Market value in compulsory acquisition must rest on bona fide comparable sales, not fiscal valuation registers or unproved potentiality.

In compulsory acquisition, market value must be fixed on reliable evidence such as bona fide comparable sales as on the notification date, not on fiscal valuation registers maintained for stamp and registration purposes. Very small plot sales and prior awards based on the same weak foundation were not safe guides for valuing large agricultural tracts, and claimed building potential had to be proved by credible evidence of existing demand and development. The lands were treated as agricultural lands, compensation was reassessed accordingly, and statutory additions, including solatium, additional compensation, and interest, were payable.

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Issues: (i) Whether the basic valuation register could be relied upon to determine market value for compulsory acquisition; (ii) whether small plotted sales and prior reference awards furnished a safe basis for fixing market value or potential value of the acquired lands; (iii) what market value and statutory additions were payable for the acquired lands.

Issue (i): Whether the basic valuation register could be relied upon to determine market value for compulsory acquisition.

Analysis: The register was maintained for fiscal purposes connected with stamp duty and registration charges. The value entered therein was not evidence of market value for compulsory acquisition. Market value must be determined on the basis of bona fide sales between willing vendors and willing purchasers of comparable lands, and not on entries made for revenue purposes under the stamp law.

Conclusion: The basic valuation register could not form the basis for fixation of compensation.

Issue (ii): Whether small plotted sales and prior reference awards furnished a safe basis for fixing market value or potential value of the acquired lands.

Analysis: Sales of very small extents could not safely be used as a yardstick for acquisition of large tracts, especially when the surrounding circumstances suggested that the sales were not bona fide market transactions. Prior awards resting on the same infirm foundation also did not assist. Potential value as building sites had to be proved by reliable evidence showing existing demand and development as on the date of notification; mere proximity to a municipality or future suitability was insufficient. On the evidence, the lands remained agricultural lands without proved building potential.

Conclusion: The small sales, prior awards, and claimed potentiality did not justify the enhanced valuation adopted by the courts below.

Issue (iii): What market value and statutory additions were payable for the acquired lands.

Analysis: Once the inadmissible material was excluded, there was no reliable basis to uphold the higher valuation. The proper approach was to assess the lands as agricultural lands as on the dates of notification, while granting only the statutory additions mandated by law, namely additional compensation, solatium, and interest on the enhanced amount fixed by the Court.

Conclusion: The market value was fixed at Rs. 65,000 per acre for the first acquisition and Rs. 80,000 per acre for the second acquisition, with statutory benefits.

Final Conclusion: The appeals succeeded, the awards of the reference court and the High Court were set aside, and compensation was reassessed on the basis of agricultural land value with statutory additions.

Ratio Decidendi: In compulsory acquisition, market value must be determined from reliable bona fide comparable sales or other acceptable evidence as on the date of notification, and not from fiscal valuation registers, manipulated sales, or unproved potentiality.

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