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Ramaswami Naidu and anr. Vs. the State of Madras - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai High Court
Decided On
Case NumberAppeal Nos. 604 of 1963 and 139 of 1964
Judge
Reported inAIR1971Mad297
ActsMadras Requisitioning and Acquisition of Immoveable Property Act, 1956 - Sections 8(1); Land Acquisition Act - Sections 23(2)
AppellantRamaswami Naidu and anr.
RespondentThe State of Madras
Cases ReferredTiruchi v. T. S. Srinivasa Rao
Excerpt:
.....to be adopted for capitalising the income has to vary according to the nature of the agricultural land acquired. if it is a wet land the multiple should be lower and in respect of dry lands the multiple should be naturally higher. in this case the lands are said to be garden lands irrigated with well water without any assured supply of water from any government irrigation source. as such the normal rule of twenty years purchase cannot be adopted in this case. ; on the question for consideration as to whether the claimants in the case are entitled under the act to any solatium in addition to the compensation fixed. ; held, that on a conjoint reading of section 8 (1) and 8 (2) of the act it is clear that the discretion given to the arbitrator under section 8(1)(e) is to be controlled by..........to be adopted for capitalising the income has to vary according to the nature of the agricultural land acquired. if it is a wet land the land the multiple should be lower and in respect of dry lands the multiple should be naturally higher. in this case the lands are said to be garden lands irrigated with well water without any assured supply of water from any government irrigation source. as such the normal rule of 20 years' purchase which has been adopted for wet lands in 1949 mad wn 131 = (air 1949 mad 902) cannot be adopted in this case. taking into account the nature of the lands, the locality in which it is situated and all the surrounding circumstances we feel the multiple of 25 adopted by the court below is correct. of course the reasoning adopted by the lower court for applying.....
Judgment:
1. These are two connected appeals. A. S. 604 of 1963 is by the claimants and A. S. 139 of 1964 is by the State against the same judgment of the District Judge, Coimbatore in A. C. 1 of 1960 on his file. 49.51 acres of land belonging to the claimants in Kannampalayam village. Palladam Taluk, Coimbatore District, had been acquired by the Government on 23-7-1958 for running a State Seed Farm under S. 8(1) (b) of the Madras Requisitioning and Acquisition of Immoveable Property Act, 1956. The Collector of Coimbatore classified the lands acquired into two groups for purposes of valuation. 32.73 acres out of the area acquired were treated as garden lands and the remaining 16.78 acres were treated as rain-fed dry lands. He fixed the value of the garden lands at Rs. 2632 per acre and the value of the dry lands at Rs. 445 per acre. As the owners did not accept the said valuation by the Collector, the matter was referred to the District Judge, Coimbatore, who was appointed Arbitrator under the provisions of the said Act. Before the District Judge the claimants stated that the entire extent of lands acquired by the Government is garden land expect an extent of 1.20 acres in S. No. 79 the market value of the garden lands at the relevant time was Rs. 10500 per acre and that there has been a gross under-valuation of the lands by the Collector both in respect of garden lands and dry lands. They also claimed solatium of not less than 15% of the market value in view of the compulsory nature of the acquisition and also interest at the rate of 6 per cent per annum on the enhanced compensation claimed.

2. The learned District Judge, while disposing of the reference before him, agreed with the claimants that except a small extent of 1.20 acres, the rest of the lands acquired were garden lands and basis. As regards the value, the learned District Judge fixed the market value of the garden lands (48.31 acres) on the relevant date Rs. 2632 fixed by the Collector market value of the dry lands (1.20 acres) at Rs. 1250 as against Rs. 445 fixed by the Collector. The learned District Judge also granted solatium at the rate of 10 per cent of the market value in consideration of the compulsory nature of the acquisition as against 15 per cent claimed by the claimants. He also granted interest at the rate of 4 per cent per annum on the enhanced compensation fixed by him from the relevant date till the date of payment. The claimants have filed A. S. 604 of 1963 claiming a further enhancement of the compensation at the rate of Rs. 10500 per acre of garden land and claiming the balance of 5 per cent solatium disallowed by the learned District Judge as also interest at the rate of 6 per cent as against 4 per cent fixed by the court.

