IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA. RFA No.181/1999 and RFA Nos.147,159 and 330/2000 Reserved on:4.8.2008 Decided on:12.9.2008 RFA No. 181/1999: Sarswati Rohal and others. …Appellants. Versus The Land Acquisition Collector and another. …Respondents RFA No.147/2000: Pushpa and others. Versus State of Himachal Pradesh and others. …Respondents. RFA No. 159/2000: Deepak Rohal and another. …Appellants. Versus State of Himachal Pradesh and others. …Respondents. RFA No. 330/2000: Deepak Rohal and another. …Appellants Versus State of Himachal Pradesh and others. …Respondents. Coram The Hon’ble Mr. Justice Rajiv Sharma, J. Whether approved for reporting ?1. yes. 1 Whether the reporters of Local Papers may be allowed to see the judgment? yes 2 RFA No. 181/1999 For the Appellants : Mr. B.S. Attri, Advocate. For the Respondents : Mr. Rajinder Dogra, Additional Advocate General with Mr. Vikas Rathore, Deputy Advocate General for respondent No.1. Mr. Sanjeev Kuthiala, Advocate for respondent No.2. RFA No.147, 159 and 330/2000 For the appellants: Mr. G.D.Verma, Sr. Advocate with Mr. Romesh Verma, Advocate. For the respondents: Mr. Rajinder Dogra, Additional Advocate General with Mr. Vikas Rathore, Deputy Advocate General for respondent No.1 and 3. Mr. V.D. Khidtta, Advocate for respondent No.2. Rajiv Sharma, J. Since all the appeals are directed against the common award dated 22.3.1999 passed by the District Judge, Shimla in Land Reference No. 38-S/4 of 1996, 36-S/4 of 1996, 39-S/4 of 1996 and 40-S/4 of 1996 as such all these appeals were heard together and are being disposed of by this common judgment. The brief facts necessary for the adjudication of these appeals are that the Government of Himachal Pradesh issued a notification under section 4 read with section 17 (4) of the Land Acquisition Act, 1894 (hereinafter referred to as ‘the Act’ for convenience sake) on 17.7.1993 for acquisition of 80-17 bighas land bearing khasra Nos. 593/327/6, 328, 330, 331,333 and 353 situated in Mauja Pateog, Tehsil and District Shimla for public purpose i.e. for construction of residential colony and development under Interim Development Plan in Kasumpati Zone. The notification was published in the Rajpatra on 14.8.1993 and in two daily newspapers, namely, Vir Partap and Himachal Times on 26.8.1993 and 25.8.1993, 3 respectively. The land was sought to be acquired under the provision of section 17 (4) of the Act also. Thereafter notifications under sections 6 and 7 were issued on 4.6.1994 and the same were published on 25.6.1994 in the Tribune and in Punjab Kesari on 28.6.1994. These were published in Rajpatra on 18.6.1994. Thereafter the land was measured and the Land Acquisition Collector in the presence of the interested persons and the representatives of the Himachal Pradesh Nagar Vikas Pradhikaran for whom the land was acquired. The Land Acquisition Collector vide award dated 27.6.1996 held that the entire notified land was Ghasni and that the average market value of Ghasni land was Rs. 1,53,074.40 paise. He observed that 40% deduction was required to be made in the compensation amount on account of development charges and after making the aforesaid deduction, he awarded compensation @ Rs. 91,845/-. Compensation for the trees standing on the acquired land was got assessed and on the basis of the assessment, a sum of Rs. 2,34,459.15 paise was awarded on account of the value of the timber trees in addition to the value of the land. A sum of Rs. 6,912/- was awarded on account of the value of structures. The claimants were held entitled to statutory benefits. The appellants (hereinafter referred to as ‘the claimants’ for convenience sake) filed reference under section 18 of the Land Acquisition Act, 1894 against the award dated 27.6.1996. These were separately registered. The learned District Judge framed the following issues for determination: 1. Whether the petitioners of all these petitions are entitled to enhanced amount of compensation on account of the acquisition of their land, if so, to what extent and amount? OPP 2. Relief. 