http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 10  

PETITIONER: UNION OF INDIA & ANR

       Vs.

RESPONDENT: SMT.SHANTI DEVI ETC. ETC

DATE OF JUDGMENT05/10/1983

BENCH: VENKATARAMIAH, E.S. (J) BENCH: VENKATARAMIAH, E.S. (J) SEN, A.P. (J)

CITATION:  1983 AIR 1190            1984 SCR  (1) 217  1983 SCC  (4) 542        1983 SCALE  (2)1020  CITATOR INFO :  R          1984 SC 774  (16)  R          1986 SC1466  (11)

ACT:      Land Acquisition  Act 1894  (I  of  1894)  Section  23- Acquisition of  land-Payment of compensation-Market value of land fixed  on basis  of capitalisation principle-Multiplier to be adopted in determination of compensation-Explained.

HEADNOTE:      Certain lands  were notified  for  acquisition  in  the years 1962  and 1963  under s.4(1)  of the  Land Acquisition Act, 1894.  On the  question of  payment of compensation the Land Acquisition  Officer, relying  on an  earlier award  in respect of  similar lands  acquired for the very same public purpose  adopted   the   same   criteria   and   fixed   the compensation. He adopted the principal of capitalisation and determined the  compensation at  Rs. 650  per kanal,  as the value of  the best category of land and awarded compensation equivalent to 13 times the net annual income.      On reference under Sec.18 the District Judge determined the market  value of  the land  adopting the  capitalisation principle, and  determined the  compensation by  multiplying the net annual income from each category of land by 20.      The Union  of India  and the State Government preferred appeals and  contended before  the High  Court that  if  the principle adopted  by the  authorities below  was  used  the Government  would   suffer.  These   appeals  were   however dismissed.      In the  meanwhile the High Court in appeals arising out of similar  awards   set aside  the orders  of the  District Judge and  remanded the cases for fresh disposal for failure to determine whether the exemplars on the record could serve as a  guide for  determining the  market value. After remand the District  Judge arrived  at the  very same valuation and this was confirmed by the High Court.      In the appeals to this Court on the question as to what should be  the multiplier  to be  adopted in determining the compensation payable in respect of land acquired in the year 1962-63 where  the market  value of the land is fixed on the basis of the capitalisation principle.      Allowing the appeals in Part,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 10  

    HELD: 1. The High Court and the District Court erred in applying the twenty years purchase rule in the case of these lands which were acquired 218 in the years 1962 and 1963. The proper principle was fifteen years’ purchase rule.[228 H]      2. The  relevant date for determining compensation of a property acquired  under the  Act, is  the date on which the notification under  s.4(1)  is  published.  The  capitalised value of  a property  is the  amount of  money whose  annual interest at  the highest  prevailing rate of interest at any given time  will be  its net  annual income.  The net annual income from a land is arrived at by deducting from the gross annual  income   all  outgoings   such  as   expenditure  on cultivation, land  revenue etc.  The net  return from landed property, reflects  the prevalent  rate of  interest on safe money investments. [225 G-H; 228 A]      3. (i)  In India  the multiplier  which is  adopted  in determining the  compensation by  the capitalisation  method has varied  from time  to time. The number of years purchase has gradually  decreased as  the prevailing rate of interest realisable from  safe investments  has gradually  increased, the higher  the rate  of interest,  the lower  the number of years  purchase.   This   method   of   valuation   involves capitalising the  net income that the property can fairly be expected to  produce and  the rate  of capitalisation is the percentage of  return on  investment that  a  willing  buyer would  expect   from  the   property  during   the  relevant period.[227 G-H; 228 A]      (ii)  In  the  years  1962  and  1963  an  investor  in agricultural land expected annual net return of at least 8%. If the  land yielded  a net annual income of Rs. 8 a willing buyer of  land would  have paid  for it Rs.100 i.e. a little more than 12 times the annual net income. The multiplier for purposes of capitalisation would be about thirteen.[228 D-E]      (iii) In  these cases  there was  no evidence about the potential value of the lands.[228 F]      (iv)In the  instant cases  neither the Land Acquisition Officer nor  the High  Court  nor  the  District  Court  has adopted the  other well-known  methods of  valuation of land namely, the price paid within a reasonable time in bona fide transactions in  respect of  the land  acquired or  adjacent lands which  possess similar  advantages, the  price which a willing buyer  was prepared  to pay  to a  willing seller of such land  or the  opinion of  valuers or  experts.  In  the absence of  any reliable evidence to adopt the other methods of valuation the very same capitalisation method was applied and the  Court adopted  fifteen  years’  purchase  rule  for determining compensation has to be adopted.[225 C-E]      The Collector, Raigarh v. Dr. Harisingh Thakuar and An. and Vice  Versa, [1979]  1 S.C.C.  236; State  of Kerala  v. Hassan Koya,  [1968] 3  S.C.R. 459; The State of West Bengal v. Shyamapada etc., A.I.R. 1975 S.C. 1723; Oriental Gas Ltd. JUDGMENT: referred to. 219

