# MAJ. GEN. KAPIL MEHRA & ORS v. UNION OF INDIA & ANR

- **Citation:** [2014] 10 S.C.R. 1153
- **Court:** Supreme Court of India
- **Decided:** 2014-10-17
- **Case number:** Civil Appeal Nos. 2545-2546 of 2012
- **Bench:** T.S. Thakur, R. Banumathi
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/maj-gen-kapil-mehra-ors-v-union-of-india-anr-29489
- **Pages:** 37

## Headnote

Land Acquisition Act, 1894 - s.23 - Acquisition of land
A
B
- Market Value - Determination of - Held: Market value is
determined with reference to the open market sale of C
comparable land in the neighbourhood, by a willing seller to
a willing buyer, on or before the date of preliminary notification,
as that would give a fair indication of the market value.
Land Acquisition Act, 1894 - s.23 - Acquisition of land
0
- Market Value - Determination of - Comparable sales
method for valuation of land - Held: Comparable sales
method of valuation is preferred rather than methods of
valuation of land such as capitalization of net income method
or experl opinion method, because it furnishes the evidence
for determination of the market value of the acquired land at
E
which the willing purchaser would pay for the acquired land if
it had been sold in the open market at the time of issuance
of notification u/s. 4.
Land Acquisition Act, 1894 - s.23 - Determination of
F
Market Value on the basis of average price paid under sale
transactions - Scope - Legal position - Discussed - Held:
Where the lands acquired are of different type and different
locations, averaging is not permissible - But where there are
several sales of similar lands, more or less, at the same time,
G
whose prices have marginal variation, averaging thereof is
permissible - For fixation of fair and reasonable market value
of any type of land, abnormally high value or abnormally low
value sales should be carefully discarded - If the number of
1153
H
1154
SUPREME COURT REPORTS
[2014] 10 S.C.R.
A
sale deeds of the same locality and the same period with
short intervals are available, average price of the available
number of sale deeds shall be considered as a fair and
reasonable market price - Ultimately, it is in the interest of
justice for the land losers to be awarded fair compensation -
B All attempts should be taken to award fair compensation to
the extent possible on the basis of their accessibility to
different kinds of roads, locational advantages etc. - On facts,
the four perpetual lease deeds A-7 to A-10 relied upon by the
appellants were of the same locality and related to the period
c just prior to s.4(1) notification - High Court justified in taking
average of the said four exemplars and approach adopted by
the High Court in averaging the sale prices of Exs A 7 to A 10
cannot be said to be perverse.
Land Acquisition Act, 1894 - s. 23 - Determination of
D Market Value - Gap between "leasehold" price and "freehold"
price - To be taken into consideration -Held: 'Freehold land'
and 'leasehold land' are conceptually different - If a property
subject to a lease and in possession of a lessee is offered
for sale by the owner to a prospective private purchaser, the
E purchaser being aware that on purchase he will get only title
and not possession and that the sale in his favour will be
subject to encumbrance namely, the lease, he will offer a
price taking note of th'e encumbrances - Naturally, such a
price would be Jess than the price of a property without any
F
encumbrance -
But wtien a land is acquired free from
encumbrances, the market value of the same will certainly be
higher - On facts, Exs A 7 to A 10 were the perpetual lease
deeds relating to the period from September 1995 to
December 1996 and to get the perpetual lease deeds
G converted as freehold, the holder of perpetual leasehold had
to pay further amount to DOA - Having regard to the pen"od
of Exs A 7 to A 10 and the date of issuance of s.4 notification
dated 19.2.1997, addition of 20% to be added for arriving at
the value of 'freehold' property.
H
MAJ. GEN. KAPIL MEHRA & ORS. v. UNION OF
1155
INDIA & ANR.
Land Acquisition Act, 1894 - s. 23 - Determination of A
Market Value - Auction sales of commercial I residential
plots - If a true index - Deduction towards competitive bidding
-
Held: The general rule that the sale prices of the
comparable sales should be relied upon for calculating the
market value will not

## Text

_Characters 0–39,955 of 71,923. This is a partial read: ask again with offset=39955 for what follows._

[2014] 10 S.C.R. 1153
MAJ. GEN. KAPIL MEHRA & ORS.
v.
UNION OF INDIA & ANR.
(Civil Appeal Nos. 2545-2546/2012)
OCTOBER 17, 2014
[T.S. THAKUR AND R. BANUMATHI, JJ.]
Land Acquisition Act, 1894 - s.23 - Acquisition of land
A
B
- Market Value - Determination of - Held: Market value is
determined with reference to the open market sale of C
comparable land in the neighbourhood, by a willing seller to
a willing buyer, on or before the date of preliminary notification,
as that would give a fair indication of the market value.
Land Acquisition Act, 1894 - s.23 - Acquisition of land
0
- Market Value - Determination of - Comparable sales
method for valuation of land - Held: Comparable sales
method of valuation is preferred rather than methods of
valuation of land such as capitalization of net income method
or experl opinion method, because it furnishes the evidence
for determination of the market value of the acquired land at
E
which the willing purchaser would pay for the acquired land if
it had been sold in the open market at the time of issuance
of notification u/s. 4.
