Annual Increase method in determining value may have pitfalls when gap exceeds 4-5 years: Supreme court

 1 REPORTA BLE IN THE CIVIL APPELLATE JURISDICTION CIVIL APPEAL No(s). 11521 out of Special Leave PetitionNo.245218) VED & ANR. …APPELLANTS STATE OF HARYANA & ANR. …RESPONDENTS CIVIL APPEAL No(s). 11521 out of Special Leave PetitionNo. 302318) CIVIL APPEAL No(s). 1160 11921 out of Special Leave PetitionNos. 3431 34619) CIVIL APPEAL No(s). 1198 12121 out of Special Leave PetitionNos. 31256 312618) CIVIL APPEAL No(s). 1211 12121 out of Special Leave PetitionNos. 31770 317718) CIVIL APPEAL No(s). 1219 12221 out of Special Leave PetitionNo(s). 5753 57621) Diary No.320018) CIVIL APPEAL No(s). 12221 out of Special Leave PetitionNo(s). 302318) 2 WITH WITH WITH CIVIL APPEAL No(s). 12221 out of Special Leave PetitionNo.302318) CIVIL APPEAL No(s). 12321 out of Special Leave PetitionNo. 302318) CIVIL APPEAL No(s). 12321 out of Special Leave PetitionNo. 32619) CIVIL APPEAL No(s). 1232 12321 out of Special Leave PetitionNos.3273 32719) CIVIL APPEAL No(s). 1234 12421 out of Special Leave PetitionNos.3266 32719) CIVIL APPEAL No(s). 1241 12421 out of Special Leave PetitionNos.3247 32419) CIVIL APPEAL No(s). 1243 12421 out of Special Leave PetitionNos.3251 32519) CIVIL APPEAL No(s). 1249 12521 out of Special Leave PetitionNo(s). 5762 57621) Diary No.370818) CIVIL APPEAL No(s). 12521 out of Special Leave PetitionNo.32019) CIVIL APPEAL No(s). 1252 12521 out of Special Leave PetitionNo(s). 5764 57621) Diary No.370918) CIVIL APPEAL No(s). 12521 out of Special Leave PetitionNo(s). 57621) Diary No.389318) 3 CIVIL APPEAL No(s). 1255 12721 out of Special Leave PetitionNo(s). 5767 57821) Diary No.394718) CIVIL APPEAL No(s). 1273 12721 out of Special Leave PetitionNos.3241 32419) CIVIL APPEAL No(s). 1279 12821 out of Special Leave PetitionNo(s). 5785 57821) Diary No.423818) CIVIL APPEAL No(s). 12821 out of Special Leave PetitionNo.34619) CIVIL APPEAL No(s). 12821 out of Special Leave PetitionNo.34819) CIVIL APPEAL No(s). 1283 12821 out of Special Leave PetitionNos.3470 34719) CIVIL APPEAL No(s). 1288 13021 out of Special Leave PetitionNo(s). 5787 58021) Diary No.440118) CIVIL APPEAL No(s). 13021 out of Special Leave PetitionNo(s). 58021) Diary No.474718) CIVIL APPEAL No(s). 13021 out of Special Leave PetitionNo(s). 58021) Diary No.63519) CIVIL APPEAL No(s). 13021 out of Special Leave PetitionNo(s). 58021) Diary No.65119) 4 CIVIL APPEAL No(s). 13021 out of Special Leave PetitionNo(s). 58021) Diary No.89719) CIVIL APPEAL No(s). 13021 out of Special Leave PetitionNo(s). 58021) Diary No.89819) CIVIL APPEAL No(s). 13021 out of Special Leave PetitionNo(s). 58021) Diary No.90119) CIVIL APPEAL No(s). 1309 13121 out of Special Leave PetitionNo(s). 5809 58121) Diary No.100219) CIVIL APPEAL No(s). 13121 out of Special Leave PetitionNo(s). 58121) Diary No.114919) CIVIL APPEAL No(s). 13121 out of Special Leave PetitionNo.107819) CIVIL APPEAL No(s). 1313 13121 out of Special Leave PetitionNo(s). 5812 58121) Diary No.219119) CIVIL APPEAL No(s). 13121 out of Special Leave PetitionNo(s). 58121) Diary No.266419) 5 JUDGMENT Uday Umesh Lalit J. Delay condoned. Permission to file Special Leave Petitions granted. Leave to appeal granted in all matters. These appeals challenge the Judgment and Order dated 25.05.2018 passed by the High Court1 based on which the individual appeals were disposed of. The facts leading to the instant appeals in brief are as under: A) The proceedings for acquisition of lands were initiated vide Notification dated 17.09.2004 issued under Section 4 read with Section 17c) of the Act2 for the purpose of setting up Industrial Model Township Phase V Manesar Gurgaon for the development of an integrated complex for industrial commercial recreational and other public utilities. B) The aforesaid Notification was followed by Declaration dated 27.10.2004 issued under Section 6 of the Act. The land covered by the 1 High Court of Punjab & Haryana At Chandigarh in RFA No.33813and other connected appeals. 