&      CIVIL APPELLATE  JURISDICTION: Civil Appeals Nos. 51-72 of 1981.      Appeals by  Special Leave  from the  Judgment and Order dated the 22nd September. 1980 of the High Court of Himachal Pradesh at  Simla in  R.F.A. Nos.  262, 249,  251, 252, 261,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 10  

265, 266,  267, 280, 281, 292, 297, 299, 300, 307, 308, 352, 355, 356, 366, 370 and 220 of 1980 respectively.      M.M. Abdul Khader and Ms. A Subhashini with him for the Appellants.      K.R. Nagargia,  Mr. Naresh  Kaushik and  Krishna Prasad for the Respondents.      The Judgment of the Court was delivered by      VENKATARAMIAH. J. What should be the true multiplier to be  adopted  in  determining  the  compensation  payable  in respect of  land acquired in or about the year 1962-63 where the market  value of the land is to be fixed on the basis of the capitalisation  principle, is  the question which arises for consideration in these appeals.      The construction  of the  Beas Project was commenced in the year  1960 as  a joint venture of the erstwhile State of Punjab and  the  State  of  Rajasthan  by  mutual  agreement between the  two States.  All decisions  on the  policy  and administrative matters  were taken  by a  Board known as the Beas  Control   Board  which  was  set  up  by  the  Central Government in  consultation with  the two States on February 19, 1961.  The Beas  Project Board  was presided over by the Governor of  the  then  State  of  Punjab  and  its  members included Ministers of the States of Punjab and Rajasthan and senior officers  of the  Central Government  and of  the two States. The  decisions of  the Beas Control Board used to be implemented by the Punjab Government which was administering and executing  the works  on the Project. The expenditure on the Project was shared by the Rajasthan Government.      With the coming into force of the Punjab Reorganisation Act, 1966 (Act 31 of 1966), the new State of Haryana and the Union Territory  of Chandigarh  came into being, having been formed out  of the  territory  of  the  erstwhile  State  of Punjab. A part of the Punjab 220 territory was also transferred to what was then the Union of Territory of  Himachal Pradesh.  What remained  with  Punjab became the new State of Punjab.      Sub-section  (1)   of  section   80   of   the   Punjab Reorganisation Act,  1966  provided  that  the  construction including the  completion of  any work  already commenced of the Beas  Project should  on and  from  November  1,1966  be undertaken by  the  Central  Government  on  behalf  of  the successor States  (as defined  under that Act) and the State of Rajasthan  should provide  the  necessary  funds  to  the Central  Government  for  the  expenditure  on  the  Project including the  expenses of  the Beas Construction Board. For the discharge  of its  functions, sub-section  (1) and  sub- section (2)  of section 80 of the Punjab Reorganistation Act empowered the  Central Government  in consultation  with the Governments  of  the  successor  States  and  the  State  of Rajasthan to  constitute a  Board  to  be  called  the  Beas Construction Board,  Thus by  the Punjab Reorganisation Act, 1966,  the  entire  expenditure  for  the  construction  and completion of  the Beas  Project was  to be  shared  by  the successor  States   and  the  State  of  Rajasthan  but  the responsibility of  construction and  completion of  the Beas Project was entrusted to the Central Government.      About 70,000  acres of  land had to be acquired for the Beas Dam Project which was located in the Kangra area of the erstwhile State  of Punjab  which stood  transferred to  the then Union  Territory of  Himachal Pradesh  under the Punjab Reorganisation Act,  1966. The necessary notifications under section 4  (1) of  the Land  Acquisition Act,  1894 had been issued by  the appropriate  Government for  that purpose. We are concerned  in these cases with lands which were notified

