IN THE HIGH COURT OF GUJARAT AT AHMEDABAD FIRST APPEAL NO.3375 OF 1997 WITH FIRST APPEALS NOS. 3376 TO 3790 OF 1997 with Civil Application No. 11452 of 1997 to Civil Application No.11467 of 1997. with Civil Application No.8277 of 1998 to Civil Application No.8290 of 1998 For Approval and Signature: Hon'ble MR.JUSTICE J.M.PANCHAL and Hon'ble MR.JUSTICE M.H.KADRI ============================================================ 1. Whether Reporters of Local Papers may be allowed to see the judgements? 2. To be referred to the Reporter or not? 3. Whether Their Lordships wish to see the fair copy of the judgement? 4. Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the Civil Judge? 1 to 6 : No. -------------------------------------------------------------- SARKAR Versus PREMJI DEVJIBHAI -------------------------------------------------------------- Appearance: First Appeals Nos. 3375 of 1997 to 3382 of 1997 Mr. S.N. Shelat, Additional Advocate General with Mr. P.G. Desai, Government Pleader, for the appellants. Mr.P.M. Thakker for M/s.Thakkar Associates for the respondents. First Appeals Nos. 3383 of 1997 to 3390 of 1997 Mr. S.N. Shelat, Additional Advocate General with Mr. U.A. Trivedi, Additional,Government Pleader, for the appellants. Mr.P.M. Thakker for M/s.Thakkar Associates for the respondents. Civil Applications Nos. 11452 of 1997 to Civil Applications Nos.11467 of 1997. Mr. U.A. Trivedi, AGP, for the applicants Mr.P.M. Thakker for M/s.Thakkar Associates for the respondents. -------------------------------------------------------------- CORAM : MR.JUSTICE J.M.PANCHAL and MR.JUSTICE M.H.KADRI Date of decision: 18/11/98 COMMON ORAL JUDGMENT : (Per: Panchal, J.) 1. All these appeals, which have been filed by the State of Gujarat and others under Section 54 of the Land Acquisition Act, 1894, ('Act' for short), read with Section 96 of the Code of Civil Procedure, 1908, are directed against the common judgment and award dated May 9, 1997, rendered by the learned District Judge, Amreli, in Land Reference Cases Nos. 54 of 1989 to 69 of 1989 respectively and, therefore, we propose to dispose of all these appeals by this common judgment. 2. The State Government was satisfied that the lands situated at village Vadia were likely to be needed for public purpose, i.e. Vadia Irrigation Scheme. Preliminary enquiry was held and joint measurement of the lands to be acquired was made on January 28,1987. Thereafter, possession of the lands to be acquired was handed over to the State Government on March 5, 1987. The State Government published notification under Section 4 of the Act on July 9, 1987, whereas declaration under Section 6 of the Act was made on January 12,1988 after receipt of report under Section 5(A)(2) of the Act. Interested persons were thereafter served with notices under Section 9 of the Act for determination of compensation to be paid to them. The interested persons appeared before the Land Acquisition Officer and without claiming any specific amount of compensation requested the Land Acquisition Officer to award compensation at a higher rate. In view of the materials placed before him, the Land Acquisition Officer, by award dated March 8, 1989, offered compensation at the rate of Rs.300 per Are for the irrigated lands and Rs.200/- per Are for the non-irrigated lands. He also offered Rs.1 per Are for the waste land. The claimants were dissatisfied by the offer of the the Land Acquisition Officer. Therefore, they sought references and, accordingly, the references were made by the Land Acquisition Officer to the District Court, Amreli, at Amreli. Those references were numbered as Land Reference Cases No. 54 of 1989 to 69 of 1989. In the reference applications, it was pleaded by the claimants that the lands acquired had potentiality of being used either for building purpose or for commercial purpose and, therefore, the offer, which was made by the Land Acquisition Officer was inadequate. It was claimed that, as the lands situated in the nearby area were sold at higher rate, they were entitled to higher compensation. It was stressed by them that the acquired lands were very fertile and the yield being very rich, they should have been awarded compensation at much higher rate. By filing reference applications, the claimants claimed compensation at the rate of Rs.1200/per Are. 3. The reference applications were contested by the State Government and others. In the reply, it was pleaded by the State Government that, since the claimants had not led any evidence before the Land Acquisition Officer in support of their claim regarding higher compensation, the reference applications were liable to be rejected. What was highlighted therein was that the offer which