Sangayya vs The Special Land Acquisition Officer, Upper Krishna Project

Anand Byrareddy, J.—Heard the learned counsel for the appellant and the learned Additional Government Advocate for the respondent.

The appellant is said to be the owner of agricultural land bearing R.S. No. 617/1A, measuring 5 acres 18 guntas, of which 4 guntas of land was said to be pot-kharab, Jamkhandi taluk of Bagalkot district. There was also a superstructure existing on the said land. The respondent, namely, the Special Land Acquisition Officer, Upper Krishna Project, Jamkhandi, had notified the land for acquisition for the purpose of a rehabilitation centre for Alagur village in Jamkhandi taluk. The preliminary notification under Section 4(1) of the Land Acquisition Act, 1894 (hereinafter referred to as ''the Act'', for brevity), was issued on 24.2.2006 and after completion of formalities an award was passed in terms of Section 11 of the Act, on 4.5.2007 and the respondent had awarded the compensation of Rs. 81,030/- per acre and Rs. 2,20,920/- for the construction, standing on the agricultural land.

The appellant being dissatisfied, as the compensation awarded was inadequate, received the award amount under protest and filed an application for enhancement in respect of both the land and the structure in terms of Section 18 of the Act. The respondent having referred the said application to the Civil Court, it was numbered as LAC No. 63/2008. The reference Court had conducted an enquiry and passed the judgment and award on 7.8.2012 partly accepting the value of the land as contended by the appellant. The Court has enhanced the compensation to Rs. 7,05,750/- per acre in respect of the cultivable land and has rejected the claim for enhancement in respect of 4 guntas of land which was pot-kharab. Further the Court below has enhanced the compensation in respect of one RCC building and one kadpatti building, to 50% over and above the compensation which has been awarded by the respondent and has granted all statutory benefits.

So far as the enhanced compensation awarded, by the Court below, at 50% over and above the compensation which has been awarded by the respondent for the superstructure is accepted and that portion of the judgment and award is not challenged. So far as the rejection of the claim for enhancement of compensation in respect of 4 guntas of pot-kharab of land is concerned, that is under challenge and also the partial enhancement for an extent of 5 acres 14 guntas of land in R.S. No. 617/1A, referred to hereinabove, at the rate of Rs. 7,05,750/-, modification which is sought to be made and further enhancement of compensation is prayed for in the present appeal.

The learned counsel for the appellant would point out that the Court below has proceeded to adopt the value assigned to the neighbouring lands, which were said to have been sold by the Life Insurance Corporation of India in favour of a private person in the year 1996. It is pointed out that the vicinity of the area was not developed and it was mostly agricultural land in the year 1996. It is pointed out, the vicinity of the area was undeveloped agricultural land and therefore the Court below having adopted the value assigned to the lands which was undeveloped agricultural land and attributing escalation of 5% per year from the year 1996 would hardly fetch the accurate compensation, which the appellant would be entitled to. Therefore the method adopted was incorrect and it is pointed out that the land of the appellant was surrounded by other lands, which were all acquired for the formation of a residential layout. The layout had been formed by the year 1998. It transpires, that the layout having been formed, the Karnataka Housing Board which formed the layout has realized that the appellant''s land also ought to have been included in the acquisition as layout was developed around the lands of the appellant and thought it fit to notify the appellant''s lands as well and it was only in the year 2004 that the land was notified and further acquisition proceedings had been taken.