3. The State has filed A. S. 139 of 1964 questioning the classification of almost the entirety of the lands acquired as garden lands as also the value fixed for the garden lands as well as dry lands. The State has also questioned the claimant's entitlement to any solatium or interest on the compensation.

4. First taking up the question of classification of the lands, we feel that the classification made by the Court below is correct.. ... ... ... .... ...

(After discussing the evidence their Lordships proceeded).

Thus there is ample and reliable oral evidence corroborated by the notice Ex. A-2 and the report. Ex. B-6 to show that only 1.20 acres out of the entire extent acquired are dry land and the rest are garden lands. Having regard to the fact that the State has not questioned the correctness of the contents of Ex. A-2 and Ex. B-6 by adducing any relevant evidence, the State's contention that the classification of the lands made by the court below is not correct cannot be accepted. We find that the lower court is justified in holding that the entirely of the acquired lands is irrigated garden lands except 1.20 acres in S. No. 79.

5. Then we take up the question of valuation of the lands, garden as well as dry. As against the value of Rs. 2632 per acre for garden lands and Rs. 445 per acre for dry lands fixed by the Collector the court below fixed the valuation at Rs. 6250 per acre for garden lands and Rs. 1250 per acre for dry lands. The Collector based his valuation of the garden lands on a sale Ex. B-10 dated 6-6-1955 whereunder 7 acres of garden lands in S. No. 137 and 19.27 acres of dry lands in S. No. 136 were sold for a price of Rs. 27000 giving a rate of Rs. 2632 per acre of garden land and Rs. 445 per acre of dry lands. The lower court, however, did not accept the said basis of valuation adopted by the Collector as correct. It was actually found by the court below on evidence that the lands covered by Ex. B-10 are half a mile away from the acquired lands, and that the lands comprised in Ex. B-10 are far interior to that of the acquired lands, that as spoken to by P.W. 2 the sale under Ex. B-10 having there being a possible litigation by the minor after attaining majority, the price fetched under Ex. B-10 was unduly low, and that there was no material for the Collector to assume that 7 acres out of 26-27 acres sold under Ex. B-10 were garden lands. For the said reasons, the lower court considered that the sale price given in Ex. B-10 cannot be regarded as indicative in any manner of the market value of the acquired lands and that the Collector was not justified in adopting it as the basis for fixing the market value of the lands acquired in the case. The lower court also rejected the sale deed, Ex. A-1, relied on by the claimants as indicative of the fair market value of the lands in the locality. That was a sale deed executed by the first defendant on 25-4-1947 in favour of P.W. 5 in respect of 7 acres of lands, four acres dry and three acres garden, in S. No. 244/1, and 244/2-A in the same village at Rs. 26000. According to the claimants 3 acres out of 7 acres sold under Ex. A-1 are garden lands and according to the value worked out by them one acre of garden land will be fetching Rs. 8000. The lower court however held that Ex. A-1 cannot afford any guidance in valuing the acquired lands as the suggested apportionment of the sale consideration thereunder between dry and garden land was not based on material on record.

6. According to the lower court, as admittedly no contemporary sale deed in respect of similar land was available, a more satisfactory method of valuation of the acquired lands, both garden and dry, would be by capitalising the net income and we entirely endorse that view. We find that was exactly the basis adopted by the Tahsildar, Palladam, in his report Ex. B-6. In Ex. B-6 the Tahsildar had fixed Rs. 5000 per acre of garden land by multiplying the annual rental of Rs. 250 by 20 times. The court below also took the annual rental from the garden lands as Rs. 250 per acre based on the rental fetched by the acquired lands under a lease Ex. B-4 dated 13-2-1958 executed a few months prior to the acquisition but computed the capital value of the lands at 25 years' rental as against 20 years' rental adopted by the Tahsildar under Ex. B-6 on the ground that gilt-edged securities fetched a rate of interest between 3 to 41/2 per cent per annum. On such computation, the lower court fixed the market value of the lands at Rs. 5000 fixed by the Tahsildar in Ex. B-6. Similar computation was adopted even in respect of dry lands by multiplying the annual rental of Rs. 50 per acre fetched under Ex. B-4 lease by 25 times and Rs. 1250 per acre was fixed as the market value of the dry lands.

