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PETITIONER: STATE OF KERALA

       Vs.

RESPONDENT: P. P. HASSAN KOYA

DATE OF JUDGMENT: 19/03/1968

BENCH: SHAH, J.C. BENCH: SHAH, J.C. MITTER, G.K.

CITATION:  1968 AIR 1201            1968 SCR  (3) 459  CITATOR INFO :  R          1981 SC 971  (1)  R          1983 SC1190  (14)  E&R        1987 SC  66  (7)  RF         1991 SC2027  (4)

ACT: Land  Acquisition Act (1 of 1894) Compensation-Jenmi  holder not  objecting  to  quantum  of  compensation-Principles  of determination.

HEADNOTE: On the acquisition of several units of land with  buildings, the  Land  Acquisition Officer determined  the  compensation payable to the persons interested. at the rate of Rs. 10,000 per  acre for the land and for houses standing  thereon  "at their break up value" The respondent, who held Kanam  rights in  one  of the units of the land and to whom  the  building standing thereon belonged, raised objections to the quantum, of  the  compensation.  The Receiver of the  Estate  holding Jenmi  rights in the land did not object.  The  trial  court disapproved  the  method  adopted  by  the  Land  Acqusition Officer for determining the compensation and held that each- unit  had  to  be  valued  as  a  composite  property.    He determined  the market value by capitalising -the  net  tent received  from  the unit and taking into  consideration  the return   from   gilt-edged  Securities  at   31/2%   awarded compensation  for  the respondens unit at j5 times  the  net annual rental.  The High Court upheld the order of the trial court  but reduced the multiple to 33-1/3.   Dismissing  the appeal, this Court HELD  :  By  the  compulsory acquisitic on  of  land  ,  all outstanding  interests  not vested in  the  Government  -are extinguished.   It  is.  therefore, the  duty  of  the  Land Acquisition  Officer  to  determine in  the  first  instance compensation  which  is to be paid for extinction  of  those interests, and then to apportion the compensation among  the persons known or believed to be interested in the land.  The rule could not be departed from merely because the  Receiver in  whom  the Jenmi rights we’re vested failed to  raise  an objection  to  the quantum of compensation awarded  to  him. The respondent being a Kanamdar has an interest in the  land and  was  entitled to appointment of  compensation  even  in

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respect of the land.[461 H-462 B] The  method  adopted  by the Land  Acquisition  Officer  for determining  compensation  payable  for  extinction  of  the interest  of  the holder of the land and  of  the  buildings separately  was  unwarranted.  In  determining  compensation payable for respect of land with building compensation  can- not be determined byt ascertainig the value of the land  and the  "break up value" of the building separately.  The  land and  the building constitute one unit, and the value of  the entire  unit must be determined with all its advantages  and its  potentialities.   When the property sold is  land  with building, it is often difficult to secure reliable  evidence of  instances  of  sale  of  similar  lands  with  buildings proximate  in time to the date of the notification under  s. 4.  Therefore the method which is generally resorted  to  in determining the value of the land with buildings  especially those   used  for  business  purposes,  is  the  method   of capitalization  of return actually received or  which  might reasonably be received from the land and the buildings. [462 C; 462 H-H-463 C] Raja Vyricherla NarayanaGajapatiraju    v.   The    Revenue Divisional Officer, Vizagapatnam, L.R. 66I.A.104,referred to. L7 Sup.C.I./68-5 460 It  cannot be laid down as a general rule applicable to  all situations  and circumstances that a multiple  approximately equal to the return from gilt-edged securities prevailing at the  relevant time forms an adequate basis for  finding  out the,  market value of the land.  But in this case the  trial court  and the High Court were Of, the view that a  multiple based  on  a return from the gilt-edged securities  was  the appropriate  multiple  for  determining  the  value  of  the Property under acquisition, and no ground ’has been suggeste for  not accepting the basis and the rate of  capitalization adopted by them. [463 E-F]

