THE HON’BLE SRI JUSTICE GODA RAGHURAM AND THE HON’BLE SRI JUSTICE SANJAY KUMAR L.A.A.S. NOS.195, 212, 215, 219, 220, 226, 234 AND 305 OF 2005 DATED JANUARY, 2011 BETWEEN Avuta Rattamma (died) and Others. …Appellants/Claimants And The Sub-Collector and Land Acquisition Officer, Vijayawada. …Respondent/Referring Officer THE HON’BLE SRI JUSTICE GODA RAGHURAM AND THE HON’BLE SRI JUSTICE SANJAY KUMAR L.A.A.S. NOS.195, 212, 215, 219, 220, 226, 234 AND 305 OF 2005 COMMON JUDGMENT: (Per SK,J) The State acquired Ac.127.86 cents of land in Nunna Village of Krishna District for construction of a 400 K.V. Sub-Station under the Central Transmission Project of the National Thermal Power Corporation. The notification under Section 4(1) of the Land Acquisition Act, 1894 in this regard was published on 23.02.1999. After due enquiry the Land Acquisition Officer-cum-Sub Collector, Vijayawada, by Award No.4/89 dated 15.07.1989, fixed the market value of the acquired land at Rs.45,000/- per acre. Aggrieved by this valuation, various land owners sought reference under Section 18 of the Land Acquisition Act, 1894. The reference Court of the learned Senior Civil Judge, Vijayawada, passed separate Orders and Decrees dated 29.01.2002 in separate batches of O.Ps. By the said Orders, the reference Court confirmed the determination of the market value by the Land Acquisition Officer. The present appeals are filed by some of the aggrieved claimants in such O.Ps. challenging the confirmation. L.A.A.S.Nos.195/2005 and 215/2005 are filed by the claimants in O.P.Nos.166/1990 and 169/1990 against the common Order and Decrees dated 29.01.2002 passed by the reference Court. L.A.A.S.Nos.212/2005, 220/2005 and 234/2005 are filed by the claimants in O.P.Nos.154/1990, 161/1990 and 162/1990 aggrieved by the separate common Order and Decrees dated 29.01.2002 passed by the learned reference Court in the said O.Ps. L.A.A.S.Nos.219/2005, 226/2005 and 305/2005 are filed by the claimants in O.P.Nos.144/1990, 152/1990 and 149/1990 against the separate common Order and Decrees dated 29.01.2002 passed therein by the reference Court. Before the reference Court, the appellants had claimed that the market value of the acquired land would be Rs.3,00,000/- per acre. They adduced oral and documentary evidence in support of their claim. Though separate common orders were passed by the reference Court in different batches of O.Ps., the reasoning is one and the same in all the orders. The reference Court took note of the fact that the Land Acquisition Officer had relied upon sale item No.1/89, relating to an extent of Ac.1.02 cents situated in R.S.No.708/1B of Nunna Village, according to which the market value was Rs.45,000/- per acre. This land was at a distance of 362 meters from the acquired land. In so far as the documents relied upon by the claimants were concerned, the reference Court eschewed from consideration the documents relating to lands which did not form part of the land acquired but were adjacent thereto. Further, these transactions were post notification and pertained to very small extents. They were therefore not a proper indicia for determining the true market value as on the date of the acquisition of the subject acquired land. However, the sale transaction dated 13.12.1988 relied upon by the claimants was found to be relevant as it pertained to part of the acquired land. This sale transaction related to an extent of Ac.0.90 cents and reflected a market value of Rs.80,000/- per acre. Another sale transaction dated 14.12.1988 relied upon by the claimants was also found relevant as this land too was adjacent to the acquired land. This transaction put the market value of the land at Rs.90,000/- per acre. These transactions, though considered by the Land Acquisition Officer, had been rejected on the ground that they were fabricated and did not reflect the true market value. Another ground for rejection was that they pertained to smaller extents. Relevant to note, the acquisition proceedings according to the reference Court commenced after 08.10.1988 but the notification under Section 4(1) of the Land Acquisition Act, 1894 was published only on 23.02.1989. Further, this reasoning of the Land Acquisition Officer also tainted sale transaction No.1/89 which was relied upon by him for fixation of the market value at Rs.45,000/- per acre. Therefore, the reference Court was correct in holding that the rejection of these sale transactions by the Land Acquisition Officer, on the ground that they were fabricated being subsequent to the commencement of the acquisition proceedings, was not proper. Further, the reference Court noticed that some of the extents acquired from various claimants in the O.Ps. were lesser in size than those covered by these two sale transactions. It therefore decried the rejection of these transactions by the Land Acquisition Officer on the said ground. However, as the claimants themselves contended that the locality was being developed for residential/commercial purposes and that their agricultural land had to be made fit to be used as house sites by providing necessary amenities, the reference Court, placing reliance on a Division Bench Judgment of this Court in CHADA DHARMAPAL REDDY v. REVENUE DIVISIONAL OFFICER-CUM-LAND ACQUISITION OFFICER, MIRYALAGUDA[1], directed deduction at the rate of 50% of the gross market value reflected by the two sale transactions. The reference Court was of the opinion that nearly 1/3rd of the acquired land would have to be foregone for development. Further, as other facilities such drains, electricity, water supply, etc. had to be provided, it opined that 20% of the value of the land would have to be deducted. Accepting the market value reflected by the two sale transactions referred