2 The Land Acquisition Act 1894 Declaration admeasured 956 acres 5 Kanals 18 Marlas the details of which as 6 tabulated by the High Court were: Villages Nawada Fatehpur Kanal Marla Naharpur Kasan 43B 9B Total 7653 18 Or 956 Acre 5 Kanal 18 Marla” C) By Awards dated 09.03.2006 the Land Acquisition Collector assessed the market value of the lands at the rate of Rs.12.50 lakhs per acre. D) While dealing with References preferred by the landholders the Reference Court assessed the compensation at the rate of Rs.50 43 315 per acre in respect of the villages other than village Manesar. Exhibit P 20 Sale Deed relied upon by the landholders was considered by the Reference Court as under: “… Sale deed Ex.P20 pertains to village Naharpur Kasan and sale deed Ex.P24 pertains to village Naurangpur. I have gone through the sale deed Ex.P20. In the considered opinion of this Court the sale deed Ex.p20 does not depict the true market value of the land. 96 kanals 13 marlas of land 7 was sold for a total sale consideration of Rs.13 62 00 000 on 28.04.2004. The price per acre comes to Rs.1.07 crores. A close scrutiny of the sale deed shows that the sale deed was not only with regard to land. There is an assertion in the sale deed Ex.P20 that the first party had good and marketable title to the industrial land and industrial building which consisted of basement ground floor first floor and second floor and was desirous of selling its rights title interest and liens in the industrial land and the building structures and machinery imbedded in the earth. Two schedules were also attached with the sale deeds. Schedule I gives the area of the land and Schedule II gives the constructed area machinery etc which includes canteen kitchen offices 7 air handling units air cooling units centrifugal chillers comprising of 400 tons each LAN networking with extensive cabling fire fighting structure etc. The price was therefore for the entire plant and not for the land alone.” E) The Acquiring Body namely HSIDC3 as well as some landholders being aggrieved filed appeals in the High Court. F) The High Court assessed the market value in respect of lands falling in villages Naurangpur and Lakhnoula at Rs.48 46 000 per acre and in respect of lands falling in villages Nawada Fatehpur Naharpur Kasan and Shikohpur the market value was assessed at Rs.43 61 400 per acre. It relied on Sale Deed Exhibit P 13 where the land was having frontage on the National Highway No.8 and after granting 12% enhancement it arrived at the figure of Rs.57 01 066 whereafter 15% cut was applied to assess the market value at 3 Haryana State Industrial Development Corporation Ltd. 4 Haryana State Industrial and Infrastructure Development Corporation Ltd. 8 Rs.48 45 907 for the lands from villages Naurangpur and Lakhnoula falling on the Highway. Since the lands from villages Shikohpur Nawada Fatehpur and Naharpur were away from the Highway a further cut of 10% was adopted to arrive at the figure of Rs.43 61 400 per acre for those three villages. The High Court relied upon the assessment made by it in Madan Pal III vs. State of Haryana5. The relevant discussion was: “71. The other instance which can be kept into mind is Ex.P13 dated 27.08.2003 for 8 kanals 8 marlaswhich was executed in favour of M s Reliance Industries Limited falling in the limits of Lakhnoula. The frontage was on the National Highway No.8 of southern side itself as per description of the plot and the sale deed in question is more than a year prior in point of time. Keeping in view the growth factor and the potentiality of the land in question which has been discussed in the evidence above that the IMT Manesar was being developed since the year 1994 in the vicinity and market value had already been assessed @ Rs.20 lakhs per acre at that point of time and for the year 2002 the market value had been assessed @ `41.40 lakhs per acre for adjoining village Naharpur Kasan the pressure of building activity was immense and pace of progress was rapid. The industries had been built up and exempted from acquisition which has been shown in blue colour in the site plans. The distance to Manesar was only 2 Km away where the main activities were taking place. Gurgaon city was only 11 Kms situated on the other side and the overall picture that can be drawn up was that there was certainable trend of development from both sides towards the land in question. The site plan showed that the land was 5 SCC OnLine P&H 2871 9 in view for which these circumstances situated in more advantageous location and the potentiality was immense. 