was made by the Land Acquisition Officer was just and adequate in view of the materials placed before him and, therefore, the references made to the Court should be rejected. The learned Assistant Judge, Amreli, who heard the Land Reference Cases, decided them on different dates. The learned Judge, first of all, decided Land Reference Case No.69/89 from which First Appeal No.1885 of 1995 was filed in the High Court. Relying on that very judgment, the learned Judge decided the subsequent Land Reference Cases. The learned Judge adopted the method of sale instances for determining the market value of the lands. However, he lost the sight of the fact that the documents Exh.14 and 15 relied upon by him were not proved nor brought on record in the manner required by Section 68 of the Indian Evidence Act. Those documents were referred to in the deposition of one of the claimants, i.e. Mr. Premji Devji, who was examined at Exh.13 and though the said documents were produced by the witness at Marks 10/3 and 10/4 they were not exhibited during the course of examination in chief of the said witness. The learned Judge awarded compensation at the rate of Rs.900/- per Are for the irrigated lands and Rs.600/- per Are for the non-irrigated lands by judgment and award dated October 7, 1994. 4. Feeling aggrieved by the said award, the State Government preferred First Appeals Nos.1885 of 1995 to 1900 of 1995 in the High Court. Neither cross objections were filed by the claimants in these appeals nor cross appeals were filed by the claimants against the judgment and award dated October 7, 1994 rendered by the learned Assistant Judge. The Division Bench (Coram:N.J.Pandya & S.K. Keshote, JJ.) which heard the appeals noted that the documents Exh.14 and 15 relied upon by the claimants were not proved as required by the provisions of Indian Evidence Act, nor the contents thereof were admitted by the State. Another infirmity in the judgment of the Reference Court which was noticed was that the reference court had divided the trees into two categories, namely, fruit bearing and non-fruit bearing trees and though the method of sale instance was adopted with regard to fruit bearing trees for ascertaining the market value of the lands acquired, the Reference Court had proceeded to offer the worth of yield on annual basis and capitalized the same. The High Court was, therefore, of the opinion that the matters deserved to be remanded. In view of this conclusion, the Division Bench remanded all the references to the Reference Court by judgment dated October 13, 1995 and made the following observations in paragraph 10 of the judgment. "10. In our opinion, when documents Exhs. 15 and 16 mark 10/3 & 10/4 are held by us not to have been properly exhibited, opportunity is required to be given to the claimants to prove these documents and hence, the matters are going back to the trial Court where the parties are at liberty to produce documentary evidence and thereafter to lead evidence in support thereof. In that view of the matter, the claimants will also have a right to adduce evidence in support of the documents at marks 10/3 & 10/4 as well as other documents that they might chose to produce in response to the additional evidence which the State wants to produce and accordingly the case may be taken from the stage of recording of evidence after issues are framed. In the circumstances, both the parties are at liberty to examine their respective witnesses. In view of the fact that the matters are very old, the Reference Court shall give top priority to the cases and parties to the References shall also co-operate and shall see that the matters are disposed of as early as possible. In any case, the reference Court shall decide the matter on or before 31st January 1996. With a view to save further time on service of notice, the parties are directed to appear before the Reference Court on 15th of November 1995 and get the date fixed for proceeding with the matter further. The office is directed to send the original record to the trial court so that the said dead-line can be met with by both the sides. The awards of the Reference Court in all these matters are set aside. The appeals stand allowed accordingly. The matters stand remanded to the Reference Court and it shall decide the same keeping in mind the observations made hereinabove and in accordance with the evidence produced before it and of course in accordance with law. There shall be no order as to costs. The Civil Applications are also disposed of accordingly." 