above, the reference Court concluded that a deduction of 50% of such market value had to be made and thereby arrived at the figure of Rs.45,000/- per acre, which was the value fixed by the Land Acquisition Officer, albeit for different reasons altogether. Before this Court, the appellants restricted their claim to a market value of Rs.80,000/- per acre without deductions. Sri K.V.Satyanarayana, learned counsel appearing for the appellants, contended that the reference Court, having rightly placed reliance upon the two sale transactions reflecting a market value of Rs.80,000/- to Rs.90,000/- per acre, erred in effecting deductions therefrom. Learned counsel argued that deductions were not invariable in every case and that when agricultural land was subjected to determination of market value no deductions were warranted. He pointed out that the Land Acquisition Officer had not resorted to making deductions towards development and therefore, the reference Court ought not to have ventured to do so. Refuting these contentions, the learned Government Pleader for Appeals submitted that the two sale transactions were not comparable as they pertained to small extents and therefore, the reference Court had rightly effected deductions from the market value obtaining therein for the purpose of arriving at the proper market value of the acquired agricultural land. He pointed out that the Supreme Court had advocated that in deserving cases, the deductions could go up to as high as 53% of the gross market value. He therefore supported the common Orders and Decrees passed by the reference Court and prayed for dismissal of the appeals. It is no doubt true that there can no hard and fast rule that sales pertaining to extents smaller than the acquired land should invariably be eschewed from consideration. It would depend upon the facts of the case as to whether there is comparability between the lands in terms of potential for being used for the same purpose. Reference in this regard may be made to the observations of the Supreme Court in ADMINISTRATOR GENERAL OF WEST BENGAL v. COLLECTOR, VARANASI[2]: "It is trite proposition that prices fetched for small plots cannot form safe basis for valuation of large tracts of land as the two are not comparable properties. The principle that evidence of market value of sales of small, developed plots is not a safe guide in valuing large extents of land has to be understood in its proper perspective. The principle requires that prices fetched for small developed plots cannot directly be adopted in valuing large extents. However, if it is shown that the large extent to be valued does admit of and is ripe for use for building purposes; that building lots that could be laid out on the land would be good selling propositions and that valuation on the basis of the method of a 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 notification would be relevant. In such a case, necessary deductions for the extent of land required for the formation of roads and other civic 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 Brig. Sahib Singh Kalha vs. Amritsar Improvement Trust (See (1982) 1 SCC 419 : (AIR 1982 SC 940)), this Court indicated that deductions for land required for roads and other developmental expenses can, together, come up to as much as 53%." It was therefore incumbent upon the reference Court to undertake an enquiry as to whether the lands covered by the two sale transactions relied upon by it were developed for the purpose of house sites and whether the acquired land had similar potential. If so, it had to undertake a further enquiry as to the quantum of deduction warranted for the purpose of development. However, no such exercise is manifest from the common Orders under appeal. The reference Court having stated at one stage that 20% of the value of the land had to be deducted towards development charges thereafter effected deductions at 50% of the gross market value. Whether deduction of 1/3rd of the land for development purposes translated into the additional 30% is not spelt out in the Orders. Even if so, the methodology followed by the reference Court in this regard remains shrouded in mystery. Though it relied upon the Division Bench Judgment of this Court in CHADA DHARMAPAL REDDY1, the reference Court lost sight of the principles extracted therein from CHIMANLAL v. SPECIAL LAND ACQUISITION OFFICER, POONA[3]. These principles to the extent relevant read as under: “……… 11. Having identified the instances which provide the index of market value the price reflected therein may be taken as the norm and the market value of the land under acquisition may be deducted by making suitable adjustment for the plus and minus factors vis-a-vis land under acquisition by placing the two in juxtaposition. 12. A balance sheet of plus and minus factors may be drawn for this purpose and the relevant factors may be evaluated in terms of price variation as a prudent purchaser would do. 13. The market value of the land under acquisition has thereafter to be deducted by loading the price reflected in the instance taken as norm for plus factors and unloading it for minus factors. Plus factors:- 1. Smallness of size. 2. Proximity to a road. 3. Frontage on a road. 4. Nearness to developed area. 5. Regular shape. 6. Level vis-a-vis land under acquisition. 7. Special value for an owner of an adjoining property to whom it may have some very special advantage. 