Appeals Nos
290 348 729 746 802 805N of 1980 2328 31  2350 2388 of 1981
Appeals by Special leave from the Judgment and decrees of the Karnataka High Court dated 12779 301079 4681 22880 4780 10780 7880 24980 21879 27779 28580 13680 5280 101279 9879 20879 8879 11479 26379 9479 24179 12479 4679 11278 6679 13679 18679 20679 26779 231080  1371979 in MFA Nos
678 681 83 68678 836 84177 15078 148 14978 8 1679 936 94377 56777 222 23478 25678 25978 444 44878 45878 705 70777 211 21778 736 73778 923 2477 130 13178 44378 13131314131179 73578 481 482 687  68878 1432 3579 377 38878 108780 135279 126778 7780 486 9878 71177 92577 62280 76580 170279 717 1877 18479 260 6178 65777  914 91577 For the Appellants SN Kacker and Swaraj Kaushal For the Respondents SS Javali BP Singh and Mr Ranjit Kumar 389 SL Bendikar and KC Dua PR Ramasesh KR Nagaraja Naresh Kaushal and B Krishna Prasad Girish Chandra AV Rangam and G Gopalakrishnan The Judgment of the Court was delivered by SEN J
The short question involved in this appeal by special leave and the further appeals under s54 of the Land Acquisition Act 1894  Act  for short directed against the judgment and decrees of the Karnataka High Court dated January 24 1979 and in the connected appeals is whether there has been any error in principle or in law in the method of valuation arrived at by the courts below in adopting fifteen  to be the multiple for computation of capitalized value of certain agricultural lands acquired in the years 1971 and 1972
In the connected appeals although the point was not specifically taken before the High Court but the parties were given notice that that was the real question to be determined
These appeals have accordingly been heard together as they involve common question
The issue involved is as to the proper multiplier to be applied in determining the capitalized value of the lands acquired and that depends on the rate of return on investments in 1971 and 1972
In these appeals the judgments were rendered by the High Court on appeals being preferred by the Special Land Acquisition Officer Davangere against the appellate judgments and decrees of the District Judge Chitradurga and of the Civil Judge Davangere on various references made under s18 of the Act
The facts giving rise to these appeals are more or less similar and the essential facts may be shortly stated
Due to the construction of DB Kere Pick up Project several thousand acres of agricultural land in two villages in the State of Karnataka videlicet Budihar village in Harihar taluq and Siraganahally village in Davangere taluq got submerged and were accordingly acquired by the State Government pursuant to different notifications issued under s41 of the Act published on diverse dates in the years 1971 and 1972 followed by the usual notifications under s6
In response to notices issued under s92 of the Act the respondents appeared before the Special Land Acquisition Officer Davangere and claimed compensation varying between Rs 15000 per acre to Rs 25000 per acre for dry and wet lands depending upon the quality of the soil the nature of the yield and the income derived therefrom
In some cases they also claimed compensation at more than rupees one lakh per acre for arecanut 390 garden lands
The Special Land Acquisition Officer however by his various awards adopted a multiple of fifteen and awarded compensation at a flat rate of Rs 3300 per care for dry agricultural lands and Rs 5000 per acre for wet agricultural lands
On reference under section 18 of the Act in each of these cases the Civil Judge Davangere enhanced the amount of compensation to Rs 19500 per acre for wet agricultural lands and Rs 110000 for arecanut garden lands
There was common evidence adduced by the parties in all these cases and the evidence disclosed that the acquired lands were more or less similar in nature and contiguously situated
On a consideration of the evidence the learned Judge came to the conclusion that the lands affected were capable of yielding two crops in a year with assured facility the first being of paddy and the second of jowar irrigation groundnut chillies etc
As there was no other method of determining the market value of the land the learned Civil Judge applied a multiple of 15 times the net annual profits
On appeal by the Special Land  Acquisition Officer the High Court also adopted the capitalized value at 15 years  purchase of the net annual profits but reduced the amount of compensation to Rs 15000 per acre for wet agricultural lands and Rs 25000 per acre for arecanut garden lands ie depending upon the nature of the lands acquired
It would therefore appear that the High Court and the courts below have both adopted fifteen to be the proper multiplier for computation of the capitalized value of the lands acquired for the purpose of determining the amount of compensation payable for acquisition thereof
Shri Kacker learned counsel appearing on behalf of the appellant contends that the High Court was wrong in adopting the multiple of 15 of the actual or immediately prospective net annual profits of the lands acquired to be the capitalized value thereof when the rate of return in the years 1971 and 1972 was 8 per annum
According to the learned counsel there is an error in principle or in law in the method employed and he draws our attention to the unreported decision of the High Court in The Special Land Acquisition Officer Davangere vs B Basavarajappa  Ors
laying down that the proper multiple for computation of the capitalized value should be 12 12 having regard to the rate of return at the relevant time ie on the date of the notification under s41 of the Act
The contention must in our opinion prevail