72. enhancement of 12% would be required on the sale deed land which was the value of Rs.50 90 238 . The 12% benefit is `6 10 828 and per acre value works out to Rs.57 01 066 per acre. As noticed Ex.P13 is of one acre of land and therefore the smallness of the plot is not applicable in the facts and circumstances as one acre of land falling on the highway cannot be said to be a small portion of land. The description also shows that it had a 75.8 meter frontage on the highway as per the dimensions given and accordingly this Court is of the opinion that a 15% cut for development would be appropriate in the facts and circumstances which is liable to be put to assess the market value which comes to Rs.8 15 159 . Thus reducing it from `57 01 066 the market value works out to Rs.48 45 907 per acrefor the land falling in village Naurangpur and village Lakhnoula which are abutting the highway. The sale exemplar being of higher value is thus being preferred over Ex.P7 which is not falling on the Highway also. 73. In similar circumstances in Chakas Vs. State of Punjab and others 2011SCR 618 when the land was being acquired for setting up of industry and infrastructure it was held that the deduction of 50% of value towards the development charges was not justified by the Reference Court. It was noticed that the land was to be used for the industrial unit for which it was being acquired and therefore 10% reduction was upheld. It is pertinent to notice here also that acquisition 74. was for mixed purpose and the Corporation is going to recover the costs as such from the eventual allottees and therefore 15% reduction would be justified in the facts and circumstances. 75. In Kasturi Vs. State of Haryana 2003SCC 354 the 20% cut was applied when 84.23 acres was acquired 10 for development of residential and commercial area in Bhiwani. The argument that there should be no reduction was repelled by noticing that the sale exemplar was of 3 kanals of land located on the main road itself and resultantly the 20% cut was applied by the Single Judge and which had been upheld by the Division Bench was also kept intact. 76. As noticed that the land which was acquired in the year 2002 is further away and closer to Manesar and away from Gurgaon the market value of which has been assessed @ Rs.41.40 per acre for village Naharpur Kasan and other villages of the compact block in Madan Palon 09.03.2018. The earlier development having taken place in and around village Manesar it being the hub of development and the IMT Manesar coming around it on the first account way back in the year 1994 the value of land of village Manesar and its surrounding were a relevant factor whereby the industry concerned on an earlier occasion namely M s Kohli Holding Pvt. Ltd. has been given a higher rate. Therefore though the present land might be falling closer to Gurgaon as such but away from the hub of development which is taking place at Manesar cannot be equated with same compensation which has been given to M s Kohli Holdings Pvt. Ltd and the landowners of village Manesar. The acquisition is of 2½ years later and therefore keeping in view the said factors also in mind compensation for the land falling closer to the town of Gurgaon would be liable to be granted which was granted in the earlier acquisition for the land further away and therefore the assessment which has been made @ `48 45 907 per acre rounding it off to Rs.48 46 000 per acre) would be a much appropriate market value. 77. For the land of other villages i.e. Nawada Fatehpur Naharpur Kasan Shikohpur an other 10% is liable to be reduced on the said compensation assessed and therefore the market value is assessed @ Rs.43 61 317 per acrefor the said villages. From the evidence of witnesses discussed above it would be clear that village Nawada Fatehpur and Shikohpur are at a distance from the highway. Nawada Fatehpur is at a distance of 4 5 Kms and Shikohpur is situated where the land 11 was acquired for CRPF and also situated behind Naurangpur and not abutting the National Highway. 