1. This is an appeal by the Government against the order of the Sub. ordinate Judge of Trichinopoly on a reference under Section 18, Land Acquisition Act, increasing the compensation awarded by the Land Acquisition Officer from Rs. 8-4-0 per cent. to Rs. 10 on an area of 2.75 acres in the Srirangam Municipality in Town Survey No. 2394. The Land Acquisition Officer based his award upon the sale price of two plots of land situate about a furlong from the land acquired. As he was of opinion that the land sold under those sale deeds was of the same quality as that acquired, he thought that the rate at which the land was sold in those two cases afforded a proper basis for the awarding of compensation in this case. The learned Subordinate Judge, purporting to follow Land Acquisition Officer, Calicut v. Subbarao A.I.R. 1941 Mad. 684 was of opinion that it was not proper to estimate the market value of the land by such a method and that the Land Acquisition Officer should have capitalised the annual profits at 30 years' purchase, as was done in the case he purported to follow. The contention of the Government in appeal is that the basis upon which the Land Acquisition Officer valued the land was the correct one. The claimant has filed a memorandum of cross-objections in this Court on the ground that the learned Judge has not properly estimated the value of paddy, which is necessary for converting the lease amount - which is fixed in kind - into money and has omitted to take account of the fact that in the lease deed relied on a part of the rent was payable in straw, which would work out at about Rs. 3 an acre.
2. The learned Subordinate Judge is clearly wrong in thinking that Land Acquisition Officer, Calicut v. Subbarao A.I.R. 1941 Mad. 684 intended to lay down a rule that even if the value of the land could be directly estimated, that value was irrelevant and that the proper way of calculating the compensation payable was always to multiply the annual profits by thirty. The learned Judges in that case were considering the compensation payable for a vacant site in Calicut and it does not seem that in that case there was any material available whereby the actual value of the site could be directly estimated. Perhaps the learned Sub-ordinate Judge was misled by a passage in the judgment in that case in which it was said:
It is clearly laid down in the case already cited (Collector of Kistna v. Siva Rama Prasad Bahadur A.I.R. 1938 Mad. 33) that it has long been the practice of the Courts in this Presidency to calculate the profits made by investing money in gilt-edged securities.
Section 11, Land Acquisition Act, makes it clear that in awarding compensation the Land Acquisition Officer should first of all estimate the value of the land, and with that value as a basis take into consideration any other special factors and calculate the proper compensation to be paid. It is in fact not denied by the learned advocate for the claimant in this Court that if the value of the land can be directly estimated by the value of the property in the neighbourhood, then that is the best manner of estimating the value of the land acquired, provided that there has been a sale of the land in the neighbourhood at or about the time when the acquisition was notified under Section 4 of the Act.
3. Before considering the direct evidence with regard to the value of the land by comparing it with lands in the neighbourhood, a word or two with regard to the case which the learned Subordinate Judge purported to follow seems necessary. The judgment in Land Acquisition Officer, Calicut v. Subbarao A.I.R. 1941 Mad. 684 was based on two judgments in Collector of Kistna v. Siva Rama Prasad Bahadur A.I.R. 1938 Mad. 33, in which the learned Judges were considering what compensation should be paid for the acquisition of a melwaram interest in a zamindari land. In such a case direct evidence was difficult to obtain; and the learned Judges considered a melwaram interest in land as equivalent to gilt-edged securities. Prior to that decision, 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 twenty unless special circumstances existed which indicated that the value should be calculated as some different multiple of the annual profits. In Land Acquisition Officer, Calicut v. Subbarao A.I.R. 1941 Mad. 684, the learned Judges, as already stated, were considering the value of a site in Calicut. It is not necessary for us to express any view on this departure from past practice; for whatever may be said with regard to a melwaram interest in a zamindari land or 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 land. 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. In a case that has been decided since Land Acquisition Officer, Calicut v. Subbarao A.I.R. 1941 Mad. 684, to which one of us was a party, viz., Sub-Collector, Rajahmundry v. Parthasarathi A.I.R. 1942 Mad. 739, it was held that thirty years' purchase did not give the probable value of the land. It was found on the facts of that case that twenty years' purchase gave the nearest practical approach to the value of the land. A passage from that judgment is worth quoting on the question of the estimation of the value of land:
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 Section 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.
The sales which form the basis of the award of the Land Acquisition Officer were dated 27th January 1936 and 29th January 1936, whereas the date of the notification under Section 4 (1) of the Act was 22nd November 1938. The land sold is situate at about one furlong from the land acquired, but there is no reason to think that the fact that the land sold is situate at a short distance from the land acquired is of any importance. The karnam has given evidence that the land is of the same quality as the land acquired, and there is no other evidence which suggests that this is not correct. It is however argued for the respondent that the difference between the dates of the sales and the notification does not make the sales a safe guide for the estimation of the value of the land on 22nd November 1938, two years and ten months after the sales. That however would depend on the evidence with regard to any changes of value that had taken place between these two dates. The karnam, who gives the only material evidence on this point, says that the price of paddy rose from Rs. 3 per kalam to Rs. 3-8-0 during that interval. We may assume that on account of the rise of price in paddy there was some rise more or less corresponding to it in the value of land. For that it is not difficult however to [make an allowance. After making such an allowance we do not see why the sales of 27th (January 1986 and 29th January 1936 should not be used as a basis for calculating the value of the land acquired. On account of the rise in the price of paddy, we are of opinion that a compensation of Rs. 9-8-0 a cent instead of Rs. 8-4-0 the value of the land in 1936, would be proper. Although some enhancement of the award of the Land Acquisition Officer has been granted by this Court, the appellant has succeeded on the main point argued. The appellant is entitled to his costs, because the learned Subordinate Judge proceeded to estimate the value of the land on an entirely wrong basis. It follows that the memorandum of cross-objections must be dismissed. As the arguments on the memorandum of cross-objections and on the main appeal are one, we pass no separate order as to costs in the memorandum of cross-objections.