guide for determining the market value of the land under acquisition and accordingly it adopted twice the price
as charged for the land in Ext
C 1 as indicating a fair market value of the land in question
The High Court further added Rs 7060 per acre as the difference between tenure rights and lease hold rights that were held by the President of India and awarded Rs 9000O per acre
it did notwithstanding the fact that it was conscious that there was no definite data for the two additions that have been made because in its view in cases of this nature a certain amount of estimate has to be made which may even be arbitrary
Accordingly it awarded compensation for the 465 acres of land which was acquired by the Government at Rs 90000 per acre together with 15 solatium Payable under clause 2 of section 23 of the Act
5 compensation for severance of land from the claimants  other portion of the land that remained with them after acquisition which was awarded by the Judicial Commissioner Chhota Nagpur was disallowed on the ground that there was an entrance to the back portion of the land which was left with the owners and also because there was no evidence to show that in fact there had been any depreciation in he value of the remaining area and if so to what extent
On the other hand it main tained the 10 on the market value of the land awarded by the Land Acquisition Court on account of the increase in the potentialities of the land
The basis adopted by the High Court is challenged on the ground that they are contrary to the well established principles applicable for determining the value of lands acquired under the Act
The general principles for determining compensation have been set out in sections 23  24 of the Act
The compensation payable to the owner of the land is the market value which is determined by reference to the price which a seller might reasonably expect to obtain from a willing purchaser bat as this may not be possible to ascertain with any amount of precision the authority charged with the duty to award compensation is bound to 212 make an estimate judged by an objective standard
The land acqui red has therefore to be valued not only with reference to its condition at the time of the declaration under section 4 of the Act but its potential value also must be taken into account
The sale deeds of the lands situated in the vicinity and the comparable benefits and advantages which they have furnish a rough and ready method of computing the market value
This however is not the only method
The rent which an owner was actually receiving at the relevant point of time or the rent which the neighbouring lands of similar nature are fetching can be taken into account by capitalising the rent which according to the present prevailing rate of interest is 20 times the annual rent
But this also is not a conclusive method
This Court had in Special Land Acquisition Officer Bangalore vs T Adinarayan Setty1 indicated at page 412 the methods of valuation to be adopted in ascertaining the market value of the land on the date of the notificatioa under section 41 which are  i opinion of experts ii the price paid within a reasonable time in bona fide transactions of purchase of the lands acquired or the lands adjacent to the lands acquired and possessing similar advantages and iii a number of years  purchase of the actual or immediately prospective profits of the lands acquired
These methods however do not preclude the Court from taking any other special circumstances into consideration the requirement being always to arrive as near as possible an estimate of the market value
In arriving to a reasonably correct market value it may be necessary to take even two or all of those methods into account inasmuch as the exact valuation is not always possible as no two lands may be the same either in respect of the situation or the extent or the potentially nor is it possible in all cases to have reliable material from which that valuation can be accurately determined
Bearing these principles in mind we do not think that the High Court was justified in adopting the registered sale deed Ex
C 1 executed by the Ranchi Club in favour of the President of India because that land is farther away not only from the land acquired but from the town though it is on the main RanchiChaibasa Road
Even the High Court recognised that there was no definite data for the two additions that have been made and in our view it would not be a proper method of ascertaining the value of the land acquired
The only two documents that may be considered are Ex10 and Ex 11 which are in respect of the lands situated in the vicinity and on either side of the land ac quired
The other sale deeds are of smaller areas and do not furnish a proper basis for ascertaining the market value and have been quite properly not relied upon by the learned Advocate for 1 1959 Supp1 1 SCR
213 the claimants  The annual rental value of the land acquired namely Rs 7 200 will also not furnish a proper method of computation because that was a rent fixed in 1944 when that land was not of such great value as it had acquired at the time when sec
4 notification was issued
A perusal of the correspondence between the owners of the land and the Deputy Commissioner of Ranchi would show that the land owners had given it at consessional rate to  the Military authorities having regard to the purpose for which it was being put to use
On behalf of the claimants great reliance is placed on Ex11 which is a sale deed executed on 16 12 1946 by the claimants the Ranchi Automobiles of an area of 1 bigha 17 kathas equal to 617 acres for Rs 145000 After deducting Rs 15403 the price of the structures according to the Engineer s report in 1959 Ex 25 the net value of the land is Rs 129697 
This value would work out to Rs 20813570 per acre
The High Court rejected this computation on the ground that though the land was contiguous to the land under acquisition neither the value of the pump and the other structures belonging to Burmah Shell nor the value of the structures that might have been on the land on the date of the sale which were built by the vendees as lessees could be ascertained either from the sale deed or the evidence
