1. This is an appeal under Section 54 of the LandAcquisition Act, and directed against an order made by the Second Additional Civil Judge, Mangalore, in O. P. No. 814 of 1966, dated 21-1-1969.
2. The lands concerned in this appeal were acquired for the purposes of laving a railway line, by a notification dated 16-4-1964 under Section 4 of the Land Acquisition Act. (hereinafter referred to as the 'Act'). The lands comprised under this acquisition are as follows: (1) 1 acre and 31 cents classified as wet.1; (2) 9 cents classified as wet 3; (3) one acre and 19 cents of garden; and one cent of dry land. The respondent had claimed compensation at the rate of Rs. 5,000/- per acre for dry land, Rupees 10,000/- per acre in regard to both classes of wet land, Rs. 24,000/- per acre for coconut garden and Rs. 60,000/- per acre towards areca garden, which was a portion of wet-1 land. The Land Acquisition Officer had awarded in regard to these lands at the rate of Rs. 1,000/-towards dry land. Rs. 5,000/- towards wet-1. Rs. 1,500/- towards wet-3, Rs. 6,000 for coconut garden and Rs. 7,250/- towards areca garden, per acre respectively. On a reference to the Civil Court, it enhanced the compensation at the rate of Rs. 5,000/- towards dry. Rs. 9,000/- towards wet-1, Rs. 2.400/- towards wet-3 Rs. 11,700/- towards coconut garden, and Rs. 58,000/- towards areca garden, per acre respectively. Aggrieved by this order the Special Land Acquisition Officer. Railways, Mangalore, has brought up this appeal.
3. The respondent has preferred cross-objections in regard to certain items. They are:
(1) That the wet-1 should be awarded at the rate of Rs. 10,000/- per acre.
(2) That wet-3, should be awarded at the rate of Rs. 5,000/- per acre; and
(3) That the coconut garden should be awarded at the rate of Rs. 20,000/-per acre and that the costs should have been awarded by the court below.
4. On behalf of the appellant, it Is contended by Sri N. Venkatachala, the learned High Court Government Pleader, that the Commissioner's report marked as Exhibit C-34 ought not to have been accepted, as his evidence was merely an opinion and he had not the necessary qualifications to speak to the lands in question. It is further contended, that the claimant's claim in regard to areca garden has clearly specified that there were only 200 fruit yielding trees in the garden in question, whereas the Commissioner had referred to a larger number of trees in his report and. therefore, the lower court was not justified in acting on the report of the Commissioner in that behalf. He further drew attention to two documents produced by theclaimant himself which are marked as Exhibits C-33 and C-40, and related to lease of areca lands in the neighbourhood. We are unable to accede to any of these contentions.
5. Exhibit C-33 relates to a composite lease of areca garden, a building and a 'Poonja' land. From the deed it is seen that the rent had not in any manner been apportioned in regard to these various items comprised in it. Hence the lower court was justified in not relying on the said document. Exhibit C-40 relates to a lease of land to an Archak by the trustees of a certain temple. The extent of the land leased thereunder was 46 cents of areca garden. It is no doubt true that the rent stipulated thereunder was one quintal of areca. In the nature of things, it is clear that it is a transaction between an Archak of the temple and the trustees of the temple. That being so, the lease stipulated thereunder, in our view, does not represent a fair bargain. It is therefore has to be refected. What remains to be considered is the report of the Commissioner, marked as Exhibit C-34. A Commissioner was appointed in this case at the instance of the claimant. When he (Commissioner) was in the witness box, no questions seem to have directed as to the yield, the cost of converting the nuts into betel nuts and other details given in the report Exhibit C-34. It is also clear from his evidence that he himself was the owner of an areca garden, though not in the same area and therefore, he was competent to speak to the facts mentioned in the report. The arguments to the contrary on behalf of the appellant, that he was not competent to speak on it cannot therefore be accepted. It is clear from his evidence that 73 cents of land under acquisition contained areca gardens. He has clearly opined that the net yield from those lands was 396 Kgs. of areca. As to the value of the areca at the relevant point of time there is undisputed evidence of C. W. 2, who has deposed in the light of documents produced by him that the price of betel nuts at the time of acquisition was Rs. 1,400/- per candy. It is not disputed that a candy is about 2,1/2 (two and a half) quintals of areca. The lower court has acted on the basis of the report of the Commissioner and multiplied with 20 on the basis of 20 years purchase, and determined the market value at the rate of Rs. 58,000/- per acre towards areca garden. He however awarded compensation at the rate of Rs. 58.000 per acre. In the facts and circumstances of the case, particularly in view of the evidence placed on record, we see no reason to disagree with the conclusion of the lower court in this regard.
6. The next contention is that while the claimant himself has mentioned that 200 trees are capable of yielding nuts, the court below was not justified in accepting the Commissioner's report that a larger number of trees were yielding fruits. This contention of the learned counsel cannot be accepted. The Commissioner has specifically mentioned that he himself was the owner of a garden. In his report the Commissioner has stated that the trees were estimated for yield, on the lands under acquisition. He had gone to the spot personally and counted the trees. His estimate has not been questioned in any manner in his cross-examination. That being so, it is but right that his report should be given preference to that of the evidence, has to be rejected. (sic)
7. In regard to the dry land it was contended that Rs. 5,000/- per acre was excessive. Dry land is necessarily inferior to a wet-3 land, in regard to which the lower court has determined the market value at Rs. 2,400/- per acre. We are unable to accept this contention, for the reasons to be mentioned later in dealing with the cross-objections preferred by the respondent. With regard to the other items of land no serious argument was addressed as the determination of the market value in regard to them was based on the rentals derived by the landlord, and admitted by the Land Acquisition Officer himself.
