REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL No. 3838  OF 2010 (@ SLP (C) No. 20767 of 2008)

Special Land Acquisition Officer  … Appellant

Versus

Karigowda & Ors.                  …Respondents

WITH

C.A.  No.  3839/2010 [@ SLP(C)  No.  21730/2008],  C.A.Nos.3840-3841  /2010 [@ SLP(C) Nos. 3971-3972/2009], C.A. No.3842/2010 [@ SLP(C)  No. 31169/2008], C.A. No. 3843/2010 [@ SLP(C) No. 7293/2009], C.A.  No.3844/2010  [@  SLP(C)  No.  9875/2009],C.A.  No.3845/2010  [@  SLP(C)  No.  10393/2009],  C.A.  No.3848/2010  [@  SLP(C)  No.  15773/2009], C.A.No.3849/2010 [@ SLP(C) No. 19684/2009] and C.A.  Nos.3850-63/2010 [@ SLP(C) No. 31096-31109/2009].

JUDGMENT

    Swatanter Kumar, J.

1.  Leave granted.  

2. All the above appeals under Article 136 of the Constitution of India  

raise a common question of law based on somewhat similar facts and

are directed against different judgments of the Karnataka High Court  

and the judgment of the Principal  Civil Judge (Senior Division) and  

JMFC, Srirangapatna (hereinafter referred to as the “Reference Court”).

3. Civil Appeals arising out of SLP (C) Nos. 20767 of 2008 and 21730 of  

2008 are directed by the Special Land Acquisition Officer (for short the  

‘SLAO’)  and the  Managing  Director  Irrigation  Board  (for  short  the  

‘Board’)  respectively,  against  the  judgment  and  order  dated  23rd  

January, 2008 passed by the High Court in MFA No. 8544 of 2007,  

whereby the High Court enhanced the compensation of the acquired  

land to Rs.5,00,000/- per acre for the wet land (garden land).   

4. Civil Appeals arising out of SLP (C) Nos. 31096-31109 of 2009 are  

directed against the judgment of the High Court dated 22nd February,  

2008  in  MFA  Nos.  6924  of  2007  (LAC)  C/W  Nos.  6925/2007,  

7289/2007, 7290/2007, 7291/2007, 7292/2007, 7294/2007, 8541/2007,  

8543/2007,  8545/2007,  8546/2007,  8549/2007,  8551/2007  and  

8553/2007  (LAC),  whereby  the  High  Court  while  relying  upon  its  

judgment in the  earlier  cases  granted the  compensation  at  a  sum of  

Rs.5,00,000/- per acre for wet land (garden land) and Rs.2,53,750/- per  

acre for dry land.   

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5. Appeal arising out of SLP (C) No.31169 of 2008 is directed against the  

judgment of the Reference Court dated 16th March, 2007 in LAC No.  

219/2006,  vide  which  the  learned  Court  granted  compensation  at  

Rs.2,92,500/- per acre in respect of wet lands (garden land).  

6. In other words, we will be dealing with the above appeals as well as  

other connected appeals, relating to the same acquisition, preferred by  

the State against the judgment of the High Court as well as that of the  

Reference Court.  At the very outset, we may also notice that objection  

was raised with regard to the maintainability of the appeal against the  

judgment passed by the Reference Court.  

7. Simple but an interesting question of law that falls for consideration of  

the  Court  in  the  present  appeals,  relates  to  the  ambit  and  scope  of  

Section 23 of the Land Acquisition Act, 1894 (for short ‘the Act’) –  

whether,  manufacturing  or  commercial  activity  carried  on  by  the  

agriculturist, either  himself  or through third party, as a continuation of  

the  agricultural activity, that is, using the yield for production of some  

other  final  product  can be the  basis  for  determining the  fair  market  

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value  of  the  acquired  land,  within  the  parameters  specified  under  

Section 23 of the Act, in the facts of the present case?

8. The learned counsel appearing for the parties, have addressed varied  

arguments in support of their respective cases while primarily focusing  

their submissions on the above-referred question of law.   

9. It  will  be appropriate  to refer  to the facts  giving rise  to the present  

appeals at the very outset.  As the facts in all other connected appeals  

are more or less similar, thus, it will not be necessary for us to refer to  

the facts of each case in detail. For the purposes of brevity and in order  

to avoid repetition, we will be referring to the facts in the civil appeals  

arising from SLP(C) Nos. 20767/2008 and 21730/2008.   

 10.  The respondents in these appeals are the owners of the lands varying  

between 2 to  48 guntas  ( total acquired land measured 146 acres and 7  

guntas  relating  to  nearly  419 claimants)  situated  in  Village  Sanaba,  

Chinakurali Hobli, Pandavapura.  These lands got submerged under the  

backwaters  of  Tonnur  tank  in  the  year  1993 due to  construction of  

Hemavathi Dam.  The water from the dam which was canalized to the  

tank  resulted  in  submerging  of  the  land  belonging  to  different  

respondents.   The physical  possession  of  the  land,  belonging  to  the  

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owners was taken on or about 24th October, 1996 and 26th December,  

1999 respectively.  However, the notification under Section 4(1) of the  

Act came to be issued on 4th April, 2002.  The crops belonging to the  

owners were damaged. The SLAO passed an award dated 28th August,  

2003, fixing the market value of the wet lands at the rate of Rs.90,640/-  

per  acre  and for  dry  land  at  the  rate  of  Rs.  37,200/-  with  statutory  

benefits. Other awards were made by the SLAO on different dates.

 11.  Aggrieved by these awards passed by the SLAO, the claimants sought  

reference  to  the  Civil  Court  for  determination  of  the  compensation.  

The Reference Court vide its judgment and award dated 16th March,  

2007  enhanced  the  compensation  payable  to  the  claimants  to  

Rs.2,92,500/- per acre for the wet lands (garden land).  In other cases  

Rs.1,46,250/- for dry land (lightly irrigated) and Rs.1,20,000/- for dry  

land (without mulberry crop) were awarded.  This compensation was  

awarded  with  other  statutory  benefits.  Still,  the  claimants  felt  

dissatisfied and preferred appeals before the High Court.  These appeals  

were  disposed  off  by  the  High  Court  vide  its  judgment  dated  23rd  

January, 2008, enhancing the compensation payable to the claimants at  

the rate of Rs. 5,00,000/- per acre for wet/garden land (in other cases)  

Rs.2,53,750/-  per acre for dry lands.   The High Court also awarded  

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interest on enhanced compensation from the date of their submergence  

in the backwaters of Tonnur Tank.  Aggrieved by the judgment of the  

High Court, the SLAO on behalf of the Government filed the present  

appeals against its judgment.

 12.Against the judgment of the Reference Court, directly an appeal had  

been filed by the Board before this Court.  This appeal arises from SLP  

(C) No. 31169 of 2008, wherein the judgment of the Reference Court,  

granting enhancement  of  the  awarded  compensation,  in  view of  the  

judgment of the High Court, has been challenged.  Usefully, it can also  

be noticed at this stage itself, that when the claimants had filed appeals  

for further enhancement before the High Court  in other  matters,  the  

State Government had neither filed any appeal against the judgment of  

the Reference Court nor any cross objections.  This fact has duly been  

noticed by the High Court in the judgment under appeal.  The challenge  

to the judgment  of  the  High Court is primarily  on the ground that  

there was no evidence  on  record before the  High Court  which would  

justify enhancement of  compensation by more than five times to the  

compensation awarded by  the Collector.   The findings of  the High  

Court besides being based upon no evidence are contrary to the very  

spirit of the provisions of Section 23 of the Act.  The contention, inter  

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alia,  raised is  that  the judgment of the High Court is  erroneous and  

contrary  to  law  as  the  High  Court  could  not  have  taken  into  

consideration the ultimate manufactured product i.e. silk thread from  

silk  cocoon  in  contra-distinction  to  the  agricultural  product  i.e.  

mulberry crop in determining the fair market value of the land.   In the  

submission of the appellant, another pure question of law which has  

been raised is that the High Court could not have granted interest on the  

enhanced  compensation,  from  the  date  the  land  belonging  to  the  

claimants submerged in the backwaters of Tonnur Tank, as such benefit  

in terms of Section 23(1A) and Section 23(2), can only be granted from  

the date of notification issued under Section 4 of the Act.     

13. Another contention raised on behalf of the appellant is that the High  

Court has allowed a uniform enhanced compensation to be paid to the  

claimants without drawing any distinction between wet and dry lands.  

Such findings of the Courts below suffer from a palpable error apparent  

on the face of the record and the impugned judgment is thus liable to be  

set aside. With reference to another ancillary legal issue, it has been  

emphasized on behalf of the appellants, that the claimants do not have  

any license as required under Section 4 of the Mysore Sales (Control)  

Act, at least none was produced before the Reference Court and thus  

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the  compensation  awarded  on  the  alleged  ground,  that  they  were  

carrying on the activity of sericulture resulting in manufacture of silk  

thread ought not to be the foundation for grant of compensation.   

14. According to learned counsel for the respondents-claimants, the Court  

below and the High Court have correctly appreciated the evidence and  

taken the view that the crops grown by claimant are shown as Mulberry  

crops and the documentary evidence clearly shows that about 250 to  

400 silk cocoon clusters can be obtained in one crop in wet land.  100  

silk cocoon clusters weigh about 45 to 50 kgs. in wet lands and 30 to 35  

kgs. in other lands depending upon rain.  The average price of the silk  

cocoons per kg. would be Rs. 100/- to Rs.150/-.   Karigowda, PW-1  

had submitted these figures and the Expert report, particularly, Exh. P.9  

and P.10 showing the average yield  of  silk  cocoons per  crop.   The  

Reference Court, therefore, rightly took into consideration the evidence  

and computed the income after deducting 50 per cent of the income  

towards cost of cultivation as per the judgment of this Court in State of  

Gujarat & Ors. vs. Rama Rana and Ors. [AIR 1997 SC 1845]. While  

applying the capitalization method and multiplier of 10, the Reference  

Court had granted compensation to the claimants at Rs. 2,92,500/- for  

the wet land (garden land) which was enhanced to Rs. 5,00,000/- by the  

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High  Court.  According  to  the  respondent-claimants,  there  was  

sufficient evidence on record including the expert evidence to ignore  

the method of sale statistics and determine compensation by applying  

the capitalization method.  

15.As is  evident  from the  above stated  facts,  the  principal  controversy  

between  the  parties  is  with  regard  to  the  method  adopted  for  

computation of compensation payable to the claimants and the quantum  

thereof.   The  appellant  has  raised  the  argument  that  the  method of  

computation adopted by the Reference Court as well as the High Court  

is impermissible in law.   The Court cannot take into consideration the  

commercial activity which may result from, and be indirectly incidental  

to, the agricultural activity particularly when both of them are carried  

on independent of each other. This being the main controversy, it will  

be  necessary  for  us  to  refer  to  the  methodology  adopted  by  the  

Reference  Court  as  well  as  the  High  Court  while  awarding  the  

compensation impugned in the present appeals.

16.We have already indicated that we would be referring to the facts of the  

two appeals except where it is necessary to refer to particular facts of  

another appeal.  The Reference Court as well as the High Court noticed  

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that  the  State  should  be  fair  and  reasonable  in  compensating  the  

uprooted agriculturists as well as the fact that no sale instances from  

Village Sanaba were available prior to 2002, though sale statistics of  

adjoining villages were produced before the Court.  In this backdrop,  

they awarded the compensation on the basis of capitalization method  

and discussion in that   regard can usefully be reproduced at this stage.