Land Acquisition Act, 1894 - s.23 - Determination of
F
Market Value on the basis of average price paid under sale
transactions - Scope - Legal position - Discussed - Held:
Where the lands acquired are of different type and different
locations, averaging is not permissible - But where there are
several sales of similar lands, more or less, at the same time,
G
whose prices have marginal variation, averaging thereof is
permissible - For fixation of fair and reasonable market value
of any type of land, abnormally high value or abnormally low
value sales should be carefully discarded - If the number of
1153
H
1154
SUPREME COURT REPORTS
[2014] 10 S.C.R.
A
sale deeds of the same locality and the same period with
short intervals are available, average price of the available
number of sale deeds shall be considered as a fair and
reasonable market price - Ultimately, it is in the interest of
justice for the land losers to be awarded fair compensation -
B All attempts should be taken to award fair compensation to
the extent possible on the basis of their accessibility to
different kinds of roads, locational advantages etc. - On facts,
the four perpetual lease deeds A-7 to A-10 relied upon by the
appellants were of the same locality and related to the period
c just prior to s.4(1) notification - High Court justified in taking
average of the said four exemplars and approach adopted by
the High Court in averaging the sale prices of Exs A 7 to A 10
cannot be said to be perverse.
Land Acquisition Act, 1894 - s. 23 - Determination of
D Market Value - Gap between "leasehold" price and "freehold"
price - To be taken into consideration -Held: 'Freehold land'
and 'leasehold land' are conceptually different - If a property
subject to a lease and in possession of a lessee is offered
for sale by the owner to a prospective private purchaser, the
E purchaser being aware that on purchase he will get only title
and not possession and that the sale in his favour will be
subject to encumbrance namely, the lease, he will offer a
price taking note of th'e encumbrances - Naturally, such a
price would be Jess than the price of a property without any
F
encumbrance -
But wtien a land is acquired free from
encumbrances, the market value of the same will certainly be
higher - On facts, Exs A 7 to A 10 were the perpetual lease
deeds relating to the period from September 1995 to
December 1996 and to get the perpetual lease deeds
G converted as freehold, the holder of perpetual leasehold had
to pay further amount to DOA - Having regard to the pen"od
of Exs A 7 to A 10 and the date of issuance of s.4 notification
dated 19.2.1997, addition of 20% to be added for arriving at
the value of 'freehold' property.
H
MAJ. GEN. KAPIL MEHRA & ORS. v. UNION OF
1155
INDIA & ANR.
Land Acquisition Act, 1894 - s. 23 - Determination of A
Market Value - Auction sales of commercial I residential
plots - If a true index - Deduction towards competitive bidding
-
Held: The general rule that the sale prices of the
comparable sales should be relied upon for calculating the
market value will not apply when the sale transactions relied s
upon are auction sales - On facts, 20% deduction made for
competitive bidding and value of acquired land fixed
accordingly.
Land Acquisition Act, 1894 - s. 23 - Determination of C
Market Value - Deductions made for development -
Essential components of -
Held: Deduction towards
development depends upon the nature and location of the
acquired land - The deduction includes components of land
required to be set apart under the building rules for roads,
sewage, electricity, parks and other common facilities and also
D
deduction towards development charges like laying of roads,
construction of sewerage - Rule of one third deduction
towards development appears to be the general rule - But so
far as Delhi Development Authority is concerned, or similar
statutory authorities, where well planned layouts are put in
E
place, larger land area may be utilized for forming layout,
roads, parks and other common amenities - In the instant
case, having regard to the extent of the land acquired and the
development in and around Vasant Kunj area, it is
appropriate to make 35% deduction towards utilization of the
F
land area in the layout for roads, drains, parks, playgrounds
and civic amenities -
So far as the expenditure for
development of the large extent of land into a developed area
by construction of proper roads, underground drainage,
sewerage and erection of electricity lines, it is appropriate to
G
make further deduction of 25% towards development charges.
Land Acquisition Act, 1894 - ss. 28 and 34 - Award of
compensation - Payment of interest - Held: Normally, Court
awards interest if it enhances compensation in excess of the
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[2014] 10 S.C.R.
A
amount awarded by the Collector, unless there are
exceptional circumstances - Award of interest uls.34 is
mandatory inasmuch the word used in the Section is 'shall' -
Interest payable u/s.34 is statutory- Claim for interest u/s.28
proceeds on the basis that due compensation not having
B been paid, the claimant should be allowed interest on the
enhanced compensation amount - Award of interest uls.28
is discretionary power vested in the Court and it has to be
exercised in a judicious manner and not arbitrarily - Use of
the word "may" in s.28 does not confer any arbitrary discretion
c on the Court to disallow interest for no valid or proper reasons
- Both in terms of s.34 and s.28, interest at 9% per annum is
payable for the first year of taking possession and 15% per
annum thereafter, if the amount of compensation was not paid
or deposited within a period of one year or deposited
D thereafter.
·
Land Acquisition Act, 1894 -
s.27 -
Award of
compensation - Payment of proportionate costs - Held: The
language of s.27(1) is clear and very wide and it gives power
to the courts to order costs to be paid by what persons and in
E
what proportions they are to be paid - In making order for costs
uls.27(1), the court may have regard to the provisions of s.35
CPC -Ordinarily, when a litigant succeeds in part and fails in
part, the equitable order made is that he should receive
F
proportionate costs.
