IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA. RFA No.186/2003 Reserved on:17.7.2008 Decided on:11.9.2008 Padmawati and others …Appellant. Versus State of Himachal Pradesh and another. …Respondents Coram The Hon’ble Mr. Justice Rajiv Sharma, J. Whether approved for reporting ?1. yes For the Appellants : Mr. B.M. Chauhan, Advocate. For the Respondents : Mr. Rajinder Dogra, Additional Advocate General Rajiv Sharma, J. This Regular First Appeal is directed against the award dated 3.3.2003 passed by the learned Additional District Judge, Shimla in Land Reference Petition No. 24-S/4 of. The brief facts necessary for the adjudication of this appeal are that the State Government has acquired the appellant’s land vide notification dated 22.2.1996 issued under section 4 of the Land Acquisition Act, 1894 (hereinafter referred to as ‘the Act’ for convenience sake). The notifications under sections 6 and 7 were issued on 20.3.1997. The 1 Whether the reporters of Local Papers may be allowed to see the judgment? yes 2 learned Land Acquisition Collector has awarded the following compensation in respect of the acquired land on 24.11.1997: Classification of land Rates per bighas Kiar Awal Rs. 1,306-80 Kiar Doem Rs. 871.20 Bakhal Awal Rs. 599.00 Karali Awal, Doyam and Bajer Kadeem Rs. 500.00 The predecessor-in-interest of the appellants filed reference under section 18 of the Act before the Land Acquisition Collector. The same was referred by the Land Acquisition Collector to the learned Additional District Judge, Shimla and was registered as reference petition No. 24-S/4 of 1999. The learned Additional District Judge has framed the following issues: 1. Whether the petitioner is entitled to the enhanced amount of compensation as alleged? OPP 2. Relief. The learned Additional District Judge has recorded the following findings on the aforesaid issues: Issue No.1: Yes. Relief: Petition allowed per operative part of award. The learned Additional District Judge held the appellants entitled to compensation @ Rs. 6,000/- per biswa with corresponding statutory benefits. Sh. Narinder Singh Rawat expired on 8.3.2003. The present appeal has been preferred by the claimants being the legal heirs of late Sh. Narinder Singh Rawat against the award dated 3.3.2003. 3 Mr. B.M. Chauhan, Advocate had strenuously argued that his clients were entitled to Rs. 20,000/- per biswa instead of Rs. 6,000/- as awarded by the learned Additional District Judge. He has placed strong reliance on Ex. PW-2, Ex.PW-3/A and Ex.PW-4/A to substantiate that the market value of the land was Rs. 20,000/- per biswa and the compensation awarded by the learned Additional District Judge was inadequate. Mr. Rajinder Dogra, Additional Advocate General has supported the award dated 3.3.2003. I have heard the learned counsel for the parties and perused the record carefully. The acquired land is located by the side of Rohru-Chirgaon Road. This land is near Rohru town. Rohru is a Notified Area Committee (NAC). Rohru town is an up-coming town. It is a Tehsil headquarters. There are important offices situated at Rohru. Their Lordships of the Hon’ble Supreme Court in the General Manager, Oil and Natural Gas Corporation Limited versus Rameshbhai Jivanbhai Patel and another, 2008 (11) Scale 637 have laid down the following factors to be considered while determining the market value: “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, 4 as compared to rural areas. In some pockets in big cities, due to rapid development and high demand for land, the escalations in prices have touched even 30% to 50% or more per year, during the nineties. 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 increase, or any specific evidence relating to the actual increase in prices, then the increase to be applied would depend upon the same. 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 acquisition), where there is no 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 precedes the subject acquisition by only a few years, that is upto 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 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 5 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. Much more unsafe is the recent trend to determine the market value of acquired lands with reference to future sale transactions or acquisitions. To illustrate, if the market value of a land acquired in 1992 has to be determined and if there are no sale transactions/acquisitions of 1991 or 1992 (prior to the date of preliminary notification), the statistics relating to sales/acquisitions in future, say of the years 1994-95 or 1995-96 are taken as the base