State of Hp Vs Budhi Singh

The appellant/State of H.P. & another, who were respondents before the learned Reference Court, preferred the instant appeals under Section 54 of the Land Acquisition Act (for short “the Act”) against award dated 27.06.2008, passed by learned Reference Court, whereby the petitioners, i.e., Dulo Ram and Budhi Singh, who were petitioners/claimants before the learned Reference Court (hereinafter referred to as “petitioners/claimants”) were granted enhanced compensation, with a prayer that the instant appeals be allowed and the impugned award be set-aside.

¶29

The facts giving rise to the instant appeals are that the land of petitioner-Dulo Ram, comprised in Khasra No. 958/381/1, measuring 0-02-11 hectares and that of petitioner-

¶30

Budhi Singh, comprised in Khasra No. 382, 383, 391, measuring 0-03-55 hectares, situated in Mohal Kandreth, Mauza Ichhi, Tehsil Dharamshala, District Kangra, H.P., was acquired for construction of Mastpur-Icchi Road, vide notification dated 30.12.1995, issued under Section 4 of the Act, which was also published in daily news paper. Subsequently, notification under Sections 6 and 7 was issued on 15.05.1996, which was also duly published in daily newspaper. Consequently, possession of total land measuring

¶31

3 Neutral Citation No. ( 2026:HHC:15247 )

¶32

0-21-00 hectares was taken under Section 8 of the Act and it was acquired with description of Kulhi Awal measuring 0-13-69 hectares, Banjar Kadeem, measuring 0-00-88 hectares, khadeter measuring 0-02-42 hectares, Charagah Durkhtan, measuring 0-01-22 hectares and Gair Mumkin Rasta measuring 0-02-79 hectares. Thereafter, the Land Acquisition Collector, passed the award and granted compensation @Rs.1,17,039/- per hectare on the basis of market value alongwith other statutory benefits and total award of Rs.2,29,046/- was passed on 26.06.1998.

¶33

The petitioners/claimants, feeling aggrieved, filed reference petitions under Section 18 of the Act before the learned Reference Court for enhancement of the compensation amount and sought higher compensation at the rate of Rs.3,00,000/- per kanal, including enhancement of interest. The learned Reference Court, after considering all the material, passed the impugned award, dated 27.06.2008, whereby the petitioners/claimants were held entitled for enhanced compensation at the rate of Rs.19,23,076/- per hectare for the acquired land alongwith other statutory benefits. Hence, the instant appeals preferred by the appellants/State against the

¶34

4 Neutral Citation No. ( 2026:HHC:15247 )

¶35

impugned award with a prayer that the appeals be allowed and the impugned award be set-aside.

¶36

The learned Deputy Advocate General for the appellants/State contended that the impugned award is wrong, illegal and against the material placed and proved on record and the learned Reference Court gravely erred in assessing the market value @ Rs.19,23,076/- per hectare. He further contended that impugned award is based on surmises, conjectures and hypotheses, thus the same is liable to be setaside. He also contended that the learned Reference Court had grossly misread and mis-appreciated the oral as well as documentary evidence on record and cogent evidence was ignored. Lastly, he prayed that the impugned award be setside by allowing the instant appeals.

¶37

Conversely, learned Counsel for proposed LRs No. 1(a) to 1(d) in RFA No. 381 of 2008, supported the impugned award and contended that the impugned award does not suffer from any legal infirmity and the same has been passed by the learned Reference Court after properly appreciating the facts and law. He prayed that the instant appeals, being without merits, be dismissed.

¶38

5 Neutral Citation No. ( 2026:HHC:15247 )

¶39

I have heard the learner Deputy Advocate General for the appellants/State, learned counsel for proposed LRs No. 1(a) to 1(d), in RFA No. 381 of 2008 and carefully examined the entire records.

¶40

As per the settled principle of law, compensation for the land acquired has to be determined at market value. Market value is the price that a willing purchaser would pay to a willing seller for the property having due regard to its existing condition with all its existing advantages and its potential possibilities when led out in most advantageous manner excluding any advantage due to carrying out of the scheme for which the property is compulsorily acquired. The determination of market value is the prediction of an economic event viz. a price outcome of hypothetical sale expressed in terms of probabilities. For ascertaining the market value of the land, the potentiality of the acquired land should also be taken into consideration. Potentiality means capacity or possibility for changing or developing into state of actuality.