Kunhayammed and Ors. vs. State of Kera/a and Anr.
c2000) 6 sec 359: 2000 (1) Suppl. scR 538 s.
Gangadhara Palo vs. Revenue Divisional Officer and Anr.
(2011) 4 SCC 602: 2011 (3) SCR 7 46; \liluben Jhalejar
G Contractor vs. State of Gujarat (2005) 4 SCC 789: 2005 (3)
SCR 542 Karnataka Urban Water Supply and Drainage
Board and Ors. vs. K.S. Gangadharappa & Anr. (2009) 11
SCC 164: 2009 (6) SCR 250; M. Vijaya/akshmamma Rao
Bahadur vs. Collector (1969) 1 MLJ SC 45; State of Punjab -
H and Anr. vs. Hans Raj (D) by Lrs. And Ors. (1994) 5 SCC 734;
MAJ. GEN. KAPIL MEHRA & ORS. v. UNION OF 1157
INDIA & ANR.
Anjani Mo/u Dessai vs. State of Goa And Anr. (2010) 13 SCC
A
710: 2010 (14) SCR 997; M.B. Gopa/a Krishna & Ors. vs.
Special Deputy Collector, Land Acquisition (1996) 3 SCC
594: 1996 (2) SCR 248; Executive Engineer, Karnataka
Housing Board vs. Land Acquisition Officer, Gadag And Ors.
(2011) 2 SCC 246: 2011 (1) SCR 600; Raj Kumar And Ors.
B
vs. Haryana State And Ors. (2007) 7 SCC 609: 2007 (9)
SCR 455; Haryana State Agricultural Market Board And Anr.
vs. Krishan Kumar And Ors. (2011) 15 SCC 297; Sabhia
Mohammed Yusuf Abdul Hamid Mui/a (Dead) by Lrs. and
Ors. vs. Special Land Acquisition Officer and Ors. (2012) 7 c
SCC 595; Special Tehsildar,. L.A. Vishakapatnam vs. Smt.A.
Mangala Gowri (1991) 4 SCC 218: 1991 (2) SCR 472;
Gu/zara Singh & Ors. vs. State of Punjab & Ors. (1993) 4 SCC
245: 1991 (2) SCR 472; Santosh Kumari & Ors. vs. State
of Haryana (1996) 10 SCC 631: 1996 (5) Suppl. SCR 315;
Revenue Divisional Officer-cum-LAO vs. Shaik Azam Saheb
D
etc. (2009) 4 SCC 395: 2009 (1) SCR 289; A.P. Housing
Board vs. K. Manohar Reddy (2010) 12 SCC 707: 2010 (11)
SCR 1107; Ashrafi & Ors. vs. State of Haryana & Ors. (2013)
5 SCC 527: 2013 (6) SCR 148; Kashmir Singh vs. State of E
Haryana & Ors. (2014) 2 SCC 165; Haryana State
Agricultural Market Board and Anr. vs. Krishan Kumar and
Ors. (2011) 15 SCC 297; Deputy Director Land Acquisition
vs. Malla Atchinaidua And Ors. AIR 2007 SC 740: 2006 (10)
Suppl. SCR 885; Mummidi Apparao (Dead by LR) vs.
Nagarjuna Fertilizers & Chemical Ltd., AIR 2009 SC 1506;
F
Lal Chand vs. Union of India and Anr. (2009) 15 SCC 769:
2009 (13) SCR 622; Basavva (Smt.) And Ors. vs. Sp/. Land
Acquisition Officer And Ors. (1996) 9 SCC 640: 1996 (3)
SCR 500 ; Kanta Devi & Ors. vs. State of Haryana And Anr.
(2008) 15 SCC 201: 2008 (10) SCR 367; Subh Ram & Ors.
G
vs. State of Haryana & Anr. (2010) 1 SCC 444: 2009 (15)
SCR 287; Chandrasekhar (dead) by L.Rs. and Ors. vs. LAO
& Anr. (2012) 1 SCC 390: 2011 (15) SCR414; Lal Chand
vs. Union of India & Anr. (2009) 15 SCC 769: 2009 (13)
H
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SUPREME COURT REPORTS
[2014] 10 S.C.R.
A
SCR 622; Commissioner of Income Tax, Faridabad vs.
B
c
D
E
F
G
H
Ghanshyam (HUF) (2009) 8 SCC 412:
2009 (10)
SCR 1025; and Gurpreet Singh vs. Union of India (2006) 8
SCC 457: 2006 (7) Suppl. SCR 422 - referred to.
Case Law Reference:
2000 (1) Suppl. SCR 538
referred to
2011 (3) SCR 7 46
referred to
2005 (3) SCR 542
referred to
2009 (6) SCR 250
(1969) 1 MLJ SC 45
(1994) 5 sec 734
2010 (14) SCR 997
1996 (2) SCR 248
2007 (9) SCR 455
2011 (1) SCR 600
c2011) 15 sec 297
c2012) 1 sec 595
1991 (2) SCR 472
referred to
referred to
referred to
referred to
referred to
referred to
referred to
referred to
referred to
referred to
1996 (5) Suppl. SCR 315
referred to
2009 (1) SCR 289
2010 (11) SCR 1107
2013 (6) SCR 148
(2014) 2 sec 165
c2011) 15 sec 297
referred to
referred to
referred to
referred to
referred to
Para 6
Para 6
Para 12
Para 13
Para 18
Para 18
Para 19
Para 22
Para 27
Para 28
Para 33
Para 35
Para 36
Para 36
Para 36
Para 36
Para 36
Para 36
Para 37
MAJ. GEN. KAPIL MEHRA & ORS. v. UNION OF
1159
INDIA & ANR.