In Basavarajappa s case supra a Division Bench of the High 391 Court while dealing with the determination of compensation payable A for similar agricultural lands in the neighborhood of the same two villages acquired at or about the same time adopted the multiple of 1212 times the net annual profits for purposes of determining the capitalized value thereof
In coming to that conclusion the High Court observed The rate of return from Government Security which is Gilt edged Security was around 6 in the year 1971 7
A person investing his capital in irrigated land would expect a return of about 2 more than what he obtains from Government Securities
That means a return of 8  would be the normal return expected by an agriculturist investing in purchase of wet land
If 8 was the return expected the number of years  purchase value comes to 1212
 We regret to find that in these cases the High Court instead of having adopted the multiple of 1212 times observed that the decision in Basavarajappa s case supra was not applicable because the land s acquired in these cases were for superior for which there is no rational basis
If the lands acquired were of a superior quality the actual or immediately prospective net annual profits would be more and when multiple by the proper multiplier arrived at on the rate of return at the relevant time ie On the date of the notification under s41 of the Act the amount of compensation for acquisition of such land s would necessarily be more
The quality of the soil has no relevance to the proper multiplier to be adopted in determining the capitalized value
In Vyricherla Narayana Gajpatiraju vs Revenue Divisional Officer Vizagapatnam the Privy Council adopted the traditional legal definition of value as the price at which the property would sell as between a willing buyer and a willing seller
Tn its narrowest sense it is designed to preclude a valuation based on an assumed  forced sale the property must be appraised at what it would probably bring if the owner allowed a reasonable opportunity for negotiations
But the Courts have invoked a mythical willing buyer to justify a valuation higher than any attainable sale price
According to the Privy Council market value of the land within  the meaning of s23 of the Act is the price the property may fetch in the open market if sold by a willing vendor unaffected by the special needs of a parti 392 cular purpose
The owner is entitled to the value of the property in its actual condition at the time of expropriation with all its advantages and with all its possibilities excluding any advantage due to the carrying out of the scheme for the purpose for which the property is acquired
lt is not only realized possibilities but also the future possibilities that must be taken into consideration
The Privy Council further observed that there is not in general any market for Indian the sense that one speaks of market for shares or commercial goods
The value of any such article at any particular time can readily be ascertained by the prices being obtained for similar articles in the market
In the case of land its value
can also be measured by a consideration of the prices that have been obtained in the past for lands of similar quantity and in similar positions and that is what must be meant in general by the market value in s23
The function of the Court in awarding compensation under the Act is to ascertain the market value of the land at the date of the notification under s41 of the Act and the methods of valuation may be 1 Opinion of experts
2 The prices paid within a reasonable time in bona fide transactions of purchase of sale of the lands acquired or of the lands adjacent to those acquired and possessing the same or similar disadvantages
And 3 A number of years purchase of the actual or immediately prospective profits of the lands acquired
Normally the methods of capitalizing the actual or immediately prospective profits or the rent of a number of years  purchase should not be resorted to if there is evidence of comparable sales or other evidence for computation of the market value
IT Can be resorted to only when no other method is available
It is axiomatic that the best evidence to prove what a willing purchaser would pay for the land acquisition would be the evidence of sales of comparable properties proximate in time to the date of acquisition similarly situate and possessing the same or similar advantages ad subject to the same or similar disadvantages
Market value is the property may fetch in the open market if sold by a willing seller unaffected by the special needs of a particular purchase
Where definite material is not forthcoming either in the shapes of sales of similar lands i the neighbourhood at or about the date of notification under s41 or otherwise the Court has no other alternative but to fall back on the method of valuation by capitalization
In valuing land or an interest in land for purposes of land acquisition proceedings the rule as to number of years  purchase is 393 not a theoretical or legal rule but depends upon economic factors such as the prevailing rate of interest in money investments
The return which all investor will expect from an investment will depend upon the characteristic of income as compared to that of idle security
The main features are I Security of the income 2 fluctuation 3 chances of increase 4 cost of collection etc
The most difficult and yet the most important and crucial part of the whole exercise is  the determination of the reasonable rate of return in respect of investment in various types of properties
Once this rate of return and accordingly the rate of capitalization are determined there is no problem in valuation of the property
The traditional concept of capitalization was indicated by this Court in Rustom cavasjee cooper vs Union of India