¶41

In Mehta Ravindrarai Ajitrai (deceased) through

¶42

his heirs & LRs & others v. State of Gujarat (1989) 4 SCC 250, the Hon’ble Supreme Court held that the market value of a

¶43

property for the purpose of Section 23 of the Act is the price at

¶44

6 Neutral Citation No. ( 2026:HHC:15247 )

¶45

which the property changes hands from a willing seller to a willing purchaser, but not too anxious a buyer, dealing at arms length. The relevant portion of the aforesaid judgment reads as under:

¶46

“4. ……….The market value of a piece of property for purpose of Section 23 of the Land Acquisition Act is stated to be the price at which the property changes hands from a willing seller to a willing, but not too anxious a buyer, dealing at arms length. Prices fetched for similar lands with similar advantages and potentialities under bona fide transactions of sale at or about the time of the preliminary notification are the usual and, indeed the best, evidences of market value.”

¶47

In Atma Singh (Dead) through LRs & others vs.

¶48

State of Haryana & another, (2008) 2 Supreme Court Cases

¶49

568, the Hon’ble Supreme Court held that the market value is the price that a willing purchaser would pay to a willing seller for the property having due regard to its existing conditions with all its existing advantages and its potential possibilities when led out in most advantages manner, excluding any advantage due to carrying out of the scheme for which the property is compulsorily acquired. In considering market value, disinclination of the vendor to part with his land and the urgent necessity of the purchaser to buy should be disregarded. The question whether a land has potential value

¶50

or not, is primarily one of the facts depending upon its condition, situation, user to which it is put or is reasonably

¶51

7 Neutral Citation No. ( 2026:HHC:15247 )

¶52

capable of being put and proximity to residential, commercial or industrial areas or institutions. The existing amenities like, water, electricity, possibility of their further extension, whether near about town is developing or has prospect of development have to be taken into consideration. The relevant portion of

¶53

the aforesaid judgment reads as under:

¶54

“4. ……The expression “market value” has been the subject-matter of consideration by this Court in several cases. The market value is the price that a willing purchaser would pay to a willing seller for the property having due regard to its existing condition with all its existing advantages and its potential possibilities when led out in most advantageous manner excluding any advantage due to carrying out of the scheme for which the property is compulsorily acquired. In considering market value disinclination of the vendor to part with his land and the urgent necessity of the purchaser to buy should be disregarded. The guiding star would be the conduct of hypothetical willing vendor who would offer the land and a purchaser in normal human conduct would be willing to buy as a prudent purchaser in normal human conduct would be willing to buy as a prudent man in normal market conditions but not an anxious dealing at arm’s length nor façade of sale nor fictitious sale brought about in quick succession or otherwise to inflate the market value………….

¶55

5. For ascertaining the market value of the land, the potentiality of the acquired land should also be taken into consideration. Potentiality means capacity or possibility for changing or developing into state of actuality. It is well settled that market value of a property has to be determined having due regard to its existing condition with all its existing advantages and its potential possibility when led out in its most advantageous manner. The question whether a land has potential value or not, is primarily one of fact depending upon its condition, situation, user to which it is put or is reasonably capable of being put and proximity to residential, commercial or industrial areas or institutions. The existing amenities like water, electricity, possibility of their further extension, whether near about town is developing or has prospect

¶56

8 Neutral Citation No. ( 2026:HHC:15247 )

¶57

of development have to be taken into consideration………….”

