Judgment

R.V. RAVEENDRAN, J. Leave granted.

2. An extent of 127 acres 26 guntas of lands in Betegeri village within the municipal limits of Gadag-Betegeri Municipality, was acquired for Karnataka Housing Board in pursuance of Preliminary Notification dated 6.2.1992. The Land Acquisition Officer, Gadag, made an award dated 14.2.1997 awarding a compensation of Rs.45,000/- per acre.

3. On a reference being made at the instance of the land owners, the Reference Court, by judgment and award dated 11.7.2003, determined the compensation for the acquired lands as Rs.2,17,372/- per acre. For this purpose, the Reference Court relied upon Exhibit P-2 which is a sale deed dated 30.7.1992 executed by the Municipal Commissioner, Gadag-Betegeri Municipality in favour of one Manikamma in regard to a plot measuring 329 sq. meters which was sold for Rs.37,600/- in an auction sale on 2.1.1989 (which works out to Rs.114.29 per sq.m). The Reference Court, therefore, arrived at the market value per acre as Rs.4,62,494/-. It deducted 53% towards development (that is, towards areas to be set apart for roads, drains and vacant spaces and towards cost of development) and arrived at the market value as Rs.2,17,372/- per acre. The Reference Court referred to the evidence showing that the plot covered by Ex. P-2 was across the road from the acquired lands and was therefore a neighbouring property.

4. Feeling aggrieved, the Appellant (Housing Board) filed appeals. The land owners filed cross-objections. The High Court, by impugned judgment dated 30.1.2008, dismissed the appeals of the appellant and allowed the cross-objections filed by the land owners and increased the compensation to Rs.4,42,000/- per acre. Instead of Ex. P-2 relied upon by the Reference Court, the High Court relied upon Ex. P-19 which related to another auction sale of a smaller plot measuring 150 sq.m. by the Gadag-Betegeri municipality on 20.11.1989, for a price of Rs.24500/- (which works out to a price of Rs.163.33 per sq.m). On that basis the High Court works out the market value per acre as Rs.6,60,977/-. The High Court was of the view that the deduction/cut towards development factor should be only 33% instead of 53% adopted by the Reference Court. By deducting 33% from Rs.6,60,977/- it arrived at the market value as Rs.4,42,875/- per acre which was rounded off to Rs.442,000/-per acre, while awarding the compensation.

5. Feeling aggrieved, the Housing Board has filed these appeals by special leave. The appellant have put forth the following contentions : (i) Ex. P-19 relied upon by the High Court did not relate to a neighbouring land whereas there was specific evidence that the plot covered by Ex. P-2 was in regard to a nearby land. Therefore, Ex. P-2 ought to have been preferred to Ex. P-19. Further as Ex.P-19 related to a very small plot it ought to have been ignored and the transaction relating to the larger plot (Ex.P-2) should have been preferred. (ii) The High Court ought to have maintained the cut towards cost of development as 53% instead of applying a cut of 33%. (iii) Auction sales do not furnish a safe guide for determination of market value and therefore, the High Court and Reference Court ought not to be relied upon either Ex.P19 or ExP2 which relate to auction sales.

6. We may deal with the last submission first. The standard method of determination of 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 Land Acquisition Act, 1894 - `Act' for short) notification, acting as a hypothetical purchaser willing to purchase the land in open market at the prevailing price on that 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 preliminary notification, as that would give a fair ind