SURESH KUMAR

TOWN IMPROVEMENT TRUST, BHOPAL

MARCH 3, 1989

[G.L. OZA AND K.N. SAIKlA, JJ.]

Madhya Pradesh Town Improvement Trust-Section 68-Land acquired-Compensation for such /and-Determine market value taking into account its special value. f

Constitution of India, 1950:-Art. 136--Appeal involving question of valuation of acquired /and-interference with award-Only when erroneous principle invoked or important piece of evidence overlooked or misapplied.

Land Acquisition Act, 1894-Sections, 4, 23-25-Compensation for land acquired-Principles for <ietermination-Determine market value of land taking into consideration its special value.

Respondent-Town Improvement Trust Bhopal acquired 152 acres of land in village J amalpura under section 68 of the Madhya Pradesh Town Improvement Trust Act within the municipal limits of Bhopal. That land included 12.62 acres of land belonging to the appel- -+ lant on which stood a house, a well and some trees. The appellant being not satisfied with the amount of compensation offered to him by the Trust, made a Reference to the Compensation Tribunal. The Tribunal awarded compensation at the rate of Rs.6,000 per acre for the land, Rs.5,000 for the building, Rs.3,000 for the well and Rs.815 for the trees. Thus the Tribunal awarded a total sum of Rs.1,20,000 as com- -'1 pensation as against a claim ofRs.13,39,560 made by the appellant. On 1 appeal, the High Court, maintained the award in respect of the build ing, well and the trees but enhanced the same so far as the land is concerned by determi_nitlg the market value of Rs.12,000 per acre.

Working or this basis, including 15% solatium, the total amount of compensation awarded worked out to be Rs.1,84,923.

Being dissatisfied with the Order of the High Court, he has come up to this Court after obtaining special leave. "

The main contentions urged by the appellant are (i) that the house and well are undervalued; (ii) that the land ought to have been treated as urbanised developed land; (iii) that potential value of the land has not

SURESH v. TOWN IMPROVEMENT TRUST 909

been taken into consideration while determining compensation; (iv) that the value of the sales of similar plots has wrongly been rejected.

Partly allowing the.appeal, this Court,

HELD: Jn determining market value, where there was no sufficient direct evidence of market price, the Court is required to ascertain as best as possible from the materials before it, what a willing vendor would reasonably have expected to obtain from a willing purchaser from the land in its particular position and with its particular potentiality. [914C-D]

A land which is certainly or likely to be used in the immediate or reasonably near future for building purposes but which at the valuation date is waste land or has been used for agricultural purposes, the owner, however, willing a vendor he is, is not likely to be content to sell the land for its value as waste or agricultural land as the case may be.

The possibility of its being used for building purposes would have to be taken into account. However, it must not be valued as though it had already been built upon. It is the possibilities of the land and not its realised possibilities that must be taken into consideration. [914E-F]

In estimating the marktt value of the land, all the capabilities of the land and all its legitimate purposes to which it may be applied, or for which it may be adapted are to be considered and not merely the condition it is in and the use to which it is put at the time applied by the owner. The proper principle is to ascertain the market value of the land taking into consideration the special value which ought to be attached to the special advantage possessed by the land; namely, its proximity to developed urbanised areas. [915A-ll]

The value of the potentiality has to be determined on such materials as are available and without indulgence in Ots of imagination. [91511-C]

A court of appeal interferes not when the judgment under attack

is not right, but only when it is shown to be wrong. [912E] G

)< In an appeal under Art. 136 of the Constitution of India involving the question of valuation of acquired land, the Supreme Court will not interfere with the award unless some erroneous principle has been invoked or some important piece of evidence has been overlooked or misapplied. -[91211-cf - H

A When the willing vendor had agreed to seU land at 14 annas per sq. feet after development and the development charge was to he paid by the willing purchaser it could he reasonable to deduct only 50% on account of the land to he set apart for roads, drains etc. and not beyond that.

