IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE PIUS C.KURIAKOSE & THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM THURSDAY, THE 27TH MAY 2010 / 6TH JYAISHTA 1932 LA.App..No. 222 of 2008() ------------------------- LAR.124/2003 of I ADDL.SUB COURT,TRIVANDRUM .................... APPELLANT(S): RESPONDENT: ------------------------- 1. STATE OF KERALA REPRESENTED BY SPECIAL TAHSILDAR, LA, PWD, (3C), THIRUVANANTHAPURAM REPRESENTED BY THE DISTRICT COLLECTOR, THIRUVANANTHAPURAM. 2. THE EXECUTIVE ENGINEER, PWD (ROADS) DIVISION, THIRUVANANTHAPURAM. BY GOVERNMENT PLEADER SMT. R. BINDU RESPONDENT(S): CLAIMANTS/RESPONDENT: ------------------------------------ SUSHAMA KUMARI, 71 CSM NAGAR, EDAPPAZHINJI, THIRUVANANTHAPURAM NOW RESIDING AT 4/823/1 FAIR FAX, GOKULAM RESIDENTIAL ASSOCIATION KARAVALUR, KAWDIAR, THIRUVANANTHAPURAM. ADV. SRI.G.S.REGHUNATH THIS LAND ACQUISITION APPEAL HAVING BEEN FINALLY HEARD ON 27/05/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: PIUS C. KURIAKOSE & C.K.ABDUL REHIM, JJ. ----------------------------------------------- LAA. No. 222 of 2008 ----------------------------------------------- Dated this the 26th day of May, 2010 J U D G M E N T Pius C.Kuriakose, J. This appeal is preferred by the Government against the award of enhanced compensation towards value of land and also towards value of the building which existed on the land under acquisition. The property was in Thycaud Village of Thiruvananthapuram District. The acquisition was for the purpose of construction of Jagathy Bridge pursuant to Section 4(1) notification dated 6-11-2000. The Land Acquisition Officer fixed land value at Rs.2,96,400/- per Are and awarded structure value at Rs.4,28,387/-. The reference court re-fixed the land value at Rs.6 lakhs per Are on the basis of the evidence which came on record. The structure value was enhanced by the reference court to Rs.3,98,365/-. Before the reference court the claimant relied mainly on Ext.A5 commission report and Ext.A5(a) LAA. 222 of 2008 -2- valuation prepared by an expert who assisted the commissioner in the matter of Ext.A5 commission report. The claim towards compensation for the building was Rs.40 lakhs. Under Ext.A5 and A5(a) the value of the building was assessed at Rs.9,56,250/-. The court below did not rely on Ext.A5 or A5(a) for the reason that the author of Ext.A5(a) was not examined and that going by Ext.A5(a) the age of the building was only 9 years, while even on the admissions of the claimant the building was 20 years old. Ultimately the court below relied on the valuation prepared by the PWD on the basis of which the awarding officer fixed value for the building. What the court below did was to rely on the judgment of the Supreme Court in Union of India v. Savjiram and another (2004)9 SCC 312 and award enhanced value of Rs.3,98,365/- for the building. That amount was the amount which had been deducted under the PWD valuation towards depreciation for the oldage of the LAA. 222 of 2008 -3- building. In other words, the learned Sub Judge relying on Savjiram's case (supra) took the view that in land acquisition cases when old buildings are acquired, depreciation for the age of the building is not liable to be deducted from the value of the building determined as per the current rates for construction. 2. Smt. R. Bindu, learned counsel for the appellant would assail the impugned judgment on the various grounds raised in the appeal memorandum. She submitted that the land value determined is exorbitant. She also submitted that the enhancement granted towards compensation for the building cannot be approved. 3. Having gone through the impugned judgment we find that the evaluation of the evidence to the extent it pertains to land value was proper. But we notice that the rate presently awarded is even more than what was claimed by the party. The claim by the respondent was only Rs.2.25 LAA. 222 of 2008 -4- lakhs per cent. According to us, the land value cannot be fixed at a rate more than what was claimed by the respondent before the court. In that view of the matter we re-fix the value of land under acquisition at Rs.5,55,976/- per Are (the amount claimed by the respondent), in modification of the land value fixed by the court below. 4. The learned Government Pleader Smt. R.Bindu would assail the decision of the Reference Court to enhance the compensation awarded for the building which existed on the property vigorously. She submitted that the court below did not become inclined to rely on the report of the commissioner who conducted inspection with the assistance of an expert. But, what was done was to rely on the valuation taken by the engineers of the Public Works Department itself and to add the amounts which had been deducted under that valuation towards depreciation for this building which was admittedly at least 20 years old. LAA. 222 of 2008 -5- According to Smt.Bindu, the judgment of the Supreme Court in Union of India v. Savjiram And Another ((2004) 9 Supreme Court Cases 312) relied on by the learned Subordinate Judge is not applicable to the facts of the present case. This is a case of acquisition of property by the authorities who are to be guided by the Kerala Land Acquisition Manual and not by the Madhya Pradesh Land Acquisition Manual. The decision of the Supreme Court, according to her, can apply only in cases where the M.P. Land Acquisition Manual is applicable. 