2006 (10) Suppl. SCR 885 referred to
Para 37
AIR 2009 SC 1506
referred to
Para 37
2009 (13) SCR 622
referred to
Para 37
1996 (3) SCR 500
referred to
Para 38
2008 (10) SCR367
referred to
Para 38
2009 (15) SCR287
referred to
Para 38
2011 (15) SCR414
referred to
Para 38
2009 (13) SCR622
referred to
Para 40
2009 (10) SCR 1025
referred to
Para 42
2006 (7) Suppl. SCR 422
referred to
Para 46
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.
2545-2546 of 2012.
From the judgment and order dated 24.12.2010 and
13.10.2011 of the Single Judge Bench of Delhi at New Delhi
A
B
c
D
in L.A. Appeal No. 149/07 and in CMP No. 735/2011.
E
Appellant-in-person.
A. Sharan, Vishnu Saharya, Viresh B. Saharya, Sanchit G.,
Aprajita, Dhruv (For Saharya & Co.) for the Respondents.
F
The Judgment of the Court was delivered by
R. BANUMATHI, J. 1. These appeals are directed
against the impugned Orders dated 24.12.2010 and
13.10.2011 passed by Delhi High Court in L.A. Appeal No.149/
G
2007 and C.M. No.735/2011 in L.A. Appeal No.149/2007
respectively by which High Court awarded compensation at the
rate of Rs.14,974/- per sq. yard for appellants' land acquired
by the Delhi Development Authority (DOA) for development of
Vasant Kunj Residential Scheme, Delhi along with interest and
proportionate costs.
H
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SUPREME COURT REPORTS
[2014] 10 S.C.R.
A
2. Shorn of details of the previous notification in 1983 and
the earlier rounds of litigation, background facts in a nutshell
are as follows: On 19.2.1997, a. fresh notification was issued
by the Land and Building Department, Govt. of NCT of Delhi
under Sections 4 and 17 of the Land Acquisition Act, 1894 (the
B Act) proposing to acquire the land of the appellants measuring
12 Bigha (12096 sq. yards) for development of Vasant Kunj
under the planned development scheme of Delhi. Land
Acquisition Collector (LAC) by award No. 2/98-99 dated
18.9.1998 assessed the market value of the land@
C Rs.2,05,642.07 paise per bigha (Rs.205/-per sq.yard), adding
additional interest @ 12% per annum on the market value of
land and the solatium @ 30% on the market value of land and
the compensation was fixed @ Rs.37,21, 180.05 paise per
big ha.
D
3. Aggrieved by the award, the appellants filed Reference
Petition under Section 18 of the Act before the Additional
District Judge (LAC), Delhi. In the reference court, the
appellants produced four documents Exs A7 to A10-perpetual
lease deeds of residential plots in Vasant Kunj, executed
E between September 1995 to December 1996 at the rates
ranging from Rs.28,719/- to Rs.47,542/- per sq. yard. The
reference court held that the lease deeds of auction of a
developed plot by a public authority are not a proper guide for
determining the fair market value of the acquired lands and
F
reference court discarded the exemplars- Exs A7 to A10 lease
deeds and rejected the claim of the appellants for enhancement
of compensation.
4. Aggrieved by the decision of the reference court,
G appellants filed Land Acquisition Appeal No.149/2007 before
High Court of Delhi. The High Court had taken average of the
exemplars- Exs A7 to A10 and deducted 40% from the
average price towards smallness of the area and further
deducted one third towards development of land and fixed the
market value of the land at Rs.14,974/- per sq. yard. High Court
H
MAJ. GEN. KAPIL MEHRA & ORS. v. UNION OF.
1161
INDIA & ANR. [R. BANUMATHI, J.]
held that the appellants shall be entitled to 30% solatium on the
A
above market value of the land under Section 23(2) of the Act
and 12% of the additional amount under Section 23(1-A) of the
Act. The High Court further ordered that in terms of Section 28
of the Act on the· enhanced market value, the appellants shall
be paid interest @ 9% per annum from 19.2.1997 i.e. date of
B
notification under Section 4 of the Act till 18.2.1998 and
thereafter @ 15% per annum till the date of deposit of
compensation. It was also held that interest shall also be paid
on solatium and additional amount. The appellants filed
application C.M. No.735/2011 in L.A. Appeal No.149/2007 c
before the High Court under Sections 152 and 153 read with
Section 151 C.P.C. to award Rs.48 lakhs which was paid as
court fees and also prayed for award of interest under Section
34 for the enhanced compensation. The application was
allowed in part by order dated 13.10.2011, granting 0
proportionate costs to the appellants over and above
Rs.20,000/- as awarded in High Court's judgment dated
24.12.2010. Being aggrieved by the quantum of compensation
and award of proportionate cost, the appellants are before us.
