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D.L.F. United Pvt. Limited Vs. Union of India - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtDelhi High Court
Decided On
Case NumberRegular First Appeal Nos. 128, 200, 360 and 12701 of 1969
Judge
Reported inILR1979Delhi771
ActsLand Acquisition Act, 1894 - Sections 23
AppellantD.L.F. United Pvt. Limited;union of India
RespondentUnion of India;d.L.F. United Pvt. Limited
Advocates: S.L. Watel,; R.C. Beri and; S.K. Mishra, Advs
Cases Referred(See D.L.F. Housing and Construction (P) Limited v. Union of India
Excerpt:
land acquisition act (1894) - section 23--hypothetical building scheme as a method for determining compensation--held a valid method to adopt in cases of large building sites--potentialities and possibilities of land to be taken into account in ascertaining the value of building sites.; in the instant case pursuant to a notification under section 4 of the land acquisition act 1894, land measuring 319 bighas 12 bids was situated in village bahapur was acquired. out of the land so acquired, d.l.f. owned an area of 81 bighas 17/60 bids was and 30 bighas 9-4/15 biswas. land acquisition collector made his award and awarded rs. 2000/- per bigha to the d.l.f. on reference the additional district judge enhanced the compensation from rs. 2000/- per bigha to rs. 11,000/- per bigha. d.l.f. brought..........had given them. (4) the learned judge adopted the method of valuation called 'hypothetical building scheme' to assess the market value of the land in question. he found as a fact that d.l.f. had purchased the acquired land for extension of their colony known as greater kailash no. 1 and that they had submitted a lay out plan to the municipal corporation of delhi for sanction. he, thereforee, came to the conclusion that compensation should be awarded to the d.l.f. on the basis of prices prevailing in the nearby colony of greater kailash no. 1 at the material time. (5) the lay-out plan was submitted to the municipal corporation on 10th november 1959. before sanction was obtained the government issued the notification under section 4 on 13th november 1959. (6) the land in question.....
Judgment:

Avadh Behari Rohatgi, J.

(1) These are four appeals from a common judgment dated 22nd November, 1968. Two appeals are by the owner, D.L.F. United Private Limited. The other two are cross-appeals of the taker of the land, the Union of India. This judgment will govern them all. The facts :

(2) D.L.F'S land was acquired pursuant to a notification under Section 4 of the Land Acquisition Act 1894 (the Act). Out of 319 Bighas 12 bids was of land situated in Village Bahapur which was acquired, D.L.F. owned an area of 81 Bighas 17/60 bids was which is the subject of appeal in R.F.A. 128/69 and 30 Bighas 94/15 bids was which is the subject of appeal in R.F.A. 127/69. In due course the Land Acquisition Collector made the awards (Nos. 1387 & 1421). He awarded Rs. 2,000 per bigha to D.L.F.

(3) Displeased with the award D.L.F. sought reference to the civil court for the proper determination of compensation under Section 18 of the Act. On reference the Additional District Judge varied the award of the Collector. He enhanced the compensation from Rs. 2,000 per bigha to Rs. 11,000 per bigha. D.L.F. has brought two appeals for further enhancement. They claim Rs. 17,000 per bigha. The Union of India, on the other hand, in their appeals say that the enhancement made by the Judge is unjustified and he ought not to have awarded to D. L. F. anything more than what the Collector had given them.

(4) The learned Judge adopted the method of valuation called 'hypothetical building scheme' to assess the market value of the land in question. He found as a fact that D.L.F. had purchased the acquired land for extension of their colony known as Greater Kailash No. 1 and that they had submitted a lay out plan to the Municipal Corporation of Delhi for sanction. He, thereforee, came to the conclusion that compensation should be awarded to the D.L.F. on the basis of prices prevailing in the nearby colony of Greater Kailash No. 1 at the material time.

(5) The lay-out plan was submitted to the Municipal Corporation on 10th November 1959. Before sanction was obtained the Government issued the notification under Section 4 on 13th November 1959.

