Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 8539 OF 2011
(Arising out of SLP (C) No. 982/2009)
Rajendra Vassudev Deshprabhu (dead)
Through Lrs. & Ors. ... Appellants
Vs.
Deputy Collector (Retd.) & Land
Acquisition Officer, Panaji ... Respondents
J U D G M E N T
R.V.RAVEENDRAN, J.
Leave granted.
2. An extent of 1,06,864 sq.m. of land including 5070 sq.m. of land in
Survey No. 284 (Part) in Pernem village of which the appellants are co-
owners was acquired in pursuance of preliminary notification dated
12.1.1990 (Gazetted on 1.2.1990). By award dated 27.3.1991, the Land
Acquisition Officer awarded compensation for the acquired land at the rate
of Rs.17 per sq.m. As there were three tenants, namely, Krishna Arjun
Kauthankar, Keshav Bhikaji Kauthankar and Harischandra Bhikaji
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Kauthankar and as the co-owners had admitted their tenancy rights, the Land
Acquisition Officer directed that the compensation to be divided between the
owners and the tenants at the rate of 50% each. The reference court, by
judgment daed 22.11.2002, increased the compensation from Rs.17 per
sq.m. to Rs.175 per sq.m. The appeal by the State was allowed by a division
bench of the Bombay High Court, by the impugned judgment dated
14.11.2008. The High Court set aside the judgment and award of the
reference court, thereby restoring the award of Rs.17/- per sq.m. by the Land
Acquisition Officer, on the following reasoning:
“….. the Applicants’ acquired portion was garden land but tenanted and
the tenants had become deemed purchasers of the same and the only
interest which the applicants had in the said land was to receive the
purchase price, and in such a case no willing purchaser would have
ventured to purchase such a land for building purposes or for that matter
for any other purpose from the applicants. The said Krishna Arjun
Kauthankar and others were in possession of the land and had become
deemed owners of the same. The learned reference court was not right in
assessing the value of the acquired land as having building potential based
on several awards/sale instances which were of land dissimilar to the
acquired land.”
3. The said judgment is challenged in this appeal by special leave. At
the outset the appellants submitted that Late Rajinder Vasdev Deshprabhu
(of whom appellants are the LRs.) and his brother late Raghuraj Vasdev
Deshprabhu were the co-owners of the property, and on their death their
respective legal heirs have become the owners thereof; that the land was
tenanted and is in occupation of Krishan Arjun Kauthankar and two others
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and vested in the tenants on the Tiller’s day in terms of section 18A of the
Goa, Daman and Diu Agricultural Tenancy Act, 1964 (`Tenancy Act’ for
short). They submitted that they do not dispute the award of the Land
Acquisition Officer apportioning 50% of the compensation to the landlords
and 50% to the tenants; and that out of 50% payable to landlords, the
appellants are entitled to one half as the LRs. of Rajendra V.Deshprabhu and
the remaining half is payable to the legal heirs of Raghuraj V.Deshprabhu.
In other words the appellants restrict their claim to 25% of the award amount
and submitted that even in regard to any increase in compensation, they are
entitled to only 25%.
4. The appellants contend that in regard to the remaining extent of land
acquired under the same notification, the High Court by judgment dated
14.11.2008 in FA No. 123/2003 (The Deputy Collector (Dev.) & LAO,
Panaji vs. Smt. Sita Devi) had determined the compensation as Rs.78 per
sq.m. and therefore the compensation should have been the same in regard to
their land also. Therefore question for consideration is whether the
compensation for the acquired land should be increased to Rs.78/- per sq.m.
5. Respondents do not dispute that in regard to the adjoining lands
compensation has been determined by the High Court at Rs. 78/- per sq.m.
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in Deputy Collector vs. Sita Devi (FA No.123/2003 decided on 14.11.2008)
and that order not having been challenged, has attained finality. They also do
not dispute the position that if the acquired land had not been subject to any
tenancy right, the land owners would have been entitled to compensation at
the said rate of Rs.78 per sq.m. They however contend that the land in
question was different from the other acquired lands for which Rs.78/- per
sq.m. has been awarded as compensation. They supported the judgment of
the High Court on the following grounds:
(i) As the land was in the occupation of tenants, the appellants as
owners would not have been able to sell the said land to any
willing purchaser and obtain the market value. Even the tenants
had obtained a purchase certificate under section 18H, they could
not have sold the property, as there was a restriction on transfer of
the land purchased by the tenant in section 18K of the Tenancy Act
which required previous sanction of the Mamlatdar for sale.
