Skip to content


Varadarajulu Naidu Vs. Revenue Divisional Officer, Tirukoilur - Court Judgment

LegalCrystal Citation
SubjectTenancy
CourtChennai High Court
Decided On
Case NumberAppeal No. 334 of 1966
Judge
Reported inAIR1970Mad374; (1970)2MLJ67
ActsConstitution of India - Article 31; Land Acquisition Act, 1894 - Sections 23
AppellantVaradarajulu Naidu
RespondentRevenue Divisional Officer, Tirukoilur
Appellant AdvocateKanakaraj, Adv.
Respondent AdvocateAddl. Govt. Pleader
DispositionAppeal allowed
Cases ReferredCollector of Chingleput v. Kadir Mohideen Sahib
Excerpt:
.....method to be adopted in the case in arriving at the compensation due to the claimant for the land acquired from him or the adoption of the market value of the lands in the vicinity.; held, that when a property is acquired in exercise of the powers of eminent domain of the state, the owner has to be justly compensated for the same by paying him its market value together with the money equivalent of its existing advantage and future potentialities. in fact, the claiment is entitled to receive such market value of the property including such intelligible though speculative advance therein attributable to it consequent upon the improvement of the locality and the surroundings and it inherent advantages as well. in a case where the land has obtained a reputation of being used and..........it was also found that r. s. no. 37-b/2b was not used as a market place, whereas the land acquired was so being used as a shandy for the sale of cattle. it was with this initial background that the above extent of land in r. s. no. 37-a/1b belonging to the appellant was acquired under the provisions of the land acquisition act for which purpose a notification under section 4(1) thereof was issued on february 29, 1956.the claimant, both before the land acquisition officer and in the court below, when the subject came to it on a reference under section 18 of the act, contended that the land was used as a shandy for a considerable length of time prior to the valuation date and that he was obtaining a rent of about rs. l,500/~ per annum and therefore the land had to be valued.....
Judgment:
1. One acre and twelve cents of land in T. S. No. 37-A/1B in Thokkavadi village, Villupuram Taluk, South Arcot District, was acquired compulsorily for the use as a weekly cattle market. This acquisition was at the instance of the District Board, as it then was, of the district. The District Board initially applied also for the acquisition of R. S. No. 37-B/2B of the same village for purposes of the weekly shandy. Later, on the suggestion of the Collector, the proposal for the acquisition of R. S. No. 37-B/2B was withdrawn, for it was felt that the said land was on the other side of the Railway line and it cannot be reached from R. S. No. 37-A/1B excepting through crossing the railway line which is objectionable. It was also found that R. S. No. 37-B/2B was not used as a market place, whereas the land acquired was so being used as a shandy for the sale of cattle. It was with this initial background that the above extent of land in R. S. No. 37-A/1B belonging to the appellant was acquired under the provisions of the Land Acquisition Act for which purpose a notification under Section 4(1) thereof was issued on February 29, 1956.

The claimant, both before the Land Acquisition Officer and in the Court below, when the subject came to it on a reference under Section 18 of the Act, contended that the land was used as a shandy for a considerable length of time prior to the valuation date and that he was obtaining a rent of about Rs. l,500/~ per annum and therefore the land had to be valued with such potential in it by capitalising the annual rental yield with a reasonable multiple arrived at on the basis of the rate of interest prevailing on the valuation date for such securities. But the Land Acquisition Officer ignoring the said contention treated the land acquired as a house site, valued it as such and awarded compensation at the rate of Rs. 25/- per cent. The Land Acquisition Officer, however, rightly in our view, did not award any interest over the compensation awarded, since the State by then was in possession of the land as a result of an arrangement between the District Board and the appellant.

On a reference to Court by the interested person, the Court sustained the value at Rs. 25/- per cent, but thought that some accommodation should be made' for the fact that the land had potential value to serve as a shandy. After noticing this, the Court awarded an additional compensation of Rs. 3,000/- having regard to the annual income realised by the appellant from and out of the acquired land and having also regard to certain other features of the land acquired. But it gave interest on the amount awarded at four per cent thereon from the date of taking possession to the date when the compensation amount was paid. Still aggrieved by the award of the Court below, the appellant is before us.

