1 FH fa.24.95.doc ndm IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION FIRST APPEAL NO. 24 OF 1995 WITH CROSS OBJECTION (stamp) NO. 9721 OF 1995 The State of Maharashtra ... Appellant Versus Shantaram Govind Tandel and others ... Respondents ----- Mr. A.R.Patil, AGP for the Appellant – State. Mr. P.M.Pradhan for the Respondents. ----- CORAM : A.S.OKA, J. DATE : 18 th February, 2011. ORAL JUDGMENT: 1 By this appeal, the Appellant – State of Maharashtra has taken an exception to the judgment and award dated 17 th September, 1993 passed by the learned Joint District Judge in a reference under Section 18 of the Land Acquisition Act, 1894 (hereinafter referred to as “the said Act”). 2 FH fa.24.95.doc 2 The acquisition relates to lands bearing survey Nos.10/6, 57/2, 74/8, 81/2, 81/4, 99/10, 104/8, 245/4, 242/24 situated at village Karave, Taluka and District Thane. The area of the said lands is 7280 square meters. The notification under Section 4(1) of the said Act was published in Government Gazette on 24 th September, 1986. The purpose of acquisition was setting up satellite city of New Bombay. An award was made under Section 11 of the said Act by which market value at the rate of Rs.11/- per square meter was offered. The Respondents – claimants did not accept the said award and at their instance, a reference under Section 18 of the said Act was made. The Respondents claimed market value at the rate of Rs.50/- per square meter apart from the other statutory benefits. By the impugned judgment and award, the learned Joint District Judge fixed the market value at the rate of Rs.30/- per square meter together with statutory benefits under Section 23 (1A), 23 (2) and Section 28 of the said Act. There is a cross objection filed by the Respondents – claimants claiming market value at the rate of Rs.50/- per square meter. 3 FH fa.24.95.doc 3 The learned AGP appearing for the Appellant submitted that there is no evidence adduced of the comparable sale instances by the Respondents – claimants. He submitted that reliance was placed by the trial Court only on a judgment in Land Acquisition Reference No. 12 of 1990, though there was no evidence to show that the land subject matter of the said reference was a comparable land. He, therefore, submitted that no case is made out for grant of enhancement. 4 The learned counsel appearing for the Respondents submitted that large tracts of lands from the same village and adjoining villages were notified for acquisition in February, 1970 for the same public purpose. He submitted that even as of February, 1970, this Court has fixed market value for lands in various villages around the village Karave at the rate of Rs.15/- per square meter. He submitted that right from the year 1970 onwards, there is a vast development in the area. He submitted that the acquired land is a part of new Bombay project. He submitted that even the rate awarded by this Court as of 1970 is taken as 4 FH fa.24.95.doc a base rate, by granting escalation at the rate of 10 % or at the rate of 15% per year, The market value on 24 th September 1985 will be much more than Rs.50/- per square meter. 5 I have given careful consideration to the submissions. Perusal of the award under Section 11 shows that the notification under Section 4(1) of the said Act was published in the Government Gazette on 24 th September, 1986. The acquisition was for the public purpose of development of the site of the proposed new town known as new Bombay. In the award, the Special Land Acquisition Officer has stated that in order to reduce the pressure of population and traffic in Mumbai, the Government of Maharashtra came out with the project of twin city called new Bombay consisting of 96 villages from Raigad and Thane Districts. It is stated that the village Karave is included in those 96 villages. 6 In the case of Avinash Dhavaji Naik Vs. State of Maharashtra, (2009) 11 Supreme Court Cases 171, the Apex Court 5 FH fa.24.95.doc dealt with an appeal arising out of an award made under Section 18 of the said Act in relation to a land at village Wahal in Taluka Panvel, District Raigad, which was notified on 3 rd February, 1970 for the same public purpose of setting up satellite city of new Bombay. In the said decision, the Apex Court has taken a note of the fact that vast tracts of the lands falling in 96 villages in Thane and Raigad Districts were sought to be acquired for the same public purpose of setting up satellite city of new Bombay. In paragraph No.11 to 15 of the said decision, the Apex Court observed thus: “11.The purpose for acquisition of land was building a new city. A vast tract of land was sought to be acquired. Indisputably, in terms of Section 23 of the Act, the market value of the land was required to be determined as was obtaining in the year 1970 when the notification under Section 4 of the Act was issued. It is unfortunate that despite the fact that Notification was issued under Section 4 of the Act as far back as on 3-2-1970 and a declaration under Section 6 of the Act was issued on 21-5-1971, the award came to be passed only on 30-6-1986 and that too probably, only having regard to the consequences ensuing in terms of Section 11-A of the Act. 12. A finding of fact was arrived at by the learned Reference Judge that no sale instance was available for the lands situated in the village Wahal and there was no industrial or commercial development therein. The Pune- Bombay Highway was constructed in the year 1978. The 6 FH fa.24.95.doc MIDC pipeline was constructed