5. First appellant- Maj. Gen. Kapil Mehra, party in person,
E
contended that correct reckoning of market value is the highest
price in any sale deed of comparable instance and the High
Court was not justified in averaging the sale prices of the four
perpetual lease deeds, Exs A 7 to A 10 and the approach of the
High Court in averaging the sale prices of exemplars is
F
erroneous. He further contended that the exemplars Exs A7 to
A 10 relied upon by the appellants are perpetual lease deeds
of residential plots in Vasant Kunj and what was acquired was
freehold lands of the appellants and the price difference
between the 'leasehold' and 'freehold' was not kept in view by
G
the High Court for ascertaini11g the correct market value. It was
submitted that deductions made for development at one third
i.e. 331/3% and 40% for the smallness of area of exemplars
as compared to the largeness of the acquired lands are very
much on the higher side.
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(2014] 10 S.C.R.
A
6. The judgment of the High Court was challenged bY DOA
in Special Leave Petition (Civil) No.15272/2011 and the same
was dismissed by the Order dated 12.5.2011. Mr. Amarendra
Sharan, learned Senior Counsel appearing for the respondents
submitted that in the Special Leave Petition (Civil) No.15272/
s 2011, Maj. Gen. Kapil Mehra appeared in person and the said
special leave petition was dismissed by a speaking order and
the said order merges with the High Court order and the same
is binding upon the appellant and in separate appeals, the
appellants cannot challenge the adequacy of the compensation
c and the present appeals are not maintainable. Reliance was
placed upon the judgment of this Court in Kunhayammed and
Ors. vs. State of Kera/a and Anr. (2000) 6 SCC 359 and S.
Gangadhara Palo vs. Revenue Divisional Officer and Anr.,
(2011) 4 sec 602.
D
7. Without prejudice to the above contention, Mr.
Amarendra Sharan, learned Senior Counsel appearing for the
respondents submitted that the land acquired is 12 bigha which
is almost 12096 sq. yards which is thousand times more than
the area of the plots in Exs A7 to A10, that too, in fully developed
E commercial area and the sale price of such a small area cannot
be taken as the value for arriving at the market value of large
extent of area. It was submitted that it is not safe to rely upon
the allotment rates/auction rates in regard to the commercial
plots formed by DOA in a developed layout in determining the
F market value of the adjoining large extent of undeveloped land.
It was further submitted that in case of Delhi Development
Authority or any statutory authority, 40% of the land area is to
be deducted for formation of roads, drains, parks and common
amenities and further 35% deduction ought to have been made
G towards the cost of leveling the land, construction of sewerages,
laying electricity lines etc. Learned Senior Counsel submitted
that deduction for development ought to have been made at 7075% and the High Court was not justified in making nominal
deduction of 331/3% of the area.
H
MAJ. GEN. KAPIL MEHRA & ORS. v. UNION OF 11-63
INDIA & ANR. [R. BANUMATHI, J.]
8. We have given our thoughtful consideration to the
A
submissions and perused the materials on record.
9. Before we proceed to consider the merits of the matter,
let us first examine the preliminary objections raised by the
respondents as to the maintainability of these appeals. Of
8
course, Special Leave Petition (Civil) No.15272/2011 filed by
ODA was dismissed on 12.5.2011 by a speaking order. It is
well settled that when a special leave petition is dismissed with
reasons, there is a merger of the judgment of the High Court
in the order of the Supreme Court. Dismissal of special leave
petition filed by ODA only means that this Court felt that the
C
quantum of Rs.14,974/- per sq. yard fixed by the High Court
need not be further reduced. In the special leave petition, though
first appellant appeared and resisted the same, the first
appellant could not have advanced his arguments seeking
enhancement of compensation. Dismissal of special leave
D
petition has become final as against DOA. When SLP filed by
ODA was heard and disposed of by this Court (vide Order
dated 12.05.2011 ), the appellants were pursuing their review
petition before the High Court which came to be dismissed on
13.10.2011. So far as the appellants are concerned, the order
E
was then res subjudice. Order of this Court dismissing the
special leave petition preferred by ODA, in our view, is not an
impediment to the appellants to pursue their appeals and we
proceed to consider merits of the rival contentions.
10. Market Value: First question that emerges is what
would be the reasonable market value which the acquired lands
are capable of fetching. While fixing the market value of the
acquired land, the Land Acquisition Officer is required to keep
F
in mind the following factors:- (i) existing geographical situation
G
of the land; (ii) existing use of the land; (iii) already available
advantages, like proximity to National or State Highway or road
and/or developed area and (iv) market value of other land
situated in the same locality/village/area or adjacent or very
near to the acquired land.
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[2014] 10 S.C.R.
A
11. The standard method of determination of the market
value of any acquired land is by the valuer evaluating the land
on the date of valuation publication of notification under Section
4(1) of the Act, acting as a hypothetical purchaser willing to
purchase the land in open market at the prevailing price on that
B day, from a seller willing to sell such land at a reasonable price.
Thus, the market value is determined with reference to the open
market sale of comparable land in the neighbourhood, by a
willing seller to a willing buyer, on or before the date of
prelimfnary notification, as that would give a fair indication of
c the market value.
D
E
F
G
H
12. In Viluben Jhalejar Contractor v. State of Gujarat
(2005) 4 SCC 789, this Court laid down the following principles
for determination of market value of the acquired land: (SCC
pp.796-97, paras 17-20)
"17. Section 23 of the Act specifies the matters required
to be considered in determining the compensation; the
principal among which is the determination of the market
value of the land on the date of the publication of the
notification under sub-section (1) of Section 4.