price and the market value in 1992 is worked back by making deductions at the rate of 10% to 15% per annum. How far is this safe? One of the fundamental principles of valuation is that the transactions subsequent to the acquisition should be ignored for determining the market value of acquired lands, as the very acquisition and the consequential development would accelerate the overall development of the surrounding areas resulting in a sudden or steep spurt in the prices. Let us illustrate. Let us assume there was no development activity in a particular area. The appreciation in market price in such area would be slow and minimal. But if some lands in that area are acquired for a residential/commercial/industrial layout, there will be all round development and improvement in the infrastructure/amenities/facilities in the next one or two years, as a result of which the surrounding lands will become more valuable. Even if there is no actual improvement in infrastructure, the potential and possibility of improvement on account of the proposed residential/commercial/ industrial layout will result in a higher rate of escalation in prices. As a result, if the annual increase in market value was around 10% per 6 annum before the acquisition, the annual increase of market value of lands in the areas neighbouring the acquired land, will become much more, say 20% to 30%, or even more on account of the development/proposed development. Therefore, if the percentage to be added with reference to previous acquisitions/sale transactions is 10% per annum, the percentage to be deducted to arrive at a market value with reference to future acquisitions/sale transactions should not be 10% per annum, but much more. The percentage of standard increase becomes unreliable. Courts should therefore avoid determination of market value with reference to subsequent/future transactions. Even if it becomes inevitable, there should be greater caution in applying the prices fetched for transactions in future. Be that as it may.” It has come in the statement of PW-1 that the acquired land could easily be used by him for commercial purposes i.e. for construction of shops etc. He has further stated that the School and Degree College are in close proximity to the acquired land. PW-2 Smt. Rekha Sharma has proved the sale deed Ex.PW-2/A. This land is situated in Notified Area Committee, Rohru. The value of one biswa of land comes to Rs. 10,000/- as per Ex.PW-2/A. PW-3 Surender Kumar has proved sale deed Ex.PW- 3/A dated 18.9.1996. It is evident from sale deed Ex.PW-3/A that the land measuring 93.93 square meters was sold for a consideration of Rs. 55,000/- on 18.9.1996. It establishes that the value of 2.2 biswas of land comes to Rs. 22,000/- per biswa. The claimants had filed assessment of average of one year with effect from 16.6.1996 to 15.6.1997 of mauza Thamtari Ex.PW-4/A wherein the value of Bakhal Awal has been mentioned as Rs. 60,000/- per biswa. In Ex.PW-5/A, which is one year assessment of Notified Area Committee, Rohru with effect from 16.6.1995 to 15.6.1996 the average value of one biswa had been mentioned as Rs. 7 7,373.32 paise. The acquired land is in close proximity of Rohru Bazar. The rates prevalent in Notified Area Committee, Rohru are comparable with the acquired land. The value of one biswa as per Ex.PW-2/A in Notified Area Committee is Rs. 10,000/- per biswa. The sale deed Ex.PW- 3/A proves that the value of 2.2 biswas of land comes to Rs. 22,000/- per biswa. The average value of Bakhal Awal as per Ex.PW-4/A of Mauza Thamtari is Rs. 60,000/- per biswa. The learned Additional District Judge has wrongly discarded Ex.PW-2/A, Ex.PW-3/A and Ex.PW-4/A while determining the market value of the acquired land. He has only considered and relied upon Ex.PW-5/A while determining the market value @ Rs. 6,000/- per biswa. The sale deeds Ex.PW-2/A and Ex.PW-3/A pertain to Notified Area Committee, Rohru. The sale deeds are in proximity to the date of issuance of notification under section 4 of the Act. The acquired land is also situate near the Notified Area Committee, Rohru. Cumulatively taking into consideration Ex. PW-2/A, Ex.PW-3/A, Ex.PW-4/A and Ex.PW-5/A, the average market value would be Rs. 25,000/- per biswa. However, the claimants can only be held entitled to Rs. 20,000/- per biswa as claimed for by them in the appeal. In view of the aforesaid reasoning the appeal is allowed. The claimants are held entitled to Rs. 20,000/- per biswa for the acquired land corresponding with statutory benefits under the Land Acquisition Act, 1894. There shall be no order as to costs. 11.9.2008 (Rajiv Sharma ), J. *awasthi*