5. On remand. the claimants examined witness Mansukhbhai Mohanbhai at Exh.123. He produced sale deed at Exh.124 executed with reference to Survey No.238/1 of village Vadia on January 22, 1979. The rate reflected in the deed was Rs.709.96 per Are. Another witness examined by the claimants, i.e, Purshottambhai Devji, produced sale deed Exh.39 relating to Survey No.339 of village Vadia on March 12,1987, wherein, the price reflected was Rs.710 per Are. The claimants also led evidence regarding income derived from fruit bearing trees and claimed compensation on yield basis in Land Reference Cases Nos. 59/89, 62/89 and 65/89. 6. On behalf of the State Government, sale instances at Exh.77, Exh.131, Exh.137 were produced. Exh.77 related to sale of Survey No.43 of village Vadia on January 16, 1987. It showed that the land admeasuring 1 Hectare 17 Are 36 Sq.mtr was sold at the rate of Rs.204.50 per Are. It may be mentioned that the sale deed was proved by witness, Babubhai Ranchhodbhai, who was examined at Exh.134. Another witness Chhaganbhai Mohanbhai examined at Exh.128 proved sale of Survey No.347 and 343/2 of village Vadia on October 6, 1986. The said sale instance showed that 90 Are 68 Sq.mtrs of land was sold at the rate of Rs.269.57 ps per Are. Another witness Dhirubhai examined at Exh.129 proved sale of Survey No.10 of village Vadia on March 25, 1983 and produced sale deed at Exh.131. That sale deed indicated that the lands admeasuring 80.94 Are were sold at the rate of Rs.185.32 ps per Are. On behalf of the State Government, witness Vithalbhai Ranchhodbhai was also examined at Exh.135 who produced deed dated December 12,1985 at Exh.137 regarding sale of Survey No.166 of village Morwada. The said deed reflected that the lands admeasuring 60.70 Are were sold at the rate of Rs.181.22 ps per Are. 7. On consideration of the evidence led by the parties, the Reference Court has awarded compensation at the rate of Rs.1125 per Are for the irrigated lands and Rs.825 per Are for the non-irrigated lands. In the three Land Reference Cases i.e. Land Reference Cases Nos. 59/89, 62/89, and 65/89, the Reference Court determined compensation payable to the claimants on yield basis and has awarded Rs.54,58,800/-, Rs.27/04,000/-, and Rs.28,92,000/- respectively, by judgment and award dated May 9, 1997, giving rise to the present appeals. 8. Mr. S.N.Shelat, learned Additional Advocate General, appearing with Mr.Prashant G. Desai, learned Government Pleader, and Mr. U.A. Trivedi, learned Assistant Government Pleader, submitted that method of capitalising the actual, or immediately prospective, profits or rent of number of years' purchase should not have been resorted to by the Reference Court for the purpose of ascertaining market value of the lands in three cases only when evidence of comparable sales of lands is not only on the record but taken into consideration with respect to other lands and, therefore, the impugned award should be set aside. It was claimed that the method of ascertaining the market value of the lands acquired on the date of notification under Section 4(1) of the Act on yield basis should not have been resorted to when the sale instances were available for the purpose of ascertaining the market value of the lands acquired. It was pleaded that the Reference Court erred in law in relying upon the sale instances relating to Survey Nos. 238/1 and 339 of village Vadia for ascertaining the market value of the lands acquired in as much as these sale instances related to small area and it was established that as they were of great advantage to the purchasers, a special price was paid by the purchasers. It was brought to the notice of the Court that, during initiation of the proceedings for acquisition of the lands in question, the abovereferred to sales had taken place and, therefore, without making proper deduction, those instances should not have been relied upon by the Reference Court for the purpose of determining the market value of the lands acquired. What was stressed was that the sale instances relied upon by the Government and produced at Exh.77, Exh.73, Exh.131, and Exh.137, were not only proximate in point of time, but were also comparable and, therefore, the compensation payable to the claimants ought to have been determined with reference to those sale instances. The learned Government Counsel emphasized that Exh.24, which is certified copy of the extract prepared by the Gujarat Agricultural University in respect of price of various products should not have been received in evidence because no one was examined to prove the contents of the same and it is not a public document of which judicial notice can be taken by the court under the provisions of Sections 74 to 78 of the Indian Evidence Act. On behalf of the appellants, it was argued that even if formal production of the said document was permissible, it ought not to have been relied upon by the Reference Court, as the contents of Exh.24 were not proved. In the alternative, it was submitted that Exh.24 was not useful for the purpose of determination of value of the trees and should have been ignored by the Reference Court. What was asserted was that while remanding the matters to the Reference Court, the High Court had given certain directions in First Appeals Nos. 1885/95 to 1900/95 and, as those directions were ignored by the Reference Court, the appeals filed by the State Government should be allowed. 