1995 JTR(SC) 754
1996 AIR(SC) 221 ; 1995 AIR(SCW) 3993 ; 1995 2 AndhWR(SC) 56 ; 1995 3 CurCC(SC) 150 ; 1995 3 RRR 521 ; 1995 4 Scale 592 ; 1995 5 SCC 203 ; 1995 Supp2 SCR 354 ; 1995 2 UJ 571 ; 1995 KHC 900
SUPREME COURT OF INDIA
K. RAMASWAMY AND K.S. PARIPOORNAN, JJ.
State of Orissa, Appellant
Versus
Brij Lal Misra etc., Respondents.
Civil Appeal Nos. 704-706 of 1980,
D/- 26-7-1995.
Act Referred :LAND ACQUISITION ACT : S.24, S.23
(A) This case centers on the interpretation of Section 23 and Section 24 of the Land Acquisition Act regarding the determination of market value for compensation. Section 23(1) mandates that compensation be determined based on the market value of the land as of the date of the notification under Section 4(1). While the court may consider the 'potentiality' of the land existing on that date, Section 24 expressly prohibits the court from considering any increase in the value of the land likely to accrue from the specific use to which the land will be put after acquisition, or any future development in the locality that occurs after the notification date.
(B) The core legal principle established is the distinction between 'existing potentiality' (which is part of market value) and 'future potentiality' (which is statutory prohibited). Market value must be determined based on the state of the land and its possibilities as of the notification date, not based on anticipated future industrialization or commercial development.
Facts of the case:
Land was acquired for the construction of an over-bridge. The Land Acquisition Officer determined initial compensation, which was later enhanced by the Reference Court to Rs. 200 per decimal based on comparable sales. The Reference Court further added a 25% increase for 'future potential value' due to the possibility of commercial development in the locality. This enhancement was upheld by the High Court.
Findings of Court:
The Court found that while the market value can include the potentiality of the land existing as of the notification date, it cannot include a separate percentage for future potentiality. The addition of 25% for future potentiality was held to be an illegality as it directly violates the prohibitions set forth in Section 24 of the Act, which forbids considering the use to which the land will be put after acquisition.
Issues:
Whether the courts are justified in enhancing compensation by a specific percentage (25%) for 'future potentiality' after having already determined the market value based on existing potentialities.
Ratio Decidendi:
Under Section 23(1), market value includes existing potentiality. However, Section 24 creates an embargo against considering any increase in value likely to accrue from the future use of the land or subsequent developments. Therefore, once market value is determined, a further percentage cannot be added for future potentiality as it constitutes a double recovery and a violation of statutory prohibitions.
Result:
Appeals partly allowed; the 25% increase for future potentiality was set aside, while the market value of Rs. 200 per decimal was upheld.
(A) This case centers on the interpretation of Section 23 and Section 24 of the Land Acquisition Act regarding the determination of market value for compensation. Section 23(1) mandates that compensation be determined based on the market value of the land as of the date of the notification under Section 4(1). While the court may consider the 'potentiality' of the land existing on that date, Section 24 expressly prohibits the court from considering any increase in the value of the land likely to accrue from the specific use to which the land will be put after acquisition, or any future development in the locality that occurs after the notification date.
(B) The core legal principle established is the distinction between 'existing potentiality' (which is part of market value) and 'future potentiality' (which is statutory prohibited). Market value must be determined based on the state of the land and its possibilities as of the notification date, not based on anticipated future industrialization or commercial development.
Facts of the case:
Land was acquired for the construction of an over-bridge. The Land Acquisition Officer determined initial compensation, which was later enhanced by the Reference Court to Rs. 200 per decimal based on comparable sales. The Reference Court further added a 25% increase for 'future potential value' due to the possibility of commercial development in the locality. This enhancement was upheld by the High Court.
Findings of Court:
The Court found that while the market value can include the potentiality of the land existing as of the notification date, it cannot include a separate percentage for future potentiality. The addition of 25% for future potentiality was held to be an illegality as it directly violates the prohibitions set forth in Section 24 of the Act, which forbids considering the use to which the land will be put after acquisition.
Issues:
Whether the courts are justified in enhancing compensation by a specific percentage (25%) for 'future potentiality' after having already determined the market value based on existing potentialities.
Ratio Decidendi:
Under Section 23(1), market value includes existing potentiality. However, Section 24 creates an embargo against considering any increase in value likely to accrue from the future use of the land or subsequent developments. Therefore, once market value is determined, a further percentage cannot be added for future potentiality as it constitutes a double recovery and a violation of statutory prohibitions.
Result:
Appeals partly allowed; the 25% increase for future potentiality was set aside, while the market value of Rs. 200 per decimal was upheld.
B.D.SHARMA, R.K.MEHTA
JUDGMENTS :- These three appeals are disposed of by a common judgment since the questions of law raised are common.