(Reference Court)

“13. Keeping the evidence of P.W.1 in mind, I  have  gone  through  the  documents  produced  by  the claimant who got marked RTC as per Ex. P.2  to  P.7,  award  Thakthe  as  per  Ex.P.8,  yield  notification and price list of Mulberry crop as per  Ex.P.9 and P.10 and estimation as per Ex.P.11.  On  perusal  of  the  documents  relied  by  the  claimant, it is noticed that, in the RTC extracts,  the nature of crops being grown by the claimant  is shown as Mulberry.  The production of RTC  Extracts as per Ex. P.2 to P.7 supports the say of  PW.1 with regard to growing of mulberry crops  over the lands in question.  Further the production  of Ex.P.9 and P.10 goes to show that, during the  year  1999-2001,  4-5  Mulberry  crops  are  being  grown in one acre of land.  It is clear from these  documents that, about 250 to 400 cocoons can be  obtained  in  one  crop  in  wet  lands.    100  silk  cocoons used to weigh about 45 to 50 kgs in wet  lands  and  30  to  35  kgs.  in  lands  which  are  depending  upon  rains.     Further,  in  the  year  2001-2002, the average yield in a wet land would  be 250 to 300 silk  cocoons per  crop.   100 silk  cocoons used to weigh 50 to 55 kgs. The average  

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price of silk cocoons per kg. would be Rs. 100/ to  Rs. 150/-.

14. Looking to the evidence of PW.1 and the  contents  of  Ex.P.2  to  P.10,  it  is  clear  that,  the  claimant  used  to  grow  minimum  4  mulberry  crops in the lands submerged under Tonnur Tank.  Further in the award Thakthe itself that, the LAO  has admitted regarding the growing of Mulberry  crop  in  the  lands  acquired  by  him.    The  documents i.e., Ex.P.9 & 10 are the letters issued  by Assistant Director of Sericulture in favour of  Assistant  Executive  Engineer,   No.  24  Sub- Division,   Pandavapura  and  in  favour  of  Advocate for claimants.  Both, these documents  i.e.,  Ex.P.9 and P.10 contain the average yield of  silk cocoons per  crop and average price of silk  cocoons per kg.  As such, as per the contents of  Ex.P.9 and P.10 a farmer would get a minimum  of 250 to 400 silk cocoons per  crop.  Further,  it  is  also  clear  that,  a  farmer  would  grow   a  minimum of 4 to 5 Mulberry crops in a year in  wet lands.  Hence,  I deem it proper to take into  consideration 4 Mulberry crops in a year so as to  determine  the  market  value  in  respect  of  wet  lands  in  the  case  on  hand  on  the  basis  of  capitalization  method.  As  such,  if  we  take  average  yield  of  silk  cocoons  per  crop  on  the  basis of Ex.P.9 and P.10, it comes to about 325  silk cocoons per crop.  Then,  if we take the same  into  consideration,  then  the  total  yield  per  acre  per year out of 4 Mulberry   crops,  it comes to  about 1300 silk cocoons per year per acre.   If 100  silk cocoons used to weigh 45 kgs.,   then 1300  silk  cocoons  would  weigh  about  585  kgs.  per  acre.   So it is clear that an average of 585 kgs. of  silk cocoons could be grown,  out of 4 crops in a  year. As such, if we take minimum price of the  cocoons per kg. i.e. Rs. 100/-  as per Ex.P.9 and  

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P.10.    Then, it comes to Rs. 58,500/- per acre  per  year.   If  we  deduct  50%  of  the  income,  towards  costs  of  cultivation  as  per  the  ruling  reported in AIR 1997 S.C. page 1845,  it comes  to Rs. 29,250/- which shall be multiplied by 10 to  arrive the market value of the lands in which the  Mulberry crop was being grown.  As such,   if we  multiply  an  amount  of  Rs.  29,250/-  by  10,  it  comes  to  Rs.  2,92,500/-  which  is  to  be  determined as  the  market  value of  the  lands in  question  of  claimant  per  acre.   Hence,  I  determined  the  market  value  of  the  lands  in  question at Rs. 2,92,500/- per acre.”

17.Not only affirming but while further enhancing the compensation,  the  

High Court held as under :-

“6. As to the number of mulberry crops grown  in  the  said  land,  the  Reference  Court  has  observed  at  Paragraph-14  of  the  impugned  Judgment that as could be seen from Exs. P9 and  P10,  the  claimant  was  growing  maximum of  6  mulberry  crop  in  a  year.   Despite  making  this  observation, the Reference Court has taken only  four  crops  a  year,  which  is  the  minimum.  Therefore,  as  rightly  submitted  by  the  learned  counsel  for  the  appellant,   the  Reference Court  ought  to  have  taken  at  least  5  crops  in  a  year  which is average of minimum and maximum of  the number of crops.  Further, it is not in dispute  that  the  claimant  was  getting  325 silk  cocoons  from each  of  the  crops.    Further,  though  the  evidence is to the effect that, 100 cocoons weigh  50  kilograms,  the  Reference  Court  took  45  kilograms  as  the  weight  of  100  cocoons.  Therefore, the contention of the learned counsel  for the appellant, that the learned Reference Court  

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ought  to  have  taken  50  kgs.  as  weight  of  100  cocoons deserves our acceptance.  

7. Further,  though Ex.P.10 price  list  reveals  that the price of 1 kilogram of cocoons was  from Rs. 100 to 150/-, the Reference Court  committed  error  in  taking  the  minimum  price  Rs.100/-.   In  our  view,  it  ought  to  have  taken  the  average  of  minimum and  maximum prices i.e. Rs.125/- per kilogram.  If  5  mulberry  crops  per  year  and  325  cocoons per crop are taken and if weight of  100 cocoon is  taken at  Rs.  50  kilograms  then per acre yield of cocoons in a year in  terms of weight comes to 812.5 kilogram  which may be rounded to 800 kilograms.  Further,  if  the  price  per  kilogram  of  cocoons  is  taken  at  Rs.  125/-  the  annual  gross  income  per  acre  of  land  under  acquisition  comes  to  Rs.  1,00,000/-  (one  lakh).  If 50% of this income is deducted  towards  the  cost  of  sericulture,  the  net  annual  income  from sericulture  comes  to  Rs. 50,000/- per acre.   By multiplying this  amount with the multiplier ‘10’ we get the  market value at the rate of Rs. 5 lakhs per  acre,  to  which,  in  our  opinion,  the  appellant-claimant is entitled and therefore,  we hereby award the same in his favour.”

18.In  SLP (C)  No.   21730 of  2008,  the  High Court  gave  a  somewhat  

further  elaborate  reasoning  in  coming  to  the  same  conclusion  of  

enhancing the rate to Rs. 5,00,000/- per acre.

“5.   PW-1 has stated in his evidence that  he used to grow maximum of 6 crops of mulberry  

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plants  in  the  land  under  acquisition  for  the  purpose  of  feeding the  silk  worms.   Further  in  Ex.P.9  (which  is  referred  to;  as  Ex.P.8   in  the  evidence of PW.1)  it is clearly mentioned at Sl.  No.s.  81  and  82  that  the  claimant  Karigodwda  was  growing  mulberry  crop  in  the  land  under  acquisition to the entire extent of 37 guntas for  the purpose of sericulture.  This document is not  disputed  by  the  respondent-SLAO.   Therefore,  the contention of the learned AGA that the very  fact that the claimant was doing sericulture in the  land under acquisition by growing mulberry crop  has  not  been  established  by  adducing  adequate  evidence cannot be accepted.

6. As to the number of mulberry crops grown  in the said land,  the Reference Court has  observed at Paragraph -14 of the impugned  Judgment that as could be seen from Exs.  P.9  and P.10,   the  claimant  was  growing  maximum  of  6  mulberry  crop  in  a  year.  Despite  making  this  observation,   the  Reference Court has taken only four crops  a year, which is the minimum.  Therefore,  as rightly submitted by the learned counsel  for  the  appellant,   the   Reference  Court  ought to have taken at  least  5 crops in a  year  which  is  average  of  minimum  and  maximum of the number of crops.  Further,  it  is  not  in  dispute  that  the  claimant  was  getting 325 silk cocoons from each of the  crops.  Further,  though the evidence is to  the  effect  that,   100  cocoons  weigh  50  kilograms,   the  Reference  Court  took  45  kilograms  as  the  weight  of  100  cocoons.  Therefore,  the  contention  of  the  learned  counsel for the appellant,  that the learned  Reference  Court  ought  to  have  taken  50  

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kilograms  as  weight  of  100  cocoons  deserves our acceptance.  

7. Further,  though Ex.P.10 price list reveals  that the price of 1 kilogram of cocoons was  from Rs. 100 to 150/-  the Reference Court  committed  error  in  taking  the  minimum  price Rs.100/-.   In our view,  it ought to  have taken  the average of minimum prices  i.e. Rs. 125/- per kilogram.  If 5 mulberry  crops per  year  and 325 cocoons per  crop  are taken and if  weight  of 100 cocoon is  taken  at  Rs.  50  kilograms  then  per  acre  yield  of  cocoons  in  a  year  in  terms  of  weight  comes  to  812.5  kilogram  which  may be rounded to 800 kilograms.  Further,  if  the  price  per  kilogram  of  cocoons  is  taken at Rs. 125/- the annual gross income  per acre of land under acquisition comes to  Rs. 1,00,000/- (one lakh).  If 50% of this  income  is  deducted  towards  the  cost  of  sericulture,   the  net  annual  income  from  sericulture comes to Rs.50,000/-  per acre.  By  multiplying  this  amount  with  the  multiplier ‘10’ we get the market value at  the rate of Rs. 5 lakhs per acre,  to which,  in  our  opinion,   the  appellant-claimant  is  entitled and therefore, we hereby award the  same in his favour.”

Scope of the statutory scheme for awarding the compensation under  the provisions of the Act.

19.The  challenge  by  the  appellant-State  is  primarily  based  upon  the  

permissible methodology which can be adopted by a court of law while  

granting  fair  market  value  of  the  land  and  the  admissible  quantum  

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thereof.  In order to examine the merit of the contentions raised before  

us,  particularly in this regard,  it  would be necessary to examine the  

scheme of the Act.   

20.It has been held that the provisions of the Act are self-contained and it  

is a Code in itself providing for a complete procedure and steps which  

are required to be taken by the authorities concerned, for acquisition of  

land and payment of compensation.  Part II and Part III of the Act deal  

with  this  aspect.   Part  II  commences  with  a  mandate  that  the  

appropriate authority shall issue a notification in terms of Section 4 of  

the  Act,  whereafter  objections  for  acquisition  are  invited  by  the  

Collector  and  he  shall  conduct  an  inquiry  in  accordance  with  law.  

Having disposed off the objections after hearing the concerned parties,  

the Collector  is  expected to make an award.  The possession of the  

acquired land has to be taken in accordance with the provision of the  

Act.   Part III  deals with the procedure of making a reference to the  

Court  of  specified  jurisdiction  and  the  procedure  to  be  adopted  

thereupon.   It  also  spells  out  what  factors  are  to  be  taken  into  

consideration  by  the  Court  and  what  should  be  ignored  while  

determining the compensation.  It is a compulsive acquisition and the  

lands are acquired without the voluntary action or consent of the land  

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owners as they are left with no choice.   The legislature in its wisdom  

has  laid  down the  procedures  and  the  guidelines  which  have  to  be  

adopted by the authorities concerned and subsequently by the Court of  

competent jurisdiction in regard to the acquisition of land and payment  

of  compensation  thereof.    It  is  expected  of  the  State  to  pay  

compensation expeditiously.   Thus, it is obligatory on the part of the  

Court  to  follow  the  legislative  intent  in  exercise  of  its  judicial  

discretion. The legislative intent is of definite relevancy when the court  

is interpreting the law.  Keeping in view the scheme of the Act, it will  

not be appropriate either to apply the rule of strict construction or too  

liberal construction to its provisions.  The Act has a unique purpose to  

achieve, i.e. fulfillment of the various purposes (projects) to serve the  

public interest at large, for which the land has been acquired under the  

provisions of  this  Act  by payment  of  compensation.   The power of  

compulsive  acquisition  has  an  inbuilt  element  of  duty  and  

responsibility upon the State to pay the compensation which is just, fair  

and without delay.  Thus, it  will  be appropriate to apply the rule of  

plain interpretation to the provisions of    this Act.