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 10  

for acquisition  in the  years 1962 and 1963 under section 4 (1) of the Land Acquisition Act. The acquisition proceedings in respect of the lands which stood transferred to the Union Territory of  the State  of Himachal  Pradesh, as  mentioned above, were  to be  completed by  its officers.  The land in question are  situated in  Tikka Bhararian,  Mauza  Dhameta, Tehril Dehra,  District Kangra.  Himachal Pradesh.  The Land Acquisition Officer  issued notices  under section  9 (3) of the Land  Acquisition Act to the interested persons inviting their representations  and objections  with  regard  to  the determination  and   payment  of   the  compensation.  After receiving  the  representations  and  objections,  the  Land Acquisition Officer (Shri Didar Singh) passed a common award on January 31, 1972 in respect of an extent of 1125.33 acres of land in Tikka Bhararian 221 which had  been notified  on April  1,1963. It  would appear that another  Land Acquisition  Officer, Shri Jaswant Singh, had passed  an award  earlier on  April 2,1969 in respect of certain lands  situated  in  Tikka  Bihari  which  has  been acquired  for   the  very  same  public  purpose.  The  Land Acquisition Officer who had to pass the award in these cases being of  the opinion  that the  fertility, productivity and potentiality of  land  in  Tikka  Bhararian  (the  lands  in question) were  more or  less comparable  with those  of the lands situated  in Tikka  Bihari and that the classification and valuation  of lands  in the award passed by Shri Jaswant Singh were  quite fair,  adopted the same for the purpose of passing the  award in  respect of  the lands in question. It may be  mentioned here  that Shri  Jaswant Singh had adopted for the  purpose of  valuation of  lands  the  principle  of capitalisation. He was of the view that the rule of 20 years purchase was to be adopted. He accordingly after determining the net annual profit per kanal of land of the best category at Rs.  50 and  multiplying it by 20 arrived at Rs. 1,000 as the value of one kanal of the best variety of land. In order to determine the net annual profit from the land, it appears that he  had carried  out a  crop cutting experiment on some Plot of land after the publication of the notification under section 4  (1) of  the Land Acquisition Act. It would appear that on behalf of the Department, a statement had been filed showing that the lands of similar quality were being sold at or about  the time  of publication of the notification under section 4  (1) of  the Land  Acquisition Act  at Rs. 300 per kanal. Shri  Jaswant Singh  (the Land  Acquisition  Officer) found that a mean between the valuation arrived at by him by adopting the  principle of  capitalisation i.e.. Rs. 1,000/- per kanal  and Rs.  300/- per  kanal which, according to the Department was the value of the best category of land in the area would  be a  reasonable  compensation.  Accordingly  by adding the  above two  figures and dividing the total by two he arrived  at Rs.  650/- per kanal as the value of the best category of  land and  reduced the  value proportionately in respect of  other categories  of land  which were  lower  in quality.  Virtually  what  was  awarded  was  equivalent  to thirteen times the net annual income.      Aggrieved by  the award  passed by the Land Acquisition Officer, the  claimants demanded  that a reference should be made under  section 18  of the  Land Acquisition  Act to the Civil Court  for the  determination of  proper  compensation payable to  them. Accordingly the cases were referred to the District Court  of Kangra  at  Dharamsala.  Alongwith  these references, several other references also had 222 been made  to that Court in respect of several other bits of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 10  