(6) The land in question adjoins Greater Kailash Colony. It is contiguous. thereforee, it was an ideal building site for a residential colony. It was excellent for building purposes. In order to determine the market price of the acquired land the Judge ascertained the value of the plots in Greater Kailash at which they were sold on the valuation date i.e. 13th November 1959. Block 'R' of Greater Kailash colony was found to be situated nearest to the land in dispute. In this block he found that the average market value of the plots in or about December 1959 was roughly Rs. 30 per sq. yard. This price he deduced from four transactions of sale which were produced before him in evidence. On 14th December 1956, a plot measuring 500 sq. yards was sold at Rs. 18 per sq. yard. On 2nd June 1958 another plot was sold in block 'R' at Rs. 24 per sq. yard. On 29th November 1958, another plot was sold for Rs. 27 per sq. yard. Yet another plot was sold on 20th December 1958 at Rs. 24.70 per sq. yard. Taking the average price of these plots and the rise which he noticed during the period 1958 to 1959 he came to the conclusion that the market value of the land in Greater Kailash which was nearest to the land in dispute was Rs. 30 per sq. yard on the given date when the notification under Section 4 was issued. .

(7) The land in question was undeveloped land. The Judge, thereforee, set himself to inquire the market value of this undeveloped land on the basis of price of plots in the developed colony of Greater Kailash. He took the cost of development into account and after deducting the same from the price of plots he reached the conclusion that Rs. 11 per sq. yard was the market value of the undeveloped land. On this basis he enhanced the compensation from Rs. 2,000 per bigha to Rs. 11,000 per bigha, thus allowing an increase of Rs. 9,000 per bigha. Against the decision both parties appeal to this court, as I have said. Hypothetical Building Scheme:

(8) Counsel for the Union of India has raised a fundamental objection to the method of valuation called 'hypothetical building scheme', which the Judge adopted in this case. He argues that this method ought not to have been applied and the market price ought to be determined on the basis of the sale transactions of this very land or the land situated in the neighborhood.

(9) It is admitted on all hands that the D.L.F. purchased a part of the land in question on 11th June 1958 at Rs. 1,350 per bigha. A part of the land they purchased on 24th April 1959 at Rs. 6,500 per bigha. One Pooran had sold 18 bigha 4 bids was of land to D.L.F. at Rs. 6,500 per bigha. This sale by Pooran in favor of D.L.F. is also not in dispute. Basing himself on this sale counsel for the Union of India says that the sale transaction of 24th April 1959 ought to be accepted as a guide to the market value of the land and all that should be done is to increase this amount of Rs. 6,500 per bigha by a few hundred rupees on account of the period of seven months which elapsed between the purchase by D.L.F. and the notification under Section 4. He further contends that the sale price of Rs. 6,500 per bigha reflects the potential value of the land because the vendor Pooran was aware of the value of his land and that is why he sold it for Rs. 6,500 per bigha. His contention, in other words, is that no separate amount should be awarded to the D.L.F. for the potentiality of the land because the prevailing market value includes the potential value of the land.

(10) In my opinion this contention is not right. The land in question had a potential value for the D.L.F. They are a well known firm of colonisers. They developed their Greater Kailash colony. The acquired land was purchased for extension of the colony. thereforee, the land had a special value in their hands and they would have exploited it for the purposes of extension if the land had not been taken from them.

(11) In the case of a large building site as is the case hers, 'hypothetical building scheme', as it has been called, is a proper method to adopt. This method received the approval of the high authority of the Privy Council as early as 1912. In a Bombay case Betty J. employed this method (In re Government of Bombay and Merwanji Muncherji Cama. : (1907)9BOMLR1232 . From his decision an appeal was taken. The appeal was heard by three judges (Batchelor, Heaton and Macleod JJ.). They condemned this method of hypothetical building scheme. In their judgment the scheme was had as being 'to remote, speculative and conjectural' (Government of Bombay V. Merwanji Muncherji Cama, (1907) 10 BomLR 907 They held that it was inadmissible in evidence and the valuation based thereon must be altogether disregarded. They reversed the decree passed by Betty J.

(12) From the decision of the Full Bench an appeal was taken to the judicial Committee of the Privy Council. The judgment of the Privy Council is reported in Merwanji Muncherji Cama v. The Government of Bombay. : (1914)16BOMLR55 . The only question that was argued before the Privy Council was whether hypothetical building schemes were or were not admissible in evidence in assessing compensation for open sites of land compulsorily acquired under the provisions of the Land Acquisition Act, and whether a court of law ought to have regard to hypothetical schemes in assessing such compensation. The Privy Council held that hypothetical building scheme is admissible in evidence and is a proper method of valuation. Lord Shaw of Dumfarmline said :

'HYPOTHETICALbuilding schemes are the usual basis of valuation in the case of building land. I can say this from my own experience of such cases. The ordinary course will be to call a surveyor who will say that in his opinion the land is worth so much. When asked for his reasons he will proceed to unfold his scheme, saying that he values it at so much because an owner, by expending so much on buildings of such and such a description, can realise such and such a rent, which when capitalized will be worth the sum named by him. In cross-examination, the surveyor's scheme will of course have to be tested in all its details. But the scheme is certainly admissible in evidence and a proper mode of valuation.'

