IMPORTANT POINT
When market value is sought to be ascertained with reference to a transaction which took place some years before acquisition, method adopted is to calculate year to year increase.

Headnote:Land Acquisition Act, 1894-Sections 18 and 54-Acquisition of land-Compensation-Enhancement-Increase in market value is calculated with reference to market value during immediate preceding yea-When market value is sought to be ascertained with reference to a transaction which took place some years before acquisition, method adopted is to calculate year to year increase-As percentage of increase is always with reference to previous year's market value, appropriate method is to calculate increase cumulatively and not applying a flat rate-Impugned judgment set aside and matter remitted to High Court for fresh disposal of appeals filed by parties under Section 54 as also cross objections.
       Held: The question whether the benefit of annual increase in the predetermined price of a portion of the acquired land or a similar land should be cumulative was considered by this Court in Oil and Natural Gas Corporation Limited v. Rameshbhai Jivanbhai Patel (supra) and answered in the affirmative. Paragraphs 12 to 15 and 18 and 19 of that judgment, which contain the rationale of granting cumulative increase are extracted below:
        12. We have examined the facts of the three decisions relied on by the respondents. They all related to acquisition of lands in urban or semi-urban areas. Ranjit Singh related to acquisition for development of Sector 41 of Chandigarh. Ramanjulu related to acquisition of the third phase of an existing and established industrial estate in an urban area. Bipin Kumar related to an acquisition of lands adjoining Badaun-Delhi Highway in a semiurban area where building construction activity was going on all around the acquired lands.
        13. Primarily, the increase in land prices depends on four factors: situation of the land, nature of development in surrounding area, availability of land for development in the area, and the demand for land in the area. In rural areas, unless there is any prospect of development in the vicinity, increase in prices would be slow, steady and gradual, without any sudden spurts or jumps. On the other hand, in urban or semi-urban areas, where the development is faster, where the demand for land is high and where there is construction activity all around, the escalation in market price is at a much higher rate, as compared to rural areas. In some pockets in big cities, due to rapid development and high demand for land, the escalations in prices have touched even 30% to 50% or more per year, during the nineties.
        14. On the other extreme, in remote rural areas where there was no chance of any development and hardly any buyers, the prices stagnated for years or rose marginally at a nominal rate of 1% or 2% per annum. There is thus a significant difference in increases in market value of lands in urban/semi-urban areas and increases in market value of lands in the rural areas. Therefore, if the increase in market value in urban/semi-urban areas is about 10% to 15% per annum, the corresponding increases in rural areas would at best be only around half of it, that is, about 5% to 7.5% per annum. This rule of thumb refers to the general trend in the nineties, to be adopted in the absence of clear and specific evidence relating to increase in prices. Where there are special reasons for applying a higher rate of increase, or any specific evidence relating to the actual increase in prices, then the increase to be applied would depend upon the same.
        15. Normally, recourse is taken to the mode of determining the market value by providing appropriate escalation over the proved market value of nearby lands in previous years (as evidenced by sale transactions or acquisitions), where there is no evidence of any contemporaneous sale transactions or acquisitions of comparable lands in the neighbourhood. The said method is reasonably safe where the relied on sale transactions/acquisitions precede the subject acquisition by only a few years, that is, up to four to five years. Beyond that it may be unsafe, even if it relates to a neighbouring land. What may be a reliable standard if the gap is of only a few years, may become unsafe and unreliable standard where the gap is larger. For example, for determining the market value of a land acquired in 1992, adopting the annual increase method with reference to a sale or acquisition in 1970 or 1980 may have many pitfalls. This is because, over the course of years, the "rate" of annual increase may itself undergo drastic change apart from the likelihood of occurrence of varying periods of stagnation in prices or sudden spurts in prices affecting the very standard of increase.