Considering this aspect of the matter and the potential value of the land as urban developed area the Court took the view that the compensation B may justly he enhanced by l/6th i.e. to Rs.14,000 per acre. Solatium@ 15% was maintained but the rate of interest was raised to 9% on the enhanced compensation till payment. [918F-G]

Atmaram Bhagwant v. Collector of Nagpur, A.I.R. 1929 P.C. 92, followed; Dollar Company Madras v. Collector of Madras, [1975] C Suppl. S.C.R. 403; Gajapatiraju v. Rev. Divisional Officer, A.I.R. 1939 P.C. 98; Mahabir Prasad Santuka v. Collector, Cuttack, [1987] 1 S.C.C. 587 aud U.P. Government v. H.S. Gupta, A.I.R. 1957 S.C. 202.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2931 D (N) of 1981.

From the Judgment and Order dated 7 .10.1980 of the Madhya Pradesh High Court in MisceUaneous First Appeal No. 78 of 1974.

L.M. Singhvi, D. Bhandari and A.K. Sanghi for the Appellant.

T.S. Krishnamurthy Iyer and S.K .. Gambhir for the Respondent.

The Judgment of the Court was delivered by

K.N. SAIKIA, J. This Civil Appeal by special leave is from the i F order dated 7.10.1980 of the High Court of Madhya Pradesh, Jabalpur in Misc (F) Appeal No. 78 of 1974, allowing the appeal and enhancing compensation for land acquired by the Improvement Trust, Bhopal.

The Improvement Trust, Bhopal, hereinafter referred to as 'the Trust', acquired 152 acres of land of Village Jamalpura by Notification G dated 30th April, 1965 issued under Section 68 of the Madhya Pradesh Town Improvement Trust Act, 1960, hereinafter referred to as 'the Act', and took possession of the land sometimes in June, 1967. Out of :< these acquired land the instant appellant owned 12.62 acres whereupon stood a house, a well and some trees. The whole of the acquired land including that of the appellant was within the limits of Bhopal H Municip;µ Co!Jl<>ration. On 25.3.1966 Notifica(jon under Section 71 of

SURESH v. TOWN IMPROVEMENT TRUST [SAIKIA, J.J 911

the Act was issued vesting the land in the Trust. The Trust offered compensation at the rate of Rs.950 per acre(@ 14 paise per sq. ft.) amounting to Rs.11,997 .00; for the well Rs.3, 108; and for the trees Rs.815 and for compulsory acquisition 15% amounting to Rs.2,400.

The appellant made reference, No. 8 of 1970 to the Compensation Tribunal under Section 72(3) of the Act. The Tribunal awarded compensation at the rate.of Rs.6,000 per acre (Rs.0.28 Paise per sqr. ft.)

B for the land, Rs.5,000 for the building, Rs.3,000 for the well and Rs.815 for the trees. Thus the Tribunal by its award dated 25th November, 1972 awarded a total sum of Rs.1,20,060 inclusive of interest as compensation to the appellant, as against his claim at the rate of Rs.20,000 per acre for the land, Rs.20,000 for the building, Rs.5,000 for the well, Rs.2,500 for the trees and Rs.10,000 for loss of business and earnings, his total claim amounting to Rs.13,39,560. On C appeal, being Misc. (F) Appeal No. 78 of 1974, the High Court maintained the award in respect of the Building, well and the trees, but enhanced.the compensation in respect of the land determining the market value at Rs.12,000 per acre and the total area being 12.62 acres the total compensation inclusive of that allowed for the house etc. and 15% solatium worked out to Rs.1,84,293. Dissatisfied, the appellant obtained leave and filed this appeal.

Dr. L.M. Singh vi learned counsel for the appellant submits, inter alia, that the house and the well were grossly undervalued; that .both the Tribunal as well as the High Court misdirected themselves in treat: E iQ.g the land as agricultural land but not as urbanised developed land on the erroneous ground that there was no building activity of substantial nature at the time of acquisition in spite of the fact that a part of the land was already converted to Abadi; that both the Tribunal as well as the High Court failed to take into consideration the potential value of the land; and that evidence of sales of similar plots was not accepted F on the ground that those pertained to small plots; and that the High Court committed an error when it deducted the development charge from the agreed price instead of adding .it to the agreed price while calqilating the market value.