4 The learned District Judge has recorded the following findings on the aforesaid issues: Issue No.1: Yes. The petitioners are entitled to enhanced compensation at the rate of Rs. 1,01,109/- per bigha. Relief: In view of the finding on issue No.1, the petitioners are entitled to enhanced amount of compensation per operative part of the award. The learned District Judge, Shimla vide award dated 22.3.1999 assessed the average market value of the land @ Rs. 3,85,909/- on the basis of Ex.PW-3/A, Ex.PW-5/A, Ex.PW-6/A, Ex.PW-8/A, Ex.PW-8/B, Ex.PW-10/A and Ex.PW-10/B. The learned District Judge deducted 50% on account of development charges and consequently the market value of the acquired land was held @ Rs. 1,92,954/- at the time of its acquisition. The learned District Judge has held the claimant entitled to other benefits accruing under the Land Acquisition Act, 1894. The claimants have filed these appeals under section 54 of the Land Acquisition Act, 1894 for the enhancement of the compensation. Mr. G.D.Verma, Senior Advocate with Mr. Romesh Verma, Advocate, and Mr. B.S. Attri, Advocate had strenuously argued that the market value assessed by the learned District Judge vide his award dated 22.3.1999 is inadequate. They also contended that the acquired land is in the vicinity which was already developed when the land of the appellants was acquired since according to them on the basis of earlier notification dated 29.12.1987, the land was acquired and was developed by the Himachal Pradesh Nagar Vikas Pradhikaran. 5 Mr. Rajinder Dogra, Additional Advocate General and Mr. V.D. Khidtta, Advocate had supported the award dated 22.3.1999. I have heard the learned counsel for the parties and perused the record carefully. It will be apt at this stage to take note that respondent No.2 Chief Administrator, Himachal Pradesh Nagar Vikash Pradhikaran was substituted vide order dated 24.12.2007 as Himachal Pradesh Housing and Urban Development Authority (HIMUDA). It will be appropriate at the threshold to take into consideration in the tabulated form, the date of sale, the area sold and the price fetched on the basis of sale deeds produced and proved before the learned District Judge: Sr No. Exhibit Mark Date of sale Area sold Price fetched. 1. PW-3/A 20.5.1988 1-0 Rs. 3,60,000/- 2. PW-5/A 14.7.1992 0-2 Rs.50,000/- 3. PW-6/A 10.3.1993 0-6 Rs. 1,00,000/- 4. PW-8/A 4.7.1992 0-4 Rs. 80,000/- 5. PW-8/B 17.6.93 0-4 Rs. 80,000/- 6. PW-10/A 22.4.1993 o-4 Rs. 81,000/- 7. PW-10/B 20.8.92 0-4 Rs. 98,000/- The learned District Judge on the basis of these sales as mentioned in the above tabulated form assessed the market value of the land to Rs. 3,85,909/-. However, the learned District Judge has deducted 50% of the amount on account of development charges. Consequently, as noticed above, the market value was assessed @ Rs. 1,92,954/- at the time of acquisition of the land. It is not disputed by the parties that the land was also acquired in the year 1987 for construction of a residential colony. The land acquired is in the close proximity to Bishop Cotton School. It has come in the 6 evidence that the bye-pass was also abutting the land of the claimants. PW-7 Krishan Singh has testified that the acquired land is situated adjacent to the Bishop Cotton School. It abuts the bye-pass. He has also testified that the acquired land falls within the jurisdiction of Municipal Corporation, Shimla. PW-8 Shanti Devi has deposed that the acquired land is situated below the Bishop Cotton School. She has further deposed that the acquired land is situated at a distance of 100-150 yards from the main bye-pass road. She has denied the suggestion that village Patyog is far away from main Shimla. PW-9 Nashewar Singh has deposed that the acquired land is adjacent to B.C.S. School and it abuts the main road i.e. bye-pass road. According to him, the value of land at the time of issuance of notification was not less than Rs. 50-60 thousand per biswa. He has further deposed that all types of facilities are available in the acquired land. It has come in the statements of the PWs, as discussed hereinabove, that the land of the claimants is situated near B.C.S. School and abuts the bye-pass road. The area in the vicinity of the acquired land was already developed since the same was acquired on the basis of the notification dated 29.12.1987. The area acquired is of the comparable value vis-à-vis the acquired land in the year 1987. RW-1 Manoj Kumar Malhotra has also admitted in his cross-examination that the acquired land abuts Shimla-Kasumpati bye-pass road. In his examination-in-chief, he has deposed that the land is steep and sloppy. The slope is of 40 degree and it is because of such high degree of slope that a lot of money has been spent on construction and developing of roads. He has denied the suggestion that the acquired land is connected with Phase-I and the facility of roads etc. already existed for the acquired land. The quality of the acquired land and the land already acquired in the year 1987 in the same Mohal was of similar value. The roads, 7 drainage, electricity etc. had already been provided in Phase-I. The land in question is in close proximity to Phase-I. The value of this land has also increased many fold since it is in immediate proximity to Phase-I. 