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Statutory Definition, 'in relation to any property, means the price which might reasonably be expected to be paid for the property on a sale in the open market."

Supreme Court, while construing the term "market value" within the meaning of Section 23 of the Land Acquisition Act, 1894, has laid stress on a pragmatic approach. The Court held:

"7. In awarding compensation in acquisition proceedings, the Court has necessarily to determine the market value of the land as on the date of the relevant notification. It is useful to consider the value paid for similar land at the material time under genuine transactions. The market value envisages the price which a willing purchaser may pay under bona fide transfer to a willing seller. The land value can differ depending upon the extent and nature of the land sold. A fully developed small plot in an important locality may fetch a higher value than a larger area in an undeveloped condition and situated in a remote locality. By comparing the price shown in the transactions all variables have to be taken into consideration. The transaction in regard to smaller property cannot, therefore, be taken as a real basis for fixing the compensation for larger tracts of property. In fixing the market value of a large property on the basis of a sale transaction for smaller property, generally a deduction is given taking into consideration the expenses required for development (22 of 41) [CMA-989/2007] of the larger tract to make smaller plots within that area in order to compare with the small plots dealt with under the sale transaction. This principle has been stated by this Court in Tribeni Devi's case."

13. The proposition that large area of land cannot possibly fetch a price at the same rate at which small plots are sold is not absolute proposition and in given circumstances it would be permissible to take into account the price fetched by the small plots of land. If the larger tract of land because of advantageous (23 of 41) [CMA-989/2007] position is capable of being used for the purpose for which the smaller plots are used and is also situated in a developed area with little or no requirement of further development, the principle of deduction of the value for purpose of comparison is not warranted. With regard to the nature of the plots involved in these two cases, it has been satisfactorily shown on the evidence on record that the land has facilities of road and other amenities and is adjacent to a developed colony and in such circumstances it is possible to utilise the entire area in question as house sites. In respect of the land acquired for the road, the same advantages are available and it did not require any further development. We are, therefore, of the view that the High Court has erred in applying the principle of deduction and reducing the fair market value of land from Rs. 10 per sq. yard to Rs. 6.50 paise per sq. yard. In our opinion, no such deduction is justified in the facts and circumstances of these cases. The appellants, therefore, succeed."

19. It is apposite to take note of some of the decisions of this Court on the issue relevant for the disposal of these appeals:

19.1. In Brig. Sahib Singh Kalha v. Amritsar Improvement Trust, this Court opined that where a large area of undeveloped land is acquired, provision has to be made for providing minimum amenities of town life. Accordingly, it was held that a deduction of 20% of the total acquired land should be made for land over which infrastructure has to be raised (space (24 of 41) [CMA-989/2007] for roads, etc.). Apart from the aforesaid, it was also held that the cost of raising infrastructure itself (like roads, electricity, water, underground drainage, etc.) needs also to be taken into consideration. To cover the cost component for raising infrastructure, the Court held that the deduction to be applied would range between 20% to 33%. Commutatively viewed, it was held, that deductions would range between 40% and 53%.

Accordingly, it was pointed out that expenses involved for development would vary keeping in mind (25 of 41) [CMA-989/2007] the facts and circumstances of each case. In Kasturi case, it was held that normal deductions on account of development would be 1/3rd of the amount of compensation. It was, however, clarified that in some cases the deduction could be more than 1/3rd in other cases even less than 1/3rd.

19.4. In Lal Chand v. Union of India, it was held that to determine the market value of a large tract of undeveloped agricultural land (with potential for development), with reference to sale price of small developed plot(s), deductions varying between 20% to 75% of the price of such developed plot(s) could be made.