lands situated  at Tikka  Bihari Tikka  Bhararian which  had been acquired  at  or  about  the  same  time.  The  learned District Judge  who tried the cases was of the view that the oral evidence  adduced by the owners of the land on whom the burden  of  proof  lay  could  not  be  relied  upon.  After discarding the  oral evidence,  the learned  District  Judge determined the  market value  of the  land by  adopting  the capitalisation principle.  He determined the compensation by multiplying the net annual income from each category of land by 20.  Accordingly he  fixed the  compensation of  the best category of land at Rs. 1,000 per kanal having held that the net annual  income per  kanal of  that class of land was Rs. 50. For this purpose he appears to have relied on the result of the  crop cutting  experiment about  which there  was  no evidence before him He rejected the reason given by the Land Acquisition Officer  for reducing  the compensation from Rs. 1,000 to  Rs. 650  on the  ground that  the  Department  had asserted that  the land of similar quality was being sold at or about  the relevant  time  at  Rs.  300  per  kanal.  The compensation was  fixed  at  comparatively  lower  rates  in respect of  other classes  of land  which were  involved  in these cases  except in the case of G.M. abadi land for which he fixed  at Rs. 650 per kanal. Aggrieved by the decision of the District  Judge, the  Union of  India and  the State  of Himachal Pradesh  preferred appeals before the High Court of Himachal Pradesh.  The appellants contended that the methods adopted by  Land Acquisition  Officer and the District Judge were both  faulty and  if the  principle adopted by them was used in  respect of  all the  70,000 acres of land acquired, the Government would suffer a huge loss.      It is necessary to state here that in the meanwhile the High Court  disposed of two appeals being R.F.A. Nos. 16 and 17 of  1970 in  respect of  the same  lands in  Tikka Bihari where the  two learned Judges (R.S. Pathak, C.J. (as he then was) and  D.B. Lal,  J.) who heard the said appeals by their separate judgments  dated January  14, 1976  set  aside  the judgment of  the District  Judge and  remanded the cases for fresh disposal  to the  District Court.  Pathak, C.J. in the course of his judgment observed :           "In my opinion the position is this. The Collector      had determined  the market  value at Rs. 1000 per kanal      of the  best category of land. He did this on the basis      of a  method recognised  in  law.  He  then  took  into      account 223      an offer of Rs. 300 per kanal made by the State. He did      not, when  taking that  rate  into  account,  determine      whether it  was based  on valid material on the record.      He acted arbitrarily in taking that offer into account.      Moreover, although  he took that offer into account, he      did not accept it as a proper basis for determining the      market value.  He  embarked  on  the  novel  method  of      adopting a  mean between  the market  value of Rs. 1000      per kanal  determined by  him and  the offer of Rs. 300      per kanal  made by  the State.  The learned  Additional      District Judge  was entirely  right in holding that the      award  of  the  Collector  was  misconceived.  But  the      learned Additional District Judge then proceeded wholly      on the  basis of the market value of Rs. 1000 per kanal      determined by  the Collector.  What he should also have      done was  to determine  whether the  exemplars  on  the      record could  serve as  a  guide  for  determining  the      market value.  It is  this error which has vitiated the      decision of the learned Additional District Judge".      After remand  the claimants in those cases adduced some