78. The evidence which is on record upon which one can safely fall back in the present set of cases is in the form of the 2 sale deeds in M s Conway Developers Ltd.in one set of cases which show that the market value was Rs.57 60 000 per acre in village Naurangpur. But as noticed above the location has not been specifically brought to the notice of this Court though an application for additional evidence has been filed bringing on record the site plans. One witness PW has deposed that it is abutting the main Highway and appropriate cut has thus to be fixed upon the same and especially since the land was towards Gurgaon as noticed and abutting the Highway. Thus if a 15% cut is given on the same on account of locational advantage it would work out Rs.8 64 000 and the market rate would be Rs.48 96 000 per acre which is around the same price as is being fixed @ Rs.48 46 000 per acre.” the appeals of “79. Resultantly the appeals of the HSIIDC are allowed landowners for further enhancement and cross objections for enhancement which are filed are dismissed and the awards passed by the Reference Courts are accordingly modified. i) The market value of the land falling in two villages namely Naurangpur and Lakhnoula assessed @ Rs.48 46 000 per acre alongwith all statutory benefits on 17.09.2004. ii) For the land falling in villages Nawada Fatehpur Naharpur Kasan and Shikohpur the market value is fixed @ Rs.43 61 400 per acre along with all statutory benefits on 17.09.2004. G) The operative part of the directions issued by the High Court was: 12 iii) The directions of the Apex Court in the case of Pran Sukh6 will also be adhered to while disbursing the balance amount of compensation. iv) Where appeals have been filed by the land owners which were beyond period of limitation and applications have been filed for condoning the delay with a condition that the land owners will not be entitled for the interest during the said period the Executive Court shall ensure that the amounts are calculated and disbursed keeping in the view the said condition which have been passed in the case of each individual land owner.” Being aggrieved these appeals have been preferred by the landholders. No appeal has been preferred by the State or the Acquiring Body and thus the scope of instant appeals is limited to consider whether the landholders are entitled to any enhancement in compensation. It must be stated at the outset that with regard to Phases II III and IV of the Industrial Model Township Manesar Gurgaon acquisition proceedings were initiated in respect of lands falling in villages Naharpur Kasan Kasan Bas Kusla Bas Haria Dhana and Manesar by issuing Notifications dated 06.03.2002 07.03.2002 and 26.02.2002 under Section 4 of the Act. The High Court vide its decision dated 09.03.2018 in Madan Pal III vs. State of Haryana5 assessed the market value in respect of lands from villages Naharpur 6 11 SCC 175 13 Kasan Kasan Bas Kusla Bas Haria and Dhanaat Rs.41.40 lakhs per acre while the value for lands from village Manesar covered by Phase IV) was assessed at Rs.62.10 lakhs per acre. The appeals arising therefrom were decided by this Court vide its Judgment dated 11.01.20197 as modified by Order dated 08.02.20198 in Civil Appeal Nos.264 270 of 2019 and other connected matters i.e. after the decision of the High Court which is presently under appeal. The relevant operative directions issued by this Court were: In the circumstances we direct: “32. In respect of lands under acquisition from 32.1 Villages Naharpur Kasan and Kasan the market value shall be Rs.39 54 666 per acre. Additionally all statutory benefits would be payable. 32.2 In respect of lands under acquisition from Villages Bas Kusla Bas Haria and Dhana the market value shall be Rs.29 77 333 per acre. Additionally all statutory benefits would be payable. 32.3 In respect of lands from Village Manesar the market value shall be Rs.59 31 999 lakhs per acre. Additionally all statutory benefits would be payable.” 713 SCC 101 8 13 SCC 123 14 In these appeals it was submitted on behalf of the landholders that: The lands from villages Naurangpur Lakhnoula and Shikohpur being abutting National Highway No.8 towards Delhi and closer to Gurgaon than the lands from villages like Manesar the lands from these villages were on a better The lands had immense potentiality for residential and commercial purposes being surrounded by many reputed Industrial Units Resorts Hotels Certain Sale Deeds including Exhibit P.20 executed on 28.04.2004 showed value greater than what was assessed by the High Court. Even if the valuation determined in Wazir and Another vs. State of Haryana7 be taken as the base after conferring cumulative increase for a period of 2 ½ years the appropriate