Mr. Krishnamurthi learned counsel for the respondent Trust G submits that the house and the well were properly valued; that it was not correct that the Tribunal did not correctly consider the question of the nature of the land which if held to be agricultural because it did not find therein any building activity of substantial nature. At any rate, counsel submits, the High Court took into consideration the potential value of the land and as such there was no omission to COJ1sider any H

'A relevant material or misdirection in tliiS regard. Counsel, however, fails to explain the reason of deducting the development charge from the agreed price, instead of adding it, while calculating market value of the lands on the basis of evidence produced by the claimant. This, however, according to. counsel, is not a sufficient ground for our interference in this appeal under Article 136 of the Constitution of IB India.

' In an appeal under Article 136 of the Constitution of India involving the question of valuation of acquired land, this Court will not interfere with the award unless some erroneous principle has been invoked or some important piece of evidence has been overlooked or C misapplied, as was held in Atmaram Bhagwant v. Collector of Nagpur, A.LR. 1929 P.C. 92. In Dollar Company, Madras v. Collector of Madras, 1975 Suppl. S.C.R. 403 the Land Acquisition Officer awarded Rs.800 per ground as compensation and the City Civil Court on reference awarded at the rate of Rs.1,000 per ground, and the High Court on appeal awarded Rs.1800 per ground. The appellant himself D purchased the nit land about 10 months bii(ore the Notification under

Section 4 was made at a price of Rs.410 i)er ground whereafter the appellant has spent a little-money on filling up a pond. Dismissing the appeal it was observed that this Court interferes with the judgment of the High Court only if the High Court applies a principle wrongly or because some important point affecting valuation has been overlooked E or misapplied. A Court of appeal interferes not when the judgment under attack is not right, but only when it is shown to be wrong. As there was no error in principle in the High Court judgment nor had any of the limited grounds on which that Court's jurisdiction could be legitimately exercised was made out, the appeal was dismissed. Therefore, it is for the the appellant to show that there is ground for interfer- F ence in this case.

As regards the value of the house, the Land Compensation Tribunal clearly observed that it visited the spot and found that the house 'was in extremely dilapidated condition having big cracks in foundation, walls and pillars. The foundation was getting loose. The G roof of asbestos sheets was sagging, indicating that the wood rafters had been badly damaged. Doors and windows were in bad condition.

The two verandahs of the house were temporary, with roof of asbestos sheets.'

The house, according to the Tribunal might be 20 to 25 years old H and dpreciation wowd be 5% per year. Considering the above factors

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SURESH v. TOWN IMPROVEMENT TRUST ISAIKIA, J.I 913

J( we are of the view that the compensation awarded, namely, Rs.5,000 is A reasonable. Also from evidence we find that Rs.3,000 for the well was reasonable. There was no error of principle and hence there can be no grievance on these counts. ,.

Regarding nature of the land the Tribunal noted that the claim-

1 ants in most of the references asserted that the acquired land should be B valued as urban house site because of alleged potential value and had claimed compensation between the Rs.3 to Rs.1 per sqr. ft. The Trust

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disputed the claim and urged that the lands at the time of acquisition, were either agricultural ormerely fallow land and they had absolutely no urban site value. Th~. claimants also urged that the lands were situated within Corporation limits and lands of some of the claimants c were already diverted (converted). We agree with Mr. Krishnamurthi

>- that though the Tribunal treated it as agricultural, the High Court proceeded on the principle of developed land. ·

It is true that the marker value of the land acquired has to be correctly determined and paid so that there is neither unjust enrich- D ment on the part of the acquirer nor undue deprivation on the part of the owner. Dr. Singhvi argues that failing to consider potential value is an error of principle. It is an accepted principle as was laid down in

..j,.- Gajapatiraju v. Rev. Divisional Officer, A.LR. 1939 P.C. 98 that the compensation must be determined by reference to tli_e price which a willing vendor might reasonably expect to obtain from willing pur- E chaser. The disinclination of the vendor to part with his land and the --

urgent necessity of the purchaser to buy it must alike be disregarded.

