STATE OF KERALA

P. P. HASSAN KOYA

March 19, 1968

fJ. C. SHAH AND G. K. MITTER, JJ.)

Land Acquisition Act (I of 1894)-Compensation-Jenmi holder not objecting to qucntunt of con1Pensation-Principle1 of dtermination.

On the acquisition of several units of land with buildino. the Land Acquisition Officer detmnined the compensation payable to - tho persons interested at the rate of Rs. 10,000 per acre for the land, and for houses standing thereon "at their break up value".

The respondent, who held Kanam rights in one of tho units of the land and te> whom the building standing thereon belonged, raised objections to the quantum of the oom pensation. The Receiver of the Estate holding Jenmi rights in the land did not object. The trial co.urt disapproved the method adopted by the Land Acquisition Officer for determining the compensation and held that each unit had to be valued as a com!""ite property. He determined the market value by capitalising the net rent received from the unit and taking into consideration tho return fcom gilt-<ldged securities at 3!% awarded compensation fdr the respondent's unit at 35 times the net annual rental. The High Court upheld the order of the trial court but reduced the multiple to 33-1/3. Dismissing the appeal, this Court:

HELD : By the compulsory acquisition of land. all outstanding inter~ ests not vested in the Government are extinguished. It is. therefore. the duty of the Land Acquisition Officer to determine in the first instance compensation v.rhich is to be paid for extinction of those interests, and then to apportion the compensation among the persons known or bc1ieved to be interested in the land. The rule could not be departed from merely because the Receiver in whom the Je111ni rights \ve'rc vested failed to raise an objection to the quantum of compensation awarded to him. The respondent being a Kane<mdar has an interest in the land and was entitled to appaintment of compensation even in respect of the land. f461 H-462 Bl

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 unwananted. In determining compensation payable in respect of land with buildings compensation c.an not 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. When the property sold is land with building, it is often difficult to secure reliable evidence of instances of sale. of similar lands with buildings proximate in time to the date of the noti fication under s. 4.

Therefore the method which is generally resorted to in dcto:rmining the value of the land 'vith buildings especially thOCie used for business purposes, is the method of capitalization of return actually received or which might reasonably be received from the land and the buildings. [462 C; 462 H-463 CJ

Rr.ja Vyricherla Narayana Gajapatira}11 v, The Revenue Di1isior:al Officer, Vitagapatnam, L.R, 66 I.A. 104, referred to.

L7 Sup.C.J/68-5

SUPREME COURT REPORTS

[1968] 3 S CR.

It cannot be laid down as a general hlle applicable to all situations and circumstances that a multiple approximately equal to the return fro1n gilt-edged securities prevail, ng 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 appropriate multiple for determining the V<tlue of the property under acquisition. and no ground has been suggesNd fdr not accepting the basis and the rate of capitalization adopted by them. [463 E-F]

CIVIL APPELLATE JURISDICTION : Civil Appeal No, 588 of 1965.

Appeal from the judgment and decree dated June 21, 1962 of the Kerala High Court in Appeal Suit No. 602 of 1958.

B. R. L. Iyengar and M. R. K. Pillai, for the appellant.

5. V. Gupte, Vishnu 8. Saharya, Yougindra Khushala11i, Sardar Baizadur Saharya and T. L. Viswanatha Iyer, for the respondent.

The Judgment of the Court was delivered by Shah, J. 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 3911 sq. ft. together with a building standing thereon used for business purposes. No!ification under s. 6 of the Act was issued on December 12, 1954, and possession of the land was taken soon thereafter.

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 Kanamdar 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 tt be valued as a composite property. He then procee.:!ed to adopt the method of determining the market value by capitalizing the net rent received from the unit, and taking into consideration the retnrn from gilt-edged

securities at 3-112 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.

Against the award of the Subordinate Judge, the State of Kerala appealed to the High Court of Kerala at Ernakulam. The High Court determined compensation by multiplying e net ent

33-1/3 times that being in their view the true multiple denved 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(l)(a) of the Constitution.

Two questions were urged in support of the appeal :

(1) that the Receiver having accepted the award of the Land Acquisition Officer, the respondent could Claim compensation only for the right which he had in the land and the buildings and the method adopted by the Land Acquisition Officer was in the circumstances the only appropriate method; and

(2) that the rate of capitalization was unduly high.

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 fuU ownership of the land, i.e. when land is notified for acquisition, the Government expresses its desire to acquire all outstanding interest collectively.

That is clear from the scheme of the und 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 anp into the value of the land at the date of the publication of the notification under s. 4, subs. (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 t? 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 interest-

462 StJPUJOI. cooaT uroan

(1968) 3 S.C.R.

eel in the land. The Subordioate Judge had also, when a refer- A encc was made to him, to assess the value of the unit and then to apportion the compensation amoag pcnons entitled tba'eeo.

The rule could not be departed from merely because the ReceiYer in whom the lenmi rights in T.S. No. 298/2 were veatcd failed to. raise an objection to the quantum of compcnsatioll awarded

to him. Again the respondent was the holder of kanam rights in B the land, and the bui!dingi; on the land belonged to him. The respondent being Kanamdar, ho 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 land.

We agree with the trial coun and the High Court that the method adopted by the- Land Acquisition Officer for determining C compensation payable for extinction of the interest of the holder of 'the land and the buildings •rate wu unwarranted. In determining compensation payable m 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 D 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 notifi• cation 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 Act.

As observed by the Judicial Committee in Raia Yyriclier/a Narayana GujapatirajtJ, v. The Revenue Divisional Officer, Vizagapatnam(') at p. 114:

"There is not in general any market for land in the sense in which one speaks of a market for shares or a market for sugar or any like commodity. 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 in general can also be measured by a consideration of the prices that have been obtained in the past for land of similar quality and in similar position, and this is what must .be meant in general by "the market Vall, IC" in s. 23."

An instance of a sale which is proximate in time to the date of the notification under s. 4(1) of the Land Acquisition Act in res- H peel of land similarly situate and with similar advantages and which is proved to be a transaction between a willing vendor and

(!) L.R. 66 I.A. 1~.

A a willing purchaser would . form a reliable guide for determining the market value. The value which a willing vendor might reasoaably expect to receive from a willing purchaser in respect of a house generally depends upon a yariety of circumstances including the nature of the consll'llction; 'its age, situation, .the amenities available, its special advantages and a tiost of other circumstances. When the property sold is land with building, it is tiften difficult to secure reliable evidence of instances of sale of B

siniilar lands with buildings proximate in time to the date of the notification under s. 4. Therefore the method which is generally resorted to in detenniliing the value of the lan<, i with buildings especially those used for biisiness purposes, is the method of capitalization of return actually received or which might rea5onably be received from the land and the buildings.

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 D the trial court proceeded to capitalize the net annual rental, having regard to the rate of return of 3t per cent from gilt-edged securities, by multiplying it by 35 timCll. The High Court has slightly reduced the multiple.

It cannot be laid down as a general rule applicable to all situations and circumstances that a multiple approximately equal E 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 giltedged securities was the aJipropriate multiple for determining the value of the property under acquisition, and no ground has been F 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.

G The appeal therefore fails and is dismissed with costs.

Y.P.

Appeal dJsmiS#tl.