2. Mr. Kanakarai, learned counsel for the appellant, contends that the Court below failed to notice his main contention and, probably the only contention, that the method of valuation of the land acquired ought to be on the capitalization system and not by secured criteria from the sales of lands in the vicinity and adopting the same as the market value of the property in question. He would contend that from 1943, the land was admittedly used as a shandy and, in, fact, he had to close down the shandy which he was running on the land by the order Ex. A-3 and had to compulsorily hand over his property to the District Board to enable them to run a shandy thereon. It is seen from Exs. A-4 and A-5 that the land acquired was used as a public market from 1943 to 1948 free of rent. But in 1947 under Ex. A-10, the appellant demanded rent for the acquired property as it appears from the record that the District Board was farming out the right to collect fees from the persons using the shandy and this activity of the District Board prompted the appellant to claim rent from them. P.W. 4, the claimant, says that in 1949 the District Board auctioned the right to collect fees from the market for the year 1949-50 for Rs. 6316 and the District Board agreed to pay him one-fourth of the auctioned money towards rent for that year. Thereafter he would say in his evidence that he was obtaining every year from the District Board one-fourth of such amount fetched in the public auction and that was one of the "main terms of the agreement between him and the District Board.

When he was cross-examined, it was not elicited from him that such was not the arrangement and the agreement. As a matter of fact, it is seen from Exs. A-12, A-14, A-20, A-29, A-30, A-31, A-52, A-59, A-61, A-62, A-63 and A-66, that the appellant was receiving on an average between 1949 and 1963 an annual rent of about Rs. 1,500/-. On the basis of such data disclosed and spoken to by the appellant, Mr. Kanakaraj contends that the acquired land has to be valued not on the usual basis of adopting the market value of lands in the vicinity, but by capitalising the rental yield by the appropriate multiple, which has to be ascertained in the circumstances of this case.

Though the learned Additional Government Pleader initially thought that the reputation acquired by the land in question, that it was used and utilised and suitable for a shandy, need not be noticed and considered as if it has a potential worth for valuation in the process of compulsory acquisition, yet he had to and he did indeed concede that, at least with reference to the principle in sub-clause (4) of Section 23 of the Act, the earnings to which the appellant was deprived does give rise to a cause of action for a claim for compensation based under that head, and for this purpose the orthodox method of adopting the values . of lands in the vicinity heed not be followed in the instant case. As a matter of fact, Mr. Ramaswami, learned Additional Government Pleader, has very fairly, but later, agreed that the method adopted by the Court below is not correct; but as the matter involved in this case raises an interesting question, we have to deal with it before we answer and consider the respective contentions of counsel.

3. The interesting question that arises in this appeal is not abounding, as is usual in land acquisition cases, in judicial precedents. When a property is acquired in exercise of the powers of eminent domain of the State, the owner has to be justly compensated for the same by paying him its market value together with the money equivalent of its existing advantages and future potentialities. In fact, the claimant is entitled to receive such market value of the property including such intelligible though speculative advance therein attributable to it, consequent upon the improvement of the locality and the surroundings and its inherent advantages as well. No doubt far-fetched capabilities cannot be noticed for pur-poses of assessment.

Even so, in a case where the land has obtained a reputation of being used and utilised as a public market place for well over fifteen continuous years before the valuation date and has thus acquired a secondary signification peculiar to its situation, then the problem is whether such a realised and patent potential of the property, which has become inhered in it, and whether such an advance and reputation gained, enter into the mechanics of the computation in compulsory acquisition proceedings. In the instant case the acquired land was admittedly used as a shandy place or as a public market from 1943 onwards by the District Board or latterly by the Panchayat Board. The owner, as already seen, by an agreement with the District Board, as it then was, was receiving his share of the proceeds by farming out of the right to sell in the market. He was indeed getting one-fourth of the auction amount in terms of the arrangement between himself and the District Board. This land was pitched upon because of this peculiar situation in the village. This is borne out by the report of the Land Acquisition Officer as well.

