Acquired land valuation turns on comparable sales and proven potentiality, not conjectural building-site pricing.

Compensation for acquired land must be based on market value as on the notification date, using comparable sales of similar land in reasonable proximity and allowing potentiality only where supported by real development prospects. The Court rejected valuation of the paddy land as a building site on a square-foot basis because the evidence did not show comparable abadi conditions or sufficient development pressure. It also found the rental multiple method and a rigid two-category classification arbitrary. Market value was reassessed on an acreage basis with limited potential value, with the lands placed in three situational categories according to location and utility.

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Issues: (i) What was the correct method for determining the market value of the acquired land on the date of notification, including the relevance of comparable sales and building potentiality? (ii) Whether the awards based on a rental multiple and on a rigid division of the land into two categories were sustainable.

Issue (i): What was the correct method for determining the market value of the acquired land on the date of notification, including the relevance of comparable sales and building potentiality?

Analysis: Market value under the land acquisition law is the price a willing purchaser would pay to a willing seller, having regard to existing advantages and reasonable potentialities. The land was paddy land with limited immediate building use, and the evidence showed little pressure of development towards the acquired area. Sales from within or contiguous to the abadi were not comparable with lands farther away and not similarly situated. The claimants failed to establish that the acquired land should be valued as a house-site on square-foot basis, while the Court accepted that potentiality could be considered only to the extent it was supported by the evidence and surrounding development.

Conclusion: The land was not to be valued as a building site on square-foot basis; its market value was to be assessed on acreage basis with limited potential value.

Issue (ii): Whether the awards based on a rental multiple and on a rigid division of the land into two categories were sustainable.

Analysis: The valuation by the Land Acquisition Officer on a rental multiple was held to be based on an irrational foundation, and the Additional District Judge's sharp bifurcation of the land into two categories was also found arbitrary. The Court accepted comparable sale material admitted in evidence and used prior adjacent land valuations as guidance. On the evidence, the acquired lands were placed in three situational categories, and only a modest increase for potentiality was justified because building activity in the direction of the acquired land was negligible.

Conclusion: The earlier valuation methods were unsustainable, and compensation was reassessed at Rs. 5,500 per acre for lands near the road, Rs. 4,800 per acre for lands near the abadi, and Rs. 4,400 per acre for interior lands.

Final Conclusion: The appeals were disposed of by substituting the Court's reassessment of compensation for the earlier award where necessary, resulting in partial success for the State and dismissal of the claimants' challenge to the reduced valuation.

Ratio Decidendi: In determining compensation for acquired land, the court must rely on comparable sales of similar lands in reasonable proximity and may consider potentiality only to the extent shown by real development prospects, not conjecture.

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