IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 05.12.2008 CORAM: THE HONOURABLE MRS. JUSTICE PRABHA SRIDEVAN AND THE HONOURABLE MR. JUSTICE K.K.SASIDHARAN A.S. Nos.639 & 640/1997 The special Tahsildar (L.A.) Neighbourhood Scheme, Tiruchengode : Appellant in both appeals Vs. A.S.No.639/1997 1.T.A.Thaiyan Padayachi (died) 2.T.T.Thambiran (died) 3.T.V.Mannathan *4.Kolanda Gounder (died) *5.Pappayee(died) *6.Pakkiyam(died) 7.Muthusamy 8.Shanmugham 9.M.Kandasamy 10.Muthusamy 11.Chinna Gounder 12.Chinnusami 13.The Executive Engineer, Administrative Officer, Housing Board, Salem Housing Unit, Salem-8. 14.Lakshmi 15.T.T.Rajah 16.T.T.Ravi 17.Paavayee 18.T.Chandrasekaran 19.T.Sellamuthu 20.T.Rajavelu 21.T.Arul 22.Thoonga Gounder @ P.Muthusamy 23.M.Shanmugam S/o.Late Muthu No.8/45, Taman Sri Asa ULU https://hcservices.ecourts.gov.in/hcservices/ Bernam 35900 Tanong Malim, Malasia 24.K.K.Shanmuga Sundaram 223/1, Nethaji Nagar, Nanjundapuram Road, Coimbatore - 36. 25.Chinnasamy Brindavan SPS, Paradurai, Sakthi Nagar Extension Thhidal Erode - 9 (respondents 14 to 16 brought on record as LRs of the deceased 1st respondent vide order made in CMP 3438/2002 respondents 17 to 21 brought on record as LRs of the deceased 2nd respondent vide order made in CMP 3439/2002 respondent 22 impleaded vide order made in CMP 4235/2004) : Respondents R23 brought on record as LR of the deceased 5 & 6 vide order dated 13.4.09 in Memo dt.2.12.08 (USSR.No.6220) in A.S.No.639/97 R24 & R25 brought on record as LR of the deceased R4 vide order court dt.13.4.09 made in A.S.No.639/97 RR A.S.No.640/1997 1.M.Kandasamy 2.R.Muthusamy 3.Arukkanaiammal 4.N.Palani Goundar (died) 5.R.Mariappan(died) 6.K.C.Sengoda Goundar(died) *7.Pappayee(died)(T.E) *8.N.Kolanda Goundar 9.C.Muthusamy 10.M.Shanmugham 11.The Executive Engineer, Administrative Officer, Housing Board, Salem Housing Unit, https://hcservices.ecourts.gov.in/hcservices/ Salem-8. 12.Perumayee 13.N.Ganesan 14.Pavalayee 15.Kannammal 16.Kanagandhi 17.M.Indirani 18.Kuppayammal 19.S.Subramaniam 20.Saraswathi 21.M.Shanmugam 22.K.K.Shanmuga Sundaram 23.Chinnasamy (respondents 12 to 14 brought on record as LRs of the deceased 4th respondent respondents 15 to 17 brought on record as LRs of the deceased 5th respondent respondents 18 to 20 brought on record as LRs of the deceased 6th respondent as per of Court dated 03.11.2003 made in CMP Nos.13373 to 13375/03) R21 brought on record as LR of the deceased R7 vide order dated 13.4.09 in Memo dt.2.12.08 (USSR.No.6221) in A.S.No.640/97 R22 & R23 brought on record as LR of the deceased R8 vide order court dt.13.4.09 made in A.S.No.640/97 : Respondents Appeals filed against the Judgment and Decree of the Addl. Subordinate Judge, Salem in L.A.O.P.Nos.14/92 and 29/92 dated 14.09.1995. For appellant : Mr.V.Ravi, Special Govt. Pleader in A.S.No.639/97. For respondents : Mr.M.S.Palanisamy in A.S.No.639/97 for respondents 3, 7 to 12, 14 to 21 Mr.A.K.Kumarasamy, for R-4 https://hcservices.ecourts.gov.in/hcservices/ Mr.P.Jagadeesan, for Mr.S.Ramesh Kumar for R-22 Mr.K.Chelladurai for T.N.H.B.(R 13) Assisted by Mr.S.Kasikumar RR 1 & 2 died steps taken. RR 5 & 6 died(T.E) A.S.No.640/97 For Appellant: Mr.V.Ravi, Special Govt. Pleader For Respondents: Mr.M.S.Palanisamy RR 1 to 3, 9 to 12 to 20 Mr.K.Chelladurai(TNHB) Respondent-II Respondents 4 to 6 (Died) Steps taken 7th Respondent (died) T.E 8th Respondent NA COMMON JUDGMENT K.K.SASIDHARAN, J. These two first appeals are directed against the common order dated 14.09.1995 in LAOP Nos.14/1992 and 29/1992 on the file of the Subordinate Judge, Salem, whereby, the learned Subordinate Judge fixed the market value of the acquired property at Rs.6 per sq.ft. Factual matrix :- 2.The Government of Tamil Nadu have issued a notification under Section 4(1) of the Land Acquisition Act on 05.01.1983 acquiring an extent of 29.40 acres of property situated in the village of Thiruchengode for the residential project of Tamil Nadu Housing Board. After complying with the statutory requirements, the Special Tahsildar, Land Acquisition Neighbourhood Scheme, Namakkal passed an award on 18.09.1986 fixing the market value of the property at Rs.17,077 per acre for un-irrigated land and Rs.14,000/- for manvari dry lands. The award was not acceptable to the land owners and as such, they have prayed for reference to the Civil Court as provided under Section 18 of the Land Acquisition Act, 1984. Accordingly, reference was made to the Civil Court in L.A.O.P.No.14/1992 and 29/1992. The claimants have prayed for compensation at the rate of Rs.50/- per sq.ft. https://hcservices.ecourts.gov.in/hcservices/ 3.During the course of proceedings, on the side of the claimants, CW-1 to CW-5 were examined and Ex.C-1 to C-8 were marked. RW-1 was examined on the side of the Land Acquisition Officer and Exs.R-1 to R-7 were marked. 