¶58

11. For ascertaining market value of the acquired land,

¶59

the Court can no doubt rely upon such sale transactions, which would offer a reasonable basis to fix the price, for which purpose, a sale transaction relating to a smaller parcel of land can be considered for the purpose of assessing the market value in respect of a large tract of land, after making appropriate deductions such as for development of land, for providing space for roads, sewers, drains, expenses involved in formation of a layout, lump- sum payments, as well as for the waiting period required for selling the sites that would be formed and other expenses involved therein, but before doing so, the evidentiary value of such a sale deed is required to be carefully scrutinized. As held in the case of Land Acquisition Officer vs. Nookala

¶60

Rajamallu reported as (2003) 12 SCC 334, in order to adopt the price reflected in the sale deed, the following conditions are required to be met:

¶61

"9. It can be broadly stated that the element of speculation is reduced to a minimum if the underlying principles of fixation of market value with reference to comparable sales are made:

¶62

(i) when sale is within a reasonable time of the date of notification under Section 4(1);

¶63

(ii) it should be a bona fide transaction; (iii) it should be of the land acquired or of the land adjacent to the land acquired; and

¶64

(iv) it should possess similar advantages

¶65

9 Neutral Citation No. ( 2026:HHC:15247 )

¶66

10. It is only when these factors are present, it can merit a consideration as a comparable case (see Special Land Acquisition Officer v. T. Adinarayan Setty AIR 1959 SC 429)."

¶67

12. In Union of India vs. Pramod Gupta (dead) by

¶68

LRs & others, 2005 (12) SCC 1, the Hon’ble Supreme Court held that the best method, as is well-known, would be the amount which a willing purchaser would pay to the owner of the land. In the absence of any direct evidence, the Court, however, may take recourse to various other known methods. Evidence admissible therefor inter alia would be the sale deeds, judgments and awards passed in respect of acquisitions of lands made in the same village and/or neighboring villages.

¶69

Such a judgment/award in the absence of any other evidence like deed of sale, report of the expert and other relevant evidence would have only evidentiary value. The relevant portion of the aforesaid judgment reads as under:

¶70

“24. While determining the amount of compensation payable in respect of the lands acquired by the State, the market value therefor indisputably has to be ascertained. There exist different modes therefor.

¶71

25. The best method, as is well known, would be the amount which a willing purchaser would pay to the owner of the land. In absence of any direct evidence, the court, however, may take recourse to various other known methods. Evidences admissible therefor inter alia would be judgments and awards passed in respect of acquisitions of lands made in the same village and/or neighboring villages. Such a judgment and award, in the absence of any other evidence like the deed of sale, report of the expert and other relevant evidence would have only evidentiary value.”

¶72

10 Neutral Citation No. ( 2026:HHC:15247 )

¶73

In the instant case, the petitioners/claimants had produced sale deed, Ex. AW-2/A, dated 08.07.1994, whereas the respondents (appellants herein)had produced on record average value of land Ex RW-1/A, for the year 1995-96 and tendered in evidence copies of sale deeds, Ex. RA, dated 08.03.1995, Ex. RB, dated 21.11.1995 and Ex. RC, dated 14.01.1995.

¶74

The perusal of Ex. AW-2/A clearly shows that it was executed on 08.07.1994 vide which 11 marlas of land, situated in Revenue Estate Mangrehd Mauza Ichhi Tehsil and District Kangra, H.P., was sold for Rs.40,000/-. Sale deed, Ex. RA, dated 08.03.1995, was executed for Rs.18,000/-, whereby 0- 02-81 hectares of land was sold. Through sale deed, Ex. RB, dated 21.11.1995, 0-00-53 hectares of land was sold for Rs.500/- and in sale deed, Ex.RC, dated 14.02.1995, land measuring 0-00-97hectares of land was sold for Rs.6000/- and the land involved in all the aforesaid sale deeds, Exs. RA, RB and RC was situated in Mauza Tika Ichhi Khas.

¶75

It is a settled law that where there are various sale deeds, then highest of the sale exemplars has to be taken into consideration and not by averaging of different types of sale transactions. In State of Punjab & another vs. Hans Raj

¶76

11 Neutral Citation No. ( 2026:HHC:15247 )

¶77

(dead) by LRs Sohan Singh & others, (1994) 5 SCC 734, the

¶78

Hon’ble Supreme Court has held as under:

¶79

“4. Having given our anxious consideration to the respective contentions, we are of the considered view that the learned Single Judge of the High Court committed a grave error in working out average price paid under the sale transactions to determine the market value of the acquired land on that basis. As the method of averaging the prices fetched by sales of different lands of different kinds at different times, for fixing the market value of the acquired land, if followed, could bring about a figure of price which may not at all be regarded as the price to be fetched by sale of acquired land. One should not have, ordinarily recourse to such method. … … … … …”