Though the claimant desired that the land has to be valued by capitalising the rent, it was not suggested that the continuity, of the shandy at that place was purely at the discretion of the Panchayat and there was no certainty of such annual income being derived from the property. The public authority never shifted the market from 1943 to any other place. A3 a matter of fact, their desire to extend the market to S. No. 37-B/2B wag thwarted by the Collector as it was not suited for the purpose and as one had to cross the railway line to reach it. It can therefore be fairly presumed that the appellant at or about the time when the notification under Section 4 was issued had a reasonable expectation of continuing to receive and realise such annual rent although it was considerably higher than the normal rent that might be ob-tainable under ordinary circumstances.

It cannot be denied that, as a general rule, the compensation to the owner has to be estimated by reference to the uses for which the property is suitable, having regard to the existing business, or wants of the community, or such as may be reasonably be expected in the immediate future. While adopting the above criteria, impractical and unimaginative benefits ought not to be noticed, but they should be judged and valued purely on commercial considerations.

The Privy Council in Vyricherla Narayana Gajapatiraiu v. Revenue Divisional Officer, Vizagapatam, AIR 1939 PC 38 observed as follows at p. 101:

"The compensation must be determined therefore by reference to the price which a willing vendor might reasonably expect to obtain from a willing purchaser. The disinclination of the vendor to part with his land and the urgent necessity of the purchaser to buy must alike be disregarded. Neither must be considered as acting under compulsion. This is implied in the common saying that the value of the land is not to be estimated at its value to the purchaser.

"But this does not mean that the fact that some particular purchaser might desire the land more than others is to be disregarded."

The land in question has undoubtedly secured an adventitious value, which is something more than its normal or intrinsic value. Ordinarily, intrinsic value does not necessarily establish a fair and 5ust value, because such value does not depend upon the exterior or surrounding circumstances. Fortuitous circumstances which are continuous and apparent and which prompt a particular mode of user of land iniect into it a marketable value of a peculiar nature. It is common knowledge that persons wishing to purchase the said quality of land for the same purpose for which the land is peculiarly applicable and usable, usually give a higher price. Prima facie it may be a contingent benefit. But each case has to be decided on its own merits. If such a benefit is not sporadic, but has become annexed to the land by Ions user and if the locus of the land lends support to such a special adaptability, then such market value has to be found and such compensation found has to be awarded.

4. One other way of looking into the problem is by applying the principle adumbrated in Section 23, clause (4) thereof. Section 23 enumerates the matters to be considered in determining com-pensation. One such matter is the dam-age sustained by the person interested at the time of the Collector taking possession of the land by reason of the acquisition injuriously affecting his other property, moveable or immoveable, in any other manner, or his earnings. The loss of earning also is one of the matters to be considered in determining compensation.

In the instant case, the appellant was getting on the average about Rs. 1,500/-per annum ever since 1949. By the compulsory process he is deprived of such earnings. Therefore, this deprivation ought not to be lightly brushed aside without being considered while granting the just equivalent for the compulsortiy acquired land. By the acquisition, the owner is likely to lose once and for all the rent obtained. Though it is not re-latable to any direct activity of his, yet the situation of the shandy and the convenience of the public in the locality to gain access to it conveniently and that too for a good number of years indicate that the rent obtained by the appellant is what is often called as the sitting rent derived therefrom for nearly fifteen years and more. It is in this light that the intrinsic or normal market value which could be obtained from adopting the sale price of ordinary lands in the vicinity fades into insignificance.

