Mehta Ravindrarai Ajitrai (Deceased) ... vs State Of Gujarat on 8 August, 1989 Equivalent citations: 1989 AIR 2051, 1989 SCR (3) 743, AIR 1989 SUPREME COURT 2051, 1989 (4) SCC 250, (1989) 3 JT 321 (SC), (1990) 2 LANDLR 178, (1990) 1 CIVLJ 410, (1990) 1 GUJ LR 372 Author: M.H. Kania Bench: M.H. Kania, Kuldip Singh PETITIONER: MEHTA RAVINDRARAI AJITRAI (DECEASED) THROUGHHIS HEIRS AND LE Vs. RESPONDENT: STATE OF GUJARAT DATE OF JUDGMENT08/08/1989 BENCH: KANIA, M.H. BENCH: KANIA, M.H. KULDIP SINGH (J) CITATION: 1989 AIR 2051 1989 SCR (3) 743 1989 SCC (4) 250 JT 1989 (3) 321 1989 SCALE (2)296 ACT: Land Acquisition Act, 1894: ss. 4 & 23--Compensation for acquired land--Market value-Determination of--Post-acquisi- tion instances--Admissibility of--Prices fetched for similar lands at or about the time of preliminary notification the best evidence of market value. HEADNOTE: Certain lands situated on the outskirts of a large city were acquired by the respondent-State after issuing prelimi- nary notification under s. 4(1) of the Land Acquisition Act, 1894 on August 6, 1956 for construction of an industrial estate. The appellants claimed compensation at the rate of Rs.3 Mehta Ravindrarai Ajitrai (Deceased) ... vs State Of Gujarat on 8 August, 1989  1 per sq. yard and cited in support thereof an agreement of sale dated January 21,1957 and a conveyance dated April 2, 1957 pertaining to a piece of land adjoining the acquired land showing the sale price at the rate of Rs.3 per sq. yard. The respondent-State relied on an auction sale dated February 23, 1953 at about 41p. per sq. yard, evidenced by Ex. 112, and the instance evidenced by Ex. 118 pertaining to sale to a minor, transacted by his father. The Land Acquisition Officer classified the land as superior agricultural land and awarded the compensation at the rate of Rs.2200 per acre, i.e., about 45p. per sq. yard. In the reference, the Civil Judge did not rely upon any of the instances proved before him, but considering the general situation of the land and its considerable building potentiality fixed the rate of compensation at Rs.4400 per acre, i.e., about 90p. per sq. yard. Dismissing the appeal, the High Court took the view that the valuation fixed by the Civil Judge was justified. It held that a postacquisition sale could not be regarded as a comparable instance at all, since the acquisition for con- struction of the industrial estate was bound to have pushed up the prices in the surrounding area. It placed reliance on the evidence furnished by the instance at Ex. 112, over a year prior to 744 the date of s. 4 notification, but discarded the instance evidence by Ex. 118 relied on by the State. Allowing the claimants' appeal by special leave, the Court, HELD: The market value of a piece of property for pur- poses of s. 23 of the Land Acquisition Act, is stated to be the price at which the property changes hands from a willing seller to a willing, but not too anxious a buyer, dealing at arm's length. Prices fetched for similar lands with similar advantages and potentialities under bona fide transactions of sale at or about the time of the preliminary notification are the usual and, indeed, the best, evidence of market value. [747C] Administrator General of West Bengal v. Collector, Varanasi, [1988] 2 SCC 150, referred to. In the instant case, the instance evidenced by Ex. 112 pertaining_ to sale of land in government auction relied on by the High Court was a distress sale. There were execution proceedings pending against the vendor. It could, thus, hardly furnish any reliable evidence for estimating the market value of the land in question. The instance evidenced by Ex. 118 was rightly discarded by the High Court. Only a certified copy of the sale deed pertaining thereto was produced in. the trial court. The evidence of the purchaser, who was minor at the time when the sale deed was executed, had no evidentiary value as he had no personal information regarding the sale. No other person conversant with the sale was examined by the State. [748AB, CF] The only comparable instance on the basis of which the Mehta Ravindrarai Ajitrai (Deceased) ... vs State Of Gujarat on 8 August, 1989  2 market value at the time of the s. 4 notification in respect of the acquired land could be determined was, therefore, the sale proved by the sale deed dated April 2, 1957 and the preceding agreement of sale dated January 21, 1957. Though entered into about five months alter the notification it could be fairly regarded as reasonably proximate to the acquisition. The price fixed under the said agreement was Rs.3 per sq. yard. However, there seem to have been some rise in the price of land on account of the acquisition of the land in question for purposes of constructing the indus- trial estate. Further, the land proposed to be purchased under the agreement was adjoining the land of the purchaser and the purchaser might have paid some extra amount for the convenience of getting the neighbouring land. These factors have to be taken into account and appropriate deductions made from the rate disclosed in the agreement in estimating the market value. Considering these together with 745 the situation and potentialities of the acquired land, it would be proper to fix its market value at Rs.8800 per acre, which comes to about Rs. 1.80p. per sq. yard. The decree passed by the Civil Judge to be amended accordingly. [748G, 747E] JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2169 