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 10  

evidence which  was not  of much  value. Again  the District Judge arrived  at the  very same  valuation which  had  been determined by  that Court earlier. The appellants once again preferred appeals  before the  High Court.  The  High  Court dismissed those appeals in limine by a short order dated May 20, 1981.  The appeals  filed against  that order  are  also before us now.      Now coming  back to the present appeals which arise out of R.F.A.  No. 262  of 1980  and connected  cases which were disposed of  by a  common judgment dated September 22, 1980, the High Court dismissed all the said connected appeals. The present appeals are filed against that common judgment after obtaining the  special leave of this Court under Article 136 of the  Constitution. Although  the award passed by the Land Acquisition Officer  deals with  18 classes of lands, we are concerned in  this case with some of them only. The rates of compensation awarded by the Land Acquisition Officer and the District Judge for the following classes of land involved in these cases are as follows : 224      Class of Land    Rate per kanal          Rate per kanal                       fixed in the award      fixed by the                       of the Land             District Judge                       Acquisition Officer      Nehri awal         Rs. 650 per kanal       Rs. 1000 per                                               kanal      Nehri Bramdi     Rs. 520   -do-          Rs. 800 -do-      Barani Dofasli   Rs. 455   -do-          Rs. 700 -do-      Barani Ekfasli   Rs. 390   -do-          Rs. 600 -do-      Banjar Kadim     Rs. 260   -do-          Rs. 400 -do-      G.M. Abadi       Rs. 650   -do-          Rs. 1000 -do-           (In Himachal Pradesh, 1 acre = 8 kanals)      The High  Court has  confirmed the  rates fixed  by the District Judge.      At the  outset we  should state  that we  are not happy about the  manner in  which the  proceedings have gone on in these and other similar cases relating to the acquisition of land for  the Beas  Project. As  mentioned earlier the total extent of  land acquired  is 70,000 acres. We are told there are nearly  800 cases before this Court arising out of those acquisition proceedings. There may be many others which have not yet  reached this  Court. The  only method  of valuation adopted in  all  cases  appears  to  be  the  capitalisation method. The  evidence regarding  the crop cutting experiment said to have been conducted is not satisfactory. The crop in question is  said to  have been  grown after the acquisition proceedings commenced  only for  the purpose  of determining the compensation.  Naturally if  such crop  is grown  by the owner, there  is bound  to be  some anxiety  on his  part to adopt extraordinary  agricultural practices to show a higher yield than what would be the normal yield of the land. It is seen that  the direction  given by Pathak, C.J. in the order of remand passed in 1976 in the cases pertaining to lands in Tikka Bihari referred to above appears not to have been kept in view  either by  the District Court and by the High Court when they subsequently disposed of hundreds of cases arising out of  these land  acquisition proceedings. The approach on their part  has been  very casual.  The fact  that any error committed  in   one  of   these  cases   would  affect   the compensation payable in respect of 70,000 acres of land does not appear  to have  weighed with the District Court and the High Court. The spirit behind the observation made by one of us (A.P. Sen, J,) on the question of fixing the compensation for lands  acquired under  the Land  Acquisition Act  in the minority judgment of this Court