21.We may notice that Part III provides for procedure and rights of the  

claimants to receive compensation for acquisition of their land and also  

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states  various  legal  remedies  which are  available  to  them under  the  

scheme of the Act.  Under Section 18 of the Act, the Reference Court  

determines  the  quantum  of  compensation  payable  to  the  claimants.  

Section  23  provides  guidelines,  which  would  be  taken  into  

consideration by the court of competent jurisdiction while determining  

the compensation to be awarded for the acquired land. Section 24 of the  

Act is a negative provision and states what should not be considered by  

the  court  while  determining  the  compensation.   In  other  words,  

Sections 23 and 24 of the Act provide a complete scheme which can  

safely be termed as statutory guidelines and factors which are to be  

considered or not to be considered by the Court while determining the  

market  value  of  the  acquired  land.   These  provisions  provide  a  

limitation within which the court has to exercise its judicial discretion  

while ensuring that the claimants get a fair market value of the acquired  

land  with  statutory  and  permissible  benefits.   Keeping  in  view  the  

scheme of the Act and the interpretation which these provisions have  

received in  the  past,  it  is  difficult  even to comprehend that  there  is  

possibility of providing any straitjacket formula which can be treated as  

panacea  to  resolve  all  controversies  uniformly,  in  relation  to  

determination of the value of the acquired land.  This essentially must  

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depend upon the facts and circumstances of each case.   It is settled  

principle of law that, the onus to prove entitlement to receive higher  

compensation is upon the claimants.  In the case of Basant Kumar and  

Ors. v. Union of India and Ors. [(1996) 11 SCC 542], this Court held  

that the claimants are expected to lead cogent and proper evidence in  

support of their claim.  Onus primarily is on the claimant, which they  

can discharge while placing and proving on record sale instances and/or  

such other evidences as they deem proper, keeping in mind the method  

of computation for awarding of compensation which they rely upon.  In  

this  very  case,  this  Court  stated  the  principles  of  awarding  

compensation  and  placed  the  matter  beyond  ambiguity,  while  also  

capsulating  the  factors  regulating  the  discretion  of  the  Court  while  

awarding the compensation.  This principle was reiterated by this Court  

even in the case of Gafar v. Moradabad Development Authority [(2007)  

7 SCC 614] and the Court held as under:

“As  held  by  this  Court  in  various  decisions,  the  burden  is  on  the  claimants  to  establish  that  the  amounts awarded to them by the Land Acquisition  Officer are inadequate and that they are entitled to  more.   That  burden had to be discharged by the  claimants  and  only  if  the  initial  burden  in  that  behalf  was  discharged,  the  burden  shifted  to  the  State to justify the award.”

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Thus, the onus being primarily upon the claimants, they are expected to  

lead evidence to  revert  the  same,  if  they so desire.   In  other  words,  it  

cannot be said that there is no onus whatsoever upon the State in such  

reference proceedings.  The Court cannot lose sight of the facts and clear  

position of documents, that obligation to pay fair compensation is on the  

State in its absolute terms.  Every case has to be examined on its own facts  

and the Courts are expected to scrutinize the evidence led by the parties in  

such proceedings.   

22. At the cost of some repetition, we may notice that the provisions of  

Sections 23 and 24 of the Act have been enacted by the Legislature  

with certain objects in mind.  The intention of the Legislature is an  

important factor in relation to interpretation of statutes.  The statute law  

and  the  case  law  go  side  by  side  and  quite  often  the  relationship  

between  them  is  supplementary.   In  other  words,  interpretation  is  

guided by the spirit of the enactment.  Interpretation can be literal or  

functional.  Literal interpretation would not look beyond  litera legis,  

while functional interpretation may make some deviation to the letter of  

the  law.   Unless,  the  law  is  logically  defective  and  suffers  from  

conceptual  and  inherent  ambiguity,  it  should  be  given  its  literal  

meaning.   Where  the  law  suffers  from  ambiguity,  it  is  said  

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“interpretation must depend upon the text and context.  They are the  

basis of the interpretation.   One may well  say that if  the text is the  

texture, context is what gives it colour.  Neither can be ignored.  Both  

are  important.   That  interpretation  is  best  which  makes  the  textual  

interpretation match the context.  A statute is best interpreted when we  

know why  it  was  enacted.”   [Reserve  Bank  of  India   v.   Peerless  

General Finance and Investment Co. Ltd. & Ors. : (1987) 1 SCC 424].  

23.The principle  of  construction of  law is  stated by Justice  Holmes as  

under :-

“You construe a particular  clause or  expression  by  construing  the  whole  instrument  and  any  dominant purposes that it may express.  In fact,  intention is a residuary clause intended to gather  up  whatever  other  aids  there  may  be  to  interpretation besides the particular words and the  dictionary.”  

(Principles of Statutory Interpretation by Justice  G.P. Singh, Page 15, 9th Edition 2004, Wadhwa &  Co., Nagpur)

24.Where a statutory provision confers rights and also states mandatory or  

implied conditions which would have to be satisfied before the claim,  

can  culminate  into  a  relief,  such  considerations  or  conditions  are  

relevant for the purposes of interpretation as well.  A power conferred  

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by the statute, often contains an express condition for its exercise and,  

in absence of, or in addition to the express condition, there are also  

implied conditions for exercise of power.  Exercise of statutory power  

in  breach  of  express  or  implied  conditions  will  be  illegal,  if  the  

conditions breached are mandatory.  This principle, to a large extent, is  

applicable  to  exercise  of  rights  arising  from  beneficial  legislations,  

when an owner claims benefits under statutory provisions, it is for him  

to show that what is contemplated under the conditions attached thereto  

has  been  satisfied,  particularly  when  such  legislative  intent  is  clear  

from the bare reading of the provisions.  Like the cases in hand, it is for  

the claimants to show that, to award the compensation payable under  

the  statutory  provisions,  they  have  brought  on  record,  evidence  to  

satisfy the criterion and conditions required to be fulfilled for such a  

claim.

25.The  provisions  with  which  we  are  concerned  primarily  are  the  

provisions  of  the  statute  which  are  coupled  with  obligations  and  

limitations specified in them.  The power is vested in the Collector to  

grant  compensation;  in courts  to enhance the  same in  favour of  the  

claimants whose lands are acquired, in case they are aggrieved.  But,  

this  power  has  to  be  exercised  while  keeping  in  mind  the  settled  

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guidelines and parameters stated in Sections 23 and 24 of the Act.  It  

will, thus, not be permissible for the authorities to go beyond the scope  

and  purview  of  the  provisions  or  the  pre-requisites  stated  in  these  

provisions for determination of the fair market value of the land.   The  

statutory law as well as the judgments pronounced by the courts has  

consistently  taken the  view that  compensation  has to  be determined  

strictly in accordance with the provisions of Sections 23 and 24 of the  

Act.  The matters which are to be governed by the terms of Section 24  

of the Act cannot be taken into consideration by extending discretion  

referable to the matters which should be considered by the courts in  

terms of Section 23 of the Act.  To put it  in another way, the court  

should  apply  the  principle  of  literal  or  plain  construction  to  these  

provisions, as the Legislature in its wisdom has not given to the court  

absolute discretion in matter relating to awarding of compensation but  

has intended to control the same by enacting these statutory provisions.  

26.About the principle of plain meaning, it has been observed more than  

often, that it may look somewhat paradoxical that plain meaning rule is  

not plain and requires some explanation.  The rule, that plain words  

require no construction, starts with the premise that the words are plain,  

which is itself a conclusion reached after construing the words.  It is not  

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possible to decide whether certain words are plain or ambiguous unless  

they are studied in their context and construed.  [ Refer - D. Saibaba  v.  

Bar Council of India & Anr.: AIR 2003 SC 2502 ].     

27.The true import of the rule of plain meaning is well brought out in an  

American case Hutton v. Philips [45 Del 156], where Judge Pearson,  

after  reaching  his  conclusion  as  to  the  meaning  of  the  statutory  

language said :  

“That seems to me a plain clear meaning of the  statutory language in its context.  Of course, in so  concluding  I  have  necessarily  construed  or  interpreted the language.  It would obviously be  impossible  to  decide  that  language  is  ‘plain’  (more accurately that a particular meaning seems  plain) without first construing it.   This involves  far more than picking out dictionary definitions  of words or expressions used.  Consideration of  the context and setting is indispensable properly  to ascertain a meaning.   In saying that a verbal  expression  is  plain  or  unambiguous,  we  mean  little  more  than  that  we  are  convinced  that  virtually anyone competent to understand it and  desiring  fairly  and  impartially  to  ascertain  its  significance would attribute to the expression in  its context a meaning such as the one we derive,  rather  than  any  other;  and  would  consider  any  different meaning by comparison, strained, or far- fetched, or unusual or unlikely.”   

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There are certain provisions which are capable of being given general  

description.   Normally  such  provisions  have  two  concepts  -  factual  

situation  and  the  legal  consequences  ensuing  therefrom.   As  already  

noticed, it is for the claimants to ascertain as a matter of fact - location,  

potential and quality of land for establishing its fair market value.  After  

this  fact  is  ascertained,  its  legal  consequences  i.e.  awarding  of  

compensation  in  terms  of  Sections  23  and 24 of  the  Act,  the  question  

before court of law is, whether the factual situation before it falls within  

the  general  description  and  principles  in  the  statute. [Principles  of  

Statutory Interpretation by Justice G.P. Singh, Page 51, 9th Edition 2004].   

28. In the light of these principles now we may advert to the language of  

Sections 23 and 24 of the Act.  The provision open with the words, that  

in  determining  the  amount  of  compensation  to  be  awarded  for  land  

acquired under the Act, the court shall take into consideration the stated  

criteria  and  in  terms  of  Section  23(1-A),  the  claimants  would  be  

entitled to additional amount @ 12 % per annum on such market value  

for the period commencing on and from the date of the publication of  

the notification under Section 4, to the date on which the Award is  

made by the Collector or possession of the land is taken, whichever is  

earlier.  In addition to this, in terms of Section 23(2), the land owners-

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claimants are entitled to 30% ‘on such market value’ because of the  

compulsory nature of acquisition.  ‘Such market value’ is an expression  

which must be read ejusdem generis  to the provisions of Section 23(1)  

of the Act, as they alone would provide meaning and relevancy to the  

guidelines which are to be taken into consideration by the courts for  

determining the market value of the land.  The expression ‘shall’ can  

hardly be construed as ‘may’ giving an absolute discretion to the court  

to take or not to take into consideration the factors stated in Section  

23(1)  of  the  Act.   The  expression  ‘shall’  thus  would  have  to  be  

construed as mandatory and not directory.  It is more so, keeping in  

view the language of Section 24 of the Act, which mandates that the  

court shall not take into consideration the matters indicated in firstly to  

eighthly of Section 24 of the Act.  This legislative intent needs to be  

noticed for beneficial and proper interpretation of these provisions in  

the light of the scheme underlining the provisions of the Act.