Neither must be considered as acting under compulsion. The value of \ the land is not to be estimated at its value to the purchaser but this r

does not mean that the fact that some particular purchaser might desire the land more than others is to be disregarded. The wish of a F particular purchaser, though not his compulsion, may always be taken . . into _consideration for what it is worth. Any sentimental value for the vendor need not be taken into account. The vendor is to be treated as a vendor willing to sell at the market price. Section 23 of the Land Acquisition Act, 1894, enumerates the matters to be considered in determining compensation. The first to be taken into consideration is G

the market value of the land on the date of the publication of the Notification under Section 4(1). Market value is that of a willing vendor and a willing purchaser. A willing vendor would naturally take into consideration such factors as would contribute to the value of his land including its unearned increment. A willing purchaser would also consider more or less the same factors. There may be many ponder- H

able and imponderable factors in such estimation or guess work.

Section 24 of the Act enumerates the matters which the Court shall not take into consideration in determining compensation. Section 25 provides that the amount of compensation awarded by the Court shall not be less than the amount awarded by the Collector under Section 11. As was observed in Gajapatiraju (supra) sometimes, it happens that the land to be valued possesses some unusual, and it may be, unique features, as regards its position or its potentiality. In such a case the court has to ascertain as best as possible from the materials before it what a willing vendor might reasonably expect to obtain from a willing purchaser, for the land in that particular position and with that particular potentiality. In the instant case also the acquired land possesses some important features being located within the Corporation area and its potentiality for being developed as a residential area. In such a situation in determining its market value, where there was no sufficient direct evidence of market price, the Court was required to ascertain as best as possible from the materials before it, what a willing vendor would reasonably have expected to obtain from a willing purchaser from the land in this particular position and with this particular potentiality. It is an accepted principle that the land is not to be valued, merely by reference to the use to which it has been put at the time at which its value has to be determined, that is, the date of the notification under Section 4, but also by reference to the use to which it is reasonably capable of being put in the future. A land which is certainly or likely to be used in the immediate or reasonably near future for building purposes but which at the valuation date is waste land or has been used for agricultural purposes, the owner, however willing a vendor he is, is not likely to be content to sell the land for its value as waste or agricultural land as the case may be. The possibility of its being used for building purposes would have to be taken into account. However, it must not be valued as though it had already been built upon. It is the possibilities of the land and not its realised possibilities that must be taken into consideration. In other words, the value of the land should be determined not necessarily according to its present disposition but laid out in its lucrative and advantageous way in which the owner can dispose it of. It is well established that the special, though natural, adaptability of the land for the purpose for which it is taken, is an important element to be taken into consideration in determining the market value of the land. In such a situation the land might have already been valued at more than its value as agricultural land, if it had any other cpabilities. However, only reasonable and fair capabilities but not far-fetched and hypothetical capabilities are to be taken into consideration. In sum, in estimating

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SURESH v. TOWN IMPROVEMENT TRUST [SAIKIA, J.] 915

the market value of the land all of the capabilities of the land, and all its legitimate purposes to which it may be applied or for which it may be adapted are to be considered and not merely the condition it is in and the use to which it is at the time applied by the owner. The proper principle is to ascertain the market value of the land taking into consideration the special value which ought to be attached to the special advantage possessed by the land; namely, its proximity to developed urbanised areas.

The value of the potentiality has to be determined on such mate' rials as are available and withoul indulgence in fits of the imagination.


the evidence on record was that the land was being used for agricultural purposes but it was fit for non-agricultural purposes and it had C potentiality for future use as factory or building site and that on industrialisation of the neighbouring areas the prices increased tremendously, and that aspect, it was held, could not be ignored in determining compensation.

On the question as to whether the land was urbanised developed D land or not we find that the Tribunal consolidated all the 15 references arising out of the acquisition for the purpose of recording evidence and, that is, how it came to consider the Exts. P-1, P-2, P-3, and P-8 being. agreements of sale executed by Phool Chand Gupta who was father of the claimant in reference No. 1 of 1970 while the petitioners reference was No. 8 of 1970. Similarly the Ext. D-1 to D-6 also E pertained to small plots of land out of land in reference No. 1 of 1970.