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, 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 8 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 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 9 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 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.” 10 Now, the Court has to consider whether the learned District Judge could deduct 50% amount on account of development charges. Their Lordships of the Hon’ble Supreme Court in Chimanlal Hargovinddas versus Special Land Acquisition officer, Poona and another, (1988) 3 SCC 751 have held that when a large block of land is required to be valued, appropriate deduction has to be made for setting aside land for carving out roads, leaving open spaces and plotting out smaller plots suitable for construction of buildings. The extent of the area required to be set apart in this connection has to be assessed by the court having regard to the shape, size and situation of the concerned block of land etc. There cannot be any hard and fast rule as to how much deduction should be made to account for this factor. It is essentially a question of fact depending on the facts and circumstances of each case. It does not involve drawing upon any principle of law. Their Lordships have upheld the decision of the High Court whereby having regard to the facts and circumstances of the case 25% deduction was ordered to be made. Their Lordships have held as under: “The valuation made by the High Court has been faulted on three grounds: (1) The High Court should not have made a deduction of 25% in place of deduction made by the Trial Court at 20% to account for the factor pertaining to the largeness of the block of land under acquisition. (2) The High Court had grossly undervalued the land in determining the market value of the appellants' land at Rs. 7000 per acre. (3) There was no warrant for pushing down or depressing the market value of land as determined by the Trial Court in order to deduce the 'present value' by reference to Miram's Tables to account for the factor as regards the estimated time lag for development reaching 11 the block of land in question which was situated in the interior. Besides, the time lag of 12 years as estimated by the High Court was excessive and unrealistic. The first two grounds are devoid of merit. It is common knowledge that when a large block of land is required to be valued, appropriate deduction has to be made for setting aside land for carving out roads, leaving open spaces, and plotting out smaller plots suitable for construction of buildings. The extent of the area required to be set apart in this connection has to be assessed by the Court having regard to the shape, size and situation of the concerned block of land etc. There cannot be any hard and fast rule as to how much deduction should be made to account for this factor. It is essentially a question of fact depending on the facts and circumstances of each case. It does not involve drawing upon any principle of law. It cannot be said that the High Court has committed any error in forming the opinion that having regard to the facts and circumstances of the case 25% deduction was required to be made in this connection. The High Court cannot be faulted on this score.” In the present case the land of the claimants adjoins Phase-I, thus, it could not be treated differently. It was to be treated as a developed land and only minor deductions could be made out for improving the infrastructure. Their Lordships of the Hon’ble Supreme Court in Bhagwathula Samanna and others versus Special Tahsildar and Land Acquisition Officer Visakhapatnam Municipality, Visakhapatnam, (1991) 4 SCC 506 have laid down that in applying the principle of deduction it is necessary to consider all relevant factors. If smaller area within the large tract is already developed and situated in an advantageous position suitable for building purposes and have all amenities such as roads, 12 drainage, electricity, communications etc., then the principle of deduction simply for the reason that it is part of the large tract acquired, may not be justified. Their Lordships have held as under: “In awarding compensation in acquisition proceedings, the Court has necessarily to determine the market value of the land as on the date of the relevant Notification. It is useful to consider the value paid for similar land at the material time under genuine transactions. The market value envisages the price which a willing purchaser