9. Mr. P.M. Thakker, learned Senior Advocate, appearing for the respondents in these appeals, submitted that the Reference Court has not committed any error in adopting yield method for the purpose of determining compensation in three cases and when the market value of the lands which may be found on the basis of sale instances is not added to the value of lands determined by resorting to yield method, the appeals should be dismissed. On behalf of the claimants, it was claimed that the sale instances relating to Survey Nos. 238/1 and 339 of village Vadia are not only proximate in time but are also comparable and the Reference Court having rightly determined the market value of the lands acquired on the basis of two sale instances, the appeals should be dismissed. What was highlighted was that the sale instances relied upon by the State Government do not furnish guidance for fixing market value of the lands acquired and, therefore, the award rendered by the Reference Court should be upheld. 10 In view of the controversy raised in the appeals, the question which falls for the consideration of the Court is whether the reference Court was justified in adopting the method of capitalising the actual or immediately prospective profits or rent of number of years' purchase for the purpose of ascertaining the market value of the lands in three cases and relying on the sale instances for determining value of lands in other cases. There is nothing secret or mysterious about the value of land. It is a commodity commonly dealt in and like every other commodity it has price which can be ascertained within certain limits. This price, however, constantly varies according to the variations of the supply and demand and it is impossible to fix it at any given time with mathematical accuracy. Valuation of immovable property is not an exact science. A determination of the value is an enquiry relating to a subject abounding in uncertainties, where, there is more than ordinary guess work and where it would be very unfair to require an exact exposition of reasons for the conclusions arrived at. It has been observed that in all valuation, judicial or otherwise there must be room for inference and inclination of opinions which being more or less conjectural are difficult to reduce to exact reasoning or to explain to other, and it is unfair to require an exact exposition of reasons for the conclusions arrived at. However, the recognised methods of valuation of land acquired under the Act may be classified under three heads: (1) the price paid, within a reasonable time, in bona fide transactions of purchase of the lands acquired, or of the lands adjacent to the land acquired and possessing similar advantages; (2) a number of years, purchase of the actual, or immediately prospective, profit from the lands acquired; (3) the opinion of valuators or experts. If a part or parts of the land taken up has or have been previously sold such sales are taken as a fair basis upon which, making all proper allowances for situation, etc., to determine the value of that taken. Normally, method of capitalizing the actual or immediately prospective profits or rent of a number of years' purchase is not resorted to if there is evidence of comparable sales or other evidence for computation of market value. If the evidence of comparable sales or other evidence for computation of the market value is not available, value of the land can be determined with reference to the net annual income of the land and to deduce its value by allowing a certain number of years' purchase of such income according to the nature of the property. However, when it is possible to find out the prices at which the lands in the vicinity have been sold and purchased, and to determine the market value of the lands acquired after making due allowance for situation, the yield method is not resorted to. In the case of State of Gujarat vs. Vakhatsinghji Vaghela (dead) his legal representatives and others, AIR 1968 Supreme Court 1481, the Constitution Bench of the Apex Court has held that the market value is the amount which the land if sold in the open market by a willing seller might be expected