14. The exercise indicated in clauses (11) to (13) has to be undertaken in a common sense mariner as a prudent man of the world of business would do. We may illustrate some such illustrative (not exhaustive) factors: 15. The evaluation of these factors of course depends on the facts of each case. There cannot be any hard and fast or rigid rule. Common sense is the best and most reliable guide. For instance, take the factor regarding the size. A building plot of land say 500 to 1000 sq. yards cannot be compared with a large tractor block of land of say 1000 sq. yards or more. Firstly while a smaller plots is within the reach of many, a large block of land will have to be developed by preparing a lay out, carving out roads, leaving open space, plotting out smaller plots, waiting for purchasers (meanwhile the invested money will be locked up) and the hazards of an entrepreneur. The factor can be discounted by making a deduction by way of an allowance at an appropriate rate ranging approximately between 20% to 50% to account for land required to be set apart for carving out lands and plotting out small plots. The discounting will to some extent also depend on whether it is a rural area or urban area, whether building activity is picking up and whether waiting period during which the capital of the entrepreneur would be locked up, will be longer or shorter and the attendant hazards. Minus factors: 1. largeness of area, 2. situation in the interior at a distance from the road, 3. narrow strip of land with very small frontage compared to depth, 4. lower level requiring the depressed portion to be filled up, 5. remoteness from developed locality, 6. some special disadvantageous factor which would deter a purchaser. 16. Every case must be dealt with on its own fact pattern bearing in mind all these factors as a prudent purchaser of land in which position the judge must place himself. ………" The Division Bench, basing on the precedents considered by it, finally concluded that deductions had to be made while computing the market value of agricultural land which required basic facilities such as roads, electricity, water, drainage, etc., for conversion into house sites on two counts. One is for applying the price fetched by a small plot to a large extent and the other is to account for the area required for formation of roads and other civic amenities. The reference Court must therefore necessarily spell out as to how it arrived at a particular quantum or percentage for deduction towards development charges and cannot base it on its ipse dixit. The observations of the Supreme Court in C.R.NAGARAJA SHETTY v. SPECIAL LAND ACQUISITION OFFICER AND ESTATE OFFICER[4] in this regard are apposite: “8. The High Court has directed the deduction of Rs.25/- per square feet. Unfortunately, the High Court has not discussed the reason for this deduction of Rs.25/- per square feet nor has the High Court relied on any piece of evidence for that purpose. It is true that where the lands are acquired for public purpose like setting up of industries or setting up of housing colonies or other such allied purposes, the acquiring body would be entitled to deduct some amount from the payable compensation on account of development charges, however, it has to be established by positive evidence that such development charges are justified. The evidence must come for the need of development contemplated and the possible expenditure for such development. We do not find any such discussion in the order of the High Court.” It is no doubt true that deductions are not invariable in every case and it would dependent upon facts and circumstances of each case. However, when a developed house site, being a much smaller extent as compared to an agricultural land, is taken into account for the purpose of computing the market value of the agricultural land, deductions necessarily have to be made to bring about parity. It may be noted that the claimants in the present cases themselves conceded that their lands required to be developed for being used as house-sites. This was therefore not a case where deductions were not warranted on facts. Reference may also be made to SUBH RAM v. HARYANA STATE[5], wherein the Supreme Court opined that such deduction has nothing to do with the purpose for which the land was acquired and that the percentage of such deduction is with reference to the price of the smaller developed plot to work back the value of the large tract of undeveloped land. The Supreme Court further pointed out that where value of an acquired agricultural land was determined with reference to the sale price of a neighbouring agricultural land, no deduction needs to be made towards development cost. That however is not the situation in the cases on hand. Both the sale transactions relied upon by the reference Court ostensibly pertained to developed plots, smaller in size, and the same were taken into account for determining the market value of the acquired agricultural land. That being so, deductions necessarily had to be effected. However, the exercise by the reference Court in baldly arriving at the figure of 50% towards such deduction without discernible basis cannot be sustained. This Court is therefore left with no option but to set aside the common Orders and Decrees passed by the reference Court in the O.Ps. under appeal and remand the matter to the reference Court for consideration afresh for determining the proper percentage of deduction to be effected on the basis of evidence. The reference Court may permit the parties to adduce necessary further evidence, if warranted, for this purpose. This exercise shall be completed expeditiously and preferably within six (6) months from the date of receipt of a copy of this order. The Appeals are accordingly allowed to the extent indicated above but in the circumstances, without any order as to costs. ______________________ GODA RAGHURAM, J. ____________________ SANJAY KUMAR, J. _________ JANUARY, 2011. VGSR [1] 1998 (1) ALT 47 (DB) [2] AIR 1988 SC 943 [3] AIR 1988 SC 1652 [4] 2009 AIR SCW 2184 [5] 2010 (1) ALD 89 (SC)