5. Sri.G.S.Reghunath, learned counsel for the claimant/respondent submitted that Section 23 of the Land Acquisition Act ensures that proper and adequate compensation is awarded to a person whose property is taken over against his wishes in exercise of State's Powers of eminent domain. Adequate compensation, in his opinion, will mean the present market value of the building LAA. 222 of 2008 -6- when it is a building that is taken over. The present market value of any building, according to him, will be the cost necessary for putting up the same building as on the date of acquisition. It is this principle that has been judicially recognised by the Supreme Court in Union of India v. Savjiram and Another (supra), according to Mr.Reghunath. Mr.Reghunath also submitted that the building in question was having a plinth area of 2500 sq. ft. and could have fetched several thousands of rupees by way of monthly rent. To put up such a building, one will require much more than the sum recommended by the advocate commissioner in the report. There is no warrant at all for interfering with the enhancement granted by the court below, which in his opinion, is very moderate. 6. We have very anxiously considered the submissions addressed at the Bar. A careful reading of the judgment of the Supreme Court in Union of India's case(supra) will show LAA. 222 of 2008 -7- that the decision of the Supreme Court in that judgment turned on the interpretation of paragraphs 43 and 44 of the M.P. Land Acquisition Manual, which deal with the method of awarding compensation for houses or buildings. Their Lordships of the Supreme Court have in fact quoted the above paragraphs at para No.8 of the Judgment. We re- quote those paragraphs as follows: “43. If any house, building or trees standing on the land to be acquired should not be required by the Government, the owner may be allowed the option of removing it within a reasonable period, to be fixed by the Collector, in which case the value of such materials, as determined in the award, will be deducted from the sum payable as compensation, or if compensation has been already paid will be recovered from the owner prior to the removal of the materials. 44. Compensation for houses or buildings should be calculated on the present value of the materials plus cost of construction at present rates, less the value of any materials made over to the proprietor. “ 7. As noticed by the Hon'ble Supreme Court, LAA. 222 of 2008 -8- paragraph 44 of the M.P. Land Acquisition Manual provides for a method of calculation for computing the compensation payable for houses and buildings. Compensation for houses and buildings acquired are required to be calculated on (a) the present value of materials, and (b) in addition to the cost of construction at present rates. Both the above components are to be added and the value of the materials if any made over to the proprietor is to be deducted. This means that under the M.P. Land Acquisition Manual, the value of the building is to be calculated as though it was a building constructed on the date of acquisition and what was deductible from the value so determined was only value of any materials or portions of the building returned to the owner. If the acquisition in question was one to which the M.P. Land Acquisition Manual applied, certainly there will be justification for determining the compensation for the building in the manner done by the learned Sub Judge. But LAA. 222 of 2008 -9- the Kerala Land Acquisition Manual, which is to guide the Land Acquisition Officers in our State, does not contain any provision similar to paragraphs 43 and 44 of the M.P. Land Acquisition Manual. Chapter-X of the Land Acquisition Manual published by the Government of Kerala deals with the principles to be followed in determining the market value of the lands and buildings acquired. Section (ii) therein explains the concept of 'market value' and states at paragraph 2 thereof that ; “The market value of a building is not the same as the cost of constructing it. Buildings may deteriorate in value and a new building erected upon a piece of land may owing to a demand for it in the locality be valued at more than the cost of the land and the cost of constructing the building upon it.” Paragraph 4 thereof incorporates the trite principle that market value has to be determined by reference to the price which a willing vendor might reasonably expect to obtain from a willing purchaser. It is Section (vii) in LAA. 222 of 2008 -10- Chapter-X that specifically provides for valuation of buildings. Paragraph 4 therein provides as follows; “In arriving at the cost of a building the Acquisition Officer should consider the condition of the building and make due allowance for depreciation. He should not only make his own enquiries but should supplement them by obtaining an estimate of the cost of the building from the Public Works Department. This estimate may be taken as a guide though not the sole determining factor in arriving at the market value. Buildings which are substantial structures and which are considered by the Revenue Officers to be likely to cost more than Rs.5,000/- should be valued by the Public Works Department Officers.” The Manual incorporates various Government Orders including G.O.