to realise. It is observed therein that in the case of land the market value is generally ascertained on a consideration of the prices obtained by sale of adjacent lands with similar advantages. What is emphasized by the Supreme Court is that where there are no sales of comparable lands, the value must be found in some other way and one method is to take annual income which the owner is expected to obtain from the land and to capitalise it by a number of years' purchase. The law propounded by the Supreme Court makes it clear that in case of lands the market value should be ascertained on a consideration of price obtained by sale of adjacent lands with similar advantages and where there are no sales of comparable lands the value should be found by resorting to yield method and not otherwise. In Special Land Acquisition Officer, Davangera vs. P. Veerabhadarappa, AIR 1984 Supreme Court 774, the Supreme Court considered advisability of adopting method of capitalising the actual or immediately prospective profits or the rent of a number of years' purchase for the purpose of ascertaining the market value of the land on the date of notification under Section 4(1) of the Act and has held that the said method can be resorted to only when no other method is available. The pertinent observations made by the Supreme Court in the said case are as under: "7. The function of the Court in awarding compensation under the Act is to ascertain the market value of the land at the date of notification under Section 4(1) of the Act and the methods of valuation may be : (i) Opinion of experts, (2) The prices paid within a reasonable time in bona fide transactions of purchase or sale of the lands acquired or of the lands adjacent to those acquired and possessing similar advantages. And (3) A number of years purchase of the actual or immediately prospective profits of the lands acquired. Normally, the method of capitalising the actual or immediately prospective profits or the rent of a number of years' purchase should not be resorted to if there is evidence of comparable sales or other evidence for computation of the market value. It can be resorted to only when no other method is available. 8. It is axiomatic that the best evidence to prove that a willing purchaser would pay for the land under acquisition would be the evidence of sale of comparable properties, proximate in time to the date of acquisition, similarly situate, and possessing the same or similar advantages and subject to the same or similar disadvantages. Market value is 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 shape of sales of similar lands in the neighbourhood at or about the date of notification under S.4(1) or otherwise, the Court has no other alternative but to fall back on the method of valuation by capitalization. In valuing land or an interest in land for purposes of land acquisition proceedings, the rule as to number of years' purchase is not a theoretical or legal rule but depends upon economic factors such as the prevailing rate of interest in money investments. The return which an investor will expect from an investment will depend upon the characteristic of income as compared to that of idle security. The main features are: (1) Security of the income: (2) fluctuation: (3) chances of increase: (4) cost of collection etc. The most difficult and yet the most important and crucial part of the whole exercise is the determination of the reasonable rate of return in respect of investment in various types of properties. Once this rate of return and accordingly the rate of capitalization are determined, there is no problem in valuation of the property. 9. The traditional concept of capitalization was indicated by this Court in Rustom Cavasiee Cooper v. Union of India (1970) 3 SCR 430: (AIR 1970 SC 564). It was stated to be : Capitalization of the net annual profit out of the property at a rate equal in normal cases to the return from gilt-edged securities. Ordinarily value of the property may be determined by capitalizing the net annual value obtainable in the market at the date of the notice of acquisition. It is thus clear from the above enunciation that the method of determining the value of the property by application of a multiplier to the net annual income or profit should only be adopted when there is no evidence of comparable sales of similar lands in or about the neighbourhood at the relevant time i.e. on the date of the notification under S.4(1) of the Act. In certain circumstances however the Court has no other alternative but to fall back on the capitalized value." From the abovequoted observations, it becoms apparent that method of determining the value of the property by application