4.The Reference Court found that the property in Exs.C-1 and C-2 dated 10.06.1992 and 23.09.1982 were situated very near to the property acquired and the sale of the said property was also few months prior to issuance of Sec.4(1) notification. As per Exs.C-1 and C-2, sale price was Rs.10/- per sq.ft. Ex.C-1 property was having an area of 4118 sq.ft. and similarly, Ex.C-2 property was also having lesser extent and both the properties were sold as house sites. Reference Court also found that in the very same village, there was an earlier acquisition as per Sec.4(1) notification issued in the year 1978, which culminated in passing an award by the Reference Court in LAOP No.56/1979 on 12.09.1985 fixing the land value at Rs.1.75 per sq.ft. The said award was marked as Ex.C-4 and the property involved in the said award was also a house site. The Reference Court also found from the topo sketch marked as Ex.R-3 (A) that the property covered by the data sale deed relied on by the Land Acquisition Officer for fixing the market value was situated far away from the property, but on the other hand, the property in Exs.C-1 and C-2 were nearer to the acquired property and accordingly, the Reference Court was of the opinion that the sale value as reflected in Exs.C-1 and C-2 shows the prevailing market rate as on the date of Sec.4(1) notification and accordingly, Rs.10 per sq.ft was taken as the land value. The Reference Court was also of the opinion that certain deductions have to be made for the purpose of development and accordingly, 40% was given towards deduction and a sum of Rs.6 per sq.ft was fixed as the market value of the property acquired. 5.Being aggrieved by the order of the Reference Court, the Land Acquisition Officer has come up with the first appeals. Submission of the appellants :- 6.Thiru.V.Ravi, learned Special Government Pleader contended that the basis adopted by the Reference Court for arriving at the market value was against the well established principles governing the determination of land value. According to him, in the face of the data sale deeds produced by the State as well as the earlier award in respect of the property in the very same village, the Reference Court was not justified in enhancing the compensation on the basis of two documents registered only few months before the issue of Sec.4(1) notification. According to the learned Government Pleader, the Reference Court should have allowed deduction of at least 50% towards development charges and a further deduction should have been given on account of smallness of the plot, the value of which was taken as the basis for determination of compensation. https://hcservices.ecourts.gov.in/hcservices/ Submission of the Housing Board :- 7.Thiru.K.Chelladurai, the learned Standing Counsel appearing on behalf of the Tamil Nadu Housing Board, beneficiary of the land acquisition, contended that the award of the Land Acquisition Officer reflected the market rate prevailing in the locality and while determining the compensation, various factors have been taken into consideration by the Land Acquisition Officer and disregarding the said award, the Reference Court refixed the compensation on the basis of two documents of dissimilar lands. According to the learned counsel, in the event of taking the value as shown in Exs.C-1 and C-2 as the prevailing market rate in the area, suitable deduction must have been given by the Reference Court towards development charges as well as on account of smaller extent covered by those documents when compared to the larger extent of property acquired. It was further contended that the deduction given by the Reference Court was not at the rate indicated by the Hon’ble Supreme Court in various judgments. 8.The learned Counsel appearing for the Appellant as well as the learned Standing Counsel appearing on behalf of the Housing Board placed reliance on the following Judgments:- 2005(4) SCC 789; 2005(4) CTC 762 and; 1996(9) SCC 640 Submission of the claimants :- 9.Tvl.B.Kumarasami, M.S.Palanisami and P.Jagadeesan, learned counsel appearing on behalf of the claimants submitted that the acquired property is situated just abetting Thiruchengode-Melur main road and is also within the municipal limits. According to the learned counsel, it was a well developed area and in and around the property acquired, there are large number of industries as well as spinning mills and in the said area property was sold as house sites at the rate of Rs.10 to Rs.20 per sq.ft. According to the learned counsel, the acquired property is a well developed property with high potential and as