8. We now turn to the cross-objections. Sri C. Shivashankar Bhat, the learned counsel appearing on behalf of the respondent confined his argument to only two items. They are:
(1) Cocoanut garden; and
(2) Wet-3 lands.
In regard to the cocoanut garden, he contended that the basis adopted by the court below, that the cocoanut palms were capable of yielding only 25 nuts a year, was clearly erroneous in the light of the report of the Commissioner in that behalf. He drew our attention to two parts of the report wherein the Commissioner has clearly specified that the palms were capable of yielding 30 nuts and 25 nuts only. His submission was that it would have been fair to take the yield as 30 nuts a year. We have been taken through the report of the Commissioner. The reference to 30 nuts thereunder was in connection with the palms standing on some other land and not the lands with which we are concerned at present. In regard to the land in question, he had clearly opined that the trees were capable of yielding only 25 nuts a year. It is on this basis that the lower court has determined the market value of the land in question. We see no reason to differ from the conclusion of the court below in this regard.
9. The next contention urged by him relates to the grant of compensation in regard to wet-3 land. The Court below has awarded compensation for this land at the rate of Rs. 2,000/- per acre, while it has awarded the compensation at the rate of Rs. 5,000/- per acre for dry lands. The contention of the learned counsel in this regard has to be upheld. It is obvious that a wet-3 land cannot be inferior to a dry land in regard to which a compensation of Rs. 5,000/- per acre has been awarded. It is but fair in the circumstances of the case to award compensation to wet-3 land at the same rate as was awarded for dry lands, at the minimum. We therefore accept this contention and allow cross objections to that extent. We hold that compensation in regard to wet-3 land should be determined at the rate of Rs. 5,000/- per acre, The decree would stand modified accordingly.
10. Before leaving this case, we however think it necessary to refer to some aspects governing determination of market value of properties by adopting the capitalisation method to areca gardens. For raw areca nuts to become marketable they should first be reduced into betel nuts and it is only thereafter that such betel nuts should be transported to the market for sale. All these steps involve some expenditure, to say nothing about diminution in the weight as between the raw areca nuts and the marketable betel nuts. Allowances should be made for all these factors in arriving at the net income or profit from the lands under acquisition. It is only after such steps are gone through, the resulting betel nuts would become marketable, and the market rates of such betel nuts could be applied. Unless there is clear evidence in regard to all these matters, any determination of the market value of an areca garden by adopting the above method would be misleading and incorrect. It also seems to us that the method of capitalisation should ordinarily be adopted only in the absence of evidence regarding prices fetched by sales of similar lands at or about the date of acquisition. Even then, the evidence in support of the adoption of such method, must, as far as possible, have relevance to all the factors above referred to.
11. In the light of what has been stated above, we desire to mention that this decision may not be understood as a precedent, while adopting the capitalisation method in assessing the market value of areca gardens. It may not be out of place to refer to the principles governing the determination of market value of properties, as enunciated in thedecision of the Supreme Court, R. C. Cooper v. Union of India reported in : 3SCR530 . Shah, J., as he then was delivering the majority opinion of the Full Court, at paras. 103 and 104 of the above report, has observed thus:--
'103. The important methods of determination of compensation are: (i) market value determined from sales of comparable properties, proximate in time of the date of acquisition, similarly situate, and possessing the same or similar advantages and subject to the same or similar disadvantages. Market value is the price the properly may fetch in the open market if sold by a willing seller unaffected by the special needs of a particular purchaser; (ii) capitalisation of the net annual profit out of the property at a rate equal in normal cases to the return from gilt edged securities. Ordinarily value of the property may be determined by capitalizing the net annual value obtainable in the market at the date of the notice of acquisition, (iii) where the property is a house, expenditure likely to be incurred for constructing a similar house, and reduced by the depreciation for the number of years since it was constructed; (iv) principle of reinstatement, where it is satisfactorily established that reinstatement in some other place is bona fide intended, there being no general market for the property for the purpose for which it is devoted (the purpose being a public purpose) and would have continued to be devoted, but for compulsory acquisition. Here compensation will be assessed on the basis of reasonable cost of reinstatement; (v) when the property has outgrown its utility and it is reasonably incapable of economic use. it may be valued as land plus the break-up value of the structure. But the fact that the acquirer does not intend to use the property for which it is used at the time of acquisition and desires to demolish it or use it for other purpose is irrelevant; and (vi) the property to be acquired has ordinarily to be valued as a unit. Normally an aggregate of the value of different components will not be the value of the suit.
104. These are, however, not the only methods. The method of determining the value of property by the application of an appropriate multiplier to the net annual income or profit is a satisfactory method of valuation of lands with buildings, only if the land is fully developed, i.e., it has been put to full use legally permissible and economically justifiable, and the income out of the property is the normal commercial and not a controlled return or a return depreciated on account of special circumstances. If the property is not fully developed, or thereturn is not commercial the method may yield a misleading result.'
It is clear from the above enunciation that the method of determining the value of the property by the application of a multiplier to the net annual income or profit could only be adopted when all the material for the determination of such income or profit has been properly placed before the court. We leave this aspect of the matter at that.
12. In the result, the appeal of the land acquisition Officer fails and is dismissed with costs of the respondent. The cross-objections are allowed to the extent indicated above. As regards cross-objections, we direct that parties bear their own costs.
We fix the Advocate's fee in the appeal at Rs. 250/-.