in the year 1978. There was no railway station nearby the village. The villagers did not obtain any electricity connection. The land was a grassy land. In the absence of any example of sale being available, the Reference Court was required to take recourse to other methods of valuation. We do not find that enough materials had been brought on record to establish the yield of the lands sought to be acquired, which are admittedly agricultural in nature. In all fairness, the State should have brought on record the requisite information viz. the nature of the crop, the annual average yield, availability of irrigation facilities, etc. so as to enable the Reference Court to arrive at a correct decision in regard to grant of compensation under the Act. 13. Although the lands in question were agricultural in nature, they were being used for making a town like Bombay. A new port known as Nhava Sheva Port had come into being which is a few kilometers away from the village. The roads were being constructed. The road to Nhava Shiva Port from Bombay is a district board road which is within 7 km from the village in question. A copy of the New Bombay Development Plan has been placed before us to point out construction of the national highway i.e. Bombay-Pune Road as also the other district board roads. 14. The potentiality of a land for the purpose of development as also for building purposes would depend upon a large number of factors. For the said purpose, the court may not only have to bear in mind the purpose for which the lands were sought to be acquired but also the subsequent events to some extent. 15. In a case of this nature the court may proceed on the presumption that such a vast tract of land viz. 96 villages were sought to be acquired at the same time 7 FH fa.24.95.doc for construction of New Bombay. We are not unmindful of the fact that development in the entire area was not possible at one point of time. Development of the area must have taken place in phases. We are also not unmindful of the fact that the price of the land may skyrocket depending upon the development as also future potentiality.” (emphasis added) 7 In the facts of the case before the Apex Court, the market value was fixed at the rate of Rs.10/- per square meter as of 3 rd February, 1970. The Apex Court was dealing with the lands notified under notification dated 3 rd February, 1970. The Apex Court observed that lands in 96 villages were notified at the same time for the same public purpose. The Apex Court also noted that in the year 1970, in village Wahal, there was no industrial or commercial development and there was no electricity connection. It is noted that Bombay-Pune highway was constructed in the year 1978. The Apex Court observed that the potentiality of the lands for the purpose of development as also for building purpose depends on various factors. More importantly, the Apex Court observed that the Court may not only have to bear in mind the purpose for which the lands were sought to be acquired, but also 8 FH fa.24.95.doc subsequent events to some extent. After noting that vast tracts of lands in 96 villages were simultaneously notified for setting up satellite city of new Bombay, the Apex Court observed that the prices of the lands may skyrocket depending upon the development as also future potentiality. 8 Now turning to the evidence in the case in hand, the 1 st respondent stepped into witness box. He stated that the acquired lands are situated on the western side of Thane Belapur road. On the east of the village, there was Belapur village and on the west of the village, there was Thane creek. He stated that facilities of water supply, electricity, primary schools, secondary schools, market etc. were available in the village. From the year 1964-65, Industrial area of Maharashtra Industrial Development Corporation was set up towards the north-east side of village Karave. He also stated that before the acquisition, there was increase in population as 10 to12 big industries like Herdila, Pfizer, Landon Pillsonor were set up near the village and about 100 to 150 small factories were also set up. In paragraph No.4 of the deposition, the has stated that in view of the acquisition, there was a complete ban on the 9 FH fa.24.95.doc sale of the lands in the village right from the year 1964 till 1986. There was no cross-examination made by the Government Pleader on the statements made by him as regards the availability of the aforesaid facilities, the fact that several industries were set up around the acquired lands and the location of the acquired lands. 9 The scenario which emerges is that in February, 1970, vast tracts of lands in 96 villages including the village Karave were notified for the purpose of setting up satellite city of new Bombay. Prior to that, in the year 1964 – 65, Industrial Estate of the Maharashtra Industrial Development Corporation was already set up on one side of the village Karave. The evidence on record and the aforesaid factors show that not only from 1970, but from the year 1964-65, there was a steady growth and development in and around village Karave. As noted by the Apex Court in the case of Avinash Dhavaji Naik (supra), while fixing the market value of the acquired land, the Court will have to not only to bear in mind the purpose for which the lands were acquired, but even the subsequent events will have to be considered to some extent. In fact, the Apex Court 10 FH fa.24.95.doc observed that in view of such large scale acquisition of lands in the year 1970, there was every possibility that the prices of the lands may skyrocket in view of the development. Therefore, it can be safely stated that due to overall development in the area around the village from 1970 onwards, there must be a steady increase in the prices of the lands in and around Karave and other villages notified in the year 1970. From the year 1970, the work of development of the city of New Bombay commenced in the area and in fact, industrial development started in the area around the village Karave from 1964. In the context of this factual matrix, the market value of the acquired lands in the present case will have to be fixed. 