such, there was no need for any kind of deduction. The property was acquired for putting up residential houses by the Tamil Nadu Housing Board and it was only after satisfying that the property was fit for construction of residential houses that necessary steps were taken for acquisition and as such, there was no justification for deduction on account of development charges. Determination of compensation – Guiding principles :- 10.While fixing market value, the Land Acquisition Officer has to consider various factors. The purpose for which the property was acquired, the nature of the property acquired, its locational advantages, presence of roads, electricity, educational institutions, hospitals and other infra-structural facilities available in the area are all relevant for the purpose of arriving at the just compensation. 11.The Honourable Supreme Court in Shaji Kuriakose v. Indian Oil Corpn. Ltd.,(2001) 7 SCC 650 indicated the importance of comparable sales method of valuation for determining market value thus :- https://hcservices.ecourts.gov.in/hcservices/ "3.It is no doubt true that courts adopt comparable sales method of valuation of land while fixing the market value of the acquired land. While fixing the market value of the acquired land, comparable sales method of valuation is preferred than other methods of valuation of land such as capitalisation of net income method or expert opinion method. Comparable sales method of valuation is preferred because it furnishes the evidence for determination of the market value of the acquired land at which a willing purchaser would pay for the acquired land if it had been sold in the open market at the time of issue of notification under Section 4 of the Act. However, comparable sales method of valuation of land for fixing the market value of the acquired land is not always conclusive. There are certain factors which are required to be fulfilled and on fulfilment of those factors the compensation can be awarded, according to the value of the land reflected in the sales. The factors laid down inter alia are: (1) the sale must be a genuine transaction, (2) that the sale deed must have been executed at the time proximate to the date of issue of notification under Section 4 of the Act, (3) that the land covered by the sale must be in the vicinity of the acquired land, (4) that the land covered by the sales must be similar to the acquired land, and (5) that the size of plot of the land covered by the sales be comparable to the land acquired. If all these factors are satisfied, then there is no reason why the sale value of the land covered by the sales be not given for the acquired land. However, if there is a dissimilarity in regard to locality, shape, site or nature of land between land covered by sales and land acquired, it is open to the court to proportionately reduce the compensation for acquired land than what is reflected in the sales depending upon the disadvantages attached with the acquired land. 12.The positive as well as negative factors to be taken into consideration for arriving at the correct market value was considered by the Honourable Supreme Court in Viluben Jhalejar Contractor v. State of Gujarat,(2005) 4 SCC 789, wherein it was held thus : "18.One of the principles for determination of the amount of compensation for acquisition of land would be the willingness of an informed https://hcservices.ecourts.gov.in/hcservices/ 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. The positive and negative factors are as under: Positive factors Negative factors (i) smallness of size (i) largeness of area (ii) proximity to a road (ii) situation in the interior at a distance from the road (iii) frontage on a road (iii) narrow strip of land with very small frontage compared to depth (iv) nearness to developed (iv)lower level requiring area the depressed portion to be filled up (v) regular shape (v) remoteness from developed locality (vi) level vis-à-vis land (vi) some special under disadvantageous acquisitionfactors which would deter a purchaser (vii)special value for an owner of an adjoining property to whom it may have some very special advantage https://hcservices.ecourts.gov.in/hcservices/ 21.Whereas a smaller plot may be within the reach of many, a large block of land will have to be developed preparing a layout plan, carving out roads, leaving open spaces, plotting out smaller plots, waiting for purchasers and the hazards of an entrepreneur. Such development charges may range between 20% and 50% of the total price." 13.In Atma Singh v. State of Haryana,(2008) 2 SCC 568 = 2007 (14) Scale 109, the Honourable Supreme Court reiterated the position that in considering the market value, the guiding star would be the conduct of hypothetical willing vendor and willing purchaser and not an anxious dealing at arms length. 