7. Mr. M. K. Nambiar, the learned counsel for the claimants, did not question the said capitalisation method of valuation but urged for the adoption of a higher multiple than 25 adopted by the court below. It was pointed out that the court below did not actually find the rate of interest, on gilt-edged securities on the relevant date, i.e., on 23-7-1958 and that its observation that interest on gilt-edged securities varied from 3 to 41/2 per cent per annum without reference to any particular time, the adoption of 4 per cent as the rate of interest arbitrarily and fixing 25 per cent as the multiple cannot be sustained as correct. It is true that the lower court has not focussed its attention as to the rate of interest on gilt-edged securities on the relevant date, that is, 23-7-1958. Having regard to the provisions of S. 8 of the Madras Requisitioning and Acquisition of Immoveable Property Act, 1956, for finding out the market value of the lands acquired on the relevant date by capitalising the income, one has to find the rate of interest on gilt-edged securities on that date. We find from the certificate issued by the Madras Stock Exchange Ltd, that 3 per cent Government of Madras loan issued in 1958 fetched also the same price. This shows that the rate of interest fetched by the gilt-edged securities in 1958 was just above 3 per cent. Based on the above figures the learned counsel for the claimants stated that the annual rental has to be multiplied by at least 33 times to arrive at a fair market value of the lands.

8. It was also submitted that the annual rental of Rs. 250 fixed by the court below on the basis of the lease deed Ex. B-4 cannot be accepted as correct. According to the learned counsel the lease of Rs. 250 fixed under Ex. B-4 was at a concessional rate as it is clear from the evidence of P.W. 7 and as such the rent fixed under Ex. B-4 cannot be taken as the rent which the lands are actually capable of fetching.. ... ... ... ...

(Their Lordships discussed the evidence and proceeded).

On a due consideration of all the facts and circumstances of this case and the evidence available on record we hold that the rent which the lands acquired would fetch would be Rs. 275 per acre per annum.

9. Then the further question arises as to what is the multiple to be adopted for fixing the market value of the lands by capitalisation. The learned counsel for the claimants states that 33 should be adopted as the multiple while the State contends that the multiple of 20 adopted by the Tahsildar in his report under Ex. B-6 will be fair and reasonable. For the claimants the decision inRadhakrishna Chettiar v. Province of Madras, 1948-2 Mad LJ 159 = (AIR 1949 Mad 171) was relied on. In that case it was held that the proper method of valuation to be adopted in a case of compulsory acquisition relating to a house and ground situated in a municipality and fetching regular income is to assess the value on the basis of capitalisation of the net annual income and that the number of years' purchase to be adopted for capitalisation has to be arrived at by taking into account the interest yielded by Government securities at the time of the notification under S. 4(1) of the Land Acquisition Act. Relying on this decision it was contended that 33 years' purchase has to be adopted for capitalising the annual rental in this case, treating the property acquired as land and buildings.