may pay under bona fide transfer to a willing seller. The land value can differ depending upon the extent and nature of the land sold. A fully developed small plot in an important locality may fetch a higher value than a larger area in an undeveloped condition and situated in a remote locality. By comparing the price shown in the transactions all variables have to be taken into consideration. The transaction in regard to smaller property cannot, therefore, be taken as a real basis for fixing the compensation for larger tracts of property. In fixing the market value of a large property on the basis of a sale transaction for smaller property, generally. a deduction is given taking into consideration the expenses required for development of the larger tract to make smaller plots within that area in order to compare with the small plots dealt with under the sale transaction. This principle has been stated by this Court in Tribeni Devi's case (AIR 1972 SC 1417). The principle of deduction in the land value covered by the comparable sale is thus adopted in order to arrive at the market value of the acquired land. In applying the principle it is necessary to consider all relevant facts. It is not the extent of the area covered under the acquisition, the only relevant factor. Even in the vast area there may be land which is fully developed having all amenities and situated in an advantageous position. If smaller area within the large tract is already developed and suitable for building purposes and have 13 in its vicinity roads, drainage, electricity, communications etc. then the principle of deduction simply for the reason that it is part of the large tract acquired, may not be justified. The national highway runs very near to the proposed Port-trust colony. The lands acquired already for the South Eastern Railway Staff Quarters lie to the southern side of the land under acquisition. The town planning trust road runs on the northern side of the land under acquisition. The colony is in the fast developing part of the municipal town. The plot of Ac. 1.68 cents in Survey No. 2/2A acquired for the formation of the diversion road is adjacent to built-in-area. The land involved in these cases is of even level and fit for construction without the necessity for levelling or reclamation. The High Court has itself concluded on the evidence that the lands covered by the acquisition are located by the side of the National Highway and the southern railway staff quarters with the town planning trust road on the north. The neighbouring areas are already developed ones and houses have been constructed, and the land has potential value for being used as building sites. Having found that the land is to be valued only as building sites and stated the advantageous position in which the land in question lies though forming part of the larger area, the High Court should not have applied the principles of deduction. It is not in every case that such deduction is to be allowed. Where the acquired land is in the midst of already developed land with amenities of roads, electricity etc., the deduction in the value of the comparable land is not warranted. The proposition that large area of land cannot possibly fetch a price at the same rate at which small plots are sold is not absolute proposition and in given circumstances it would be permissible to take into account the price fetched by the small plots of land. If the larger tract of land because of advantageous 14 position is capable of being used for the purpose for which the smaller plots are used and is also situated in a developed area with little or no requirement of further development, the principle of deduction of the value for purpose of comparison is not warranted. With regard to the nature of the plots involved in these two cases, it has been satisfactorily shown on the evidence on record that the land has facilities of road and other amenities and is adjacent to a developed colony and in such circumstances it is possible to utilise the entire area in question as house sites. In respect of the land acquired for the road, the same advantages are available and it did not require any further development. We are, therefore, of the view that the High Court has erred in applying the principle of deduction and reducing the fair market value of land from Rs. 10/- per sq. yard to Rs. 6.50 paise per sq. yard. In our opinion, no such deduction is justified in the facts and circumstances of these cases. The appellants, therefore, succeed.” The land of the claimants is in advantageous position. It abuts Bishop Cotton School and National Highway connecting