¶80

16. In Anjani Molu Dessai vs. State of Goa &

¶81

another, (2010) 13 SCC 710, the Hon’ble Supreme Court has

¶82

held as under:

¶83

“20. The legal position is that even where there are several exemplars with reference to similar lands, usually the highest of the exemplars, which is a bona fide transaction, will be considered. Where however there are several sales of similar lands whose prices range in a narrow bandwidth, the average thereof can be taken, as representing the market price. But where the values disclosed in respect of two sales are markedly different, it can only lead to an inference that they are with reference to dissimilar lands or that the lower value sale is on account of under-valuation or other price depressing reasons. Consequently averaging cannot be resorted to. We may refer to two decisions of this Court in this behalf.

¶84

21. In M. Vijayalakshmamma Rao Bahadur v. Collector, (1969) 1 MLJ 45 (SC), a three-Judge Bench of this Court observed that the proper method for evaluation of market value is by taking the highest of the exemplars and not by averaging of different types of sale transactions. This Court held:

¶85

“It seems to us that there is substance in the first contention of Mr. Ram Reddy. After all, when the land is being compulsorily taken away from a person, he is entitled to say that he should be given the highest value which similar land in the locality is shown to have fetched in a bona fide transaction entered into between a willing purchaser and a willing seller near about the time of the acquisition. It is not disputed that the transaction represented by Exhibit R-19 was a few months prior to the notification under

¶86

12 Neutral Citation No. ( 2026:HHC:15247 )

¶87

section 4, that it was a bona fide transaction and that it was entered into between a willing purchaser and a willing seller. The land comprised in the sale deed is 11grounds and was sold at Rs.1,961 per ground. The land covered by Exhibit27 was also sold before the notification, but after the land comprised in ExhibitR-19 was sold. It is true that this land was sold atRs.1,096/- per ground. This, however, is apparently because of two circumstances. One is that betterment levy at Rs.500 per ground had to be paid by the vendee and the other that the land comprised in it is very much more extensive, that is about 93 grounds or so. Whatever that may be, it seems to us to be only fair that where sale deed, pertaining to different transactions are relied on behalf of the Government, that representing the highest value should be preferred to the rest unless there are strong circumstances justifying a different course. In any case we see no reason why an average of two sale deeds should have been taken in this case.”

¶88

22. In State of Punjab v. Hans Raj, (1994) 5 SCC 734, this Court held:

¶89

“4. Having given our anxious consideration to the respective contentions, we are of the considered view that the learned single Judge of the High Court committed a grave error in working out average price paid under the sale transactions to determine the market value of the acquired land on that basis. As the method of averaging the prices fetched by sales of different lands of different kinds at different times, for fixing the market value of the acquired land, if followed, could bring about a figure of price which may not at all be regarded as the price to be fetched by sale of acquired land. One should not have, ordinarily recourse to such method. It is well settled that genuine and bonafide sale transactions in respect of the land under acquisition or in its absence the bona fide sale transactions proximate to the point of acquisition of the lands situated in the neighborhood of the acquired lands possessing similar value or utility taken place between a willing vendee and the willing vendor which could be expected to reflect the true value, as agreed between reasonable prudent persons acting in the normal market conditions are the real basis to determine the market value.”

¶90

23. T herefore, we are of the view that the averaging of the prices under the two Sale Deeds was not justified. The Sale Deed dated 31.1.1990 ought to have been excluded for the reasons stated above. That means compensation for the acquired lands had to be fixed only with reference to the Sale Deed dated30.8.1989

¶91

13 Neutral Citation No. ( 2026:HHC:15247 )

¶92

relied upon by the Land Acquisition Collector which will be Rs.57.50 per sq.m. As the said market value has been fixed with reference to comparable bharad land with fruit trees, the question of again separately awarding any compensation for the trees situated in the acquired land does not arise.”