29.The expression ‘such market value’ used in Sections 23(1-A) and 23(2)  

respectively  obviously  would  mean  and  refers  to  the  market  value  

determined in terms of Section 23(1) of the Act.  This expression  has  

been  well  explained  by  different  judicial  pronouncements  and  they  

have consistently been following what the Privy Council in the case of  

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Municipal Council of Colombo  v.  Kuna Mana Navanna Suna Pana  

Letchiman  Chettiar [ AIR (34) 1947 PC 118], laid down.  There it is  

stated that “such market value” as used in Section 23 of the Act is the  

price which a willing vendor might be expected to obtain in the open  

market from a willing purchaser. It is the price which would be payable  

to  a  person  after  the  complete  appraisal  of  land  with  its  peculiar  

advantages  and  disadvantages  being  estimated  with  reference  to  

commercial value.  

 30.This principle holds good even now and any other consequential right,  

legal or commercial, which remotely flows from an agricultural activity  

will not and should not be treated as a relevant consideration.   

31. Equally true will be the principle that the extent of compensation would  

always depend on the facts and circumstances of the given case and it  

is not possible to set any absolute legal principle as a panacea which  

uniformly will be applicable or capable of being applied as a binding  

precedent dehors the facts of a given case.  

32. The  discretion  of  the  Court,  therefore,  has  to  be  regulated  by  the  

legislative intent spelt out under these provisions.  It is no more  res  

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integra and has been well settled by different judgments of this Court,  

requiring that the computation of compensation has to be in terms of  

Sections 23 and 24 of the Act and that too from the date of issuance of  

the Notification under Section 4 of the Act.   It  is only the statutory  

benefits  which would be available in terms of Sections 23(1-A) and  

23(2) of the Act.

33. A Bench  of  this  Court  in  the  case  of  Nelson  Fernandes  & Ors.  v.  

Special Land Acquisition Officer, South Goa & Ors. [(2007) 9 SCC  

447], while discussing on this aspect of the Act and its relevancy to the  

market value of the land, held as under :-  

“22. In determining the amount of compensation  to be awarded, the LAO shall be guided by the  provisions of Sections 23 and 24 of the Act. As  per Section 22 of the Act, the market value of the  land  has  to  be  determined  at  the  date  of  publication of notice under Section 4 of the Act  i.e. 25-8-1994. As per Section 24, the LAO shall  also  exclude  any  increase  in  the  value  of  land  likely to accrue from use to which it will be put  once  acquired.  The  market  value  of  the  land  means the price of the land which a willing seller  is reasonably expected to fetch in the open market  from a willing purchaser. In other words, it is a  price of the land in hypothetical market. During  the site inspection, it has been observed that the  land under acquisition is situated in Sancoale and  Cortalim  Village  adjacent  to  the  land  already  acquired for the same purpose earlier.”

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34.This  was  also  reiterated  by  this  Court  in  the  case  of  Mohammad  

Raofuddin  v.  The Land Acquisition Officer, [ (2009) 5 SCR 864 ]  

stating that Section 23 contains a list of positive factors and Section 24  

has a list of negative, vis-à-vis the land under acquisition, to be taken  

into consideration while determining the amount of compensation,  the  

first step being the determination of the market value of the land from  

the date of publication of Notification under sub-section (1) of Section  

4 of the Act.   

35.The next question which is of some importance arises out as a corollary  

to the above discussion.   Should there be direct  nexus between the  

potentiality of the acquired land as on the date of the Notification or  

can any matter which may be consequential or remotely connected with  

the agricultural activity be the basis for determining the market value of  

the land?  Does the scheme of the Act, particularly with reference to  

Sections 23 and 24 of the Act permit such an approach?   This question  

has to be answered in the negative.  What is required to be assessed, is  

the land and its existing potentiality alone as on the date of acquisition.  

Moreover, the potentiality has to be directly relatable to the capacity of  

the acquired land to produce agricultural products or, its market value  

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relatable to the known methods of computation of compensation which  

we shall shortly proceed to discuss.  

36.The second circumstance specified in Section 23(1) to be considered by  

the Court in determining compensation is the damage sustained by the  

person on account of any standing crops or trees which may be on the  

land at  the  time of  the Collector’s  taking possession thereof.   Even  

from a  reasonable  practicable  view it  has  to  be  understood that  the  

compensation which is  payable to the claimants is  in relation to the  

acquired land, the standing crops or trees and what they earn from the  

agricultural crops or fruits or trees on the agricultural land.  To extend  

the benefit for the purposes of compensation, considering that the fruits  

grown on the agricultural  land would be converted into Jam or any  

other eatable products will not be a relevant consideration within the  

scheme of the Act.  The purpose is not to connect the acquisition to  

remote factors which may have some bearing or some connection with  

the agricultural activity being carried on, on the land in question.  Such  

an approach by the Court is neither permissible nor prudent, as it would  

be opposed to the legislative intent contained under the provisions of  

Sections 23 and 24 of the Act.   

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37.Similarly, another example which can usefully be referred at this stage  

itself is that a person growing sugarcane on the land, which is acquired,  

would be entitled to the compensation of the land with reference to the  

agricultural  yield  and/or  capitalization  thereof  only  in  respect  of  

sugarcane.   The rate  of  sugarcane  in  the  market  may  be a  relevant  

consideration  but  the  fluctuating  prices  of  sugar  and  other  allied  

products in the market will be of no relevance in determining the fair  

market value of the acquired land.

38.It  is  the  option  of  the  agriculturist  to  give  his  sugarcane  crop  for  

manufacture of sugar or gur or for any other purpose which he may  

choose using his business wisdom but the costing and manufacturing  

activity  of that  particular  product  for  which the sugarcane had been  

supplied by him would not be, in our view, a relevant consideration for  

determining the fair market value of the land, whichever be the method  

of  computation  of  compensation  adopted  by  the  court  of  competent  

jurisdiction.  

39. Such approach is in consonance with the judicial pronouncements of  

this Court as well as the requirements of law.  In the case of State of  

Orissa  v.  Brij Lal Misra and Ors. [ (1995) 5 SCC 203 ], the Court  

3

clearly stated the principle that any increase in the amount awarded by  

way of compensation keeping in view the potentiality of the land and  

further  increase  on  future  potentiality  would  be  contrary  to  the  

provisions of clauses fifthly and sixthly of Section 24 of the Act.  The  

provisions of the Act require the court not to take into consideration  

various other  factors  including increase in the value of the  acquired  

land, likely to accrue from the use for which it was acquired may be put  

to  on  a  subsequent  stage  in  regard  to  any  lay  out  or  improvement  

scheme etc.  

40.Thus the restriction stated in law has been followed by the judgments  

of this Court and there is no occasion to take any view at variance to  

the existing law.  

41.On  proper  analysis  of  the  above  stated  principles  and  the  relevant  

provisions of law, we have no hesitation in coming to the conclusion  

that  consequential  or  remote  benefits  occurring  from an agricultural  

activity  is  not  a  relevant  consideration  for  determination  of  the  fair  

market value on the date of the Notification issued under Section 4(1)  

of  the  Act.   It  is  only  the  direct  agricultural  crop  produced  by  the  

agriculturist from the acquired land or its price in market at best, which  

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is  a  relevant  consideration  to  be  kept  in  mind  by  the  court  while  

applying any of  the known and accepted  method of  computation of  

compensation or the fair market value of the acquired land.  

42.Having answered the question of law, now we would proceed to apply  

this principle to the facts and circumstances of the cases before us.  In  

paragraphs 16,  17 and 18 of  this  judgment  we have  referred to  the  

findings  recorded  by  the  Reference  Court  and  the  High  Court  for  

enhancing the compensation from Rs. 90,640/- to Rs.2,92,500/-  (by the  

Reference  Court)  and  Rs.5,00,000/-  (by  the  High  Court  )  for  wet  

(irrigated)  land.   The  same  is  not  in  conformity  with  the  settled  

principles of law.  

43.Mulberry crop is a crop which is grown on the land and then this crop  

is used as feed for silk worms which ultimately results in producing silk  

thread used for various purposes at a commercial level.  

44. The respondents in the present appeal had filed an affidavit dated 14th  

July, 2009 to substantiate their arguments that cocoons and silk thread  

is  the  end product  for  which  the  Mulberry  crop  is  being  used and,  

therefore, the income from or market value of cocoon and even the silk  

thread  would  be  a  relevant  consideration  for  determination  of  

3

compensation.  In paragraph 1(1) of the affidavit it has been averred  

that cocoon (a female moth)   in a single laying lays 450-550 Grains  

DFL (Deceased Free Layings) on a single day.  The same is made to lie  

on an egg sheet.  The entire 450-550 Grains are called as one egg and  

each of these Grains will develop as one cocoon.  Therefore, out of one  

egg the claimants get 450-550 cocoons which weigh 1.5 gms to 2.00  

gms.  each.   The  literature  annexed  to  this  affidavit  shows  that  

Sericulture,  the  technique  of  silk  production,  is  an  agro-industry  

playing an eminent role in the rural industry of India.  It also says that  

the  cost  of  producing  mulberry  has  a  direct  impact  on  the  cost  of  

producing cocoons, as nearly 60% of the total  cost of production of  

cocoons goes to the production of mulberry leaves.  

 45.The photographs contained in the literature placed on record also show  

that mulberry crop is grown like other crops and its leaves are used as a  

feed to cocoons.  It is after they are provided with this food that they  

convert themselves into cocoons which are then industrially processed  

to  the  manufacture  silk  and  is  ultimately  converted  in  those  

manufacturing units as a silk thread.   

3

46.The  handbook  issued  by  the  Central  Silk  Board  under  the  title  

‘Handbook  of  Sericulture  Technologies’  shows  that  the  full  grown  

plant is a plant which is ready for pruning and suggest that to improve  

the leaf quality as well as the productivity, whenever necessary, plant  

protection measures must be followed.  These measures are taken only  

after pruning and 15 to 18 days before leaf harvest for brushing. From  

brushing to two feedings after second instar,  the silk worms are fed  

with  tender  leaves.   The leaves to  be harvested  are  from below the  

largest glossy leaf, which is yellowish green in colour.  The cardinal  

point is shoot tip and it should not be removed during any crop.  Below  

the glossy leaf, about 3 leaves during the first (1-3) and about 3 leaves  

(4-6) during the second instar can be harvested.   Silk worms grow best  

when fed with fresh mulberry leaves, which are rich in nutrients and  

moisture.  Under tropical conditions, driage of leaf is faster.  Usually,  

the leaves are harvested twice a day and are preserved for successive  

feedings, depending on the necessity.  During the periods, the leaves  

should be properly preserved.   

47.Thus, the literature submitted by both the parties before us clearly show  

that manufacture of silk from cocoons is a process of manufacturing  

where the silk worms are fed with the mulberry leaves grown on fields  

3

and  which  alone  is  an  agricultural  activity.   There  is  a  connection  

between the two but it is not of such a direct relevancy that it should  

form the criteria for awarding compensation in terms of Section 23 of  

the Act.  The mulberry crop is like tea crop and is grown in the shape of  

small trees or bushes.  The leaves are taken off and used for feeding the  

silk worms for production of silk thread.  It is upon the person carrying  

out  the agricultural  activity  whether  he sells  his  mulberry  crop to a  

manufacturing  unit  or  establishes  his  own unit  for  that  purpose  and  

utilizes  the  mulberry  crop  grown  on  the  fields  for  the  process  of  

manufacturing by providing it as a food to the silk worms.   