The learned counsel would point out that the surrounding areas being totally developed as a layout, the inclusion of the appellant''s land would only entail minimal development by way of formation of roads and drainage and formation of plots. The question of setting up of the other infrastructure facilities would not arise. The development cost therefore was minimal to the Karnataka Housing Board and if the value of the property with reference to the development of the surrounding lands is taken into account, it would be certainly be of a much higher rate than that was adopted in the year 1996 with escalation thereon at the rate of 5% per annum and if the sale deed executed by the Karnataka Housing Board in the year 2004 in respect of the neighbouring land is taken into account, the value adopted is Rs. 52,00,000/- per acre, which is the nominal and appropriate value that could be possibly assigned to the land in question and would submit that if deductions applicable in respect of the compensation is taken into account, the appellant would be entitled to a large amount of compensation, than as has been arrived by the Special Land Acquisition Officer or the Reference Court and hence seeks that he is entitled to at least a compensation of Rs. 20,00,000/- per acre, which is on a mere surmise and the learned counsel would submit that the legal position having been elucidated by the Supreme Court and given the facts and circumstances of the present case on hand it is always possible for this Court to calculate the compensation payable in accordance with law and if the appellant is found entitled to a larger sum, the same be directed to be paid subject to the appellant paying the Court fee and this being the legal position as settled by the Supreme Court in the case of Bhimasha vs. Special Land Acquisition Officer and another, reported in , (2008) 10 Supreme Court Cases 797 .

While the learned Additional Government Advocate would vehemently oppose the appeal and would submit, that the surrounding lands having been acquired and the compensation payable having been subject matter of challenge, finally the matter had been considered by this Court and the value adopted has been formed by this Court which is the basis on which the reference Court has also assigned the value of the compensation payable. There is, hence, no warrant for interference. It would lead to a cascading effect in other land owners seeking to claim such enhancement of compensation which would completely dislocate the object and scheme of acquisition where the money set apart for payment of compensation is budgetary and if compensation is liberally granted to the claimants, it would result in a run on the funds allocated for the project and the State will be seriously affected and hence seeks there should be no interference when other lands owners have received the compensation at a particular rate, any concession made in favour of the present appellant would result in an imbalance, apart from creating much hardship to the State in completing the acquisition proceedings and proceeding further.

In the light of these rival contentions, as rightly pointed out by the learned counsel for the appellant it would not be unfair and would not address the reality of the situation, if the value adopted to the land that was sold in the vicinity of the land of the appellant, in the year 1996, is taken as the bench mark and even if escalation of 5% is applied, though normally escalation should have been applied at 10%. The Reference Court having exercised its sense of prudence and having scaled it down to 5% is itself unfair. Accordingly the value as on the date of preliminary notification is the appropriate value and since as rightly pointed out by the learned counsel, development of the vicinity having taken place by the formation of a layout by the Karnataka Housing Board, which ought to have been acquired at the first instance by the Board having utilized the same belatedly, having chosen to notify the land in the year 2004, it is appropriate that neighbouring lands which were sold at a particular rate during that period should be the bench mark in applying the value to the land. If Rs. 52,00,000/- was the value for an acre of the land sold in the vicinity, the same should be adopted insofar as the appellant is concerned.

As regards the deduction to be made out of the said value for the purpose of payment of compensation, the law has been reviewed by the Supreme Court in the case of Chandrashekar (D) by L.Rs. and Others Vs. Land Acquisition Officer and Another, . After considering the judgment of the Apex Court, it was concluded that the quantum of deduction made from the market value determined on the basis of the developed exemplar transaction on account of development is taken as consisting of two components.

Firstly, the area which would have to be left out for providing essential and indispensable amenities like roads, pavements, sewers, water drains, overhead tanks, electricity transformers, effluent treatment plants, etc. Besides land to be set apart for parking areas, gardens etc.; This first component was hence to be conveniently referred to as deductions for setting apart spaces or areas meant for infrastructure.

Secondly, deduction has to be made for the expenditure which would be incurred in providing the infrastructure, including the costs if any in levelling uneven land or filling up low lying lands. This second component was termed as developmental expenditure.