10. The learned Assistant Government Pleader on the other hand submits that the adoption of 20 years' purchase as has been done by the Tahsildar in his report Ex. B-6 will be fair and reasonable but he does not give the reason as to why the rate of rent fetched by the gilt-edged securities should not be adopted in this case. Though we find that the correct method of valuation to be adopted in this case is on the basis of capitalisation of the net annual income, we are not inclined to adopt the number of years' purchase for capitalisation taking into account the interest yielded for gilt-edged securities at the relevant date, for fixing the value of agricultural lands acquired in this case. The decision of the Bench above referred to dealt with a house property and it has been laid down therein that the principle of valuation based on the interest on gilt-edged securities should be adopted for all kinds of house properties irrespective of their nature. As a matter of fact courts have consistently declined to adopt the basis of the interest on gilt-edged securities for capitalising annual income on agricultural lands. The basis for making such a distinction in respect of agricultural lands seems to be that agricultural lands are likely to fetch a higher rate of income than house properties or security and that if the rate of interest on gilt-edged securities is adopted for purpose of capitalising the annual rental from agricultural lands, which is comparatively higher, the value arrived at by such capitalisation would be far above and disproportionate to the market value of the lands. The following decisions are relevant.

11. In Revenue Divisional Officer, Trichinopoly v. Varadachari, 1944-1 Mad LJ 142 = (AIR 1944 Mad 271), a Bench of this court expressed the view that the general rule adopted both in the courts in India and in England was to estimate the value of the land in cases where direct evidence was not obtainable by multiplying the annual profits by 20 unless special circumstances existed which indicated that the value should be calculated as some different multiple of the annual profits. They distinguished the decisions in Land Acquisition Officer, Calicut v. Subba Rao, 1941-2 Mad LJ 75 = (AIR 1941 Mad 684) and Collector of Kistna v. Zamindar of Chellapalli, 1937-2 Mad LJ 744 = (AIR 1938 Mad 33), on the ground that they dealt with value of urban site in one case and the melwaram interest in the other case where direct evidence of valuation of the interest acquired was difficult to obtain and observed-

"Whatever may be said with regard to melwaram interest in a zamindari land on a vacant site, it is difficult to accept the current rate of interest on gilt-edged securities as a safe guide to the multiple to be applied to the annual profits on ryotwari lands. The landlord in such cases not only expects to get a return on the capital invested on the land but also something in addition to that as compensation for his trouble in attending to the land and for the risks involved in the cultivation of land. Although the tenants may agree to pay him a fixed rent in money, yet if a full crop is not raised on the land either through failure of rain, or because of pests or for any other reason, it is extremely difficult for the landlord to realise the rent. For these reasons. the landlord naturally expects an appreciably larger return than he would expect from gilt-edged securities, which he leaves in the bank and for the realisation of the interest on which he is put to no trouble whatsoever."

12. Reference may be made to the earlier Bench decision in Sub-Collector, Rajahmundry v. Parthasarathi, 1942-2 Mad LJ 512 = (AIR 1942 Mad 739) wherein it was held that in respect of agricultural lands 30 years' purchase did not give the probable value of the land but that on the facts of that case 20 years' purchase gave the nearest practical approach to the value of the land. The relevant passage dealing with the question of the estimation of the value of the land is as follows:--

"After all, the function of the court in awarding compensation is to ascertain the market value of the land at the date of the notification under S. 4(1). Where definite material is not forthcoming, either in the shape of sales of neighbouring land at or about the date of the notification or otherwise, the court can only proceed to do the best, it can, under the circumstances. In the present case we think we shall not be erring on the wrong side, if we say that the market, value should be fixed by capitalising the net annual income at twenty years' purchase."

13. In Lakshminarasimha Devaru v. Revenue Divisional Officer. 1949 Mad WN 131 = (AIR 1949 Mad 902), a Division Bench of this court agreed with the observations made by the earlier Bench in 1944-1 Mad LJ 142 = (AIR 1944 Mad 271) and adopted the mutiple 20 for fixing the value of the agricultural land by capitalising the income. The Bench was not inclined to accept that the number of years' purchase should be 33-1/3 based on the current rate of interest on the guilt-edged securities. The Supreme Court in State of Kerala v. P. P. Hassan Koya, AIR 1968 SC 1201 has also expressed that 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. On a due consideration of the above decisions, we are of the view that there should be a distinction between house properties and agricultural lands in the method of valuation and the method based on the rate of gilt-edged securities cannot straightway be applied to agricultural lands. With respect we are inclined to adopt the reasoning given in 1944-1 Mad LJ 142 = (AIR 1944 Mad 271), for making such a distinction between agricultural lands and other properties. When we pointed out this distinction, the learned counsel for the claimants stated that the property acquired should be treated as house property as it consisted of certain structures. Having regard to the nature of the structure a tiled farm house, a tiled shed and a few thatched sheds erected for agricultural purposes which the claimant himself has valued at Rs. 20,000 only, we are unable to treat the property acquired which is about 50 acres as house property as desired by the claimants.