It was stated to be Capitalization of the net annual profit out of the property at a rate equal in normal cases to the return from gilt edged securities ordinarily value of the property may be determined by capitalizing the net annual value obtainable in the market at the date of the notice of acquisition
 It is thus clear from the above enunciation that the method of determining the value of the property by application of a multiplier to the net annual income or profit should only be adopted when there is no evidence of comparable sales of similar lands in or about the neighb ourhood at the relevant time ie on the date of the notification under s41 of the Act
In certain circumstances however the Court has no other alternative but to fall back on the capitalized value
Alfred D Jahr in Law of Eminent Domain 1953 edn after a general discussion regarding the valuation of property sums up at pp
100 101 lt is evident therefore from the foregoing definitions as well as from numerous other definitions which may be cited that the fair market value of properly taken by eminent domain is the price that the property will bring when offered for sale by one desiring but not obliged to sell and purchased by one desiring to purchase but under no necessity 394 of buying
It is the price which a piece of property will bring in the market when offered for sale and purchased by another taking into consideration all the elements of the availability of the property its use potential or prospective and all other elements which combine to give a piece of property a market value 
The learned author then deals with the fixation of market value on the basis of rental income at pp
226 229 and states  It is far sounder practice to avoid the use of rental value capitalization if better evidence of market value is available
In any event the courts are inclined to give a greater weight to sales of similar properties in the market than to evidence of 
lease hold rentals
 Jahr then deals with the method of capitalization of income and says at p 230 It is quite evident from the formula that the lower the rate of return applied the higher the capitalized sum will be
How ever the rate of return on money invested is dependent upon many varied factors 1 safety of principal 2 liquidity of investment 3 certainty of income 4 possible market fluctuations S appreciation of principal or income and undoubtedly other elements too numerous to mention
The interest rate current in the security market must be considered as well as the investment rate to be obtained from high grade bonds or common stocks and commodities traded on the several exchanges
 The principle deducible from the above passage is that the basic factor in applying the method of capitalization of income for ascertaining the market value of property is the rate of return that an ordinary investor would reasonably get on his investment having due regard to all the relevant circumstances
In the classical economic sense as adopted by the Privy Council in Vyrricherla s case supra the meaning to be placed upon the phrase market value of the land under s23 of the Act is the price at which  the land acquired
could actually be sold at the relevant time ie On the date of the notification under s41 of the Act by a fictitious willing buyer in a hypothetical market with the qualification that a forced 395 sale is hot to be assumed
The price at which the property would A sell as between a willing buyer and a willing seller raises the problem of valuation
The value of any object of wealth is simply a capitalization of the services or income which actual or potential owners of the property expect to  derive from it ie earning power as a basis of valuation
The rule of number of years  purchase is not a theoretical or legal rule but depends upon the economic factors such as the prevailing rate of return which a prudent investor in the class of properties in question would expect
The most important of such economic factors is the prevailing rate of interest at the relevant time ie in the date of the notification under s41 of the Act
It is first necessary to ascertain the gross income from the acquired property The next step should be to ascertain the net income Having ascertained the net annual income it must be capitalized by computing the number of years  purchase
During
the imperial days investment in gilt edged securities was looked upon as the only safe form of investment But after the attainment of independence the country has taken long strides in the growth of commerce and trade
Due to growth of industries both in the public as well as in the private sector investment of capital such industries if
not any more secure have come into the law merchant and such other alternative available securities have attracted persons who are inclined to invest rather than gilt edged securities alone apart from making fixed deposits in the scheduled banks
This accounts for the variation of the proper multiple to be adopted
The line of inquiry in such cases must therefore be 
What was the prevailing rate of interest on long term deposits with scheduled banks or in the public or private sector 
At the
turn of the century it was not uncommon for the Courts to adopt a rule of 20 years  purchase for arriving at the capitalized value of agricultural lands
It had long been the practice in the Courts of the then Madras Presidency to calculate the profits from any form of landed property as equal to the profits made by investing of money in the gilt edged securities
Till the early 50 s the Courts of the then Madras Presidency held that the capitalized value of agricultural lands should be arrived at 20 years  purchase having regard to the rate of interest on gilt edged securities at five percent per annum