14.In Special Dy. Collector v. Kurra Sambasiva Rao, (1997) 6 SCC 41, the Hon'ble Supreme Court also considered the best evidence for fixing the market value thus :- "8.The best evidence of the value of property are the sale transactions in respect of the acquired land to which the claimant himself is a party; the time at which the property comes to be sold; the purpose for which it is sold; nature of the consideration; and the manner in which the transaction came to be brought out. They are all relevant factors. In the absence of such a sale deed relating to the acquired land, the sale transactions relating to the neighbouring lands in the vicinity of the acquired land. In that case, the features required to be present are: it must be within a reasonable time of the date of the notification; it must be a bona fide transaction; it should be a sale of land similar to the land acquired or land adjacent to the land acquired; and it should possess similar advantageous features. These are relevant features to be taken into consideration to prove the market value of the acquired land as on the date of the notification published under Section 4(1) of the Act." Documents of Transaction relating to the Adjacent land- Relevancy :- 15.In ONGC Ltd. v. Sendhabhai Vastram Patel,(2005) 6 SCC 454 = JT 2005(7) SC 465, the Honourable Supreme Court referred to the importance of instances of sale in respect of similar lands in the locality thus :- "15.Instances of sale in respect of the similar land situated in the same village and/or neighbouring villages should have been taken as https://hcservices.ecourts.gov.in/hcservices/ guiding factors by the Reference Judge as also by the High Court. In the absence of any better evidence, the Reference Judge as also the High Court could have made addition in the sale prices for the land as evidenced by the said deeds of sale. Potentiality :- 16.In Pattammal v. Union of India, (2005) 13 SCC 63 = 2005(9) Scale 182, the issue before the Supreme Court was regarding the reduction made by the High Court in respect of the compensation awarded by the Reference Court for acquiring about 9 hectares of property in Keezhaveli Village of Karaikal in the Union Territory of Pondicherry. The Honourable Supreme Court found that the Reference Court had taken into consideration the positive factors in determining the compensation and while restoring the award of the Reference Court, observed thus : "35.In our view, the Reference Court had adopted the correct procedure upon examination of the location and potential value of the acquired lands in its detailed award, as also the contemporaneous sale deeds which indicated that there had been a steep escalation of the price of lands in the immediate vicinity of the acquired lands, which fact had also been admitted by the Land Acquisition Officer." Guess work :- 17.In Special Dy. Collector v. Kurra Sambasiva Rao, (1997) 6, the Hon'ble Supreme Court while considering the bounden duty of the Court to evaluate the evidence on the basis of human conduct, indicated that for the purpose of arriving at the reasonable market value of the property, some amount of guess work is permissible. Calculation of increase in market value - whether cumulative or flat rate :- 18.In The General Manager, Oil & Natural Gas Corporation Ltd. v. Rameshbhai Jivanbhai Patel & Anr., 2008 (11) Scale 637, Hon'ble Supreme Court gave an illustration of the increase in the market value and the percentage of increase to be made and the method of calculation of the increase thus :- "15.The increase in market value is calculated with reference to the market value during the immediate preceding year. When market value is sought to be ascertained with reference to a transaction which took place some years before the acquisition, the method adopted is to https://hcservices.ecourts.gov.in/hcservices/ calculate the year to year increase. As the percentage of increase is always with reference to the previous year's market value, the appropriate method is to calculate the increase cumulatively and not applying a flat rate. The difference between the two methods is shown by the following illustration (with reference to a 10% increase over a basic price of Rs.10/- per sq.m): Year By flat rate By cumulative increase method increase method 1987 10.00 10.00 (Base Year) 1988 10 + 1=11.00 10.00 + 1.00 = 11.00 1989 11 + 1=12.00 11.00 + 1.10 = 12.10 1990 12 + 1=13.00 12.10 + 1.21 = 13.31 1991 13 + 1=14.00 13.31 + 1.33 = 14.64 1992 14 + 1=15.00 14.64 + 1.46 = 16.10 "16.We may also point out that application of a flat rate will lead to anomalous results. This may be