Then the Supreme Court has concluded thus:

"17. It is essential to earmark appropriate deductions, out of the market value of an exemplar land, for each of the two components referred to above. This would be the first step towards balancing the differential factors. This would pave the way for determining the market value of the undeveloped acquired land on the basis of market value of the developed exemplar land. As far back as in 1982, this Court in Brigadier Sahib Singh Kalha''s case (supra) held, that the permissible deduction could be upto 53 percent. This deduction was divided by the Court into two components. For the "first component" referred to in the foregoing paragraph, it was held that a deduction of 20 percent should be made. For the "second component", it was held that the deduction could range between 20 to 33 percent. It is therefore apparent, that a deduction of upto 53 percent was the norm laid down by the Court as far back as in 1982. The aforesaid norm remained unchanged for a long duration of time, even though, keeping in mind the peculiar facts and circumstances emerging from case to case, different deductions were applied by this Court to balance the differential factors between the exemplar land and the acquired land. Recently however, this Court has approved a higher component of deduction. In 2009 in Lal Chand''s case (supra) and in 2010 in Andhra Pradesh Housing Board''s case (supra), it has been held, that while applying the sale consideration of a small piece of developed land, to determine the market value of a large tract of undeveloped acquired land, deductions between 20 to 75 percent could be made. But in 2009 in Subh Ram''s case (supra), this Court restricted deductions on account of the "first component" of development, as also, on account of the "second component" of development to 33-1/3 percent each. The aforesaid deductions would roughly amount to 67 percent of the component of the sale consideration of the exemplar sale transaction(s).

Having given our thoughtful consideration to the analysis of the legal position referred to in the foregoing two paragraphs, we are of the view that there is no discrepancy on the issue, in the recent judgments of this Court. In our view, for the "first component" under the head of "development", deduction of 33-1/3 percent can be made. Likewise, for the "second component" under the head of "development" a further deduction of 33-1/3 percent can additionally be made. The facts and circumstances of each case would determine the actual component of deduction, for each of the two components. Yet under the head of "development", the applied deduction should not exceed 67 percent. That should be treated as the upper benchmark. This would mean, that even if deduction under one or the other of the two components exceeds 33-1/3 percent, the two components under the head of "development" put together, should not exceed the upper benchmark.

In Lal Chand''s case (supra) and in Andhra Pradesh Housing Board''s case (supra), this Court expressed the upper limit of permissible deductions as 75 percent. Deductions upto 67 percent can be made under the head of "development". Under what head then, would the remaining component of deductions fall? Further deductions would obviously pertain to considerations other than the head of "development". Illustratively a deduction could be made keeping in mind the waiting period required to raise infrastructure, as also, the waiting period for sale of developed plots and or built-up areas. This nature of deduction may be placed under the head "waiting period". Illustratively again, deductions could also be made in cases where the exemplar sale transaction, is of a date subsequent to the publication of the preliminary notification. This nature of deduction may be placed under the head "de-escalation". Likewise, deductions may be made for a variety of other causes which may arise in different cases. It is however necessary for us to conclude, in the backdrop of the precedents on the issue, that all deductions should not cumulatively exceed the upper benchmark of 75 percent. A deduction beyond 75 percent would give the impression of being lopsided, or contextually unreal, since the land loser would seemingly get paid for only 25 percent of his land. This impression is unjustified, because deductions are made out of the market value of developed land, whereas, the acquired land is undeveloped (or not fully developed). Differences between the nature of the exemplar land and the acquired land, it should be remembered, is the reason/cause for applying deductions. Another aspect of this matter must also be kept in mind. Market value based on an exemplar sale, from which a deduction in excess of 75 percent has to be made, would not be a relevant sale transaction to be taken into consideration, for determining the compensation of the acquired land. In such a situation the exemplar land and the acquired land would be uncomparable, and therefore, there would be no question of applying the market value of one (exemplar sale) to determine the compensation payable for the other (acquired land). It however needs to be clarified, that even though on account of developmental activities (under the head "development"), we have specified the upper benchmark of 67 percent, it would seem, that for the remaining deduction(s), the permissible range would be upto 8 percent. That however is not the correct position. The range of deductions, other than under the head "development", would depend on the facts and circumstances of each case. Such deductions, may even exceed 8 percent, but that would be so only, where deductions for developmental activities (under the head "development") is less than 67 percent, i.e., as long as the cumulative deductions do not cross the upper benchmark of 75 percent. We therefore hold, that the range for deductions, for issues other than developmental costs, would depend on the facts and circumstances of each case, they may be 8 percent, or even the double thereof, or even further more, as long as, cumulatively all deductions put together do not exceed the upper benchmark of 75 percent.