It was however observed that with respect to melwaram interest in a zamindari land or a vacant site it was difficult to accept the current rate of interest on gilt edged secutries as a safe guide to the multiple to be applied to the annual profits on ryotwari land
The 396 Landlord in such cases would not only expect to get a return on the capital invested on the land but also something in addition to that as compensation for this trouble in attending to the land and for the risks involved in the cultivating of land
 It was observed that although the tenants might have agreed to pay him a fixed rent in money yet if a full crop was not raised on the land either through failure of rain or because of pests or for any other reason it was extremely difficult for the landlord to realise the rent
For these reasons the landlord naturally expected an appreciably larger return than he would expect from gilt edged securities which he lefts in the bank and for the realization of the interest of which he is put to no trouble whatsoever
It would be unrealistic to adhere to the traditional view of capitalized value being linked with gilt edged securities when investment in fixed deposits with nationalized banks National Savings Certificates Unit Trusts and other forms of Government securities and even in the share market in the shape of blue chips command a much greater return
More secure the capital and regular the return lesser the rate of interest
Most secured kind of investment is Government securities or deposits with scheduled banks or Unit Trust or National Savings Certificates
The rate of interest on Government of India bonds for a period of 30 years in 1972 yielded 575 per annum  As per the Government of Karnataka publication called Finance Accounts of 1972 73 the rate of interest on the Mysore State Development Loans issued in the years 1967 1968 1969 1970 1971 and 1972 was uniformly 5314 return
The rate of interest on fixed deposits with State Bank of India for a period ranging from 3 years upto 5 years yielded 7 while the rate on fixed deposits above S years was 725
The rate of dividend payable on unit trusts in 1972 was 825 per annum
National Savings Certificates 7 years 2nd issue yielded tax free interest at 6
On maturity 7 years
3rd  issue 6 tax free payable annually and 7 years 4th issue 75 payable annually but subject to income tax
In oriental Gas Co Ltd  Ors
vs State of West Bengal this Court held for the acquisition of an industrial undertaking in the State of West Bengal that if 12 of the capital invested was the annual return the adoption of multiplier of eight could not be unreasonable in the year 1963
That contention based on the traditional view expressed by Shah J in Cooper s case supra that the multiplier must be related to the rate of interest on gilt edged securities 397 was repelled by Chinnapa Reddy J
It was stated that the observations of Shah J in Coopers case that capitalization of the net annual value of the property at a rate equal in normal cases to the return from gilt edged securities was all important methods of determination of compensation did not lay down a rule of law of universal application was observed 
The very use of the Word normal by Such J indicates that it was not intended to lay down any invariable rule that whenever a method of capitalization of net profit was adopted the return from glit edged securities was to be the basis
That 
should depend on a variety of circumstances such as the nature of the property the normal return which may be C  expected on like investment the state of the capital market and several such factors
 In Union of India  Anr vs Smt
Shanti Devi etc
this Court recently had occasion to lay down the principle as to the true multiplier of thirteen applicable in determining the capitalized value of about 70000 acres of agricultural land located in the Kangra valley in the State of Himachal Pradesh where the notification under s41 of the Act had been issued in the years 1962 and 1963 and where there was no evidence of comparable sales of similar lands in the Kangra valley
After referring to the judgment of this Court in Oriental Gas Co Ltd s case supra and several other decisions one of us Venkatramiah J observed The number of years  purchase has gradually decreased  as the prevailing rate of interest realisable from safe investments has gradually increased
the higher the late of interest the lower the number of years  purchase
This method of valua tion involves capitalizing the net inclose that the property c an fairly be expected to produce and the rate or capitalization is the percentage of return on his investment that a willing buyer would expect from the property during the relevant period
 The Court explained that although alone time it was felt that interest on gilt edged securities or Government bonds should alone
be taken into consideration having regard to the safety and liquidity of investment but the circumstances have now changed during the 398 recent years and deposits with the State Bank of India and other nationalized banks and even in the share market there arc many blue chips while command stability and other attendant benefits such as issue of bonus shares et cetera and added A return of 10 per annum on such safe investments is almost assured
Today nobody thinks of investing on land which would yield a net income of just 5  to 6  per annum
A higher return of the order of 10 is usually anticipated
Even in the years 1962 and 1963 an investor in agricultural land expected annual net return of at least 8 
It means that if the land yielded a net annual income of Rs8 a willing under of land would have paid for it Rs 100 ie a little more than 12 times the annual net income   There are certain general considerations which investors of all types take more or less into account yield and appreciation possibilities the ability readily to dispose of the investment marketability and safety