¶93

In the case on hand, since sale deed, Ex. AW-2/A,

¶94

is the highest of the exemplars, therefore, in view of the aforesaid judgments, the sale deed, Ex. AW-2/A has to be taken into consideration for determining the market value of the land under acquisition. As observed earlier, sale deed, Ex. AW-2/A, was executed 08.07.1994, vide which 11 marlas of land, situated in Revenue Estate Mangrehd Mauza Ichhi Tehsil and District Kangra, H.P., was sold for Rs.40,000/-.Therefore, in view of the sale deed, Ex. AW-2/A, the market value of the land is determined at Rs.18,93,900/- per hectare. However, the learned Reference Court had wrongly calculated the market value of the acquired land @ Rs.19,23,076/- instead of Rs.18,93,900/-per hectare on the basis of sale deed, Ex. AW2/A.

¶95

The learned Deputy Advocate General for the appellant/State contended that the learned Reference Court had erred in not deducting any amount while assessing the market value of the land in question. However, this contention is devoid of any force as it is a settled law that no deduction will

¶96

14 Neutral Citation No. ( 2026:HHC:15247 )

¶97

be permissible where the land is acquired for the purpose of construction of the road and for laying railway line etc.. In The

¶98

Land Acquisition Collector vs. Bangalu @ Daulat Ram, 2025 (1) Shimla Law Cases 146 , this Court has held as under: 19. In Nelson Fernandes & others vs. Special Land Acquisition Officer, South Goa & others, (2007) 9 Supreme

¶99

Court Cases 447 , while dealing with the case where the land was acquired for laying a railway line, the Hon’ble Apex Court held that no deduction by way of development charges was permissible, as there was no question of any development thereof. The relevant portion of the judgment (supra) is as

¶100

under:

¶101

“30. … … that where lands are acquired for specific purposes, deduction by way of development charges is permissible. In the instant case, acquisition is for laying a railway line. Therefore, the question of development thereof would not arise.”

¶102

Thus, the contention of learned Deputy Advocate

¶103

General cannot be upheld for the reasons firstly, that no deduction will be permissible keeping in view the purpose of acquisition involved in the instant appeals, secondly, every inch of acquired land was put to the same use for which it was

¶104

acquired.

¶105

Since in the instant case also the land was acquired

¶106

for the purpose of construction of Mastpur-Icchi Road, no

¶107

15 Neutral Citation No. ( 2026:HHC:15247 )

¶108

deduction will be permissible. Hence, the market value of the acquired land is assessed @ Rs.18,93,900/- per hectare in terms of sale deed, Ex.AW-2/A.

¶109

The learned Deputy Advocate General for the State lastly contended that the learned Reference Court has erred in awarding uniform rate for the entire land by ignoring the classification and nature of the land. However, this contention of the learned Deputy Advocate General is also devoid of any force. It is a settled law that where the entire area is similarly situated, the value of the land under acquisition is to be assessed as a single unit irrespective of its classification and nature ignoring the purpose to which it was being put prior to the acquisition, as well as to the one it is likely to be put thereafter. In Gulabi & etc. vs. State of H.P., AIR 1998 HP 9, it has been held as under:

¶110

“As a result of this discussion it is held that the market value of the land on the date of acquisition is Rs.4,000/- per biswa. In this context it is further held that the value of the land under acquisition is to be assessed irrespective of its classification and nature ignoring the purpose to which it was being put prior to the acquisition, as well as to the one it is likely to be put thereafter, Consequently, the appellants are held entitled to compensation at the rate of Rs. 4,000/- per biswa uniformly for all qualities of land and it is ordered accordingly. In taking this view, we are guided by the judgment of the Hon’ble Apex Court reported in Bhagwathula Samanna and others Vs. Special Tahsildar and Land Acquisition Officer, Visakhapatnam Municipality, and the relevant abstracts from the said judgment are as under (paras 7, 11, 13):--

¶111

“In awarding compensation in acquisition proceedings, the Court has necessarily to determine the market value of the land as on the date of the relevant Notification. It is useful to consider the value paid for similar land at the

¶112

16 Neutral Citation No. ( 2026:HHC:15247 )

¶113

material time under genuine transactions. The market value envisages the price which a willing purchaser may pay under bona fide transfer to a willing seller. The land value can differ depending upon the extent and nature of the land sold. A fully developed small plot in a important locality may fetch a higher value than a larger area in an undeveloped condition and situated in a remote locality. By comparing the price shown in the transactions all variables have to be taken into consideration. The transaction in regard to smaller property cannot, therefore, be taken as a real basis for fixing the compensation for larger tracts of property. In fixing the market value of a large property on the basis of a sale transaction for smaller property, generally a deduction is given taking into consideration the expenses required for development of the larger tract to make smaller plots within that area in order to compare with the small plots dealt with under the sale transaction.