Before applying deductions for ascertaining the market value of the undeveloped acquired land, it would be necessary to classify the nature of the exemplar land, as also, the acquired land. This would constitute the second step in the process of determination of the correct quantum of deductions. The lands under reference may be totally undeveloped, partially developed, substantially developed or fully developed. In arriving at an appropriate classification of the nature of the lands which are to be compared, reference may be made to the developmental activities referred to by us in connection with the "first component", as also, the "second component" (in paragraph 17 above). The presence (or absence) of one or more of the components of development, would lead to an appropriate classification of the exemplar land, and the acquired land. Comparison of the classifications thus arrived, would depict the difference in terms of development, between the exemplar land and the acquired land. This exercise would lead to the final step. In the final step, the absence and presence of developmental components, based on such comparison, would constitute the basis for arriving at an appropriate percentage of deduction, necessary to balance the differential factors between the exemplar land and the acquired land."

In the present case on hand it is pointed out by the learned counsel for the appellant that the surrounding areas have been developed into a full fledged layout and the land of the appellant is to be integrated into the layout and this would entail formation of roads, drainage system and nothing else apart from formation of plots. Having regard to the extent of land which is a little over 5 acres, it would only be possible to form roads and plots with drainage systems and nothing more. There is no contra evidence tendered by the respondent to demonstrate that it would be utilized for formation of parks or other areas, in the absence of which it could be accepted that there is minimal development that would take place in the said area.

Insofar as the first component is concerned, the Supreme Court having held that it could be up to 33-1/3 percent, it would have to be sealed down in the present case on hand, as the development involved is only to a certain extent and 20% deduction is applied towards the first component, it should meet the ends of justice.

Insofar as the second component is concerned, the expenditure involved, should be taken at 33-1/3 percent, because certainly the expenditure in the development involved in the formation of roads, plots, and drainage system and for the convenience if it is taken as 53% of deductions totally of the two components out of 52 lakh rupees, it would be just and fair.

Insofar as the claim of the appellant that 4 guntas of pot-kharab land should also be made amenable to payment of compensation is concerned, the nature of pot-kharab was necessary to be demonstrated. Pot-kharab is referred to as two kinds under the Land Revenue Rules. One which is utilized for the use of general public and the other which is not fit for agriculture and treated as unarable land in respect of which revenue is not paid. The appellant has not produced any material to demonstrate as to which class it belonged. It is pointed out that it is unarable land and not being used for any public purpose. Therefore since the land is being acquired for the formation of a layout, it matters little, whether it was arable land or otherwise, the land will be utilized by the acquiring authority and therefore he would be entitled for compensation in respect of the said land as well. Accordingly if the deductions as quantified are applied to the total extent of 5 acres 18 guntas of land, the appellant would be entitled to Rs. 24,37,966/- per acre and he shall be paid compensation accordingly with all statutory benefits and costs of the appeal.

Though the learned Additional Government Advocate would assert that the exemplar land which was said to be shown as being neighbouring land and the value of which is sought to be adopted, is not really the neighbouring land, but is far away from the land in question and hence could not be adopted is also not an objection which would take away the entitlement of the appellant, since it is not in dispute that the land of the appellant is being acquired for the purpose of integration of the same into the layout that is already formed that by itself would indicate that the land is surrounded by developed land which would fetch a value, as if it was urban property and not agricultural land. Therefore there is no substance in the objection raised by the learned Additional Government Advocate.