Investments differ with respect to assurance of income and safety of principal
In the investment market the quality of investments evidenced by the yield or return that is produced in relation to market price higher the quality the lower the yield
Investors must take into account various types of risks associated with different investment mediums and therefore adopt a type of investment that is appropriate to their resources and particular investment objectives As already stated some 20 to 30 years back ie till the early 50s it was taken as
a settled rule of practice that the capitalized value of agricultural lands should be arrived at 20 years purchase having regard to the rate of interest on gilt edged securities at five per cent
That rule no longer can be adhered to in view of the changed economic situation
In the early 70s people believed that investment in housing was more secure than other forms of Government securities in respect of safety of investment
Investment in housing involves  certainly of labour and effort such as maintenance collection of rent payment of taxes et cetera
They rate of return expected therefore was 112 to 212 more than what was expected from gilt edged securities person investing
capital in agricultural lands would ordinarily expect a return of 2 to 3 more than what he could obtain from gilt edged securities or other forms of safe investment such as fixed deposits in scheduled banks
National Savings  Certificates Unit Trusts at cetera or on blue chips ie On stocks and 399 shares in the public or private sector which yield a much greater return
In regard to investment agricultural lands there are many imponderables in as much as the investor runs a much greater risk than the risk that he runs in investment in housing which consists in vagaries of weather and other uncertainties
There is no security of principal no liquidity of investment nor any certainty of income
The appreciation of principal or income is also uncertain
The reasons for these is that agricultural lands are not readily
transferable under the various land reform legislations eg laws  relating to ceiling on agricultural holdings under the existing State laws and tenancy laws which place restrictions on transfer of such lands with concomitant danger of effacement of the rights of the absentee landlors and the creation of rights in the tillers of the soil
In evaluating the rate of return which would ordinarily satisfy an investor in such a property the risk factor has further to be evaluated
There may be total or partial failure of crops either through failure of rain or drought or inadequate or excessive rainfall
There may be a failure of crops on account of locust invasion or insects or pests
The cost inputs such as seeds water fertilizer labour charges etc would vary from year to year
If the overall cost goes up the income from agricultural produce would be comparatively less
The fluctuations in price of 
agricultural produce introduce a great deal of uncertainty in regard to the income that can be expected from the sale of the produce
If the yield of the crop in other producing countries is large or the market prices prevailing in such countries are low the prices of such agricultural produce in India would go down
In view of these considerations an investor would expect a much higher rate of return so that the risk factor is properly discounted
In the premises when the rate of return on investment was 825 in the years 1971 and 1972 a person investing his capital in 
agricultural lands would ordinarily expect 2 to 3 more than what he could obtain from gilt edged securities or other forms of safe investment and therefore the proper multiplier to be applied for the purpose of capitalization could not in any event exceed ten
In the present case the State Government however contends that the proper multiple to be applied should be 12 1 in computation of the capitalized value of the lands in these cases having regard to the rate of return of 8 at the relevant time ie On the date of the notification under s41 of the Act
In view of this it must be held that the multiple of 1212 should be applied in computation of the capitalized value of the lands
400 In the result the appeals must succeed and are allowed
The judgments and decrees of the High Court are modified by directing that the compensation awarded for acquisition of land should be reduced by one sixth in these cases wherever the amount of compensation has been determined by the method of capitalization
The respondents shall get solatium 15 on the compensation computed on the above basis and shall be paid interest at the rate decreed by the courts below
The costs shall be borne by the parties throughout as incurred NVK Appeals allowed


Summary:
In the years 1971 and 1972 several thousand acres of agricultural lands in two villages were acquired by the State Government pursuant to different notifications issued under section 41 of the Land Acquisition Act 1894
In response to notices under section 92 the respondents appeared before the Special Land Acquisition officer and claimed compensation varying between Rs 15000 to Rs 25000 per acre for dry and wet lands depending upon the nature and the quality of the soil and the income derived therefrom
In some cases compensation was claimed at more than Rs 1 lakh per acre for arecanut garden lands
The Special Land Acquisition officer by his various awards adopted a multiple of fifteen and awarded compensation at a flat rate of Rs 3300 per acre for dry agricultural lands and Rs 5000 per acre for wet agricultural lands