48.It  would have been more desirable for the reason that there was no  

evidence led by the  claimants to substantiate  and justify their  claim  

with reference to the alleged silk cocoons being an agricultural activity,  

the onus being upon them.  There was a presumption in the mind of the  

court as well as the claimants that, the manufacture of silk thread by the  

stated process of boiling silk cocoons which is the result  of the silk  

worm being fed by mulberry leaves is an agricultural  activity.  This  

presumption is contrary to law and the literature referred by the expert  

body as well.

3

49.It is quite similar to the crops grown in different parts of the country for  

example sugarcane and tea.  The tea leaves are pruned and used for  

manufacturing different kinds of tea and allied products.  Similar is the  

case with the sugarcane.  The manufacturing and commercial activities  

for manufacture of tea, sugar and for that matter silk from silk worms  

cannot be treated as a permissible factor to be taken into consideration  

by the courts for determining the fair market value of the land.  Activity  

of agriculture cannot thus be equated to sericulture.  While agricultural  

activity is the growing of mulberry crop and disbursing it, manufacture  

of silk thread from silk worms who are fed with mulberry leaves, and  

then  converted  through  the  specified  process  into  cocoons  and  

ultimately  silk thread and its  sale is an activity  of sericulture which  

primarily falls in the domain of manufacturing and commercial activity.  

This  activity  of producing silk from silk worms for which mulberry  

crop is used as food, therefore, cannot be an activity directly covered  

under the provisions of Section 23 of the Act.  Even by the process of  

judicial  interpretation,  it  will  amount  to  drawing  an  impermissible  

inference that sericulture is a part of agricultural activity, that too to the  

extent  to  make  it  a  permissible  consideration  under  the  relevant  

provisions of the Act.

3

50.We may also usefully refer to a judgment of this Court in the case of  

K. Lakshmanan and Co. and Ors.  v.  Commissioner of Income Tax,  

[(1998) 9 SCC 537], where the Court was primarily concerned with  

what is the agricultural income for the purposes of the provisions of the  

Income Tax Act.   The Court considered that the assessee was growing  

mulberry leaves which were not otherwise marketable and could only  

be  used  to  feed  the  silk  worms  from which  he  was  obtaining  silk  

cocoons.  It was held by the Court :  

“Had  mulberry  leaves  been  subjected  to  some  process  and  sold  in  the  market  as  such  then  certainly the income derived therefrom would be  regarded as agricultural  income but  the  case  of  the  appellant  before  the  authorities,  and in  this  Court, has been that, mulberry leaves cannot be  sold in the market and they can only be fed to the  silkworms.  The  agricultural  produce  of  the  cultivator  will  be  mulberry  leaves  and  by  no  stretch  of  imagination  can  the  silkworms,  and  certainly not the silk cocoons, be regarded as the  agricultural produce of the cultivator.”

  51.The aforesaid judgment clearly shows and supports the view that we  

have taken, that silk worms being converted into silk cocoons and final  

product  being  silk  thread  for  which  some process  or  manufacturing  

activity  is  taken  by  the  manufacturer,  does  not  include  growing  of  

mulberry crop which is a food only for silk worms and thus, is only an  

3

agricultural activity and the entire remaining process cannot impliedly  

or by inference be termed as agricultural activity or an activity directly  

connected to agriculture for the purposes of Section 23 of the Act.   

52.The  learned  Reference  Court  which  enhanced  the  compensation  to  

Rs.2,92,500/-  in relation to wet land ;  Rs.1,46,250/-  lightly irrigated  

land and Rs.1,20,000/- to other land, and the High Court in enhancing  

compensation to Rs.5,00,000/- for wet land and Rs.2,53,750/- for dry  

land have primarily based their reasoning which is not sustainable in  

law being contrary to the statutory scheme of the Act.

53.We  are  unable  to  appreciate  the  approach  adopted  by  the  learned  

Reference Court and as upheld by the High Court.  The basic error of  

law  to  which  the  courts  below  have  fallen  is  that  ultimate  

manufacturing of silk thread under the nomenclature of cocoons has  

been treated as a purely agricultural activity relevant for determination  

of fair market value of the land in terms of Section 23 of the Act.

54.We are unable to uphold the methodology adopted by the courts as well  

as  the  extent  of compensation  awarded to the claimants.   The other  

reasons for our not accepting the findings recorded and compensation  

allowed by the High Court is that, there is no evidence on record to  

3

show that  there is  any intrinsic  or  inseparable link between the two  

activities.  Furthermore, there is hardly any evidence on record, and in  

fact nothing was brought to our notice by the claimants have proved by  

documentary or any other cogent evidence, that they were carrying on  

the activity of sericulture and were utilizing mulberry crop only for that  

purpose.  Even if that was so, we have serious doubt that even in those  

circumstances, whether it could be said to be a relevant consideration.

55.The error by the courts in appreciation of evidence is that they have  

treated the cocoons as the crop and not mulberry leaves.  In fact, it is  

the very basis of a claim for higher compensation that cocoons being  

the agricultural end product, they were entitled to higher compensation.  

We have already indicated that there is no direct evidence led by the  

claimants in this regard.  The courts have only referred to the statement  

of PW-1 to say that there were six crops of mulberry plants.  Further,  

the document Exh. P-9 showed that claimant Karigowda (respondent  

herein) was growing mulberry crop on the entire acquired land of 37  

guntas for the purpose of sericulture.   Thus relying on Exhs. P-9 and P-

10,  statement  of  PW-1 and  on the  computation  put  forward  by  the  

claimants, enhanced compensation was granted.  It may be noticed that  

PW-1 in his own statement has stated that mulberry plants are used for  

4

the purposes  of  feeding the silk worms.   He stated that  farmers are  

doing sericulture in huge quantity in the area but which of the person  

was carrying on the said activity has not been stated.  No record has  

been produced.  Neither any other claimant entered in the witness box  

in support of the compensation claimed, nor any statistics or figures  

were produced, supported by the previous record, as to how they were  

carrying on this  activity.   The so called expert  opinion again is  not  

specific and supported by any scientific data.  In fact, it is based more  

upon  what  the  expert  felt  rather  than  the  opinion  which  the  expert  

would support, by actual physical inspection of the lands in question,  

data and literature.

56.It is also come on record that the entire lands situated in the village do  

not have the same fertility.  Vide Exh. P-9 it was stated that the yield of  

cocoons  per  acre  differ  from crop  to  crop  and this  was  an  average  

estimated report.  This exhibit is of no help to the claimants inasmuch it  

does not give the statistics with regard to mulberry crops but talks of  

cocoons which were stated to be 250-300 in one acre wet land (for 1  

crop).   

4

57.While adopting the criteria of capitalization and multiplying the same  

by 10, the finding of the High Court is clearly not supported by any  

cogent  evidence  on  record  and  thus  the  question  of  applying  the  

multiplier to a figure which has been arrived at, without any evidence  

would            be inconsequential.  

58.There  is  no  direct  and  appropriate  evidence  to  show any  nexus  to  

support  the  claim  of  the  claimants.   Thus,  cocoons  cannot  be  

considered as a crop even as per literature submitted by the respective  

parties.   Therefore  the  finding  recorded  is  unsustainable  even  on  

appreciation of evidence.  

What method should be adopted for determining fair market of the  acquired land

59.To examine what method could be adopted for determining the market  

value  of  land  and  criticism  of  the  method  adopted  by  the  Land  

Acquisition Collector, by the courts, that the same is not in accordance  

with law, we must notice various methods which are normally adopted  

by the Courts for determining the fair market value of the land and  

which of  the method can be more properly applied in the facts  and  

circumstances of     this case.  

4

60.Sections  23  and  24  of  the  Act  spell  out  the  have  and  have  nots,  

applicable to the scheme of awarding compensation by the Collector  

but do not describe the methodology which should be adopted by the  

courts in determining the fair market value of the land at the relevant  

time.   By  development  of  law,  the  courts  have  adopted  different  

methods for computing the compensation payable to the land owners  

depending upon the facts and circumstances of the case.  The Courts  

have been exercising their  discretion by adopting different  methods,  

inter alia the following methods have a larger acceptance in law :  

(a) Sales Statistics Method: In applying this method, it has been  

stated that, sales must be genuine and bonafide, should have  

been executed at the time proximate to the date of notification  

under Section 4 of the Act, the land covered by the sale must  

be in the vicinity of the acquired land and the land should be  

comparable to the acquired land.  The land covered under the  

sale instance should have similar potential and occasion as that  

of the acquired land {Faridabad Gas Power Project, N.T.P.C.  

Ltd. & Ors. v. Om Prakash & Ors. [2009 (4) SCC 719], Shaji  

Kuriakose & Anr. v. Indian Oil Corp. Ltd. & Ors. [AIR 2001  

4

SC 3341], Ravinder Narain & Anr. v. Union of India [2003 (4)  

SCC 481]}.

(b) Capitalization of Net Income Method: This method has also  

been applied by the courts.  In this method of determination of  

market value, capitalization of net income method or expert  

opinion method has been applied. {Union of India & Anr. v.  

Smt.  Shanti  Devi  &  Ors.  [1983  (4)  SCC  542],  Executive  

Director v. Sarat Chandra Bisoi & Anr. [2000 (6) SCC 326],  

Nelson Fernandes & Ors. V. Special Land Acquisition Officer,  

South Goa & Ors. (supra)}

(c) Agriculture  Yield Basis  Method:  Agricultural  yield  of  the  

acquired land with reference to revenue records and keeping in  

mind the potential and nature of the land – wet (irrigated), dry  

and barren (banjar).

61.Normally, where the compensation is awarded on agricultural yield or  

capitalization method basis, the principle of multiplier is also applied  

for  final  determination.   These  are  broadly  the  methods  which  are  

applied by the courts with further reduction on account of development  

charges.  In some cases, depending upon the peculiar facts, this Court  

4

has accepted the principle of granting compound increase at the rate of  

10% to 15% of the fair market value determined in accordance with  

law to avoid any unfair loss to the claimants suffering from compulsive  

acquisition.   However,  this  consideration should squarely fall  within  

the  parameters  of  Section  23  while  taking  care  that  the  negative  

mandate contained in Section 24 of the Act is not offended.  How one  

or  any of  the  principles  afore stated  is  to  be  applied by  the  courts,  

would depend on the facts and circumstances of a given case.   

62.In the present case, the Court has applied the method of agricultural  

yield and multiplier of 10 years.  Further, it has declined to accept the  

method  adopted  by  the  Collector  for  granting  compensation  to  the  

claimants  for  the  reason  that  the  SLAO  ought  not  to  have  taken  

recourse to the method of sale statistics.  It was further recorded that no  

sale  instances  of  Sanaba  Village  three  years  prior  to  2002  were  

available and instances of adjacent village should not have been taken  

into  consideration.   Instead,  the  market  value  should  have  been  

calculated by adopting capitalization method and no reason was stated  

as to why this method was not applied.  We are unable to accept the  

approach of the High Court as well as that of the Reference Court on  

both these issues.  Firstly, we are of the considered view that adopting  

4

the method of agricultural yield and applying the multiplier method on  

the basis that the cocoon was an agricultural crop and resultantly silk  

cocoon itself was an agricultural activity was not correct.   We need not  

elaborate on this aspect in view of our detailed discussion on it supra.  

Secondly, we are also of the firm view that the Reference Court fell in  

error of law in stating that the lands of the adjacent or nearby villages  

could not have been taken into consideration and compensation could  

be determined with reference to the sales statistics.   