(Ms.) No.52/PW. dated 3/3/1965 which provides that building, having estimated cost of above Rs.5,000/- and upto Rs.15,000/-, can be valued by Assistant Engineers and building with approximate estimated cost of above Rs.15,000/- and upto to Rs. 1,00,000/- can be valued by Executive Engineers and LAA. 222 of 2008 -11- buildings with above estimated cost of Rs.1,00,000/- and below Rs.5 Lakhs can be valued by Superintending Engineer. 8. The Kerala Land Acquisition Manual binds only the Land Acquisition Officer and does not bind the Court. But the practice of deducting depreciation from the present value of the building taking into account the age of the building has been judicially approved. The judgment of a Division Bench of this court in State of Kerala v. Kuruvila (2005 (3) KLT 580) was a case where the issue was regarding the correct percentage of depreciation to be deducted for B class buildings acquired under the provisions of the Land Acquisition Act. Their Lordships of the Division Bench, after referring to the earlier decisions of this Court such as Bhavani Ramalakshmy v. State of Kerala (1990 (2) KLT 581) and Mytheen Kunju Abdulrahiman Kunju v. State (1954 KLT 798) wherein also the method of deducting LAA. 222 of 2008 -12- depreciation for the purpose of determining the value of the old building is recognised and approved, held approving the judgment of Bhavani's case that if the building is B class building, the percentage of depreciation to be deducted is 5/6 % per year and that the deduction is to be made from the very first year of construction itself. 9. Various provisions of law pertaining to the concept of compensation for the properties compulsorily acquired by the State including Article 31A of the Constitution will show that the insistence of law is that the compensation shall not be less than the market value of the property under acquisition. The compensation expected to be determined by applying the principles enumerated under Section 23 is adequate compensation for the loss that is sustained by the owner on account of compulsory acquisition and not excessive compensation or inadequate compensation. We find it difficult to accept the argument of Sri.Reghunath that LAA. 222 of 2008 -13- adequate compensation for an old building will be the cost of construction of a brand new building. No willing buyer will be prepared to pay the value of a brand new building to a willing seller while purchasing an old building. The market value of an old building will be lesser than the market value of an identical new building. The Judgment of the Supreme Court relied on by the learned Subordinate Judge cannot apply to the present case where the M.P. Land Acquisition Manual does not apply. 10. At the same time, the compensation fixed by the Land Acquisition Authority for the building placing reliance solely on the valuation prepared by the Engineers of the PWD Department cannot be approved. The PWD engineers have valued the building adopting the published schedule of rates of the PWD. These rates are not realistic and the PWD itself tenders out their civil works at rates above their own rates. We cannot justify the action of the learned LAA. 222 of 2008 -14- Subordinate Judge in having rejected the advocate commissioner's report regarding the quality of the materials used and the class of construction. We feel that the correct compensation payable for the building which existed on the property is certainly more than a sum of Rs.4,28,387/- awarded by the Land Acquisition Officer. If the claimants were able to adduce cogent evidence as to the rental income which was being derived from the building, the market value of the building could have been determined on the basis of capitalization of the rental income, in which case, the value of the building would have come to much more than what is awarded by the L.A. Officer. For reasons best known to her, the claimant chose not to adduce evidence in that line and seek determination of building value by that method. 11. Re-appreciating the entire evidence including the oral evidence adduced by the parties, the commissioner's report, and keeping in mind the reality that valuation in LAA. 222 of 2008 -15- accordance with PWD's schedule of rates is not realistic, we come to the conclusion that the correct compensation payable for the building which existed on the property is Rs.7,28,387/-. This means that the enhancement granted by the court below towards compensation for the building stands reduced from Rs.3,98,365/- to Rs.3 Lakhs. The appeal stand allowed as above. It is needless to mention that the respondent/claimant will be entitled for all statutory benefits admissible under Section 23 (2) 23(1A) and Section 28 of the Act on the total enhanced compensation to which she becomes eligible by virtue of this judgment. The parties are directed to suffer their costs. PIUS C.KURIAKOSE,JUDGE C.K.ABDUL REHIM , JUDGE ksv/dpk