Lord Macnaghten said:

'Iam of the same opinion. Hypothetical building schemes seem to me to be the most obvious basis of valuation in cases like these. Of course the weight to be attached to such a scheme is a question for the tribunal hearing the case.'

(13) Lord Atkinson, Sir John Edge and Mr. Ameer Ali also concurred in the above expression of opinion.

(14) Counsel for the Government of Bombay then argued that the scheme of development on which Betty J. relied was of an 'extravagent nature' and ought to have received no attention at all from the court. On this Lord Macnaghten said :

'THEIRLordship's view certainly is that the evidence was admissible and ought to have been considered by the court. This Board is strongly of opinion that Government ought not to contest the case any further but ought to accept the judgment of Betty J. at all events in principle.'

(15) Their lordships then suggested to the Government to come to a settlement as to the figure of compensation, so as to avoid its being remitted to the High Court for further hearing on appeal. The parties arrived at a settlement as to the figure of compensation. At the end Lord Macnaghten said :

'I have no doubt that the Judges are perfectly competent to decide what weight ought to be attached to any scheme that may be put forward by the parties. All that their Lordships decide is that such schemes are admissible in evidence and must be considered on their merits in every case.'

(16) In the result the appeal of the claiments was allowed and the decree passed by the High Court in appeal was reversed. This case establishes that hypothetical building scheme is a proper method of valuation.

(17) I have set out this judgment in full because it has not been noticed anywhere in the text books or the judgments of courts. Nor has it been reported anywhere else because the report was prepared from notes made by Mr. G. R. Lowndes who appeared for the appellants with Sir Arthur Cripps.

(18) The method of hypothetical scheme of development has been adopted in a number of decisions in recent years. It was followed by the Bombay High Court in two decisions (Additional Special Land Acquisition Officer, Poona v. Shantaram Shamrao Ghole, Air 1960 Bom 448 and The State of Maharashtra v. Bapurao Dnyanoba Chiddarwar, : AIR1973Bom231 . In Punjab it was employed in D.L.F. Housing and Construction (P) Ltd. v. Union of India, . Where the judges followed their own decision in Union of India v. Hanuman Pershad, R.F.A. 91-D of 1961 decided on April 29, 1964(7). The Punjab decision in D.L.F. was followed in State of Maharashtra v. Bapurao (supra) by Bombay Judges.

(19) In this court this method of valuation has been accepted in three recent decisions. In Madan Mohan Manoharlal v. Union of India, : AIR1971Delhi257 . S. N. Andley and T. V. R. Tatachari, JJ. applied this method in relation to a colony known as Sangam Park. Likewise in two other cases of D.L.F. this method of valuation was adopted. [See D.L.F. Housing and Construction (P) Ltd. v. Union of India, R.F.A. 79 of 1967, decided on 29th November 1977 (Prakash Narain and Ranganathan, JJ. (9) and D.L.F. United Limited v. Union of India, R.F.A. 282 of 1968 decided on 15th February 1979 (V. D. Misra and F. S. Gill, JJ.)](19). In all these cases what was done was this. The Judges ascertained the maximum value of each plot laid out In the most advantageous and lucrative manner in the light of its potentialities, and in doing so expenses which may have to be incurred turn developing the land in the most profitable manner have been taken into account. Cost of development, for example, laying of roads, parks, electricity, water and other modern amenities were taken into account in arriving at the value of the land in question.

(20) I find nothing wrong with this method which the Judge in this case accepted in principle and applied to the facts and circumstances of this case. He took the potentialities and the possibilities of the land into account. The probability of a more profitable future use was an advantage of the land in the hands of D.L.F. Potentialities and Possibilities:

(21) But how is the increase to the value of the land by reason of its potentialities or possibilities to be measured As Lord Romer said in Raja Viricherla Narayana Gajapatiraju v. Revenue Divisional Officer, I.L.R. 1939 Mad 532 :

'FORit has been established by numerous authorities that the land is not to be valued merely by reference to the use to which it is being put at the time at which its value has to be determined (that time under the Indian Act being the date of the notification under Section 4(1) ), but also by reference to the uses to which it is reasonably capable of being put in the future. No authority indeed is required for this proposition. It is a self-evident one.'