63.It is not in dispute before us that the entire land was acquired for the  

same purpose and,  in fact,  the entire  land including the land of  the  

adjacent  villages had submerged or  was utilized for the purposes of  

construction and operation of the Hemavathi Dam.  This Court has held  

in number of judgments that the lands of the adjacent villages can be  

taken into consideration for determining the fair market value of the  

land,  provided  they  are  comparable  instances  and  satisfy  the  other  

ingredients stated in this judgment.  It can hardly be disputed that the  

land in the area of village Sanaba and the adjacent village is being used  

for growing mulberry crops which is supplied by the agriculturists to  

the  silk  factories  or  they  use  the  same  for  their  own  benefit  of  

manufacturing silk.  The lands were given two classification i.e. wet  

4

land  and  lands  which  were  not  having  their  own regular  source  of  

irrigation (dry lands).

64.It is a settled principle of law that lands of adjacent villages can be  

made the basis for determining the fair market value of the acquired  

land.  This principle of law is qualified by clear dictum of this Court  

itself that whenever direct evidence i.e. instances of the same villages  

are available, then it is most desirable that the court should consider  

that  evidence.   But  where  such  evidence  is  not  available  court  can  

safely  rely  upon  the  sales  statistics  of  adjoining  lands  provided  the  

instances are comparable and the potentiality and location of the land is  

somewhat similar.  The evidence tendered in relation to the land of the  

adjacent  villages  would  be  a  relevant  piece  of  evidence  for  such  

determination.  Once it is shown that situation and potential of the land  

in  two  different  villages  are  the  same  then  they  could  be  awarded  

similar compensation or such other compensation as would be just and  

fair.   

65.The cases of acquisition are not unknown to our legal system where  

lands of a number of villages are acquired for the same public purpose  

or  different  schemes  but  on  the  commonality  of  purpose  and  unite  

4

development.  The parties are expected to place documentary evidence  

on record that price of the land of adjoining village has an increasing  

trend  and  the  court  may  adopt  such  a  price  as  the  same  is  not  

impermissible.  Where there is commonality of purpose and common  

development,  compensation  based  on  statistical  data  of  adjacent  

villages was held to be proper.  Usefully, reference can be made to the  

judgments of this Court to the cases of Kanwar Singh & Ors. v. Union  

of India [JT 1998 (7) SC 397] and Union of India v. Bal Ram & Anr.  

[AIR 2004 SC 3981].

66.In this regard we may also make a reference to the judgment of this  

Court in the case of Kanwar Singh & Ors. v. Union of India [AIR 1999  

SC 317], where sale instance of the adjacent villages were taken into  

consideration for the purpose of determining the fair market value of  

the land in question and their comparability, potential and acquisition  

for the same purpose was hardly in dispute.  It was not only permissible  

but even more practical for the courts to take into consideration the sale  

statistics of the adjacent villages for determining the fair market value  

of the      acquired land.   

4

67.We are unable to hold, that the SLAO had exceeded its jurisdiction or  

failed  to  exercise  its  jurisdiction  properly  while  making  the  sale  

statistics of the adjacent villages Sanaba and Pandavapura as the basis  

for  computing  the  compensation  payable  for  the  acquired  land.  

However  the  extent  of  compensation  which  ought  to  have  been  

awarded, we shall discuss shortly.

68. At this stage, we may notice the proceedings of the SLAO, where he  

submitted  the  draft  compensation  award of  the  acquired land to  the  

Government for its approval in accordance with law.  As per clause 6  

of this Report, he had visited and inspected the lands in the presence of  

various  officers  at  Village  Sanaba,  Chinakurali  Hobli,  Pandavapura  

Taluk, Karnataka which were flooded by the backwaters of the river.  

Even the claimants were present and they had prayed for compensation  

of  Rs.  60,000/-  per  acre  for  dry  land and Rs.  90,640/-  per  acre  for  

garden land.  But they did not produce any document before the said  

authority for determining the compensation for the acquired land.  The  

Report reads    as under :

“In this regard, as per confirmation letter of  the  guidance  value  at  the  office  of  the  Sub- Registrar, Pandavapura, the guidance value of the  dry  land during the  period 1998-99 to  2001-02  are as follows :  

4

     Years Per Acre of dry land

1999.2000           Rs. 36,000-00

2000-2001 Rs. 36,000-00

2001-2002 Rs. 38,000-00

  3 years Rs. 1,10,000-00

Average 1,10,000 = 36,666.66 or 36,667-00

Per Gunta Rs. 916.68 or Rs. 917/-

While fixation of the compensation for the  dry land, it is Rs. 37,200/- per acre of dry land  and Rs. 930/- per gunta as per the statement of  sale transaction at the office of the Sub Registrar,  Pandavapura Taluk and as per the guidance value  it is observed to be Rs. 37,200/- per acre and Rs.  930/- per guntas of land.

While fixation of compensation amount to  the  garden  lands,  since  there  are  no  sale  transactions  of  the  garden  lands  in  Sanaba  Village,  the  statement  of  the  same  are  not  available  for  consideration  at  the  office  of  the  Sub-Registrar, Pandavapura.  For the said reason,  the  statement  of  the  sale  transactions  of  the  garden lands within the Hobli Circle of the said  village is taken as base.  As such, the details of  the transactions are as   under :  

Sl No

Name of the Village

Sy. No.

Nature Extent  of

land

Sale considera

tion

R.No. & date

01 Mahadevapura (Melukote  Hobli)

84/1 Garden land

0-10 G Rs.26000 1318/99- 00 4-10-99

5

02 Hosahalli (Chinkurali  Hobli)

12/6 Garden land

0-18 G Rs.37500 1770/99- 00 6-12-99

03 Dinkakaval (Chinkurali  Hobli)

Out  of 33

Garden land

0-10 G Rs.27000 184/00- 01 29-04-00

04 Vaddara halli (Kasaba Hobli)

36/4

36/2

36/3

Garden Land

Garden  land

Garden  land

0-09  

0-03

0-02

0-14

Rs.30000 199/01- 02 20-4-00

05 Vaddara halli (Kasaba Hobli)

51/7 Garden land

0-17½  Rs.37000 1028/01- 02 26-06-01

Total 01-29 ½ 1,57,500

The  extent  of  garden  land  in  which  there  was  transaction :  01 Acre 29 ½ Guntas

Total amount of transaction :  Rs. 1,57,500/- Per Acre 1,57,500 x 40 =  90647-48  or  90640- 00

69.5

Per gunta 2266-18 or 2266-00

Per Acre Rs. 90,640/- and per gunta Rs. 2266/-

In the same matter, the guidance value of  the  garden  lands  available  at  the  office  of  the  Sub-Registrar, Pandavapura is examined and the  details are as under :           Year          Per Acre of garden land

5

1999.2000    Rs. 85,000-00

2000-2001 Rs. 85,000-00 2001-2002 Rs. 90,000-00    Rs. 2,60,000-00

Per Acre = 2,60,000  =   Rs. 86,666.67      3 or Rs. 86,667   and    

Per gunta  Rs. 2167/-

While fixation of the compensation amount  for the garden lands, finally, the statements of the  sale  transactions and the guidance value details  were  made  in  comparison.   AS  such,  the  statements  of  sale  transactions  as  base  is  considered to be just and hence per acre of garden  land Rs. 90,640/- and per gunta as Rs. 2,266/- is  decided and fixed.

For the amount of compensation fixed i.e.  Rs. 37,200/- per acre of dry land and Rs. 90,640/-  per  acre  of  garden  land,  as  statement  shall  be  prepared  and  for  the  said  amount  a  legislative  compensation at the rate of 30% without interest  shall be paid”

69.The above compensation was computed by the SLAO on the basis of  

the sale instances of the villages falling within the same Circle as well  

as on the basis of the guidance value maintained in the Register of the  

Sub-Registrar of the concerned villages.  From the Report, it is evident  

that  both  these  villages  Sanaba  and  Pandavapura  are  located  in  the  

same Circle and are practically part of the larger revenue estate.  It was  

5

not in dispute before us that primarily all these lands were being used  

for  cultivating  mulberry  crop  which  is  the  sole  agricultural  activity.  

The court has to keep in mind a very pertinent equitable principle while  

awarding compensation, i.e the court should grant just and fair market  

value of the land at the time of the acquisition while ensuring that there  

is  no undue enrichment.   These  are compulsive  acquisitions but  the  

guiding factor for the court is sale instances of a willing seller and a  

willing  purchaser  while  determining the  compensation  payable.   To  

award fair compensation is the obligation of the State and depending on  

the facts  and circumstances of the case,  the courts may enhance the  

compensation within the framework of law.  The sale instances referred  

to by the Collector in his report are from the same villages or nearby  

villages or adjacent villages which are a part of the same Circle and  

where the land can easily said to be comparable as the entire chunk of  

the land was being used for raising mulberry crop and was acquired for  

common  purpose,  that  is,  the  lands  were  submerged  in  the  water  

coming from the Hemavathi Dam.   

70.This Court in the case of Shaji Kuriakose (supra) held that out of the  

three afore stated methods, the courts adopt comparable sales method  

of valuation of land while fixing the market value of the acquired land,  

5

comparable sales method of valuation of land is preferred than the other  

methods such as capitalization of net income method or expert opinion  

method.  Comparable sales methods of valuation is preferred because it  

furnishes  the  evidence  for  determination  of  the  market  value  of  the  

acquired land which a willing purchaser would pay for the acquired  

land  if  it  has  been  sold  in  open  market  at  the  time  of  issue  of  

notification under Section 4 of the Act.  In Kantaben Manibhai Amin &  

Anr. v. The Special Land Acquisition Officer, Baroda [AIR 1990 SC  

103] this Court also stated that latest sale instance closer to the date of  

notification  for  acquisition  of  the  land  should  be  taken  into  

consideration.   

71.  It is also an accepted judicial norm that the claimants can be given the  

benefit  of  awarding  compensation  on  the  basis  of  the  genuine  sale  

instance  containing the  highest  rate,  provided it  has been proved in  

accordance with law and is a comparable instance.  Such sale instance  

must satisfy all the requirements and pre-requisite stated in the Act.  It  

should  be  a  bonafide  transaction  and  should  also  be  in  reasonable  

proximity to the date of notification under Section 4 of the Act.  Since  

the SLAO had referred to the four sale instances which were produced  

before him and being part of the reference file, they were duly noticed  

5

by the Reference Court as well as by the High Court.   But the Courts  

held that it was not appropriate to apply sales statistics method in the  

facts  and  circumstances  of  the  case.   Admittedly,  the  claimants  

produced no sale instances.  In our view, these sale instances can be  

taken  into  consideration  by  the  Court  and  benefit  of  the  highest  

instance  can be  granted to  the  claimants  in  accordance  with  law in  

fixing the market value of the acquired land.  Whatever benefit accrues  

to  the  claimants  from  the  record  produced  and  proved  by  the  

respondents,  cannot  be  denied  to  them  just  because  they  have  not  

produced evidence by way of sale instances.

72.The afore noticed sale instances which were taken into consideration by  

the SLAO, and which were part of the reference file show that there  

was an increasing trend in the sale price of the land in these villages as  

10 guntas of garden land was sold in Mahadevpura (Melukote Hobli)  

for a sum of Rs. 26,000/- on 04.10.1999 while 9 guntas of garden land  

was sold in Vadara Halli (Kasaba Hobli) for  a sum of Rs. 30,000/- on  

20.04.2000.  Similarly, 18 guntas of garden land was sold in Hosahalli  

(Chinkurali Hobli) for  a sum of Rs. 37,500/- on 06.12.1999 and 10  

guntas of garden land was sold in Dinkakaval (Chinkurali Hobli) for  a  

sum of Rs. 27,000/- on 29.04.2000, all these sold lands fall in the same  

5

circle.  Besides this increasing trend and the fact that all these villages  

are adjacent villages to each other, the highest price fetched was for the  

sale instance executed on 26.06.2001 where 17 ½ guntas of garden land  

was sold in village Vaddara Halli (Kasaba Hobli) for  a sum of Rs.  