14. But it is not possible to be dogmatic regarding the number of years. It has to naturally vary with conditions, nature of the property and the like. It cannot, therefore, be stated that 20 years' purchase should be adopted as a general rule for all agricultural lands irrespective of their nature and normal yield. Even in case of agricultural lands there are properties like registered wet lands with assured supply of water which are likely to fetch more agricultural income than other lands such as dry and garden. It is well known that the market value of wet lands assured supply of water is higher than the value of the garden lands or dry lands. In view of this natural distinction between wet lands, garden lands and dry lands the multiple that has to be adopted for capitalising the income has to vary according to the nature of the agricultural land acquired. If it is a wet land the land the multiple should be lower and in respect of dry lands the multiple should be naturally higher. In this case the lands are said to be garden lands irrigated with well water without any assured supply of water from any Government irrigation source. As such the normal rule of 20 years' purchase which has been adopted for wet lands in 1949 Mad WN 131 = (AIR 1949 Mad 902) cannot be adopted in this case. Taking into account the nature of the lands, the locality in which it is situated and all the surrounding circumstances we feel the multiple of 25 adopted by the court below is correct. Of course the reasoning adopted by the lower court for applying the multiple of 25 on the basis of the gilt-edged securities is obviously incorrect. But for the different reason expressed above by us we adopt the multiple 25 for capitalising the income from the lands acquired. The claimants will therefore be entitled for a compensation capitalising the annual income of Rs. 275 per acre by applying the multiple of 25 in respect of garden lands, that is, at the rate of Rs. 6875.

15. In respect of 1.20 acres of dry lands the trial court has taken Rs. 50 as the annual rent and multiplied it by 25 times. We accept the rate of rent at Rs. 50 per acre but we are inclined to adopt the valuation capitalised at the rate of 271/2 years' purchase. Calculated on that basis the compensation payable for dry lands will be at the rate of Rs. 1375 per acre.

16. Then the further question that has to be considered in this case is as to whether the claimants are entitled to any solatium in addition to the compensation fixed as above. As already stated, the lower court has given 10 per cent solatium as against the claim of the claimants for 15 per cent. The learned counsel for the claimants submitted that normally in land acquisition cases there a statutory solatium of 15 per cent for compulsory acquisition and that there is no reason as to why in this case the Arbitrator should not award solatium at the same rate. The State, however, contended that the claimants are not entitled to any solatium at all as there is no statutory provision for awarding solatium to the claimants in addition to the compensation and that the claimants are entitled only to such sum as representing the true market value of the properties acquired.