demonstrated with further reference to the above illustration. In regard to the sale transaction in 1987, where the price was Rs.10 per sq.m, if the annual increase to be applied is a flat rate of 10%, the increase will be Rs.1 per annum during each of the five years 1988, 1989, 1990, 1991 and 1992. If the price increase is to be determined with reference to sale transaction of the year 1989 when the price was Rs.12 per sq.m, the flat rate increase will be Rs.1.20 per annum, for the years 1990, 1991 and 1992. If the price increase is determined with reference to a sale transaction of the year 1990 when the price was Rs.13 per sq.m, then the flat rate increase will be Rs.1.30 per annum for the years 1991 and 1992. It will thus be seen that even if the percentage of increase is constant, the application of a flat rate leads to different amounts being added depending upon the market value in the base year. On the other hand, the cumulative rate method will lead to consistency and more realistic results. Whether the base price is Rs.10/- or Rs.12/10 or Rs.13/31, the increase will lead to the same result. The logical, practical and appropriate method is therefore to apply the increase cumulatively and not at a flat rate." https://hcservices.ecourts.gov.in/hcservices/ Guideline rate – irrelevant :- 19.The learned Counsel for the claimants contended that even in the Sale Deed marked on the side of the appellant as Ex.R-5 before the Reference Court, the market value of the property was shown as Rs.10 per sq.ft. on the basis of the guideline rate and as such, the said guideline rate was also an indication of the prevailing market value in the area. 20.It is trite that guideline register is maintained by the Revenue Department only for the purpose of collection of stamp duty and the said rate has nothing to do with the market rate. The Government is primarily concerned about the collection of revenue and it is only for the purpose of preventing under-valuation of documents that the Government periodically reviews the guideline rate and no reliance could be placed on such guideline rate for the purpose of fixing the market value of the property. Similarly, the Collector also cannot make an award on the basis of guideline rate and in case award is only on the basis of guideline rate, the value shown in such award cannot be termed as "market value". 21.The Hon'ble Supreme Court in Land Acquisition Officer v. Jasti Rohini, (1995) 1 SCC 717, considered the evidentiary value of the entries in the basic value register and held thus :- "6.The admissibility and evidentiary value of the entries in the basic value register was considered by this Court in Jawajee Nagnatham v. Revenue Divisional Officer. After an elaborate consideration this Court held that the basic value register is maintained only for fiscal purpose of collecting stamp duty and registration charges. The market value mentioned therein cannot form a foundation to determine the compensation under Section 23(1) of the Act. It is settled law that the market value should be determined on the hypothesis of the price fetched in the bona fide sale by a willing vendor who would agree to sell the lands to a willing vendee of the acquired land or the land in the neighbourhood possessed of similar features. The notification under Section 47-A which is meant to be a guide for collection of revenue cannot form the basis for determination of market value of the land under Section 23(1) of the Act. 22.In R.Sai Bharathi v. J.Jayalalitha,(2004) 2 SCC 9,, the legal position was reiterated thus:- "22.The guideline value has relevance only in the context of Section 47-A of the Indian Stamp Act (as amended by T.N. Act 24 of 1967) which https://hcservices.ecourts.gov.in/hcservices/ provides for dealing with instruments of conveyance which are undervalued. The guideline value is a rate fixed by authorities under the Stamp Act for purposes of determining the true market value of the property disclosed in an instrument requiring payment of stamp duty. Thus the guideline value fixed is not final but only a prima facie rate prevailing in an area. It is open to the registering authority as well as the person seeking registration to prove the actual market value of property. The authorities cannot regard the guideline valuation as the last word on the subject of market value. 24. This scheme of the enactment and the Rules contemplate that guideline value will only afford a prima facie basis to ascertain the true or correct market value, undue emphasis on the guideline value without reference to the setting in which it is to be viewed will obscure the issue for consideration. It is clear, therefore, that guideline value is not sacrosanct as urged