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 10  

225 in The  Collector. Raigarh  v. Dr. Harisingh Thakur and Anr. and Vice Versa to the effect that           "While it is not suggested that unfairly low value      should be  offered, on the other hand the temptation to      over-generosity  must   be   equally   resisted.   Such      generosity at  the public  expense reacts  against  the      development and  against the  prosperity of the country      and imposes an unnecessary burden on the taxpayer" appears to  be lacking in the disposal of these cases by the District Court and the High Court.      In these  and other  connected cases,  neither the Land Acquisition Officer  nor the  High Court  and  the  District Court have adopted the other well-known methods of valuation of land  namely, the  price paid within a reasonable time in bona fide  transactions in  respect of  the land acquired or adjacent lands  which possess  similar advantages, the price which a  willing buyer  was prepared  to pay  to  a  willing seller of  such lands  or the opinion of valuers or experts. They have all followed the capitalisation method by adopting the 20  years’ purchase rule. In the absence of any reliable evidence to  adopt the  other methods  of valuation,  we are also  driven   in  these   cases  to  adopt  the  very  same capitalisation  method   in  disposing   of  these  appeals. Although we  are not satisfied with the determination of the net annual  profit from  each plot of land acquired in these proceedings, we  have to  adopt the  finding of the District Court which has been affirmed by the High Court on the facts and in  the circumstances  of these  cases as  none  of  the parties has questioned it.      The only question which remains to be determined is the appropriate number of years purchase that should be followed in the case of acquisition made in the years 1962 and 1963.      The relevant  date for  determining compensation  of  a property acquired  under the  Land Acquisition  Act, 1894 is the date  on which  the notification  under section 4 (1) is published. The capitalised value of a property is the amount of money  whose annual  interest at  the highest  prevailing interest at  any given  time will  be its net annual income. The net annual income from a land is arrived at by deducting from  the  gross  annual  income  all  out  goings  such  as expenditure 226 on cultivation, Land revenue etc. The net return from landed property generally  speaking, reflects the prevalent rate of interest on  safe money  investments. It  is on  this basis, Rajamannar offg.  C. J.  held in T. Radhakrishna Chettiar v. The Province of Madras that the number of years’ purchase to be adopted  was 33 1/3 where the interest paid on gilt-edged securities at  the time  of acquisition i. e. in 1942 was 3% per annum.  But the  same learned  Chief Justice held in Sri Lakshmi Narasimha  Devaru &  Anr. v.  The Revenue Divisional Officer. Mangalore  & Anr.  that 20  years’ purchase was the appropriate rule  to be followed in determining the value of agricultural   Land   acquired   in   the   year   1943   by capitalisation method.  In State of Kerala v. Hassan Koya in the case  of a  Land with building acquired in the year 1954 when Government  securities were  yielding 3 1/2% per annum, this Court  upheld the  decision of  the Kerala  High  Court which had  adopted 33  1/3 as  the multiple  for determining compensation payable  in respect  of it. For a land acquired in the  year 1952. this Court in The State of West Bengal v. Shyama Pada  etc. awarded  compensation at  20 times the net annual  income.   In  Varadarajulu   Naidu  v.  The  Revenue Divisional Officer,  Tirukoilur, the High Court of Madras in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 10  

the case  of a  land acquired  in the  year 1956 adopted the rule of  11 years’  purchase. In Oriental Gas Ltd. & Ors. v. State of  West Bengal,  the Constitution Bench of this Court speaking through Chinnappa Reddy, J. observed:           "The next  target of  Mr.  Sen’s  attack  was  the      choice of the multiplier. He submitted that in the year      1962 gilt-edged  securities were  fetching no more than      six per  cent per  annum and  therefore, not eight, but      some  other   higher  multiplier   should   have   been      specified.           The  argument   of  Shri   Sen  is  based  on  the      observation  of   Shah,  J.,   in  Cooper’s  case  that      ‘capitalisation of the net annual value of the property      at a  rate equal  in normal  cases to  the return  from      gilt-edged  securities’  was  an  important  method  of      determination of compensation. The very use of the word      normal by Shah J., indicates 227      that it  was not  intended to  lay down  any invariable      rule that  whenever a  method of  capitalisation of net      profit  was   adopted,  the   return  from   gilt-edged      securities was to be the basis. That should depend on a      variety of  circumstances such  as the  nature  of  the      property, the  normal return  which may  be expected on      like investment,  the state  of the  capital market and      several such  factors. For  example, it  is well  known      that a  large investment  yields a higher return that a      smaller investment and similarly a long term investment      yields a  better return than a short term investment. A      different principle and a different multiplier may have      to be  applied to different kinds of property, such as,      agricultural land,  residential  buildings,  industrial      undertakings etc.  In the  case of  a going business or      industrial undertaking  the appropriate  multiplier may      be determined  on the  basis of the annual return of an      undertaking with  similar capital  investment.  If  the      Legislature thinks that a return of 12 1/2% in the case      of  a   large  industrial   undertaking  such   as  the      petitioner’s is reasonable and on that basis adopts the      multiplier ‘eight’,  it is not for this Court to sit in      judgment and  attempt to  determine a  more appropriate      multiplier. We  are unable  to see  how the adoption of      the particular  multiplier in  the present  case is the      result of  the application of any irrelevant principle.      We do not, therefore, agree with the submission of Shri      Sen.,’      In the  above case  the Court  felt that if 12 1/2% was the annual  return, the adoption of multiplier ‘eight’ could not be  unreasonable in  the year  1962 in  the case  of  an industrial undertaking.      A perusal  of the  decisions referred to above and some others which  have not  been cited  here shows that in India the  multiplier   which  is   adopted  in   determining  the compensation by  the capitalisation  method has been 33 1/3, 25, 20,  16 3/2  11 and 8. The number of years’ purchase has gradually, decreased  as the  prevailing  rate  of  interest realisable from safe investments has gradually increased the higher the  rate of interest, the lower the number of years’ purchase. This method of valuation involves capitalising the net income  that the  property can  fairly  be  expected  to produce and  the rate of capitalisation is the percentage of return on his investment that a willing buyer would expect 228 from the  property during  the relevant  period. It was once felt that the relevant rate of interest that should be taken