of 1970. From the Judgment and Order dated 12.8.68 of the Gujarat High Court in F.A. No. 233 of 1963. B.K. Mehta, U.A. Rana, Bhushan B. Oza and K.L. Hathi for the Appellants. G.A. Shah and M.N. Shroff for the Respondent. The Judgment of the Court was delivered by KANIA, J. This is an appeal by special leave granted by this Court under Article 136 of the Constitution. The appeal arises out of land acquisition proceedings. The appellants before us are the heirs and legal repre- sentatives of the original claimants. Appellants Nos. 1(a) to 1(c) are the heirs and legal representatives of original claimant No. 1 and appellants Nos. 2(i) to 2(ii) are the heirs and legal representatives of original claimant No. 2. The acquisition was in respect of an area admeasuring 15 acres and 1 guntha belonging to claimant No. 1 (Original) and area admeasuring 6 acres and 25 gunthas belonging to claimant Nos. 1 and 2 (Original). The lands are situated in the Bhavnagar District and are on the outskirts of the Bhavnagar City and adjoining the Bhavnagar Rajkot Road. The acquisition forms part of a larger acquisition for the construction of an industrial estate at Bhavnagar. The preliminary notification under section 4(1) of the Land Acquisition Act, 1894 was published on August 6, 1956. The claimants made their claims before the Land Acquisition Officer who classified the lands as superior of Bagayat type of agricultural land and awarded compensation at the rate of Rs.2200 per acre which would come to about 0.48 p. per sq. yard. This award was not accepted by the claimants and they made a reference which came up for hearing before the learned Mehta Ravindrarai Ajitrai (Deceased) ... vs State Of Gujarat on 8 August, 1989  3 Civil Judge, Senior Division, Bhavnagar. The evi- dence of some instances of sale was led before the learned Civil Judge by the respective parties but he did not rely upon any of the instances proved before him. He considered the general situation of the lands and held that on the evidence it was shown that the lands had a considerable building potentiality and the Land Acqui- sition Officer was in error in so far as he did not take that potentiality into account. The learned Civil Judge considered the general situation of the land under acquisi- tion and the potential value of the same for building pur- poses and fixed the rate of compensation at Rs.4,400 per acre which had come to about 0.90p. per sq. yard. Being dissatisfied, the claimants preferred an appeal against the decision of the learned Civil Judge, Bhavnagar to the High Court of Gujarat. The Division Bench of. the High Court, which disposed of the appeal, took the view that the valua- tion fixed by the learned Civil Judge was justified and dismissed the appeal. This appeal is directed against the said decision of the High Court. We do not feel called upon to enter into a detailed scrutiny of the evidence led by the parties before the learned Civil Judge. The main instance relied upon by the claimants was by way of an agreement to sell dated January 21, 1957 and a sale deed dated April 2, 1957 in respect of the sale of 42552 square yards of land out of survey No. 333/2 which is adjoining the land with which we are con- cerned which forms part of survey No. 33 1. The land sold under this instance was known as "Kesarbagh" and was sold to Mahalaxmi Mills Limited by Prince Nirmal kumar singhji. The rate at which it was sold works out to Rs.3 per sq. yard. On the basis of this instance, the claimants had made their claim at Rs.3 per sq. yard before the Land Acquisition Officer. The High Court inter alia rejected this instance on the basis that the contents of the sale deed were not prop- erly proved. However, after an order for remand made by this Court on August 25, 1981 evidence has been led regarding this sale and the sale deed has been duly proved by the evidence of one Dharamdas, a director of Mahalaxmi Mills Limited, the purchaser, and the vendor Prince Nirmal kumar singhji. It was marked originally as Exhibit 87 and after the evidence on remand as Exhibit 152. The evidence shows that this land was just adjacent to the land of the purchas- er, Mahalaxmi Mills Limited. The agreement of sale is dated January 21, 1957 and the conveyance or sale-deed is dated April 2, 1957 as aforestated. The price has been fixed under the agreement of sale. This agreement of sale was entered into about five months after the publication of section 4 notification in the case before us The High Court rejected the said instance on the ground that the contents of the sale-deed were not proved although the execution was thereof duly proved. In view of the evidence led after remand, it cannot be disputed that this agreement of sale as well as the sale deed have been duly proved and they have been duly marked as exhibits. The High Court further took the view that in any event, no reliance could be placed on this instance of sale because the acqui- sition of the land in question before us was for the con- struction of an industrial estate at Bhavnagar and such construction was bound to have pushed up the price of land in the surrounding area. There is, however, nothing in the evidence to show that there was any sharp or speculative rise in the price of the land after the acquisition and this has been noticed by the High Court. It appears that under these circumstances, the High Court was not justified in not taking this instance into account at all