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 588 of Appeal from the iudgment and decree dated June 21, 196Z of the kerala High Court in APPeal Suit No. 602 of 1958. B. R. L. Iyengar and M, R. K. Pillai, for the appellant. S. V. Gupte, Vishnu B. Saharya, Yougindra Khushalani, Sardar Bahadur   Saharva  and  T.  L.  Viswanatha  Iyer,  for   the respon.dent. The Judgment of the Court was delivered by Shah,  J.  On  December 8, 1954, the  Government  of  Madras issued a notification under s. 4 of the Land Acquisition Act notifying  for  acquisition  for  a  public  purpose,   viz. widening  the Madras-Calicut Road at Palyam, seven units  of land  with buildings.  One of the units was T.S.  No.  298/2 admeasuring  3911 sq. ft. together with a building  standing thereon used for business purposes.  Notification under S. 6 of  the Act was issued on December 12, 1954, and  possession of the land was taken soon thereafter. The  Receiver  of Patinhare Kovilakam Estate held  T.S.  No. 298/2 in Jenmi right.  The respondent in this appeal held in that land the rights of a Kanamdar under a deed dated  March 27, 1954.  The buildings constructed on the land belonged to the  respondent and were let out to tenants at an  aggregate monthly  rent  of Rs. 332.50. The Land  Acquisition  Officer determined   the   compensation  payable  to   the   persons interested  at  the rate of Rs. 10,000/- per  acre  for  the

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land, and for the houses standing thereon "at their break-up value?.   In a reference at the instance of  the  respondent under,  S.  18  of the Land Acquisition Act  (in  which  the Receiver  of, Patinhare Kovilakam Estate did not  join)  the Subordinate  Judge,  Kozhikode,  was of the  view  that  the method  adopted  by the Land Acquisition  Officer  for  dete compensation by separately valuing the lands as garden lands and the break-up value of the houses was "manifestly  unjust and improper".  In his view, each unit had to be valued as a composite  property.  He then proceeded to adopt the  method of determining the market value by capitalizing the net rent received  from the unit, and taking into  consideration  the return from gilt-edged 461 securities  at  3-112 per cent. at the  relevant  date,  the learned Judge awarded compensation for the unit in which the respondent was interested at 35 times the net annual rental. Against  the award of the Subordinate Judge, the  State  of, Kerala  appealed to the High Court of Kerala  at  Ernakulam. The  High Court determined compensation by  multiplying  the net  rent  33-1/3 times that being in their view  the  true, multiple derived from the return based on the current  retum from  gilt-edged securities.  Against the award made by  the High  Court, this appeal has been preferred by the State  of Kerala   with  certificate  under  Art.  133(i)(a)  of   the Constitution.               Two  questions  were urged in support  of  the               appeal .               (1)  that  the Receiver  having  accepted  the               award  of the Land Acuisition.   Officer.  the               respondent  could Claim compensation only  for               the  right  which he had in the land  and  the               buildings  and the method adopted by the  Land               Acquisition  Officer was in the  circumstances               the only appropriate method; and               (2)  that  the  rate  of   capitalization  was               unduly high. In  our  judgment,  there is no forcei  in  either,  of  the contentions.   Where  land-which expression includes  by  s. 3(a)  of the Act benefits to arise out, of land  and  things attached  to the earth or fastened to anything  attached  to the  earth-is notified for acquisition, it is notified as  a single  unit whatever may be the interests which the  owners thereof may have therein.  The purpose of acquisition is  to acquire all interests which clog the right of the Government to  full ownership of the land, i.e. when land  is  notified for  acquisition,  the Government expresses  its  desire  to acquire  all  outstanding interest  collectively.   That  is clear from the scheme of the Land Acquisition Act.  Under S. 11 of the Land Acquisition Act, the Collector is required to enquire into the objections raised by the persons interested in  the land and into the value of the land at the date  of. the  publication of the notification under s. 4, subs.  (1). and  into- the respective interests Of the persons  claiming the  Compensation, - and then-to make an award  determining) The  true area of the land; (ii) the compensation  which  in his  opinion should be allowed for the land; and  (III)  the apportion_  ment of the compensation among all  the  persons known  or believed to be interested in the land, Whether  or not  they,  have respectively appeared before him.   By  the compulsory  acquisition of land, all  outstanding  interests not  vested  in  the Government  are  extinguished.   It  is therefore the duty of the Land Acquisition Offcert determine in  the first instance compensation which is to be paid  for extinction  of  those interest ’and then  to  apportion  the

