The determination of fair market value cannot be denied to claimants due to their failure to file appeal or cross-objections. The calculation of annual appreciation/escalation should be done cumulatively, and the production of sufficient evidence is necessary for the determination of fair market value.

Ashok B. Hinchigeri, J.

1. The State is in appeal aggrieved by the judgment and award, dated 11.09.2012 passed by the Court of the III Additional Senior Civil Judge, (Reference Court) Mangalore, Dakshina Kannada in L.A.C. No. 11/2004.

2. The facts of the case in brief are that the land measuring 2.50 acres standing at Sy.No.60/2 of Malavoor Village of Mangalore Taluk were notified for acquisition on 27.05.2005 for the purpose and benefit of Bajpe Airport. The Special Land Acquisition Officer passed the award, dated 20.10.2011 fixing the market value at the rate of Rs. 1.00 Lakh per acre. The claimants sought enhancement of compensation by seeking reference of the matter, invoking Section 18 of the Land Acquisition Act, 1894. The Reference Court raised the market value to Rs.10,000/- per cent.

3. Sri Vasanth V. Fernandes, the learned High Court Government Pleader appearing for the appellants submits that fixation of Rs.10,000/- per cent is arbitrary.

4. The learned counsel for the respondent claimants submits that the fixation of Rs. 10,000/- per cent itself is on the lower side. He submits that the claimants had little time to file the appeal or cross-objections.

5. The submissions of the learned counsel have received our thoughtful consideration. We have browsed through the Lower Court Records The Reference Court has taken the judgments passed in L.A.C. Nos. 116/97 and 13/97 as the basis for the determination of the market value in this case. But it has not examined whether the lands in question and the lands covered by L.A.C. Nos. 116/97 and 13/97 are contiguous, possessing similar features, advantages, etc. Even assuming that the lands covered by L.A.C. Nos. 116/97 and 13/97 and the lands in question are similar, the Reference Court has to first determine the annual rate of escalation and then apply the same cumulatively.

6. It is profitable to refer to the Hon’ble Supreme Court’s decision in the case of General Manager, Oil & Natural Gas Corporation Limited v. Rameshbhai Jivanbhai Patel & Another reported in (2008) 14 SCC 745. The relevant paragraph of the said decision is extracted hereinbelow:

"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. Ac 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 method	By cumulative increase method
1987 (Base Year)	10.00	10.00
1988	10+1=11.00	10+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

“23 It is held therein that in the matter of calculating the annual appreciation/escalation over the base level evidential transaction, the percentage is always with reference to the previous year’s market value. Over the course of years, the rate of annual increase itself undergoes drastic changes on account of sudden spurt in prices. Therefore the application of flat rate may lead to anomalous results. It would be appropriate to calculate the increase cumulatively and not to apply a flat rate. It appears the parties did not pointedly bring to the notice of the Reference Court the relevant portions of the said decision, which are extracted in paragraph No. 3 supra and which deal with the issue of applying the escalation rate cumulatively. We answer the question No.2 in the negative.