At the Bar several decisions were cited and we should record that the learned Government Pleader has very fairly placed before us several decisions which would support the contention of the coun-sel for the appellant, rather than further his case. Mr. Kanakarai referred to a decision in Raja of Vizianagaram v. Revenue Divisional Officer, Vizagapatnam, 1954-2 Mad LJ (Andhra) 1 = (AIR 1954 Andhra 12). Subba Rao, C. IV, as he then was of the Andhra High Court, was therein evaluating a land which was suited for being used as a salt-pan and which was very near the neighbouring salt-pan near Balucheruvu Salt-Pan. The learned Judges constituting the Division Bench therein noticed several sale deeds in respect of salt-pans in the vicinity, but, in the absence of specific evidence as to the expenses that are to be incurred by the owner in that case to reclaim the waste land into a salt-pan, they did not resort to the orthodox method of evaluation. On the other hand, they would say that having regard to the evidence in the circumstances and as the lands were eminently fit for development as a saltpan, the income from a working salt-pan may be taken and after deducting therefrom the expenditure incurred for converting the waste land into a salt-pan, some reasonable rate may be fixed. In effect, the principle laid down therein is, if sale deeds of salt-pans in and around the locality are available, the value of the potentiality may be ascertained having regard to the expenditure incurred for conversion. If it is not available, then Capitalising the rental yield would afford a surer and better guide for purpose.

In Collector of Chingleput v. Kadir Mohideen Sahib, AIR 1926 Mad 732 -50 Mad LJ 566, Krishnan, J., speaking for the Bench, dealing with the acquisition of a brick field, observed as follows (page 567) = (at p. 733 of AIR):

"As regards the value of the land acquired, which is the most important item in the total valuation, it is conceded that the claimant is entitled to have his land valued with reference to the most profitable use it can be put to. The land is very suitable for a brick field as shown by the evidence; in fact the Government is acquiring it for the very purpose of using it as a brick field. It is also suitable as a building site as proved by witnesses.....The claimant is, therefore, entitled to have his land valued in both ways and given the higher value, whichever it may be."

Once again the learned Judges laid down the principle that if the property acquired in a compulsory acquisition is subject to a user which is beneficial and which can be commercialised, then such a factor is to be taken note of while valuing the property on the valuation date, regard being had to the potential of such secured or realised amenity.

In the instant case, the Government acquired the property for the purpose of a public market or a shandy. The owner also had a fair expectancy that he would receive the rent from the Panchayat Board for the use of his land as shandy for many years more. That the land is suitable for the purpose of a shandy is not in dispute. It is in such circumstances we should consider whether the value of lands which are not qualitatively comparable to the acquired lands can be taken into consideration by blindly following the orthodox rule of evaluation. We think not.

In Bijaya Kanta v. Secretary of State, AIR 1934 Cal 97 a land in which a bazar was run was acquired. In that case evidence was let in to show the value of the lands in the vicinity and such evidence was pressed into service for adoption. But as already stated, the property was being utilised as a market and was fetching a rent. The question, therefore, was whether the capitalisation of the rent was the proper method or the adoption of the market rate of the lands in the vicinity was better. In those circumstances, the

learned Judges in the said case observed (at p. 99):--

"In the absence of evidence of the selling value of similar class of lands in the neighbourhood it seems to me that the only course of proceeding was to estimate the rent at which the whole plot might be leased and the purchase money might be properly calculated at 25 years' purchase plus....."

The ratio in this case is again indicative of the fact that unless clinching evidence of sales in the neighbourhood of lands similar and similarly utilised, like the acquired land, is available, then it would be venturesome to blindly adopt the value of other lands for the purpose of awarding compensation under the Land Acquisition Act.

According to us, it is now fairly clear that though the price of land has to be valued by a reference to sales of lands in the vicinity, yet in a peculiar situation like the one on hand, it would be unfair to adopt the intrinsic value of the land as its market value, as that would mean, its special adaptability, its realised potentiality etc. ought to be ignored. This cannot be done, as the claimant is entitled to the just equivalent of the land in terms of money when it is compulsorily acquired.