10 As the acquisition started from the year 1970 for the said project, there are various decisions of this Court fixing market value of lands in various villages out of the said 96 villages. In most of the cases, the market value fixed by this Court is as of February 1970. Village Karave is far away from the Bombay-Pune national highway on its western side. In case of village Sanpada, which was far away from the 11 FH fa.24.95.doc said highway, this Court in a decision, which is not challenged by the Stare Government, has held that market value will be slightly more than Rs.15/- per square meter. On the western side of the village Sanpada is village Sonakhar. Thane creek is on the western side of the said village as in case of village Karave. In case of village Sonakhar, this Court has fixed market value at the rate of Rs.12/- per square meter. Village Targhar in Raigad District which is separated from the village Karave by Panvel creek is also one of the 96 villages. This Court has fixed market value at the rate of Rs.15/- per square meter as of February 1970 in respect of lands in village Karave. The village Targhar is on the southern side of the village Karave. The decision of the Apex Court in the case of Avinash Dhavaji Naik (supra) relates to village Wahal, which is on the southern side of village Targhar. The said village Wahal is far away from the national highway wherein the Apex Court has fixed market value at the rate of Rs.10/- per square meter as of 3 rd February 1970. In village Wahal, in 1970, there was no development and even electricity was not available in the said village. The several decisions of this Court relating to various villages nearby village karave out of 96 villages show that the 12 FH fa.24.95.doc market value fixed by this Court as of 1970 is in the range of Rs.10/- to Rs.15/- per square Meter. 11 There is an unchallenged statement in the evidence of the 1 st respondent that there were no sale transactions in village Karave right from the year 1964 up to 1986 due to acquisition of the lands for the purpose of setting up satellite city of new Bombay. When sale instances from the same village are not available, the Court can always consider the sale instances of the lands in the surrounding villages. As stated earlier, as far as village Sanpada is concerned, which is abutting the Thane Belapur Road, this Court has fixed market value at the rate of Rs. 15/- per square meter. For village Sonakhar, which is away from the said road, but which is similarly situated as village Karave insofar as the location of Thane creek is concerned, the market value has been fixed at the rate of Rs.12/- per square meter. The development plan of New Bombay produced for the perusal of this Court by the learned A.G.P. shows that both the villages Sanpada and Sonkhar are close to village Karave, but the village Sanpada is better located considering that it is 13 FH fa.24.95.doc close to Thane Belapur Road. In a matter of fixing the market value under Section 23 of the said Act, as held by the Apex Court, there is always an element of guess work. Considering the various decisions of this Court and considering the decision of the Apex Court in the case of Avinash Dhavaji Naik (supra), the market value of lands at village Karave as of February 1970, was certainly not less than Rs.12/- per square meter. 12 In the case of General Manager, Oil and Natural Gas Corporation Limited Vs. Rameshbhai Jivanbhai Patel and another, (2008) 14 Supreme Court Cases 745, the Apex Court observed that in a case where there was no evidence of comparable sales, the compensation awarded in earlier acquisitions can be the basis for determining the market value at a later date by granting annual escalation. This aspect has been considered by the Apex Court in paragraph Nos. 13 to 15 and 17 of the decision, which read thus: 14 FH fa.24.95.doc “13. Primarily, the increase in land prices depends on four factors: situation of the land, nature of development in surrounding area, availability of land for development in the area, and the demand for land in the area. In rural areas, unless there is any prospect of development in the vicinity, increase in prices would be slow, steady and gradual, without any sudden spurts or jumps. On the other hand, in urban or semi-urban areas, where the development is faster, where the demand for land is high and where there is construction activity all around, the escalation in market price is at a much higher rate, as compared to rural areas. In some pockets in big cites, due to rapid development and high demand for land, the escalation in prices have touched even 30% to 50% or more per year, during the nineties. 