18. One of the principles for determination of thee amount.
of compensation for acquisition of land would be the
willingness of an informed buyer to offer the price therefor.
It is beyond any cavil that the price of the land which a
willing and informed buyer would offer would be different
in the cases where the owner is in possession and
enjoyment of the property and in the cases where he is not.
19. Market value is ordinarily 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 material is not forthcoming either in the
shape of sales of similar lands in the neighbourhood at or
about the date of notification under Section 4(1) or
MAJ. GEN. KAPIL MEHRA & ORS. v. UNION OF
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INDIA & ANR. [R. BANUMATHI, J.]
otherwise, other sale instances as well as other evidences
A
have to be considered.
20. The amount of compensation cannot be ascertained
with mathematical accuracy. A comparable instance has
to be identified having regard to the proximity from time
angle as well as proximity from situation angle. For
determining the market value of the land under acquisition, .
suitable adjustment has to be made having regard to
various positive and negative factors vis-a-vis the land
under acquisition by placing the two in juxtaposition ...... "
B
c
13. The courts adopt comparable sales method for
valuation of land while fixing the market value of the acquired
land. Comparable sales method of valuation is preferred rather
than methods of valuation of land such as capitalization of net
income method or expert opinion method, because it furnishes
D
the evidence for determination of the market value of the
acquired land at which the willing purchaser would pay for the
acquired land if it had been sold in the open market at the time
of issuance of notification under Section 4 of the Act.
14. While taking comparable sales method of valuation of
land for fixing the market value of the acquired land, there are
certain factors which are required to be satisfied and only on
fulfillment of those factors, the compensation can be awarded
according to the value of the land stated in the sale deeds. In
Kamataka Urban Water Supply and Drainage Board and Ors.
v. K.S. Gangadharappa & Anr., (2009) 11 SCC 164, factors
which merit consideration as comparable sales are, interalia,
laid down as under:-
E
F
"It can be broadly stated that the element of
G
speculation is reduced to minimum if the underlying
principles of fixation of market value with reference to
comparable sales are made:
(i)
when sale is within a reasonable time of the
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[2014] 10 S.C.R.
A
date of notification under Section 4(1);
B
c
(ii)
It should be a bona fide transaction;
(iii)
It should be of the land acquired or of the land
adjacent to the land acquired; and
(iv)
It should possess similar advantages.
It is only when these factors are present, it can merit
a consideration as a comparable case (See Special Land
Acquisition Officer v. T. Adinarayan Setty (AIR 1959 SC
429) These aspects have been highlighted in Ravinder
Narain v. Union of India (2003) 4 SCC 481."
15. Appellants have produced Exs A7 to A10-four
perpetual lease deeds of residential plots in Pocket C of
D Vasant Kunj Area between September 1995 to December
1996, the details of which are as under:
Exh.
Sale Date
Plot
Size
Sale
Rate
No.
(Sq.
Price
(Rs.
E
Mtr.)
(Rs.)
per
sq.yd.)
A-7
22.09.95
59C
218
5, 75,05,000/-
28,719/-
A-8
02.02.96
SC
220
96,55,000/-
36,695/-
F
A-9
02.02.96
SC
231
1,01,61,000/-
36,779/-
A-10
10.12.96
13C
242
1,37,60,000/-
47,542/-
16. Exs A 7 to A 10 are lease deeds of small plots executed
G by DOA. Plots in the above lease deeds are in the same vicinity
of the acquired land and High Court had taken the same as
comparable sales. The size of the plots covered in the
exemplars are smaller. If there is a dissimilarity in regard to the
area, it is open to the court to make proper deduction towards
smallness of area. We find no error in the approach of the High
H
MAJ. GEN. KAPIL MEHRA & ORS. v. UNION OF 1167
INDIA & ANR. [R. BANUMATHI, J.]
Court taking Exs A7 to A10 as comparable sales for fixation
A
of market value.
17. The High Court has taken average of sale price of Exs
A7 to A10 and deducted 40% towards smallness of the plot
taken for comparison, further deducted one third towards
8
development. Though we may finally affirm the rate fixed by the
High Court, for the reasons stated infra we fix the market value
in accordance with the well settled principles laid down by this
Court.
18. Determination of Market Value on the basis of C
average price paid under sale transactions: For
ascertaining the fair market value of the acquired land, High
Court adopted the 'average method' by averaging the sale
price of Exs A-7 to A-10 and calculated the rate at Rs.37,433.75
paise per sq. yard. The appellants contend that when land is
D
being compulsorily taken away, the landholder is entitled to
claim the highest value which similar land in the locality is shown
to have fetched in a bonafide transaction and High Court was
not justified in averaging the sale prices of four perpetual lease
deeds. Appellants placed reliance upon the judgments of this
E
Court in M. Vijaya/akshmamma Rao Bahadur vs. Collector
(1969) 1 MLJ SC 45 and State of Punjab and Anr. vs. Hans
Raj (0) by Lrs. And Ors., (1994) 5 SCC 734. In Hans Raj case
(supra) it was held as under:
"4. Having given our anxious consideration to the
respective contentions, we are of the considered view that
F
the learned Single Judge of the High Court committed a
grave error in working out average price paid under the
sale transactions to determine the market value of the
acquired land on that basis. As the method of averaging
G
the prices fetched by sales of different lands of different
kinds at different times, for fixing the market value of the
acquired land, if followed, could bring about a figure of
price which may not at all be regarded as the price to be
fetched by sale of acquired land. One should not have,
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[2014] 10 S.C.R.