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compensation  among  the  persons known or  believed  to  be interest- 462 ed  in  the land.  The Subordinate Judge had  also,  when  a reference -was made to him, to assess the value of the  unit and  then  to  apportion  the  compensation  among   persons entitled  thereto.   The  rule could not  be  departed  from niciely  because  the Receiver in whom the Jenmi  rights  in T.S.  No. 298/2 were vested failed to raise an objection  to the  quantun  of  compensation awarded to  him.   Again  the respondent  was @e holder of kanam rights in the  land,  and the  buildings on the land belonged to him  The,  respondent being  Kanamdar, he had an interest in T.S. No. 298/ 2,  and as Kanamdar the respondent was  entitled to apportionment of compensation even in respect of the land. We  agree with the trial court and the High Court  that  the method   adopted  by  the  Land  Acquisition   Officer   for determining  compensation  payable  for  extinction  of  the interest  of  the  holder  of the  land  and  the  buildings separate  was  unwarranted.  In  deter  mining  compensation payable  in  respect of land  with  buildings,  compensation cannot be determined’ by ascertaining the value of the  land and  the "break-up value" of the building  separately.   The land and the building constitute one unit, and the value  of the  entire unit must be determined with all its  advantages and its potentialities.  Under s. 23 of the Land Acquisition Act  compensation  has  to  be  determined  by  taking  into consideration  the market value of the land at the  date  of the  publication of the notification under s. 4(1)  and  the damage,  if any, sustained by the persons  interested  under any  of  the heads mentioned in secondly to  sixthly  in  s. 23(1) of the Land Acquisition Act. As  observed  by the Judicial Committee in  Raja  Vyricherla Narayana  Gujapatiraju( v. The Revenue  Divisional  Officer, Viza. gapatnam (1) at p. 1 14 -               "There  is not in general any market for  land               in  the sense in which one speaks of a  market               for  shares or a market for sugar or any  like               commodity.   The value of any such article  at               any particular time can readily be ascertained               by  the  prices  being  obtained  for  similar               articles in the market.  In the case of  land,               its value in general can also be measured by a               consideration  of  the prices that  have  been               obtaioed  in  the past, for  land  Of  similar               quality  and in similar position, and  this,is               what  must be meant in general by "the  market               value" in S. 23." An instance of a sale which is proximate in time to the date of  the notification under s. 4(1) of the  Land  Acquisition Act in respect of - land similarly situate and with  similar advantages and which is proved to be -a transaction  between a willing vendor and (1) L.R. 66 I. A. 104. 463 a  willing  purchaser  would  form  a  reliable  guide   for determining  the  market value.  The value which  a  willing vendor  might  reasonably expect to receive from  a  willing Purchaser  in  respect of a house generally depends  upon  a variety  of  circumstances  including  the  nature  of   the constrauction, ’its age, situation, the amenities available, its  special, advantages and a host,of other  circumstances. When the property   sold is land with building, it is  often difficult  to secure reliable evidence of instances of  sale of  similar  lands with buildings proximaye in time  to  the

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date  of  the notification under s 4. Therefore  the  method which is generally resorted to in determining the value  ’of the  land with buildings especially those used for  business purposes, is the method of capitalization of return actually received or which might reasonably be received from the land and tie buildings. That  method was rightly adopted by the trial court and  the High Court.  The unit under acquisition is used for business purposes  and  has  a prominent situation in  the  town,  of Calicut.   There was clear evidence about the rental of  the building,  and the trial court proceeded to  capitalize  the net.  annual rental, having regard to the rate of return  of i3  1/2 per cent from gilt-edged securities, by  multiplying it  by  35  tines The High Court has  slightly  reduced  the multiple. It  cannot be laid down as a general rule applicable to  all situations  and circumstances that a multiple  approximately equal to the return from gilt-edged securities prevailing at the  relevant time forms an adequate basis for  finding  out the  market value of the land.  But in this case  the  trial court  and the High Court were’ of the view that a  multiple based  on a return from the gilt-qedged securities  was  the appropriate multiple for determining the value of the  prope under acquisition, and no ground has been suggested for  not lepting the basis and the rate of capitalization adopted  by them.   It is relevant to note that the same multiple  which has  been  adopted  in other cases  relating  to  lands  and buildings  acquired under the same notification under  which the  land  of  the  respondent was  acquired  has  not  been challenged by the State. The appeal therefore fails and is dismissed with costs. Y.P.                                  Appeal dismissed. 464