The learned counsel for the claimants relies on S. 8(1)(e) of the Madras Requisitioning and Acquisition of Immoveable Property Act, 1956 (Madras Act 42 of 1956) and particularly as the phrase "which appears to him to be just" and urges that notwithstanding the provision in Section 8(3)(a) equating the compensation payable for the acquisition of the property to the price which the requisitioned property would have fetched in the open market if it had remained in the same condition as it was at the time of requisitioning and been sold on the date of acquisition, the court is empowered to ascertain and fix the value which it feels just and that if the court finds that the compensation as arrived at under Section 8(3)(a) is not just and fair it can award an additional sum under Section 8 (1)(e) as solatium for the compulsory nature of the acquisition. According to the learned counsel Section 8(1)(e) gives ample discretion to the Arbitrator to fix such compensation as it finds reasonable and the same need not be restricted to the amount as fixed under Section 8 (3)(a). However, we are not inclined to agree with the above contention. On a conjoint reading of Sections 8(1) and 8(3) it seems to us to be clear that the discretion given to the arbitrator under Section 8(1)(e) is to be controlled by the provisions in Section 8(3)(a) and the fairness and reasonableness of the compensation fixed by the Arbitrator under Section 8 (1)(e) has to be viewed in the light of Section 8 (3). It cannot be said that the Arbitrator, while fixing a just compensation under Section 8(3). If the appellant's contention that he will be entitled to an additional sum as solatium apart from the compensation fixed under Section 8(3) were to be accepted, it would mean that the Arbitrator is not bound by the provisions in Section 8(3) and can award such compensation as he considers just and reasonable. That would result in the Arbitrator acting without any guidelines as to the excess amount to be awarded. In one case he may award 15 per cent of the compensation as solatium and in another case he may award a nominal percentage as solatium. Unless the statute itself guides him as to how the excess compensation has to be fixed, it is not possible for the arbitrator to act except in an arbitrary manner. For the reasons aforesaid we are not willing to accept the contention of the learned counsel for the claimant that the word 'just' occurring in Section 8(1)(e) is capable of such a wide construction as is being put forward for the claimants.

As a matter of fact Section 11 of the Land Acquisition Act more or less uses similar words giving a discretion to the Collector in the fixation of compensation. Section 11 of the Land Acquisition Act empowers the Collector to make an award under his hand and the compensation which in his opinion should be allowed for the land and Sec. 23 of that Act provides the matters to be considered in determining the compensation. It was never contended that the power enabling the Collector to fix such a compensation which in his opinion should be allowed for the land authorised him to award any sum in excess of the compensation arrived at on consideration of the matters set out in Section 23. It is only by the application of Section 23(2) of the Land Acquisition Act, the statutory solatium of 15 per cent is paid in addition to the compensation. But for the statutory provision in Section 23(2), in our view, it is not possible for the Collector in awarding compensation in exercise of his powers under Section 11 of the Land Acquisition Act to add an extra sum if in his opinion it is necessary. For the reasons aforesaid, we are clearly of the view that the claimants are not entitled to any solatium in addition to the compensation fixed under Section 8(3)(a) of the Act.

17. The last question that remains to be considered is as to the rate of interest payable on the enhanced compensation fixed by the arbitrator and by this court. The court below has awarded interest at the rate of 4 per cent and the claimants claim the same at the rate of 6 per cent. The State, on the other hand, contends that no interest is payable as there is no provision in the statute enabling the arbitrator or the court to direct payment of interest on the enhanced compensation. It is the contention of the State that there is no provision in the Madras Act 42 of 1956 similar to S., 28 or S. 34 of the Land Acquisition Act enabling the Arbitrator or the court to fix interest on the compensation. We have already considered this question in A. S. No. 192 of 1964 (Mad) and we have held therein, relying on the decision of the Supreme Court in Satinder Singh v. Umrao Singh,dealt with a case arising under East Punjab

Requisition of Immoveable Property (Temporary Powers) Act, 48 of 1948. There compensation was not paid in time and on the claim for interest for the delayed payment of the compensation the Supreme Court observed that the power to award interest on equitable grounds or under any other provisions of the law is expressly saved by the proviso to Section 1 of the Interest Act.

In the decision in A. S. No. 192 of 1964 (Mad) the Competent Authority and Dt. Revenue Officer, Tiruchi v. T. S. Srinivasa Rao, we considered the rate of interest also and we fixed the rate at 4 per cent as against the rate of 51/2 per cent given by the Arbitrator as we felt that 4 per cent interest is reasonable. Adopting the reasoning given in the said judgment we uphold the view of the lower court that the claimant is entitled to interest only at 4 per cent and not at 6 per cent as claimed.

18. In the result, both the appeals are allowed in part and the compensation shall be recomputed as above. As the parties have not succeeded in sustaining their contentions in entirety, each party is directed to bear its own costs.

19. Appeals partly allowed.


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