        18. The increase in market value is calculated with reference to the market value during the immediate preceding year. When market value is sought to be ascertained with reference to a transaction which took place some years before the acquisition, the method adopted is to calculate the year to year increase. As the percentage of increase is always with reference to the previous year's market value, the appropriate method is to calculate the increase cumulatively and not applying a flat rate. The difference between the two methods is shown by the following illustration (with reference to a 10% increase over a basic price of Rs 10 per square metre):
        Year By flat rate increase By cumulative increase method
       method
       1987 10.00 10.00 (Base year)
       1988 10 + 1 = 11.00 10.00 + 1.00 = 11.00
       1989 11 + 1 = 12.00 11.00 + 1.10 = 12.10
       1990 12 + 1 = 13.00 12.10 + 1.21 = 13.31
       1991 13 + 1 = 14.00 13.31 + 1.33 = 14.64
       1992 14 + 1 = 15.00 14.64 + 1.46 = 16.10
        19. We may also point out that application of a flat rate will lead to anomalous results. This may be demonstrated with further reference to the above illustration. In regard to the sale transaction in 1987, where the price was Rs 10 per square metre, if the annual increase to be applied is a flat rate of 10%, the increase will be Rs 1 per annum during each of the five years 1988, 1989, 1990, 1991 and 1992. If the price increase is to be determined with reference to sale transaction of the year 1989 when the price was Rs 12 per square metre, the flat rate increase will be Rs 1.20 per annum, for the years 1990, 1991 and 1992. If the price increase is determined with reference to a sale transaction of the year 1990 when the price was Rs 13 per square metre, then the flat rate increase will be Rs 1.30 per annum for the years 1991 and 1992. It will thus be seen that even if the percentage of increase is constant, the application of a flat rate leads to different amounts being added depending upon the market value in the base year. On the other hand, the cumulative rate method will lead to consistency and more realistic results. Whether the base price is Rs 10 or Rs 12.10 or Rs 13.31, the increase will lead to the same result. The logical, practical and appropriate method is therefore to apply the increase cumulatively and not at a flat rate."
       The same view was reiterated in Valliyammal v. Special Tahsildar (Land Acquisition) (2011) 8 SCC 91. Of course, in that case annual increase of 10% was allowed to the landowners.
       We also find merit in the argument of the learned counsel for the landowners that while fixing market value of the acquired land the learned Single Judge committed serious error by not considering an important piece of evidence, i.e., Exhibit PW9/A dated 23.11.1999 vide which HSIIDC had allotted land to M/s. Honda Motorcycles and Scooters India (Private) Limited at the rate of Rs.1254.18 per square yard. Although, this document was produced before the Reference Court but the same was not taken into consideration while determining the amount of compensation. The same error has been repeated in the impugned judgment. If this document is taken into consideration, then market value of the acquired land would come to Rs.60,69,360 per acre. By making deduction of 50% towards development cost and granting annual increase of 12/15% (cumulative), market value of the land will be much higher than Rs.37,40,000 per acre.
       In view of the above conclusions, we do not consider it necessary to deal with the other points argued by learned counsel for the parties/intervenors and feel that ends of justice will be served by setting aside the impugned judgment and remitting the matters to the High Court for fresh disposal of the appeals and cross objections filed by the parties subject to the rider that the State Government/HSIIDC shall pay the balance of Rs.37,40,000 to the landowners along with other statutory benefits.
       In the result, the appeals are allowed, the impugned judgment is set aside and the matter is remitted to the High Court for fresh disposal of the appeals filed by the parties under Section 54 of the Act as also the cross objections. The parties shall be free to urge all points in support of their respective cause and the High Court shall decide the matter uninfluenced by the observations contained in this judgment.
       Result: Appeals allowed.