37,000/-.  The notification under Section 4 was issued on 04.04.2002  

that means that all the sale instances of the adjacent comparable lands  

are in proximity of time to the date of notification under Section 4 of  

the Act.  The average of sale statistical instances referred above comes  

out to be Rs. 1,57,500/- for sale of  01 Acre 29 ½ Guntas i.e. 90,647.48  

per acre.  Since the sale instances relied upon are nearly around 1 to 2  

½  years  prior  to  the  date  of  notification,  they  are  relevant  

considerations and, therefore, the claimants are entitled to an increase  

at the rate of 15% per annum compounded.   

73. The aforesaid increase, in our view, is justified and equitable – firstly,  

on the ground that there was increasing trend in the sale price of that  

land  and  secondly,  the  lands  acquired  were  being  used  by  the  

agriculturists for production of mulberry crops which had a restrictive  

use  in  the  manufacturing,  commercial  or  industrial  activities  i.e.  

feeding the silk worms which are ultimately used for production of silk  

thread.   The  court  cannot  use  this  admitted  restricted  use  to  the  

5

disadvantage of the land owners and some benefit should be given to  

them while balancing the equities in accordance with law.  The concept  

of fair compensation payable for the acquired land is embodied in the  

Act itself, particularly in view of secondly and fifthly of Section 23 of  

the Act.  In fact, it was stated during the course of arguments by the  

learned counsel appearing for the appellants that, the State Government  

itself  has  given  some  additional  compensation  to  the  claimants  for  

mulberry crops which were standing at the time of submerging.  We  

find  this  stand  of  the  State  Government  to  be  reasonable  and  fair.  

Thus, giving a 15% compounded increase for 2 ½ years on the sale  

price of Rs. 1,08,000/- in respect of garden land, the claimants would  

be entitled to get compensation at the rate of Rs. 1,53,542.50 per acre  

for the wet (irrigated) land.  This can even be examined from another  

point of view, that is, the sale instance no. 3 where the land in village  

Dinkakaval (Chinkurali Hobli) garden land of 10 guntas were sold for a  

sum of Rs. 27,000/- on 29.04.2000, i.e. approximately 2 years prior to  

the date of notification under Section 4 of the Act.  This would give the  

sale price of the surrounding village lands to the acquired land at the  

rate of 1,08,000/- per acre for the garden land.  Giving it a compound  

increase  of  15%  for  two  year  it  will  come  to  Rs.  1,42,830/-  (Rs.  

5

1,08,000/- + 15% on Rs. 1,08,000/- = Rs. 1,24,200/- for the first year;  

Rs. 1,24,200/- + 15% on Rs. 1,24,200/- = Rs. 1,42,830/- for the second  

year) and Rs. 1,42,830/- + 7.5% of Rs. 1,42,830/- = Rs. 1,53,542.50 for  

two and half years.    

We have two important facts which cannot be ignored by the Court.  

Firstly,  that  the claimants,  by leading definite  evidence have shown on  

record that the lands in question are not only lands having regular source  

of irrigation through the backwaters but otherwise are also lands superior  

to the other garden lands used for ordinary agricultural  activities.   The  

fields in question are being used exclusively for growing mulberry crops.  

Mulberry leaves are the only and the specified food for cocoons.  In other  

words, the agricultural purpose for which the fields in question are being  

used is a special purpose and the crop so grown is again used for a specific  

commercial purpose to which there is no other alternative.  In fact, none  

was stated before us by the learned counsel appearing for the parties.  In  

all these peculiar facts, it cannot be disputed that some additional benefits  

have to be provided in favour of the claimants. In the present cases, the  

claimants have not only lost their agricultural land but they have also been  

deprived of seasonal income that was available to them as a result of sale  

of mulberry leaves. Deprivation of livelihood is a serious consideration.  

5

The Court  is  entitled  to  apply  some kind  of  reasonable  guess  work  to  

balance  the  equities  and fix just  and fair  market  value in  terms of  the  

parameters specified under Section 23 of the Act.  The SLAO has ignored  

both  these  aspects  firstly  providing  of  annual  increase,  and  secondly,  

giving some weightage to the special agricultural purpose and the purpose  

for which the mulberry crop had to be utilized.  The claimants have not  

proved  and  produced  on  record  sale  instances.   They  have  also  not  

produced  on  record  any  specific  evidence  to  justify  the  compensation  

awarded to them by the Reference Court and/or the High Court.  In fact,  

there is hardly any evidence, much less a cogent and impeccable evidence  

to support the increase on the basis of net income capitalization method.  It  

is  a  settled  rudiment  of  law  that  the  Court,  in  given  facts  and  

circumstances of the case and keeping in mind the potentiality and utility  

of  the  land  acquired,  can  award  higher  compensation  to  ensure  that  

injustice is not done to the claimants and they are not deprived of their  

property without grant of fair compensation.  Reference, in this regard, can  

be made to the judgment of this Court in the case of Land Acquisition  

Officer, A.P. v. Kamadana Ramakrishna Rao [(2007) 3 SCC 526]. While  

adopting  the  average  sale  method  as  the  formula  for  awarding  

compensation to the claimants, we are also of the considered view that in  

5

the peculiar facts and circumstances of the case and the fact that the land is  

being compulsorily acquired, the claimants should be awarded a higher  

compensation.  The compensation at the rate of Rs. 2,30,000/- per acre for  

the wet land and at the rate of Rs. 1,53,400/- per acre for the dry land  

would  be  just  and  fair  compensation  and  would  do  complete  justice  

between the parties. This element of increase had not been added by the  

SLAO which ought to have been done.  As far as claimants are concerned,  

they  have  not  produced  and  proved  any  sale  instance  and  as  already  

noticed, they have not even brought on record any specific evidence to  

justify their claims relatable to and based upon net income capitalization  

method.  In fact, we do not hesitate in observing that claimants have failed  

to discharge their onus fully and satisfactorily.   

74.The  claimants  have  proceeded  on  the  assumption  that  they  will  be  

entitled  to  get  compensation,  by treating  the  silk  cocoons reared  by  

them as the yield from the land and by capitalizing the value of the silk  

cocoons.  We have already held that the determination of the market  

value  by  capitalization  of  yield  method  will  depend  upon  the  

agricultural yield, that is, value of agricultural produce less expenditure  

for  growing  them,  and  not  with  reference  to  a  further  sericultural  

activity by using the agricultural produce.  Therefore, what could be  

6

capitalized for determination of market value was the value of mulberry  

leaves used for sericulture and not the value of silk cocoons produced  

by feeding such mulberry leaves to the silkworms.  The yield of silk  

cocoons is  the  result  of  further  human effort  and industry,  value of  

which obviously cannot be capitalized for the purpose of arriving at the  

market value of the agricultural land.  The evidence discloses that the  

acquired lands were used for growing mulberry crop which was being  

harvested  to  provide  feed  for  the  silkworms  by  way  of  sericulture.  

Therefore,  one  way  of  arriving  at  the  market  value  is  to  provide  

appropriate addition for the mulberry cultivation to the value arrived at  

for  the  land  without  mulberry  cultivation.   The  second  method  is  

instead of taking the value of cocoons for the purpose of capitalization,  

take  a  part  thereof,  being the  value of  the  mulberry  crop input  and  

capitalize the same.  The land in question is special garden lands being  

used only for growing mulberry crop.   

75.Keeping in mind the facts and circumstances of the case, it will also be  

just and fair to adopt some liberal approach with some element of guess  

work to provide the claimants with just and fair market value of the  

land in question.  It must be remembered that, the entire land including  

village Sanaba and all other villages was acquired for the purpose of  

6

submerging the lands because of the water coming from the Hemavathi  

Dam.  In view of the cumulative discussion referred to above, we are of  

the  considered  view  that  it  will  be  just,  fair,  equitable  and  in  

consonance with Sections 23 and 24 of the Act that the market value of  

the land as on 04.04.2002 can safely be taken as Rs. 2,30,000/- per acre  

in  the  case  of  garden  land  and,  applying  the  accepted  principle  of  

reducing the said compensation in the case of dry lands by one third,  

the rate will be Rs.1,53,400/- per acre in the case of dry land keeping in  

view the peculiar facts and circumstances of the present case and the  

evidence on record.  

Claim in regard to interest payable on taking of possession

76. The  claimants  while  relying  upon  the  judgment  of  this  Court  in  

Satinder Singh & Ors.  v.  Umrao Singh and Anrs. [AIR 1961 SC 908]  

and some other judgments of the High Court had claimed that they are  

entitled  to  receive  interest  from  the  date  when  their  lands  were  

submerged  in  the  year  1993 onwards  and  not  from the  date  of  the  

Notification i.e. 4th April, 2002.  It was contended that since they had  

lost possession and interest being payable in lieu of possession, they  

would be entitled to receive interest from those dates i.e. from 1993,  

6

and not from the date the Land Acquisition Collector had granted, i.e.  

4th April,  2002.   The  Reference  Court  as  well  as  the  High  Court  

accepted  this  contention  while  referring  to  the  judgments  of  the  

Executive  Engineer,  Dhenkanal  Minor  Irrigation  Division,  Orissa  &  

Ors. v. N.C. Budharaj (deceased) by Lrs. & Ors., [(2001) 2 SCC 721 ]  

and  Satinder  Singh  (Supra),  granted  the  relief  to  the  claimants  as  

prayed.  

77. The reliance  placed  by  the  respondents  upon  the  judgment  of  N.C.  

Budharaj (supra), was with reference to the scope and interpretation of  

the relevant provisions of the Act.  That case related to the provisions  

of the Indian Arbitration Act, 1940 and with reference to the relevant  

sections  of  the  Interest  Act,  1839,  where  this  Court  has  held  that  

provisions of the Act could be made applicable to arbitration as there  

was nothing to indicate that its application was restricted.  Thus, it is  

not necessary for us to deliberate on the judgment of N.C. Budharaj  

case  (supra)  any  further.   Further,  even  the  reliance  placed  upon  

Satinder  Singh case (supra)  is  not  of  much help to the respondents.  

This  judgment  relates  to  the  period,  prior  to  introduction  and/or  

amendment of Sections 23(1A), 23(2) and 34 of the Act i.e.  on 30th  

April, 1982 and 24th September, 1984.  It has been contended on behalf  

6

of the appellants, that it is now a well settled proposition of law that  

Reference  Court  cannot  grant  interest  for  any  period  prior  to  the  

issuance  of  the  Notification  under  Section  4  of  the  Act.   As  such,  

possession even if taken or assumed to have been taken earlier would,  

dehor the provisions of the Act and, therefore, was improper.  Thus, the  

possession has to be legal and within the framework of law.    The  

provision of the Act clearly lays down the procedure required to be  

followed while taking possession of the acquired land.    The words  

“from the date on which he took the possession of the land” occurring  

in Section 20 would mean lawful taking of possession.  The case of  

Shree Vijay Cotton & Oil Mills Ltd. v. State of Gujarat [(1991) 1 SCC  

262], also stated the principle that, interest on the compensation amount  

could be awarded  under Section 34 of the Act, with effect from the  

date of taking possession. However, this controversy need not detain us  

any further, as the three Judge Bench of this Court in the case of R.L.  