14. On the other extreme, in remote rural areas where there was no chance of any development and hardly any buyers, the prices stagnated for years or rose marginally at a nominal rate of 1% or 2% per annum. There is thus a significant difference in increases in market value of lands in urban/semi-urban areas and increases in market value of lands in the rural areas. Therefore, if the increase in market value in urban/semi-urban areas is about 10% to 15% per annum, the corresponding increases in rural areas would at best be only around half of it, that is, about 5% to 7.5% per annum. This rule of thumb refers to the general trend in the nineties, to be adopted in the absence of clear and specific evidence relating to increase in prices. Where there are special reasons for applying a higher rate of increases, or any specific evidence relating to the actual increase in prices, then the increase to be applied would depend upon the same. 15. Normally, recourse is taken to the mode of determining the market value by providing appropriate escalation over the proved market value of nearby lands in previous years (as evidenced by sale transactions or acquisitions), where there is no 15 FH fa.24.95.doc evidence of any contemporaneous sale transactions or acquisitions of comparable lands in the neighbourhood. The said method is reasonably safe where the relied-on sale transactions/ acquisitions precede the subject acquisition by only a few years, that is, up to four to five years. Beyond that it may be unsafe, even if it relates to a neighbouring land. What may be a reliable standard if the gap is of only a few years, may become unsafe and unreliable standard where the gap is larger. For example, for determining the market value of a land acquired in 1992, adopting the annual increase method with reference to a sale or acquisition in 1970 or 1980 may have many pitfalls. This is because, over the course of years, the “rate” of annual increase may itself undergo drastic change apart from the likelihood of occurrence of varying periods of stagnation in prices or sudden spurts in prices affecting the very standard of increase. 16. ..... 17. In this case, the acquisition was in a rural area. There was no evidence of any out of the ordinary developments or increases in prices in the area. We are of the view that providing an escalation of 7.5% per annum over the 1987 price under Ext. 15, would be sufficient and appropriate to arrive at the market value of acquired lands.” (emphasis added) 13 As stated earlier, much prior to the year 1986, overall growth and development in the area of village Karave commenced. As practically the entire area was notified for setting up satellite city of new 16 FH fa.24.95.doc Bombay from the year 1968, it can be safely assumed that there must be a steady escalation in the market value of the lands in the said village from the year 1970 onwards. Considering the purpose of acquisition of development of a planned city of new Bombay and the nature of development from 1970, there is every possibility of the market value skyrocketing. The Apex Court has observed that in case of rural area, escalation at the rate of Rs.7.5% per year can be taken and in case of urban area or semi-urban area it can be taken as 10% or 15%. In the present case, considering the very purpose of acquisition and the fact that steps were taken from the year 1970 for development of satellite city of new Bombay, though the area can be classified as urban, escalation can be taken only at the rate of 10% per annum. The reason is that we are dealing with escalation from 1970 to 1986. The Apex Court was dealing with a case of nineties. In the same decision of General Manager, Oil and Natural Gas Corporation Limited (supra), the Apex Court dealt with the issue whether the escalation should be calculated at a cumulative rate or a flat rate. In paragraph No.18, the Apex Court has observed thus: 17 FH fa.24.95.doc “18. 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 transaction which took place some years before the acquisition, the method adopted is to 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 method is shown by the following illustration (with reference to a 10% increase over a basic price of Rs.10 per square meter): Year By flat rate increase method By cumulative 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” (emphasis added) 14 Thus, the Apex Court held that the appropriate method is to calculate the yearly increase cumulatively. If the base value is taken as Rs.12/- per square meter in the year 1970, and if cumulative method is adopted, by giving escalation of 10 %, the market value of the year 1985 will be Rs.50.08/- per square meter. 18 FH fa.24.95.doc 15 Hence, this is a case where market value will have to be fixed at the rate of Rs.50/- per square meter. 16 Hence, I pass the following order: i. First Appeal No.24 of 1995 is dismissed with no order as to costs ; ii. Cross Objection (stamp) No. 9721 of 1995 is allowed; iii. The impugned award is modified by fixing the market value at the rate of Rs.50/- per square meter. iv. The Respondents – claimants will be entitled to statutory benefits under Section 23 (1A), 23 (2) and Section 28 of the said Act. v. The claimants will be entitled to costs of the reference as well as cross objection; vi. The exercise of determining the compensation payable as per the modified award shall be completed by the reference Court within a period of three months from the date on which writ of this judgment is received by the said Court; 19 FH fa.24.95.doc vii. Enhanced amount of compensation shall be deposited within a period of three months from the date on which determination of the amount is made