Judgment :

G. S. Singhvi, J.

1. Leave granted.

2. Feeling aggrieved/dissatisfied with the judgment of the learned Single Judge of the Punjab and Haryana High Court whereby he enhanced the amount of compensation payable to the landowners from Rs.28,15,356 per acre to Rs.37,40,000 per acre, the beneficiary of the acquisition, namely, Haryana State Industrial Development Corporation Limited, now known as Haryana State Industrial and Infrastructure Development Corporation (HSIIDC), and the landowners have filed these appeals.

3. In furtherance of the policy decision taken by it to establish Industrial Model Township at Manesar (hereinafter described as ‘IMT Manesar’), District Gurgaon, the Government of Haryana acquired large tracts of land under the Land Acquisition Act, 1894 (for short, ‘the Act’). For Phase-I of IMT, Manesar, over 700 acres of land was acquired. By notification dated 30.04.1994 issued under Section 4 of the Act, which was followed by declaration dated 30.09.1995 issued under Section 6, 256 acres 3 kanals and 17 marlas land of village Manesar was acquired. By another notification dated 15.11.1994 issued under Section 4 of the Act, which was followed by Section 6 declaration dated 10.11.1995, 490 acres 3 kanals 17 marlas land situated in villages Manesar, Naharpur Kasan, Khoh and Kasan was acquired.

4. For Phase-II, 1380 kanals 16 marlas land situated in villages Kasan, Bas Kusla, Naharpur Kasan and Manesar was acquired vide notification dated 6.3.2002 issued under Section 4 of the Act which was followed by Section 6 declaration dated 15.11.2002. Another notification was issued on 7.3.2002 under Section 4 of the Act for the acquisition of 595 acres 5 kanals 12 marlas land situated in villages Kasan, Bas Kusla, Bas Haria and Dhana for Phase-III of IMT, Manesar. The declaration under Section 6 was issued on 25.11.2002.

5. For Phase-IV, 567 acres 4 kanals 3 marlas land was acquired vide notification dated 26.2.2002 issued under Section 4 of the Act and for Phase-V, 965 acres 5 kanals 18 marlas land was acquired vide notification dated 17.9.2004 issued under Section 4 of the Act.

6. Since the issue arising in these appeals relates to the quantum of compensation payable in lieu of the acquisitions made for Phases-II and III of IMT, Manesar, we do not consider it necessary to take cognizance of the facts relating to other acquisitions but would make a reference to the events leading to the judgment of this Court in Haryana State Industrial Development Corporation v. Pran Sukh and others (2010) 11 SCC 175, and the orders passed in the review applications filed by HSIIDC.

7. For the acquisition made vide notification dated 30.4.1994, the Land Acquisition Collector passed award dated 28.3.1997 whereby he fixed market value of the acquired land at the rate of Rs.3,67,400 per acre. On a reference made at the instance of the landowners, the Reference Court divided the acquired land into two blocks, i.e., A and B. For the land falling in Block A, i.e., land situated 500 yards from National Highway 8, the Reference Court determined the compensation at the rate of Rs.6,51,994.13 per acre. For the remaining land categorized as Block B, market value was fixed at the rate of Rs.3,91,196.97 per acre.

8. For the acquisition made vide notification dated 15.11.1994, the Land Acquisition Collector passed award dated 3.4.1997 and fixed market value at the rate of Rs.4,13,600 per acre. The Reference Court fixed market value of the acquired land by dividing the same into two blocks. Block A comprised of the land falling within 500 yards of National Highway 8 and market value thereof was fixed at Rs.6,89,333. The remaining land was included in Block B and market value thereof was not increased.

9. The appeals filed by the landowners in relation to the first acquisition were disposed of by the learned Single Judge of the Punjab and Haryana High Court vide judgment dated 5.9.2008 and the amount of compensation was determined at the rate

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2013 Supreme(SC) 567

IMPORTANT POINTWhen market value is sought to be ascertained with reference to a transaction which took place some years before acquisition, method adopted is to calculate year to year increase.

Cases Referred (8)

IMPORTANT POINT
When market value is sought to be ascertained with reference to a transaction which took place some years before acquisition, method adopted is to calculate year to year increase.