(ii) Section 3 of the Tenancy Act provided that when a request is made
by the owner of an agricultural land to convert it to non
agricultural purpose, the authority concerned can grant conversion,
or in public interest prohibit the conversion. There was thus no
absolute right to get the land converted to non agricultural use and
develop it for other non-agricultural purposes.
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(iii) Section 2 of the Goa Land Use (Regulations) Act, 1991 (`Land Use
Act’ for short) provides that no land which vested in the tenant
under the provisions of the Tenancy Act shall be used or allowed
to be used for any purpose other than agriculture. As the land in
question had vested in the tenants on the Tiller’s Day (8.10.1976),
the land had to be used only for agricultural purposes. The land
therefore did not have the potential for development for any non-
agricultural purpose and therefore will have to be valued only as an
agricultural land. Even as agricultural land, the market value will
not be the normal market value as it was tenanted.
6. We are not required to decide in this appeal, either the entitlement of
the landlords/owners for compensation or the extent of share in the
compensation. It is an admitted position that the land is tenanted and vested
in the tenants under section 18A of the Tenancy Act on the Tiller’s Day (that
is, 8.10.1976) and the tenants are deemed to have purchased the land. The
purchase price under section 18D of the Tenancy Act was not however paid
to the landlords and no purchase certificate had been issued to the tenants
under section 18H of the Tenancy Act. According to the appellants, where
land is acquired under the Land Acquisition Act, 1894, before payment of
the purchase price to the landlords under section 18D of Tenancy Act and
before the issue of purchase certificate to the tenants under section 18H of
the Tenancy Act, inspite of the vesting under section 18A of the Tenancy
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Act, the compensation will be divided equally between the landlord and
tenant as per standing instructions of the government. The appellants
contend that the said procedure had been followed by the Land Acquisition
Officer in making the award by holding that 50% of the compensation was
payable to the landlords and 50% of compensation was payable to the
tenants. The appellants submitted that neither the landlords, nor the tenants,
have disputed the said apportionment and therefore this appeal does not
involve any issue relating to entitlement to compensation or apportionment
thereof. It was further submitted that the only issue in this appeal relates to
the quantum of compensation. In view of the said submission, we have only
considered the question of quantum in this appeal, and have not examined
the rights of the landlord vis-`-vis the tenants.
7. We may first deal with the contention of the respondents with
reference to the regulation of land use under the Land Use Act. Section 2 of
the said Act provides that no land which is vested in a tenant under the
provisions of the Tenancy Act shall be used or allowed to be used for any
purpose other than agriculture. If the Land Use Act was applicable to the
land at the time of acquisition, then the land could be used only as
agricultural land and could be valued only as an agricultural land. But the
Land Use Act, came into force with effect from 2.11.1990. The relevant date
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for the purpose of determination of compensation is the date of publication
of preliminary notification under section 4(1) of the Land Acquisition Act,
1894 which is 1.2.1990. On that day the Land Use Act was not in force and
consequently there was no restriction that the use land vested in the tenant
should be used only for agricultural purposes. Therefore the market value of
the land could be determined with reference to the development potential for
non agricultural purposes.
8. The next contention of the respondents is that a land purchased by a
tenant under Chapter IIA of the Tenancy Act, could not be sold without the
previous sanction of Mamlatdar, under section 18K of the Tenancy Act. The
mere fact that the sanction has to be obtained from Mamlatdar for sale of
such land would not depress the price of the land, nor affect its potential for
being developed as residential or industrial use.
9. The next contention of the respondents was based on Section 3 of the
Tenancy Act. Section 3 provides that if any owner of agricultural land
applies for conversion thereof for non-agricultural use, the Government may,
instead of granting conversion, prohibit such conversion in public interest.