On references under section 18 the Civil Judge adopted a multiple of fifty times the net annual profits as there was no other method of determining the market value of the land and enhanced the amount of compensation to Rs 19500 per acre for wet agricultural lands and Rs 110000 for arecanut garden lands
On appeals by the Special Land Acquisition Officer the High Court also adopted the capitalised value at 15 years  purchase of the net annual profits but reduced the amount of compensation to Rs 15000 per acre for wet agricultural lands and Rs 25000 per acre for arecanut garden lands
In the appeals to this Court by the Special Land Acquisition officer it was contended relying on the unreported decision of the High Court dated November 21 1977 in MFA Nos
881 476 The Special Land Acquisition officer Davangere vs B Basavarajappa  Ors that the proper multiple for computation of the capitalized value should be 1212 and that the High Court was wrong in adopting the multiple of 15 when the rate of return in the years 1971 and 1972 was 8 per cent per annum
387 Allowing the Appeals  HELD 1
The function of the Court in awarding compensation under the Land Acquisition Act 1894 is to ascertain the market value of the land at the date of the notification under section 41 of the Act and the methods of valuation may be 1 Opinion of experts 2 The price paid within a reasonable time in bona fide transactions of purchase or sale of the lands acquired or of the lands adjacent to these acquired and possessing similar advantages and 3 a number of years  purchase of the actual or
immediately prospective profits of the lands acquired
392 D E 2
The method of capitalising the actual or immediately prospective profits or the rent of a number of years purchase should not be resorted to if there is evidence of comparable sales or other evidence for computation of the market value
It can be resorted to only when no other method is available
392 E 3
The meaning to be placed upon the phrase Market Value of the land under s23 of the Act is the price the land acquired could actually be sold at the relevant time ie on the date of the notification under s 41
The owner is entitled to the value of the property in its actual condition at the time of expropriation with all its advantages and with all its possibilities excluding any advantage due to the carrying out of the scheme for the purpose for which the property is acquired
Its value is measured by a consideration of the prices that have been obtained in the past for lands of similar quality and in similar positions
394 H 392 B C 4
In valuing land or an interest in Land for purposes of land acquisition proceedings the rule as to number of years  purchase is not a theoretical or legal rule but depends upon economic factors such as the prevailing rate of return which a prudent investor in the class of properties in question would expect
The return which an investor will expect from investment will depend upon the characteristic of income as compared to that of idle security
The most important of such economic factors is the prevailing rate of interest at the relevant time ie on the date of the notification under s41
It is first necessary to ascertain the gross income from the acquired property
The next step should be ascertain the net income
Having ascertained the net annual income it must be capitalized by computing the number of years  purchase
395 B C Vyricherla Narayana Gajapatiraju vs Revenue Divisional Officer Vizagapatnam LR 193966 IA 104 Rustom Cavasjee Cooper vs Union of India   Oriental Gas Co Ltd  Ors vs State of West Bengal   Union of India  Anr vs Smt
Shanti Devi etc
etc   referred to
In regard to investment in agricultural lands there are many imponderables inasmuch as the investor runs a much greater risk than the risk that he runs in investment in housing which consists in vagaries of weather and other uncertainties
There is no security of principal no liquidity of investment nor any certainty of income
The appreciation of principal or in come is also uncertain
The reasons for these is that agricultural lands are not readily transferable under the various land reforms legislation ex
laws relating to ceiling on agricultural holding and tenancy laws
In evaluating the rate of return which would ordinarily satisfy an investor in such a property the risk factor has further to be evaluated
There 388 may be total of partial failure of crops through the failure of rain or drought or inadequate or excessive rainfall
There may be failure of crops on account of locusts insects or pests
The cost inputs such as seeds water fertilizer etc
vary from year to year
The fluctuations in price of agricultural produce introduce a great deal of uncertainty in regard to income
In view of these considerations an investor would expect a much higher rate of return so that the risk factor is properly discounted
399 B E In the instant cases when the rate of return on investment was 825 per cent in the years 1971 and 1972 a person investing his capital in agricultural lands would ordinarily accept 2 per cent to 3 per cent more than what he could obtain from gilt edged securities or other forms of Safe investment and therefore the proper multiplier to be applied for the purpose of capitalization could not in any event exceeded ten but since the State Government in these cases contends that proper multiple for cover should be 12 12 399 F G 6
The multiple of 12 12 should be applied in computation of the capitalized value of lands
The judgments and crees of the High Court are modified
The compensation awarded for acquisition of land reduced by one sixth wherever the amount of compensation had been determined by the method of capitalization
The respondents shall get solatium 15 on the compensation computed as aforesaid and also interest
399 H 400A B