Jain (D) by Lrs. v. DDA & Ors. [2004 (4) SCC 79] considered all these  

aspects of the matter and held as under :-

“…….

15. Similar  view  has  been  taken  in  a  recent  decision by a Bench of two Judges in Lila Ghosh  v.  State of W.B., reported in (2004) 9 SCC 337  

6

and  the  reasons  given  there  in  para  16  of  the  Report are being reproduced below:  

16. ……There are two decisions of this Court,  wherein same controversy arose, namely, whether  the claimant would be entitled to additional sum  at  the rate  of twelve per  centum on the market  value where possession has been taken over prior  to publication of notification under Section 4(1).  In  Special  Tahsildar  (LA),  PWD  Schemes v.  M.A.  Jabbar,  reported  in  (1995)  2  SCC  142  which  has  been  decided  by  a  Bench  of  two  Judges  (K.  Ramaswamy  and  Mrs  Sujata  V.  Manohar, JJ.), it was held that the claimant would  not  be  entitled  to  this  additional  sum  for  the  period  anterior  to  publication  of  notification  under Section 4(1). However, in  Asstt. Commr.,  Gadag  Sub-Division v.  Mathapathi  Basavannewwa, reported in  (1995) 6 SCC 355  also  decided  by  a  two-Judge  Bench  (K.  Ramaswamy and B.L. Hansaria, JJ.) it was held  that even though notification under Section 4(1)  was issued after taking possession of the acquired  land the owners would be entitled to additional  amount at  twelve per  cent  per  annum from the  date  of  taking  possession  though  notification  under Section 4(1)  was published later.  For the  reasons already indicated, we are of the opinion  that the view taken in Special Tahsildar (supra) is  legally correct and the view to the contrary taken  in Asstt. Commr.(supra) is not in accordance with  law and is hereby overruled.

17. Shri Dave, learned counsel for the appellant  has also placed strong reliance on Satinder Singh  v.  Umrao Singh (supra)  wherein the question of  payment  of  interest  in  the  matter  of  award  of  compensation  was considered  by  this  Court.  In  this case the initial notification was issued under  Section 4(1) of the Land Acquisition Act,  1894  but  the  proceedings  for  acquisition  were  completed under East Punjab Act 48 of 1948. The  High Court negatived the claim for interest on the  ground that the 1948 Act made no provision for  award of interest. After quoting with approval the  following  observations  of  the  Privy  Council  in  

6

Inglewood  Pulp  and  Paper  Co.  Ltd. v.  New  Brunswick Electric Power Commission, reported  in  AIR 1928 PC 287.

“upon the expropriation of  land under  statutory  power, whether for the purpose of private gain or  of  good  to  the  public  at  large,  the  owner  is  entitled  to  interest  upon  the  principal  sum  awarded  from  the  date  when  possession  was  taken, unless the statute clearly shows a contrary  intention”

the Bench held as under:

“... when a claim for payment of interest is made  by a person whose immovable property has been  acquired compulsorily he is not making claim for  damages properly or technically so-called; he is  basing his claim on the general rule that if he is  deprived  of  his  land  he  should  be  put  in  possession of compensation immediately;  if not,  in  lieu  of  possession  taken  by  compulsory  acquisition interest should be paid to him on the  said amount of compensation”.

17.1. The  normal  rule,  therefore,  is  that  if  on  account  of  acquisition  of  land  a  person  is  deprived of possession of his property he should  be  paid  compensation  immediately  and  if  the  same is not  paid to him forthwith he would be  entitled  to  interest  thereon  from  the  date  of  dispossession till the date of payment thereof. But  here  the  land  has  been  acquired  only  after  the  preliminary notification was issued on 9-9-1992  as earlier acquisition proceedings were declared  to be null  and void in the suit  instituted by the  landowner himself and consequently, he was not  entitled  to  compensation  or  interest  thereon  for  the anterior period.

18. In a case where the landowner is dispossessed  prior  to the issuance of preliminary notification  

6

under  Section  4(1)  of  the  Act  the  Government  merely takes possession of the land but the title  thereof continues to vest with the landowner. It is  fully  open  for  the  landowner  to  recover  the  possession of his land by taking appropriate legal  proceedings. He is therefore only entitled to get  rent or damages for use and occupation for the  period the Government retains possession of the  property. Where possession is taken prior to the  issuance  of  the  preliminary  notification,  in  our  opinion,  it  will  be  just  and  equitable  that  the  Collector may also determine the rent or damages  for use of the property to which the landowner is  entitled  while  determining  the  compensation  amount  payable  to  the  landowner  for  the  acquisition  of  the  property.  The  provisions  of  Section  48  of  the  Act  lend  support  to  such  a  course  of  action.  For  delayed  payment  of  such  amount  appropriate  interest  at  prevailing  bank  rate may be awarded.”

78.We  are  bound  by  the  decision  of  the  larger  Bench,  which  had  

considered the case of Satinder Singh (supra), on which the reliance has  

even been placed by the claimants in the present appeal.   The larger  

Bench after detailed discussion on the subject, rejected the claim for  

payment of interest claimed by the respondents in those cases, prior to  

the date of issuance of the Notification under Section 4 of the Act.  As  

is evident from the above dictum of the Court, despite dispossession,  

the title continues to vest in the land owners and it is open for the land  

owners to take action in accordance with law.  Once notification under  

Section 4 (1) of the Act has been issued and the acquisition proceedings  

culminated into an award in terms of Section 11, then alone the land  

6

vests in the State free of any encumbrance or restriction in terms of  

provisions of Section 16 of the Act.  The Court, in situations where  

possessions  has  been  taken  prior  to  issuance  of  notification  under  

Section 4(1) of the Act, can direct the Collector to examine the extent  

of  rent  or  damage that  the  owners  of  land would be entitled  to  the  

provisions of Section 48 of the Act would come to aid and the Court  

would also be justified in issuing appropriate direction.  This was the  

unequivocal view expressed by the Court in R.L. Jain case (supra) as  

well.  This legal question is no more open to controversy and stands  

settled by this Court.  We would follow the view taken and accept the  

contention of the appellant-State that the Reference Court as well as the  

High Court could not have granted any interest under the provisions of  

the Act, for a date anterior to the issuance of Notification under Section  

4 of the Act.  However, following the dictum of the Bench, we direct  

the Collector to examine the question of payment of rent/damages to  

the  claimants,  from  the  period  when  their  respective  lands  were  

submerged under the back water of the river, till the date of issuance of  

the Notification under Section 4(1) of the Act, from which date, they  

would  be  entitled  to  the  statutory  benefits  on  the  enhanced  

compensation.

6

79.As noticed in the opening part of the judgment, the respondents had  

taken an exception and raised objection to the maintainability of the  

appeal before this Court being directly filed against the judgment of the  

Principal  Civil  Judge, Senior Division (Reference Court).   It  is  true,  

that right of appeal is a statutory right.  It normally should be exercised  

in terms of the statute but the fact of the matter, in the present appeals,  

is that the High Court had followed its earlier view and disposed of  

number of appeals against the judgment of the Reference Court against  

which  appeals  have  been  preferred  before  this  Court.   In  the  

meanwhile,  the  Reference  Court  had  passed  different  judgments  

granting the same compensation against which appeal before the High  

Court would hardly be of any substantial benefit and would have been  

academic only.  It  also requires to be noticed at this stage that certain  

appeals preferred by the State  against the judgment of the Reference  

Court, before the District Judge were also pending  during the period  

when the High Court disposed of the above-noticed appeals. In other  

words, the fate of the appeals preferred by the State before the District  

Court (First Appellate Court) challenging the quantum of compensation  

awarded by the Reference Court stood decided in view of the judgment  

of the High Court and became academic.  In these circumstances and  

6

keeping in view the peculiar facts and circumstances of these cases, we  

do not propose to accept the objection raised by the respondents and  

while leaving the question of law open, dispose off the said appeal on  

merit.

The  above-noticed  facts  clearly  indicate  that  appeals  are  even  now  

pending before various Courts in the State of Karnataka.  The Government  

Authorities are expected to advert to the factors relating to the pendency of  

various appeals including those before the Reference Court and take steps  

at the earliest to remedy the legal grievances raised by the claimants at  

different levels of justice administration system.  Despite its might, it is  

expected to be a responsible and reluctant litigant as there is obligation  

upon the State to act fairly and for the benefit of the public at large.  It will  

be in harmony with the principle of proper administration that State also  

takes decisions which would avoid unnecessary litigation.  An established  

maxim  “Boni  judicis  est  lites  dirimere,  ne lis  ex lite  oritur,  et  interest   

reipublicae ut sint fines litium”,  casts  a  duty  upon the Court  to bring  

litigation to an end or at least  endure that if  possible, no further litigation  

arises from the cases pending before the Court  in accordance with law.  

This  doctrine  would  be  applicable  with  greater  emphasis  where  the  

judgment of the Court has attained finality before the highest Court.  All  

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other  Courts  should  decide  similar  cases  particularly  covered  cases,  

expeditiously and in consonance with the law of precedents. There should  

be speedy disposal of cases particularly where the small land owners have  

been  deprived  of  their  small  land-holdings  by  compulsive  acquisition.  

Any unnecessary delay in payment of the compensation to them would  

cause serious prejudice and even may have adverse effect on their living.  

In  these  circumstances,   we consider  it   necessary to  issue appropriate  

directions to the State authorities and request the Courts, where cases are  

pending arising from  the same notification, to dispose  of the pending  

proceedings  without any further delay.  

80.In view of the aforesaid discussion, we allow these appeals in part, with  

the following directions: -

(i) The appeals filed by the State are partially allowed.  

In the peculiar facts and circumstance of the present  

case,  the  claimants  would  be  entitled  to  get  

compensation at the rate of Rs.2,30,000/- per acre for  

the wet/garden land and at the rate of Rs.1,53,400/-  

per acre for the dry land.

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(ii) The claimants - land owners would be entitled to get  

statutory  benefits  on  the  enhanced  compensation  

under  Sections  23(1A)  and  23(2)  of  the  Act  and  

interest in terms of Section 28 of the Act.

(iii) Since,  the  appeals  filed  by  the  State  have  been  

partially  allowed  by  this  Court,  we  hope  that  the  

Government  shall  grant  compensation  to  all  the  

interested  persons  whose  lands  have  been  acquired  

under  the  same  notification  and  pay  them  

compensation in terms of this judgment without any  

further delay.

(iv) Following the principle and the directions stated by  

this Court in R.L. Jain’s case (supra), we grant liberty  

to  the  claimants  to  file  applications  before  the  

competent  authority  (State  Government/concerned  

Collector)  to  claim damages  for  their  dispossession  

from  the  lands  owned  by  them  as  a  result  of  

submerging,  till  the date of  issuance of  notification  

under Section 4 of the Act i.e. 4th April, 2002.  These  

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applications may be filed within eight weeks from the  

date  of  pronouncement  of  this  judgment.   If  such  

applications  are  filed  we  direct  the  competent  

authority  to  consider  the  same  sympathetically  and  

award  such  amounts  to  the  claimants  as  may  be  

payable  in accordance with law expeditiously.   We  

make it clear that the amounts, if already paid for this  

period, shall be adjusted.

(v) The  direction  of  the  High  Court  for  payment  of  

interest  for  the  period  prior  to  the  issuance  of  the  

notification under Section 4 of the Act i.e. 4th April,  

2002 is hereby set aside and order to be deleted.

(vi) The appeals are allowed to the above extent.  

(vii) Parties to bear their own costs.

........................................J.  [ R.V. RAVEENDRAN ]

........................................J.       [ SWATANTER KUMAR ]

    New Delhi     April 26, 2010

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