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 10  

into  consideration   was  the   interest  which  gilt-edged securities or  Government bonds  would normally  fetch.  The safety and  liquidity of the investment in bonds were relied on as the twin factors to take the view that the interest on gilt-edged   securities   should   alone   be   taken   into consideration. This  was at  a time when there were not many avenues  of  safe  investments  and  investment  in  private commercial concerns  was not  quite reliable.  But from  the year 1959-60 circumstances have gradually changed. There are many State  Banks and  nationalised banks  in which deposits made are  quite safe.  Even in the share market we have many ‘blue chips’  which command  stability and  other  attendant benefits such  as the  possibility of  issue of bonus shares and rights  shares and  appreciation of  the  value  of  the shares themselves.  They are  attracting a  lot  of  capital investment.  A   return  of  10%  per  annum  on  such  safe investments  is  almost  assured.  Today  nobody  thinks  of investing on  land which would yield a net income of just 5% to 6% per annum. A higher return of the order of 10% usually anticipated. Even  in the years 1962 and 1963 an investor in agricultural land expected annual net return of at least 8%. It means  that if the land yielded a net annual income Rs. 8 a willing buyer of land would have paid for it Rs. 100 i. e. a little  more than  12 times  the annual  net  income.  The multiplier for  purposes of  capitalisation would  be  about thirteen.      On the  question of  the potential  value of  the lands involved in  these cases, we may state here that there is no evidence suggesting  that the  lands were  likely to  be  in demand for  any other  purpose. They  were all  agricultural lands or  banjar lands  on which  no agricultural operations could be  carried on.  They were  situated in a hilly tract. There were no potential buyers who were in need of this vast tract of  70,000 acres.  If the  project work  had not  been undertaken possibly  there would  have been  no occasion for the sale of all these lands in one lot.      Having regard to all the facts and circumstances of the case we  feel that  the High  Court and  the District  Court erred in  applying the  twenty years,  purchase rule  in the case of  these lands  which were  acquired in the years 1962 and 1963.  The proper  principle was fifteen years’ purchase rule. The  District Judge  awarded compensation in all these cases at  Rs. 1,000  per kanal  for the  land of  the  first category by applying the twenty years’ purchase rule and has fixed the  compensation for  other lands on the above basis. The 229 High Court  has affirmed  it. Since  we have  held that  the proper basis  of fixing  compensation  in  these  cases  was fifteen years’  purchase rule,  the compensation awarded for lands in  these cases  should be  reduced by one-fourth i.e. for lands  of the first category compensation payable should be Rs.  750 per  kanal  instead  of  Rs.  1,000  per  kanal. Similarly in  the case of other lands also there should be a reduction of  the compensation  awarded by  one-fourth.  The claimants shall  get solatium  of 15%  on  the  compensation computed on  the above basis and they shall be paid interest at the  rate ordered  by the District Judge on the aggregate amount from  the date  of taking possession of the land till the date  of payment. The orders passed by the High Court in all these cases shall stand modified accordingly.      The appeals  are accordingly  allowed in  part. Parties shall bear their own costs throughout. N.V.K.                               Appeals partly allowed. 230

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 10