The High Court rightly held that the Exts. P-1, P-2, P-3 and P-8 and the sale deeds Exts. D-1 to D-6 furnished a more reliable data for working out the market value. If those lands were the urban developed house site lands, their prices would have reflected the same. It cannot, therefore be said that High Court was in error in taking the above F Exts. into consideration. However, potential value was not separately considered. Exts. P-1, P-2, P-3 and P-8 were agreements of sale executed on 29th July, 1961 in respect of small parcels of land wherein the vendor agreed to sell the land at that time at the rate of 14 annas per sqr. ft .. to Rs.1 per sqr. ft. It was further agreed that the vendees would pay development charges at the rate of 4 annas per sqr. ft. The G vendor and the respective vendees were examined. It should be noted that the Exts. were agreements to sell and not sales. The High Court observed that the idea behind those transactions was that the vendor would apply to the revenue authority for diversion and the town planning authority for sanction of lay-out plan and the sale deeds Would be executed after the land was developed. T)I~ Jiiglt Cm!fl aj§o n()td t!Jl\t H

A there was nothing to show that the agreements were prepared only to

I'- . be used later as evidence of market value. In December 1960 Phool i:;· Chand Gupta applied for diversion of his land to the Sub-Divisional Officer. In January 1961 application was also made to the Town Planning Authority for sanction of the lay-out plan but in the meantime the land was notified for acquisition under the Land Acquisition Act B sometimes in 1962 and Phool Chand Gupta tried to extricate his land from acquisition which, however, did not materialise and, as already I' noted, on 30.4.65 the instant notification to acquire under Section 68 of the Act was issued. Rejecting the contention that the agreements ),-,_ were spurious, the High Court observed that the very fact that applications were made for diversion and for sanction of lay-out plan went to c show that the owner was interested in the development in the land and in selling it after dividing it into plots. Thus, the High Court, rightly took into consideration the above Ei<ts, which pertained to a part of ..\ the acquired land of 152 acres.

The High Court also considered the sale deeds Exts. D-1 to D-6 D which pertained to small plots of lands out of land in reference No. 1 of

1970. Those sale deeds were registered in 1966-67, but the agreements to sale were entered into in 1959-62. The respective purchasers and the vendors were examined. The market value on the basis of Ext. D-2 made in the sale deed of 1962 selling only to 12.50 sqr. ft. for Rs.260

~- which worked out to Rs.8712 per acre. The High Court did not say that E these Exts. were rejected. By Ext. P-5, P-6 and P-32 small parcels of land, at Kumharpura were sold. Kumharpura was noted to be two to three furlongs away from the acquired land. The market rate according

J'= to these Exts. ranged from Rs.1.88 to 2.34 per sqr. ft. The High Court observed that these sales could not be a useful guide for determining i

the market value of land acquired. We are of the view that compared F to Exts. P-1, P-2, P-3 and P-8 Exts. P-5 and P-6 and P-32 were less indicative of the market value of the acquired land. We feel that the appellant should have no grievance for rejection of these sales of Kumharpura. We find force in the contention of Dr. Singhvi that potential value was not taken into account in this case to the extent it should have been done. From the award dated 25.11.1972 it appears G that the acquired land was situated at Village Nissatpura, within Corporation limits of Bhopal Town and consisting of Khasra No. 190/ 73, 136/74, 178/74, 135/75-76, the total area being 12.62 acres. The :', High Court found that the land was bounded on three sides by three roads: towards the eastern side by Berasia road; towards the western side b)' Sultania road; and towards the northern side by P.G.B.T. ..

College Road. Southern boundary of the land was a Nala. The High

tl.

SURESH v. TOWN IMPROVEMENT TRUST JSAIKIA, J.J 917

Court also noticed that the land abutted to roads, namely, Berasia road and P. G .B. T. College road and the claimant had a house on the land and that the claimant had stated that he had obtained water and electricity connection from the Corporation and the electricity Board. 7.60 acres of land out of 12.62 acres had been diverted and the land

Wt; lS even.