Ex10 is a lease in respect of 13 acre granted by the owners to Thakur Chandra Bali Shah and others executed on 20 2 1950 on a monthly rent of Rs 157 
The High Court calculated the monthly rental of the land under acquisition at that rate to be not less than Rs 2000 per month or Rs 24000 per year
On the basis of 20 times the annual rent if computed Rs 480000as the market value which works out at Rs 103226per acre
It is however pointed out on behalf of the claimants that the High Court made a mistake in thinking that the rent for the land leased under Ex10 was Rs 157 pm and on that basis it calculated the annual rental value of 465 acres of the  acquired land
We have checked the figures from the original lease and find that in fact the rent is Rs 175 and not Rs 157 
On this basis the rate per acre of 20 times annual rental value would come to Rs 126000 
Even if exhibit 11 is to be taken as the basis and the value of the structures as given by the Engineer in Ex25 is to be accepted that cannot furnish a proper basis because the land in question is a small area of 617 acres or just over 1 an acre
A smaller area such as this on a main road Would certainly fetch a higher price compared to a larger un developed area even though it may have a frontage on the main road
In order to develop that area atleast the value of 13 of the land will have to be deducted for roads drainage and other amenities
On this basis the value of the land at Rs 20813570 per acre would after deduction of 13 come to Rs 138757per acre
On the basis of the rental of Rs 175 pm in Ex10 214 the value at 20 times the rental will work out as already seen at Rs 126000 
Allowing for an increase in rents from 1950 to 1954 the date of section 4 notification say at 5 the value per acre may be Rs 133000 or thereabout
If we take the average of Ex10 and Ex11 as computed by us the value per acre would come to about Rs 135878 
In our view Rs 135000 per acre would be a reasonable rate at which compensation could be awarded to the claimants
The High Court was not justified in giving 10 towards potential value because that element is inherent in the fixation of the market value of the land and could not be assessed separately
The High Court was also not justified in disallowing 5 awarded by the Judicial Commissioner Chhotanagpur as compensation for severance merely because there was an entrance to the land
When a portion left out there would be a diminution in the value of the land that is left out for which some compensation has to be allowed
The 5 allowed by the Judicial Commissioner Chhotanagpur is reasonable
In this view the claimants would be entitled to a decree as follows in respect of the lands acquired  1 At the rate of Rs 135000 per acre for 465 acres 2 5 severence and 15 solatium on the market value computed as in 1 3 Interest at 6 from the date of taking possession
The appeals of the claimants are allowed to the extent of the variation and those by the Government are dismissed with costs
The claimants will be entitled to proportionate costs on the difference between the amounts decreed and those that are now awarded in each of the two appeals filed by them
KBN 864SupCI72 2500 12 4 73 GIPF


Summary:
According to the general principles set out in sections 23 and 24 of the Land Acquision Act 1894 for determining compensation the compensation payable to the owner of the land is the market value which is determined by reference to the price which a seller might reasonable expect to obtain from a willing purchaser but since it may not be possible to ascertain this with any amount of precision the authority charged with the duty to award compensation is bound to make an estimate judged by an objective standard
The land acquired has therefore to be valued not only with reference to its condition at the time of the declaration under section 4 of the Act but its potential value also must be taken into account
This Court has laid down the methods of valuation to be adopted in ascertaining the market value of the land on the date of the notification under section 4 which are  i opinion of experts ii the price paid within a reasonable time in bona fide transactions of the purchase of the lands acquired or the lands adjacent to the lands acquired and possessing similar advantages and iii a number of years purchase of the actual or immediately prospective profits of the lands acquired
These methods however do not preclude the Court from taking any other special circumstance into consideration the requirement being always to arrive as near as possible an estimate of the market value
In arriving at a reasonable correct market value it may be necessary to take even two or all these methods into account in as much as the exact valuation is not always possible as no two lands may be same either in respect of the situation or the extent or the potentiality nor is it possible in all cases to have reliable material from which that valuation can be accurately determined
211 H Special Land Acquisition Officer Bangalore vs T Adinarayan Setty 1959 Supp
1 SCR 404 referred to
In the present case the High Court was not justified in adopting the sale deed in respect of a land which was farther away not only from the land acquired but from the town
The annual rental value of the land acquired based on the rent fixed in 1944 when that land was not of such great value as  it had acquired at the time when section 4 notification was issued would also not furnish a proper method of computation
The High Court was not justified in giving 10 per cent towards potential value be
cause that element was inherent in the fixation of market value of the land and could not be assessed separately
The High Court was also not justified in disallowing 5 per cent awarded by the Judicial Commissioner Is compensation for severance merely because there was an entrance to the land
When a portion of the land is acquired and a large portion left out there would be diminution
in the value of land that is left out for which some compensation has to be allowed
214 B