All advantages which the land possesses, present or future, in the hands of the owner may be taken into consideration, and the ownr is entitled to have the price assessed in reference to the advantages which will give the land the greatest value. The probability of a more profitable future use is one such advantage which may be taken into consideration. Thus the land which may possibly be used for building purposes must not be valued on the same basis as purely agricultural land (Cripps Compulsory Acquisition of Land, 11th Edition p. 680).

(22) The value of the land must be assessed, it would seem, at what the purchaser of the potentiality is willing to pay for it, and if the owner its one of the persons able to turn the potentiality to account, 'the value to him of the potentiality will not be less than the profit that would accrue to him by making use of it had he retained it in his own possession.' (Raja Vyricherla (supra) at page 546).

(23) If the owner of the land is the only person who can turn the potentiality of the land to account the value to the owner must be ascertained by reference to what profit he might thereby have been able to derive from the land in the future. Take as an example the case of an owner of vacant land that adjoins the factory. The land possesses the potentiality of being profitably used for an extension of the factory. But the owner is the only person who can turn the potentiality to account. In valuing the land, however, as between him and a willing purchaser, the value to him of the potentiality would necessarily have to be included. (Raja Vyricherla (supra) at pp. 545-546).

(24) That the land in question had potentialities and possibilities. of a more profitable use in the future cannot be denied. D.L.F. would have made the most of this property. The value to the owner is what it is worth to him. It is exemplified by the developed colony of Greater Kailash where D.L.F. were able to sell a developed plct at the end of 1958 at as much as Rs. 27 per sq. yard. After deducting the cost of development from the price of Rs. 30 per sq. yard, which the Judge fixed as the average price, he came to the conclusion, and I think rightly, that Rs. 11 per sq. yard was the value of the undeveloped plot situated next door to the colony of Greater Kailash at the critical moment. D.L.F.'s case:

(25) Counsel for the D.L.F. in support of his appeal has raised two arguments. Firstly, he says that the market price of the developed land ought to have been fixed at Rs. 36 and not Rs. 30 per sq. yard as was done by the Judge. For this he relies on a sale of plot on 13th March 1959 at Rs. 36.10 per sq. yard. This instance was cited before' the Judge. He refused to accept it because this plot was situated in block 'C' and not in block 'R'. He was guided by the price prevailing in block 'R' which he said, 'is situated nearest to the land in dispute'. Block 'R' sales he thought were 'the best possible guide for evaluating land in dispute'. I think he was plainly right in this. Sales in block 'C' cannot be preferred to sales in 'block 'R'. Block 'R' sales truely represent the value of the developed land because the' land there was in the closest proximity to the land in question.

(26) In the second place counsel argues that the learned Judge ought not to have taken development charges at Rs. 5 per sq. yard on the plottable area. He says that he should have fixed the development charges at Rs. 3 per sq. yard instead of Rs. 5. For this he referred me to the audited statement of accounts of Greater Kailash filed by the D.L.F. showing the cost of development in that colony right from 1956 to 1965. The argument is that since the D.L.F. are an experienced people in this line and were extending their own colony, they would have saved Rs. 2 on the cost of development. I do not agree with this submission. In Hanuman Pershad's. case (Supra) cost of development was taken at Rs. 5 per sq. yard and this the learned Judge accepted in this case also. It is impossible to determine the market value with any mathematical accuracy. Valuation is not an exact science. The art of valuation in any case involves making assumptions, because value is to a large extent governed by future prospects which must in turn be largely, though not entirely, governed by assumptions. (Keith Davies Law of Compulsory Purchase and Compensation, Third (1977) Ed 175. Conclusion:

(27) In my opinion the Judge was perfectly right in estimating the market value of the land at Rs. 11 per sq. yard for an additional' reason also. In another appeal of D.L.F., a Division Bench of this court fixed the value of the land of D.L.F. in this very locality at Rs. 15 per sq. yard in which notification under Section 4 of the Act was issued on 16th May 1961. (See D.L.F. Housing and Construction (P) Limited v. Union of India, R.F.A. 79 of 1967 decided on 29th November 1977). thereforee, the Judge's conclusion is confirmed by the fact that afer a year and a half the price of the land rose to Rs. 15 per sq. yard. This increment well illustrates the increasing pressure on the land and a rising market.

(28) In my opinion D.L.F. have failed to make out a case for further enhancement. Nor am I persuaded to hold that the value fixed by the learned Judge is in any way erroneous or excessive. I hold it to be reasonable and fair. For these reasons I dismiss all the four appeals, leaving the parties to bear their own costs.


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