¶114

The principle of deduction in the land value covered by the comparable sale is thus adopted in order to arrive at the market value of the acquired land. In applying the principle it is necessary to consider all relevant facts. It is not the extent of the area covered under the acquisition, the only relevant factor. Even in the vast area there may be land which is fully developed having all amenities and situated in an advantageous position. If smaller area within the large tract is already developed and suitable for building purposes and have in its vicinity roads, drainage, electricity, communications etc., then the principle of deduction simply for the reason that it is part of the large tract acquired, may not be justified.

¶115

The proposition that large area of land cannot possibly fetch a price at the same rate at which small plots are sold is not absolute proposition and in given circumstances it would be permissible to take into account the price fetched by the small plots of land. If the larger tract of land because of advantageous position is capable of being used for the purpose for which the smaller plots are used and is also situated in a developed area with little or no requirement of further development, the principle of deduction of the value for purpose of comparison is not warranted.

¶116

In the instant case it has been satisfactorily shown on the evidence on record that the land has facilities of road and other amenities and is adjacent to a developed colony and in such circumstances it is possible to utilize the entire area in question as house sites. In respect of the land acquired for the road, the same advantages are available and it did not require any further development. Therefore, no deduction could be made on ground, that large tract of land is required.”

¶117

17 Neutral Citation No. ( 2026:HHC:15247 )

¶118

In Land Acquisition Officer vs. L Kamalamma (1998) 2 SCC 385, H.P. Housing Board vs. Ram Lal & others 2003(3) Sim.L.C. 64, Executive Engineer & Anr. vs. Dilla Ram Latest HLJ 2008 (HP) 1007), it was held that when the entire land acquired belongs to one block, classification of the same into different categories is not reasonable. In case acquired land is to be used/developed as a single unit for a purpose having no relevancy with quality of land, the classification of land completely loses its significance.

¶119

In the case on hand also as the land was acquired

¶120

as the single unit for the public purpose, i.e., for construction of Mastpur-Icchi Road, therefore, the value of the land under acquisition is to be assessed as a single unit irrespective of its nature and classification ignoring the purpose to which it was being put prior to the acquisition, as well as to the one it is likely to be put thereafter Therefore, in view of the aforesaid authoritative pronouncements of law, the contention of the learned Deputy Advocate General that the learned Reference Court has erred in awarding uniform rate for the entire land by ignoring the classification and nature of the land deserves to be rejected.

¶121

18 Neutral Citation No. ( 2026:HHC:15247 )

¶122

As a result of my aforesaid discussion, it is held that

¶123

the market value of the land on the date of acquisition was Rs.18,93,900/- per hectare. Consequently, the appellants are held entitled to compensation at the rate of Rs.18,93,900/-per hectare uniformly for all qualities of land, irrespective of its classification, along with all statutory benefits. Rest of the terms of the impugned award shall remain the same.

¶124

In view of what has been discussed hereinabove,

¶125

the appeals, are partly allowed and accordingly disposed of.

¶126

Pending application(s), if any, shall also stand(s) disposed of.

¶127

7^th May, 2026 (virender)

¶128

( Sushil Kukreja ) Judge

State of Hp v. Budhi Singh

Case brief

What is this about?

State of Hp v. Budhi Singh

Case brief

What is this about?

What did the court decide?

Why is it important?

What the court decided

Issues for consideration

Cases cited

Statutes considered

Procedural history

Parties & counsel

Coram

Case details

Similar cases

United India Insurance Company Ltd. Vs Deep Ram and Ors.

Ms Swati Storewel Pvt. Ltd. Vs National Research Dev.Corpn.

Durga Ram and Ors. Vs Principal Secretary(Power) and Ors.

Royal Sundaram General Ins. Co. Ltd. Vs Ajay Kumar and Ors.

Land Acquisition Collector Hppwd Vs Madan Lal

Land Acquisition Collector Vs Balbir Singh