2. A notification under Section 4(1) of the Land Acquisition Act (for short, `the Act) was published in 1968 acquiring 0.62 acre, 0.82 acre and 0.15 acre in Survey No.704, 705 and 706/80 respectively for construction of over-bridge, near Vedavyas in Rajganjpur - Rourkela Road. The Land Acquisition Officer determined the compensation under Section 11 of the Act between Rs.1,360/- per acre to Rs.2912/- per acre. On reference, the Subordinate Judge, by award and decree dated January 19, 1970, while determining the compensation at the rate of Rs.200/- per decimal, on the basis of comparable sales which ranged between Rs.100/- to Rs.115/- per decimal, further enhanced 25% of the compensation for future potential value which was upheld by the High Court by its impugned judgment dated August 16, 1978. The only question, rightly canvassed by Shri Mehta, learned counsel for the appellant is whether the Courts having determined the compensation take the potential value. Whether would be right to further enhance compensation at 25% more for future potentiality. The High Court placed reliance on two judgments of that Court reported in Musmat Kunduna Bibi alias Khatun Bibi v. State of Orissa, (1968) 34 Cut LT 1043 and in State of Orissa through the Land Acquisition Collector, Sundergarh v. Budha Oram etc. (1977) 2 Cut WR 631 : (AIR 1978 Ori 74), and held thus :
"There is immense possibility of commercial development and industrialisation in the locality in the immediate future and, therefore, the direction that potential value be estimated at twenty five per cent for the purposes of compensation is justified and does not call for interference".
3. Section 23(1) of the Act charges determination of the amount of compensation for the acquired land taking into account firstly the market value of the land at the date of the publication of the notification under Section 4(1) of the Act. The question, therefore, would be that what would be the market value of the land. The Market value prevailing on the date of the notification including potentiality the land possessed of or realisable potentiality existing as on the date of the notification, would be the relevant facts for consideration to determine market value. This question was settled by the Privy Council in V.N. Gajapatiraju v. Revenue Divisional Officer, Vishakhapatnam, (AIR 1939 PC 98). The Privy Council held that in determining market value under Section 23, the Court would be guided by ascertaining in a best way from the material on record from willing vendors. It is possibility of the market value of the land and not realised possibility that must be taken into consideration. That judgment is followed in a catena of decisions of this Court and held that in determining the compensation the Court would take into consideration the potentialities of the land existing as on the date of the notification published under Section 4(1). The very concept of the potential value would mean existing in possibility but not in act, i.e., the land is capable to be used in future in the existing condition. Having taken that factor into consideration and determined compensation whether the Court would be justified in further enhancing at 25% for further potentiality ? Our answer is positively no. Section 24, fifthly, of the Act expressly prohibits taking into account such future use declaring such matters to be neglected in determining compensation. The Court shall not take into consideration and increase to the value of the land acquired likely to accrue from the use to which it will be put when acquired; sixthly, any increase to the value of the other land of the person interested likely to accrue from the use to which the land acquired will be put. In other words, the statute expressly enjoins to omit consideration of the future use of the land or potentialities of the neighbouring lands on account of the acquisition in determining compensation. In a recent judgment in P. Rama Reddy v.Land Acquisition Officer, (1995) 2 SCC 305 at 314 : (1995 AIR SCW 871 at P.880), this Court considering this aspect of the matter held thus :
".....When a land with building potentiality is acquired, the price which its willing seller could reasonably expect to obtain from its willing purchaser with reference to the date envisaged under Section 4(1) of the Land Acquisition Act, ought to necessarily include that portion of the price of the land attributable to its building potentiality. Such price of the acquired land then becomes its market value envisaged under Section 23(1) of the Land Acquisition Act. If that be the market value of the acquired land with building potentiality, which acquired land with building potentiality, which acquired land could be regarded to have a building potentiality, and how the market value of such acquired land with such building potentiality requires to be measured or determined are matters which means for our consideration now".
4. In Land Acquisition Officer, Eluru v. Jasti Rohini, (Smt), (1995) 1 SCC 717 at page 722 : (1995 AIR SCW 823 at p. 827), this Court held that :
"Section 24 of the Act puts an embargo on the Court that it shall not take into consideration the degree of urgency for the acquisition; disinclination of the person interested to part with possession of the acquired land; any increase in the value of the land acquired likely to accrue from the use to which it will be put when acquired; any increase to the value of the other land of the person interested likely to accrue from the use to which the land acquired will be put to; any layout or improvements on or disposal of the land acquired etc. without the sanction of the Collector or after Section 4(1) notification was published, special suitability or adaptability of the land for any purpose or any increase in the value of the land on account of its being put to any use which is forbidden of law are opposed to public policy. Therefore, in determining the market value and fixation of the compensation, the Court should be alive to these factors and keep them at the back of the mind and should not be influenced by the future or later development in the locality or neighbourhood and should not get influenced by the prevailing situation as on the date of the determination of the compensation. Its consideration should alone be confined to the market value prevailing as on the date of the notification under Section 4(1)".
5. Thus, having taken the existing potentialities into consideration and determination the compensation at Rs.200/- per decimal, the Reference Court as well as the High Court have committed obvious illegality in applying wrong principle to award further increase at 25% more for future potentialities which is within the grinding teeth of the prohibition engrafted in Section 24, fifthly and sixthly, of the Act. The two decisions relied on by the High Court of that Court (sic) had not correctly laid the law. While confirming the determination of the market value of Rs.200/- per decimal, which is not challenged before us, further increase of 25% is set aside. The claimants are entitled to the statutory benefits according to law. Appeals are accordingly allowed in part. No costs.
Appeal partly allowed.