In the case before us, the acquisition is for the purpose of establishing a shandy. The land was utilised as a shandy for several years. It gained a reputation as such and it is not denied. Such advance in the nature and potential of the property has to be turned to account. It is in this respect that the values arrived at by comparing the values of ordinary lands bereft of such potential in the vicinity do not reflect a fair method for computing the market value of the acquired land. The income derived from the property should, therefore, be taken into consideration and the same capitalised by applying a fair multiple as in the words of Venkata-subba Rao, J. in Collector of Chingleput v. Kadir Mohideen Sahib, 50 Mad LJ 566 at p. 574 = (AIR 1926 Mad 732 at p. 737);

"It is undoubtedly true that in awarding compensation, any and every element of value which the lands possess to the owner must be taken into consideration in so far as it increases the value to him." In the light of the above discussion, we are unable to accept the mode and method adopted by the Court below in ultimately evaluating the acquired land.

The learned Subordinate Judge was aware of the special adaptability and potential of the acquired land. But he valued such potential on an unknown basis. He valued the land with reference to the "prevailing prices of lands which could not be compared, as they are not of the same quality and added to it a sum of Rs. 3000 arbitrarily as and towards compensation for the potential noticed by him in the acquired land. This method is not the proper method and we have already indicated as to the lines on which properties similar to the acquired land have to be valued. Once the valuer finds that the prices of lands in the vicinity do not reflect the real price of the land acquired, then the alternative method of capitalising the net annual rental yield has to be resorted to. We have no hesita-tion in stating that the rental basis affords a fair guide for evaluation in the instant case.

5. According to the appellant, the average income derived by him from the land by reason of the use to which it was put by the District Board with his consent was about Rs. 1551-62 per year. But we notice in the particulars shown to us that in the years 1952-53 and 1956-57, the ap-pellant derived a rent of about Rs. 1048-45, during the former year, and Rs. 1031-25 during the latter year. The notification under Section 4(1) of the Land Acquisition Act was issued on 29-2-1956. Therefore, it can safely be taken that Rs. 1,000 per year represents the net annual yield which the appellant was recovering, from the land from the District Board by reason of its special adaptability discussed above.

6. The next question is as to the number of years purchase with which multiple, the annual rent has to be multiplied to arrive at the market value. The number of years purchase no doubt varies in accordance with the prevailing rate per cent of approved securities at or about the time of the notification and also the process by which the annual rent is derived. In the instant case the owner does not exert himself. It is the District Board or the Panchayat Board which runs the market, farms out the fees and pays him his agreed share. In such circumstances, what is the reasonable multiple that has to be fixed for arriving at the ultimate compensation.

7. In AIR 1934 Cal 97, the learned Judges capitalised the rent at 25 years purchase. But this related to an acquisition of the year 1927. Again, in 1954-2 Mad LJ (Andhra) 1 = (AIR 1954 An-dhra 12) the learned Judges adopted the multiple of 20. But there also the acquisition related to the year 1944. It is no doubt true that the number of years adopted must depend on the rate of interest which a first class security will yield in the money market. But in the case under consideration the rate of interest cannot be blindly fixed with reference to Government securities, for, the rent derived from properties used as public markets, shops and business places will certainly be higher than the well-recognised approved Government securities. The valuation date in this case is 29-2-1956. It cannot be said that the rate per cent on such securities of business premises or business places would be the same as 4 to 4 1/2 per cent as in the case of Govt. securities or other well-known securities. We are of the view that the rate per cent in such cases would vary, in the year 1956 between 9 to 12 per cent Having regard to the fact that the land in question is a village site, we fix the rate at 9 per cent and thus arrive at the multiple of 11. We fix the average rental yield at Rs. 1000 per year. Multiplying this by 11, we fix the value of the property acquired at Rs. 11,000. The excess compensation would be worked out oh this basis and the appeal is allowed with proportionate costs. The appellant would be entitled to the usual 15 per cent solatium on the excess compensation.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //