Case: State Of Kerala Vs. P. P. Hassan Koya

1. On December, 8, 1954, the Government of Madras issued a notification under S. 4 of the Land Acquisition Act notifying for acquisition for a public purpose, viz. widening the Madras-Calicut Road at Palyam -seven units of land with buildings. One of the units was T. S. No. 298/2 admeasuring 3911sq. ft. together with a building standing thereon used for business purposes. Notification under S. 6 of the Act was issued on December 12, 1954, and possession of the land was taken soon thereafter.      2. The Receiver of Patinhare Kovilakam Estate held T. S. NO. 298/2 in Jenmi right. The respondent in this appeal held in that land the rights of a Kanomdar under a deed dated March 27, 1954. The buildings constructed on the land belonged to the respondent and were let out to tenants at an aggregate monthly rent of Rs 332.50. The Land Acquisition Officer determined the compensation payable to the persons interested at the rate of Rs 10,000/ per acre for the land, and for the houses standing thereon "at their break-up value" In a reference at the instance of the respondent under S. 18 of the Land Acquisition Act (in which the Receiver of Patinhare Kovilakam Estate did not join) the Subordinate Judge. Kozhikode, was of the view that the method adopted by the Land Acquisition Officer for determining compensation by separately valuing the lands as garden lands and the break-up value of the houses was "manifestly unjust and improper". In his view, each unit had to be valued as a composite property. He then proceeded to adopt the method of determining the market value by capitalizing the net rent received from the unit, and taking into consideration the return from gilt-edged securities at 3 1/2 per cent. at the relevant date, the learned Judge awarded compensation for the unit in which the respondent was interested at 35 times the net annual rental.      3. Against the award of the Subordinate Judge, the State of Kerala appealed to the High Court of Kerala at Erankulam. The High Court determined compensation by multiplying the net rent by 33 1/3 times that being in their view the true multiple derived from the return based on the current return from gilt-edged securities. Against the award made by the High Court, this appeal has been preferred by the State of Kerala with certificate under Art. 133 (1) (a) of the Constitution.

Court's reasoning:
In our judgment, there is no force in either of the contentions. When land - which expression includes by S. 3 (a) of the Act benefits to arise out of land and things attached to the earth or fastened to anything attached to the earth - is notified for acquisition, it is notified as a single unit whatever may be the interests which the owners thereof may have therein. The purpose of acquisition is to acquire all interests which clog the right of the Government to full ownership of the land, i. e. when land is notified for acquisition, the Government expresses its desire to acquire all outstanding interests collectively. That is clear from the scheme of the Land Acquisition Act.Under S. 11 of the Land Acquisition Act, the Collector is required to enquire into the objections raised by the persons interested in the land and into the value of the lard at the date of the publication of the notification under S. 4, sub-s. (1), and into the respective interests of the persons claiming the compensation, and then to make an award determining-(i) the true area of the land; (ii) the compensation which in his opinion should be allowed for the land; and (iii) the apportionment of the compensation among all the persons known or believed to be interested in the land, whether or not they have respectively appeared before him. By the compulsory acquisition of land, all outstanding interests not vested in the Government are extinguished.It is therefore the duty of the Land Acquisition Officer to determine in the first instance compensation which is to be paid for extinction of those interests, and then to apportion the compensation among the persons known or believed to be interested in the land. The Subordinate Judge had also, when a reference was made to him to assess the value of the unit and then to apportion the compensation among persons entitled thereto. The rule could not be departed from merely because the Receiver in whom the Jenmi rights in T. S. No. 298/2 were vested failed to raise an objection to the quantum of compensation awarded to him. Again the respondent was the holder of kanam rights in the land, and the buildings on the land belonged to him.The respondent being Kanamdar, he had an interest in T. S. No. 298/2, and as Kanamdar the respondent was entitled to apportionment of compensation even in respect of the land5. We agree with the Trial Court and the High Court that the method adopted by the Land Acquisition Officer for determining compensation payable for extinction of the interest of the holder of the land and of the buildings separately was unwarranted. In determining compensation payable in respect of land with buildings, compensation cannot be determined by ascertaining the value of the land and the "break-up value" of the building separately. The land and the building constitute one unit, and the value of the entire unit must be determined with all its advantages and its potentialities. Under S. 23 of the Land Acquisition Act compensation has to be determined by taking into consideration the market value of the land at the date of the publication of the notification under S. 4 (1) and the damage, if any, sustained by the persons interested under any of the heads mentioned in secondly to sixthly in S. 23 (1) of the Land Acquisition Act7. That method was rightly adopted by the Trial Court and the High Court. The unit under acquisition is used for business purposes and has a prominent situation in the town of Calicut. There was clear evidence about the rental of the building, and the Trial Court proceeded to capitalize the net annual rental, having regard to the rate of return of 3 1/2 per cent. from gilt-edged securities, by multiplying, it by 35 times. The High Court has slightly reduced the multiple8. It cannot be laid down as a general rule applicable to all situations and circumstances that a multiple approximately equal to the return from gilt-edged securities prevailing at the relevant time forms an adequate basis for finding out the market value of the land. But in this case the Trial Court and the High Court were of the view that a multiple based on a return from the gilt - edged securities was the approximate multiple for determining the value of the property under acquisition, and no ground has been suggested for not accepting the basis and the rate of capitalization adopted by them.It is relevant to note that the same multiple which has been adopted in other cases relating to lands and buildings acquired under the same notification under which the land of the respondent was acquired has not been challenged by the State.