At paragraph 14 of the special leave petition it is stated that the land is approachable from two different and important localities of Bhopal Town. From Bajaria Chowk Shahjanabad, a road, called Sultania Infantry road, proceeds Military Lines called Sultania Infantry lines. On both sides of this road, there is the thickly habited locality of Shahjahanabad, till about two furlongs. Slightly ahead is the enterance porch gate of the Military lines. Just before the gate, a tarred road bifurcates on the right hand side and it enters the acquired land of Swatantra Kumar Ref. No. 1/70. This tarred road was constructed by the Trust after acquisition of the lands. It goes on all sides of village Jamalpura, which is surrounded on all sides by the lands of Ref. No. 1/70. A part of land of Ref. No. 1/70 was developed after acquisition, and the tarred road reaches the developed plots. We have to note that such detail evidence was not there before the Tribunal and no benefit of development pursuant to and after the acquisition can be taken into consideration. Even so, from the map and juxtaposition we have no doubt that the acquired land had potentialities which deserved to be counted.

In U.P. Government v. H.S. Gupta, A.LR. 1957 S.C. 202 where in computing compensation for acquisition of an estate outside the Municipal area the High Court had given valid and weighty reasons for adopting the principle that the valuation should be on plot-wise though there was certain advantages in computing the value at the block rate where vast area of land was acquired, this Court held that in the circumstances of that case the proper mode of valuation was plot rate basis. In the instant case the application of the principle that if the land has to be sold in one block consisting of a large area, the rate likely to be fixed per sq. ft. would be lower than if an equal extent of land is parcelled out into smaller bits and sold to different purchasers could not be found fault with. The price fetched for smaller extent of land similarly situated with the same kind of advantages and drawbacks can also be applied to a large area valued plot-wise instead of block-wise.

In the instant case relying on Exts. P-1, P-2, P-3 and P-8 and considering the fact that applications were made for diversion and for sanction of a lay-out plan the High Court found that it went to show H that the owner was interested in developing the land and in selling it by

A dividing it into plots. The lowest rate of price in these agreements was

"" 14 annas. per sqr. ft. and the agreements mentioned that 4 annas per sqr. ft. would be needed for developing the land. This charge was to be paid by the purchaser. So the price of developed land would be Rs.1/2 per sqr. ft. The evidence of M.P. Jain (D.W. 9), Senior Draftsman of the Improvement Trust went to show that expenses for improvement B of land ranged from Rs.1.50 to 2 per sqr. ft. The statement of Shri Jain t was recorded in 1972. Making some allowance for the increase in the rate the High Court considered it proper to hold that in 1965 when this land was acquired the charges for improvement would have worked at ·~>- 75 paise (12 annas) per sqr. ft. It had also come in the evidence of Shri Jain that 50 to 60 per cent of the land had to be left for roads, drainage, c gardens, school etc. and it was only thei:i that the lay-out plan was sanctioned. High Court, accordingly, deducted improvement charges at the rate of 12 annas per sqr. ft., and the market rate for unimproved -i land in the light of these agreements worked out to 6 annas per sqr. ft.

As 50% of the land at least had to be left out for roads etc; so the market rate of 3 annas per sqr. ft. was applied for the entire D undeveloped land. Market rate thus worked out to Rs.8,000 per acre approximately. However, the High Court awarded Rs.12,000 per acre.

There was an additional factors in the calculation. Mr. Krishnamurthi therefore submitted that the High Court took into consideration the potential value of the land as a developed area but while making .... calculation it may have committed mistake. To our mind the error was E in wholly overlooking the basic price agreed to be paid by the purchaser and the standard of development they visualised. The whole of the basic price could not be expected to be eaten up by the develop- - ment of the land to the standard contemplated by the vendor and purchaser. When the willing vendor , has agreed to sell land at 14 annas i per sqr. ft. after development and the development charge was to be F paid by the willing purchaser, it could be reasonable to deduct only 50% on account of the land to be set apart for roads, drains etc. and not beyond that. Considering this aspect of the matter and the potential value of the land as urban developed area we are of the view that the compensation may justly be enhanced by 1/6th to Rs.14,000 per acre and we do so. We maintain 15% solatium but raise the rate of G interest to 9% on the enhanced compensation from today till payment.

We leave it open for the appellant to move for higher interest and

-.: solatium if entitled by virtue of subsequent judgment of this Court, if any.

In the result, this appeal is allowed as above. We make no order as to costs.

Y.L.

Appeal allowed.