ordinarily recourse to such method. It is well settled that
genuine and bona fide sale transactions in respect of the
land under acquisition or in its absence the bona fide sale
transactions proximate to the point of acquisition of the
lands situated in the neighbourhood of the acquired lands
possessing similar value or utility taken place between a
willing vendee and the willing vendor which could be
expected to reflect the true value, as agreed between
reasonable prudent persons acting in the normal market
conditions are the real basis to determine the market
value."
19. Referring to Hans Raj's case in Anjani Molu Dessai
vs. State of Goa And Anr., (2010) 13 SCC 710, this Court held
as under:-
"20. The legal position is that even where there are several
exemplars with reference to similar lands, usually the
highest of the exemplars, which is a bonafide transaction,
will be considered. Where however there are several sales
of similar lands whose prices range in a narrow bandwidth,
the average thereof can be taken, as representing the
market price. But where the values disclosed in respect
of two sales are markedly different, it can only lead to an
inference that they are with reference to dissimilar lands
or that the lower value sales is on account of
undervaluation or other price depressing reasons.
Consequently, averaging cannot be resorted to. We may
refer to two decisions of this Court in this behalf."
20. Where the lands acquired are of different type and
different locations, averaging is not permissible. But where
G there are several sales of similar lands, more or less, at the
same time, whose prices have marginal variation, averaging
thereof is permissible. For the purpose of fixation of fair and
reasonable market value of any type of land, abnormally high
value or abnormally low value sales should be carefully
H
MAJ. GEN. KAPIL MEHRA & ORS. v. UNION OF
1169
INDIA & ANR. [R. BANUMATHI, J.]
discarded. If the number of sale deeds of the same locality and
A
the same period with short intervals are available, the average
price of the available number of sale deeds shall be considered
as a fair and reasonable market price. Ultimately, it is in the
interest of justice for the land losers to be awarded fair
compensation. All attempts should be taken to award fair s
compensation to the extent possible on the basis of their
accessibility to different kinds of roads, locational advantages
etc. Four perpetual lease deeds A-7 to A-10 relied upon by the
appellants are of the same locality - Vasant Kunj Residential
Scheme and relate to the period ranging from September 1995 c
to December 1996, but they are just prior to Section 4(1)
notification. In our view, the High Court was justified in taking
the average of the said four exemplars and approach adopted
by the High Court in averaging the sale prices of Exs A 7 to A 10
cannot be said to be perverse.
D
21. Freehold vis-a-vis Leasehold Price - Market Value~
Contention of the appellants is that Exs A 7 to A 10 relate to long
term perpetual leasehold deeds and what was acquired was
appellants' freehold property and freehold property has higher
value than the leasehold plot and suitable addition should have
E
been made. The appellant contends that the terms stipulated
in perpetual leasehold are extremely stringent and in such
cases, no sale is permitted without the permission of ODA and
there are many other uncomfortable clauses in the terms of the
perpetual lease deeds and all these 'stringent conditions'
F
increase the gap between 'freehold' price and 'leasehold' price.
It is submitted that market value of 'freehold property' is much
higher than the value of 'leasehold property' and this was not
taken into consideration by the High Court.
G
22. In M.B. Gopala Krishna & Ors. vs. Special Deputy
Collector, Land Acquisition, (1996) 3 SCC 594, as relied upon
by the appellants, it was held as under:-
"lt is further contended by Shri Mudgal that value of the land
does not get pegged down on account of the land being
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c
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SUPREME COURT REPORTS
[2014] 10 S.C.R.
in occupation of a tenant and the circumstances in this
behalf taken into account by the High Court, is irrelevant.
We find no force in the contention. A freehold land and one
burdened with encumbrances do make a big difference in
attracting willing buyers. A freehold land normally
commands higher compensation while the land burdened
with encumbrances secures lesser price. The fact of a
tenant in occupation would be an encumbrance and no
willing purchaser would willingly offer the same price as
would be offered for a freehold land. Under those
circumstances, the High Court would be right in its
conclusion that the land burdened with encumbrances
takes lesser price than the freehold land. The
encumbrances would operate as a disabling factor to peg
down the price when we compare the same with freehold
land."
The above observations were made in the aforesaid
decision while upholding the compensation that was payable
to the landlord without reference to the tenant's rights. The
above principle will apply only where a property subject to
E encumbrances is to be sold to a private purchaser or is
acquired subject to the tenancy.
23. 'Freehold land' and 'leasehold land' are conceptually
different. If a property subject to a lease and in the possession
F of a lessee is offered for sale by the owner to a prospective
private purchaser, the purchaser being aware that on purchase
he will get only title and not possession and that the sale in his
favour will be subject to encumbrance namely, the lease, he will
offer a price taking note of the encumbrances. Naturally, such
G a price would be less than the price of a property without any
encumbrance. But when a land is acquired free from
encumbrances, the market value of the same will certainly be
higher.
