Market value for compulsory acquisition includes special adaptability, but only on a willing-purchaser basis at the notification date.

Compensation for compulsorily acquired land is to be fixed at market value on the valuation date, applying the willing vendor and willing purchaser test and excluding any increase caused by the acquisition scheme. Land must be valued with its existing advantages and potentialities, so special adaptability remains a real element of value even if only a limited class of buyers could exploit it and the acquiring body is the only practical purchaser. The post-acquisition use of the land cannot be used to inflate valuation, but the special adaptability itself is not to be ignored when assessing what a willing purchaser would have paid on the notification date.

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Issues: Whether, in assessing compensation for compulsorily acquired land, the land's special adaptability as a water supply had to be valued on the footing of the price a willing purchaser would pay to a willing vendor, even though the acquiring authority was the only practically possible purchaser, and whether the value attributable to that adaptability was excluded because the land would be more valuable after acquisition and use under the scheme.

Analysis: The governing rule under the Land Acquisition Act, 1894 is that compensation is measured by the market value of the land at the relevant date, on the basis of a willing vendor and a willing purchaser, while ignoring compulsory elements and any increase in value caused by the scheme itself. The land must be valued with its existing advantages and potentialities, and not merely by its present actual use. Where land has a special adaptability or potentiality that can be realised only by a limited class of purchasers, that feature remains a real element of value and is not destroyed merely because the acquiring body is the only practical buyer. Section 24(5) prevents valuation on the basis of the post-acquisition use of the land, but does not require the special adaptability itself to be ignored when fixing the price that the authority would have paid in a friendly negotiation on the valuation date.

Conclusion: The special adaptability of the land as a water supply was a compensable element of value, but it had to be assessed on a willing-purchaser basis as at the date of notification, not on the footing of the land's enhanced value after acquisition.

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