valuation for lands from village Naharpur and Farm houses. Kasan would be: 15 “Notification dated awarded to Naharpur Yearly increment Cumulative Interest for the period 2 years 6 months and 11 Rs.39 54 666 per 48 08 795 50 39 544 52 787 392” On the other hand it was submitted by the State that the valuation arrived at and the discussion by the High Court on the point did not call for any interference. In the instant case the High Court considered Exhibit P13 concerning an extent of land admeasuring 8 Kanals and 8 Marlas in the limits of Village Lakhnoula and two Sale Deeds in respect of M s Conway Developers Private Limited.14 SCC 745 17 the proved market value of nearby lands in previous years as evidenced by sale transactions or acquisitions) where 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 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.” It is true that the process of determining the value by annual increase was considered as one of the alternatives in Wazir and Another vs. State of Haryana7. But in that case three methods including one relating to cumulative annual increase were considered and that method which led to the highest valuation was adopted. But the law laid down in ONGC Ltd.9 is quite clear. In case we go by the method of cumulative annual increase it would mean that cumulative increase over the valuation in Wazir and Another vs. State of Haryana7 must displace the valuation based on Sale Deed which is normally the safest method. 18 In the circumstances the decision of the High Court which is presently under appeal calls for no interference and these appeals are dismissed without any order as to costs. Uday Umesh Lalit) .. . …J. New Delhi April 08 2021 

Summary: On an appeal regarding the method of calculation of market value, the court held that the annual increase method shall not be discarded but be exercised with caution. This judgment was passed in the case of Ved &amp; Anr. vs. State of Karnataka [C.A.No.1158/2021], by a Triple Bench consisting of Hon’ble Justice Uday Umesh Lalit, Hon’ble Justice Indira Banerjee And  Hon’ble Justice K.M. Joseph. The proceedings for acquisition of land were initiated vide the notification under section 4 read with section 17(2)(c) of the Land Acquisition Act, 1984 (the Act) for setting up phase V of the Industrial Model Township with industrial, commercial, recreational and other public facilities. The notification under section 4 was allowed vide declaration under section 6 of the Act. By an award passed by the Land Acquisition Collector, the land was assessed at Rs. 12.50 Lakhs per acre. The Reference Court assessed the compensation at the rate of Rs.50,43,315/- per acre in respect of the villages other than village Manesar. The acquiring body-HSIDC as well as some landholders aggrieved by the decision filed an appeal in the High Court. The High Court assessed the market value in respect of lands falling in two of the villages at Rs.48,46,000/- per acre, and of lands falling in other four villages the market value was assessed at Rs.43,61,400/- per acre. To assess the market value of the 15% cut was applied to the first two villages and a 10% cut for the other four villages. Being aggrieved by the same, the appeals were preferred by the landholders. The scope of the appeal was limited to the question of whether the landholders are eligible for the enhancement of compensation. The supreme court after hearing both the parties concerned observed that in order to decide on the enhancement of compensation the Court will first have to look into whether the method of annual increase over the values determined in connection with the acquisition for phases II, III, and IV, any advantage could be conferred upon the landholders. The Supreme Court observed that the process of determining the value by annual increase was considered as one of the alternatives in the case of Wazir and Another vs. State of Haryana. In the same case, three methods including one relating to the cumulative annual increase were considered and that method which led to the highest valuation was adopted. However, the law laid down in the ONGC Ltd. case was, in case one goes by the method of cumulative annual increase it would mean that cumulative increase over the valuation must displace the valuation based on Sale Deed, which is normally the safest method.