The risk not being permitted to convert the land should also be taken note of
while assessing the market value with reference to development potential of
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the land. Such a contingency exists in regard to all agricultural lands and is
not specific to the appellants. Inspite of section 3 of Tenancy Act,
compensation has been determined as Rs.78/- per sq.m. for neighbouring
agricultural lands and we see no reason why the said rate should not apply to
the land in question also.
10. The High Court committed an error in holding that the compensation
for the land in question should be lesser than the compensation for a land
which is not subject to tenancy. It relied upon the decision of this Court in
M.B. Gopala Krishna & Ors. v. Special Deputy Collector, Land Acquisition
(1996) 3 SCC 594 wherein this Court observed :
“A freehold land and one burdened with encumbrances do make a big
difference in attracting willing buyers. A free hold land normally
commands higher compensation while the land burdened with
encumbrances secures lesser price. The fact of a tenant in occupation
would be an encumbrance and no willing purchaser would willingly offer
the same price as would be offered for a freehold land.”
The said principle will apply only where a property subject to encumbrances
is to be sold to a private purchaser or is acquired subject to the tenancy. The
decision of this Court made those observations when upholding the
compensation that was payable to the landlord, without reference to the
tenant’s rights, where the tenant did not claim any compensation. But in this
case, the landlords have been awarded only 50% of the compensation
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amount and remaining 50% has been awarded to the tenants. The High Court
has mixed up a sale subject to encumbrances with an acquisition free from
encumbrances under the Land Acquisition Act, 1894. The two are
conceptually different. If a property subject to a lease and in the possession
of a lessee is offered for sale by the owner to a prospective private
purchaser, the purchaser being aware that on purchase he will get only title,
but not possession and that the sale in his favour will be subject to an
encumbrance, namely the lease, will offer a price taking note of the
encumbrances. Naturally such a price would be less than the price of a
property without any encumbrances. But when a land is acquired free from
encumbrances, what is acquired is not only the landlord’s right, but also the
lessee’s rights. In such a case compensation awarded is for the property free
from encumbrances, which includes the lessee’s rights also. We may
illustrate by the following example:
Let us assume the value of a property which is not subject to
any lease is Rs.Ten lakhs. If that property was subject to a lease
and if the possession was with the lessee, a purchaser will offer
only Rs.Five lakhs as he will be purchasing a property with an
encumbrance and will not be getting physical possession. But
when the property subject to a lease is acquired, under the Land
Acquisition Act, 1894, what is acquired is not only the
landlord’s right, title and interest, but also the lessee’s right and
interest. In other words the property with all rights, free from
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encumbrances is acquired and the compensation is determined
and paid for the property as one free from encumbrances. The
rights of lessor as well as lessee are extinguished. Therefore
compensation payable will be the entire market value that is
Rs.Ten lakhs which may be shared by the lessors and lessee at
the rate of Rs.Five lakhs each or such other ratio as may be
determined with reference to the extent of their respective
rights. The Land Acquisition Officer issue notice to all persons
interested and hears them before making the apportionment of
the compensation among the persons interested. The `market
value’ of the property free from encumbrances acquired by the
State will not therefore be the same as the price a purchaser
may pay to buy the property subject to a lease (encumbrances).
11. As the High Court has already determined Rs.78 per sq.m. as the
compensation in regard to the adjoining lands acquired under the same
notification vide its judgment dated 14.10.2008 (Dy.Collector
(Development) and Land Acquisition Officer, Panaji v. Smt. Sitadevi & Ors.
in FA No.123/2003) and the said judgment has attained finality, there is no
reason why the same compensation should not be awarded for this land also.
The appellants have no grievance in regard to the apportionment made by
the Land Acquisition Officer at the rate of 50% for the landlords and 50%
for the tenants. The tenants apparently have not raised any dispute in regard
to the apportionment. It is made clear that if any dispute regarding
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apportionment is pending, this decision shall not be construed as
determining the percentage of entitlement of appellants or other co-owners
(not before us) or the tenants (not before us).
12. In view of the above, this appeal is allowed and the order of the High
Court is modified by increasing the compensation for the acquired land from
Rs.17 per sq.m. to Rs.78 per sq.m. All statutory benefits are also granted.
……………………….J.
(R V Raveendran)
New Delhi; ............................J.
October 11, 2011. (A K Patnaik)