24. Exs A7 to A10 are the perpetual lease deeds relating
H
MAJ. GEN. KAPIL MEHRA & ORS. v. UNION OF
1171
INDIA & ANR. [R. BANUMATHI, J.]
to the period from September 1995 to December 1996 and to
A
get the perpetual lease deeds converted as freehold, the holder
of perpetual leasehold has to pay further amount to DDA.
Having regard to the period of Exs A 7 to A 10 and the date of
issuance of Section 4 notification dated 19.2.1997, in our view,
addition of 20% is to be added for arriving at the value of
B
'freehold' property. Adding 20% to Rs.37,433.75 per sq. yard
which comes to Rs.7,486.75, the value is calculated at
Rs.44,920.50 rounded off to Rs. 44,921/- per sq. yard.
25. Deduction Towards Competitive Bidding: Exs A7
C
to A 10 exemplars are perpetual lease deeds of commercial
plots auctioned in Vasant Kunj area. Learned senior counsel
for the respondents contended that this auctioned commercial
site can never be equated to the value of large extent of
agricultural land like the land acquired in the present case and
those plots auctioned are developed plots on which the
D
Government had spent a considerable amount. It is contended
that the auction prices of commercial plots in exemplars are
not true index of a fair market value of the land at the relevant
time because elements of speculation and unfair competition
in such auctions and suitable deduction ought to have been
E
made for competitive bidding.
26. While considering the competition involved in auction
sales of commercial/residential plots and observing that the
element of competition in auction sales make them unsafe
F
guides for determining the market value of the acquired lands,
in Executive Engineer, Karnataka Housing Board v. Land
Acquisition Officer, Gadag And Ors., (2011) 2 SCC 246 paras
6 & 7, this Court held as under:-
"6. But auction-sales stand on a different footing.
G
When purchasers start bidding for a property in an auction,
an element of competition enters into the auction. Human
ego, and desire to do better and excel over other
competitors, leads to competitive bidding, each trying to
outbid the others. Thus in a well advertised open auctionH
A
B
c
D
E
F
G
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[2014] 10 S.C.R.
sale, where a large number of bidders participate, there
is always a tendency for the price of the auctioned property
to go up considerably. On the other hand, where the
auction-sale is by banks or financial institutions, courts etc.
to recover dues, there is an element of distress, a cloud
regarding title, and a chance of litigation, which have the
effect of dampening the enthusiasm of bidders and making
them cautious, thereby depressing the price. There is
therefore every likelihood of auction price being either
higher or lower than the real market price. depending upon
the nature of sale. As a result. courts are wary of relying
upon auction-sale transactions when other regular
traditional sale transactions are available while determining
the market value of the acquired land. This Court in Raj
Kumar v. Harvana State (2007) 7 SCC 609 observed that
the element of competition in auction-sales makes them
unsafe guides for determining the market value.
7. But where an open auction-sale is the only
comparable sale transaction available (on account of
proximity in situation and proximity in time to the acquired
land), the court may have to, with caution, rely upon the
price disclosed by such auction-sales, by providing an
appropriate deduction or cut to offset the competitive hike
in value. In this case, the Reference Court and the High
Court, after referring to the evidence relating to other sale
transactions, found them to be inapplicable as they related
to far away properties. Therefore we are left with only the
auction-sale transactions. On the facts and circumstances.
we are of the view that a deduction or cut of 20% in the
auction price disclosed by the relied upon auction
transaction towards the factor of "competitive price hike"
would enable us to arrive at the fair market price."
(Underlining added)
27. The above principle was reiterated in Raj Kumar And
Ors. v. Haryana State And Ors., (2007) 7 SCC 609 where in
H oara 16, this Court has held as under:-
MAJ. GEN. KAPIL MEHRA & ORS. v. UNION OF
1173
INDIA & ANR. [R. BANUMATHI, J.]
"16. All the relevant aspects have been taken into
A
consideration and we do not find any error in principle
committed by the High Court justifying our interference in
appeal. An argument was raised that the prices of lands
fetched in auction had been ignored on the basis that
prices fetched in auction-sales cannot form the basis. It s
was submitted that there was no general rule that such
prices cannot be adopted. On considering the relevant
facts disclosed, it cannot be said that the High Court has
committed any error in discarding those auction-sales while
determining the compensation payable. The element of c
competition in auction-sales does not make them safe
guides. Similarly, the argument that when a compact piece
of land is acquired there cannot be adoption of separate
rates, cannot be accepted in the light of the decision of
this Court in Union of India vs. Mangatu Ram (1997) 6
0
sec 59. That case related to acquisition of lands in the
vicinity of the present properties. The ratio of that decision
also supports the distinction made by the Awarding Officer
and the High Court in the matter of fixing the land value
for the lands in Satrod Khurd and Satrod Khas."
28. The general rule that the sale prices of the comparable
sales should be relied upon for calculating the market value will
E
not apply when the sale transactions relied upon are auction
sales. As per the decision in Kamataka Housing Board's case
(2011) 2 SCC 246, in our view, 20% deduction is to be made
F
for competitive bidding. Deducting 20% i.e. Rs.8,984/- from
Rs.44,921/-, balance arrived at Rs.35,937/- per sq. yard is fixed
as the value for the acquired land.
29.