as it has done on the ground that it was a post-acquisition sale and could not be regarded as a comparable instance at all. The market value of a piece of property for purposes of section 23 of the Land Acquisition Act is stated to be the price at which the property changes hands from a willing seller to a will- ing, but not too anxious a buyer, dealing at arms length. Prices fetched for similar lands with similar advantages Mehta Ravindrarai Ajitrai (Deceased) ... vs State Of Gujarat on 8 August, 1989  4 and potentialities under bona fide transactions of sale at or about the time of the preliminary notification are the usual and, indeed the best, evidences of market value. (See: Administrator General of West Bengal v. Collector, Varanasi, [1988] 2 SCC 150 at para 8. ) Keeping these factors in mind, we feel that although the instance reflected in the sale deed (Exhibit 152) and the agreement for sale in connection with that land, pertains to a sale after the acquisition, it can be fairly regarded as reasonably proximate to the acquisition and, in the absence of any evidence to show that there was any speculative or sharp rise in the prices after the acquisition the agreement to sell dated January 21, 1957 must be regarded as furnish- ing some light on the market value of the land on the date of publication of section 4 notification. However, certain factors have to be taken into account and appropriate deduc- tions made from the rate disclosed in the said agreement to sell in estimating the market value of the land with which we are concerned at the date of the acquisition. One of these factors is that there seems to have been some rise in the price of land on account of the acquisition of the land in question before us for purposes of constructing an indus- trial estate. Another factor is that the land proposed to be purchased under the said agreement to sell was adjoining the land of the purchaser and the purchaser might have paid some extra amount for the convenience of getting the neighbouring land. We find that the High Court placed reliance on the evidence furnished by the instances at Exhibit 112 relied on by the State. By Exhibit 112 land admeasuring 4 acres (19,360 sq. yard) was sold from Survey No. 384 for Rs.8,000. This sale deed is dated February 23, 1953, that is, over a year prior to the date of the section 4 notification in the case before us. The purchaser stated in the witness box that apart from Rs.8,000 mentioned as the consideration in the sale deed, he had to pay an extra amount of Rs.4,000. Although the High Court has not relied upon this statement, it cannot be altogether ignored. The land was sold at a Government auc- tion which means that it was a distress sale. There were execution applications pending against the vendor. Under these circumstances, there is a little doubt that it was a distress sale and it hardly furnishes any reliable evidence for estimating the market value of the land. Therefore, although the price of the land appearing in that instance comes to about 0.62p. per sq. yard, it furnishes no reliable guidance regarding the market price of the land. As far as the sale instance evidenced by Exhibit 118 is concerned, it has been discarded by the High Court and, in our view, rightly so. In the Trial Court neither the vendor nor the purchaser nor any person conversant with the sale was exam- ined. Not the original but only a certified copy of the sale deed was produced. After the remand the situation appears to be hardly any better. The State examined one Virbhadrasingh on whose behalf the land was purchased under the said sale deed. He was a minor at the time when the sale deed (Exhibit 118) was executed. Virbhadrasingh's father had purchased the land in Virbhadrasingh's name as Virbhadrasingh was a minor only about 12 years old at that time. The evidence of Virbhadrasingh has no evidentiary value as he has no personal information regarding the sale under Exhibit 118. One Ratilal who prepared the said document gave evidence in court but he did not have any personal knowledge about the transaction either. Under these circumstances, no reliance can be placed on Exhibit 118. Mehta Ravindrarai Ajitrai (Deceased) ... vs State Of Gujarat on 8 August, 1989  5 In our view, the only comparable instance on the basis of which the market value at the time of the section 4 notification in respect of the acquired land can be deter- mined is the sale proved by the sale deed (Exhibit 152) and the preceding agreement for sale in respect of the land sold which was entered into about five months after the notifica- tion. The price thereunder is Rs.3 per sq. yard. From that price certain deductions have to be made on account of the various factors which have been enumerated earlier such as the rise in prices of land after the acquisition and so on. Taking into account all these factors including the situa- tion and potentialities of the acquired land, it ap- pears to us that it would be proper to fix the market value of the acquired land at Rs.8,800 per acre which comes to about Rs. 1.80 per sq. yard and we direct accordingly. The decree passed by the Civil Judge, Senior Division, Bhavnagar will be amended accordingly. The respondent will pay to the appellants one half of the costs of the appeal in this Court. There will be no change as far as the rest of the order is concerned. P.S.S. Mehta Ravindrarai Ajitrai (Deceased) ... vs State Of Gujarat on 8 August, 1989  6