Comparable sale exemplars and development deduction guide land acquisition valuation, with auction sales used cautiously.

In determining market value of acquired land under Section 4(1) of the Land Acquisition Act, 1894, the guiding test is the price a willing purchaser would pay a willing seller for comparable land in the vicinity on or before the notification date. Auction sales may be used only with caution because competitive bidding can distort value; where adopted, they require adjustment for that element and for time-gap appreciation. On the facts, the more proximate and larger plot in Ex. P-2 was the better comparable than Ex. P-19, and a 40% deduction towards development was applied to reflect the acquired land's potential and partial infrastructure access.

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Issues: Determination of market value of acquired land by relying on auction sale instances, the proper comparable sale exemplar, the appropriate deduction towards development, and the extent of appreciation to be added for the period between the comparable sale and the date of notification.

Analysis: In fixing market value under Section 4(1) of the Land Acquisition Act, 1894, the relevant test is the price that a willing purchaser would pay to a willing seller for comparable land in the vicinity on or before the notification date. Auction sales are not ideal comparables because competitive bidding may inflate or depress price, but where no better comparable is available they may be used with caution and an appropriate deduction. On the facts, the more proximate and larger plot covered by Ex. P-2 was a better comparable than Ex. P-19. The earlier auction sale rate required a deduction to neutralise the competitive-hike element, and further appreciation for the three-year gap to the notification date, followed by a development cut reflecting the acquired land's potential and partial infrastructure access.

Conclusion: The sale instance under Ex. P-2 was the proper basis, the deduction towards development had to be fixed at 40%, and the compensation was rightly reduced to Rs. 2,95,500 per acre.

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