S. Velu Pillai, J.:— These civil revision petitions which have been referred to a Division Bench, and others which are posted before us, have arisen out of orders passed by District Judges under Section 10 of the Indian Telegraph Act, 1885, settling the compensation payable under S. 10 proviso (d) of that Act, for damage caused to owners of immovable properties, in taking electric supply lines across their properties, in exercise of the powers conferred by Section 51 of the Indian Electricity Act, 1910, or by Section 42 of the Electricity (Supply) Act, 1948.
2. The Kerala State Electricity Board, to be referred to as the Board, which was Constituted on April, 1957, and in whom, the liability to pay compensation is now vested, was not a party to some of these civil revision petitions. At the time they were referred, Shri K.V Suryanarayana Iyer, appearing for the Board agreed, that it may be impleaded as a party, and accordingly the referring order itself directed its impleadment. At the hearing of these and the other civil revision petitions now before us, Shri K.V Suryanarayana Iyer, appeared for the Board and we hereby order, that the Board be recorded as a party respondent in all the civil revision petitions which are before us, and in which it is not already a party. We also ordered notice on these revision petitions to the learned Advocate General, and the learned Government Pleader has appeared for him. These and other civil revision petitions postal before us, raise a common question as to the principles to be adopted in settling compensation payable under Section 10 proviso (d) of the Indian Telegraph Act, 1885. In this judgment, we record our answer to the question raised, by laying down certain principles.
3. The relevant part of Section 51 of the Indian Electricity Act, 1910, may be extracted as follows:—
“…the State Government may, by order in writing, for the placing of electric supply-lines, appliances and apparatus for the transmission of energy………confer upon any public officer, licensee or any other person engaged in the business of supplying energy to the public under this Act, subject to such conditions and restrictions if any as the State Government may think fit to impose and to the provisions of the Indian Telegraph Act, 1885, any of the powers which the telegraph-authority possesses under that Act, with respect to the placing of telegraph-lines and posts for the purposes of a telegraph established or maintained by the Government or to be so established or maintained.”
4. Though in the large majority of the cases before us, the powers referred to above were exercised, before the Board was constituted, it is useful to quote Section 42 of the Electricity (Supply) Act, 1948 also, as in some of the cases, they were exercised by the Board itself. The material part of Section 42 of the Electricity (Supply) Act, 1948 is as follows:
“…the Board shall have, for placing of any wires, poles, wall-brackets, stays, apparatus and appliances for the transmission and distribution of electricity……all the powers which the telegraph authority possesses under Part III of the Indian Telegraph Act, 1885 with regard to a telegraph established or maintained by the Government or to be so established or maintained.”
5. These enactments have thus defined the powers to be exercised, in terms of the provision in the Indian Telegraph Act, 1885, which is S. 10 proviso (d), which reads:—
6. Section 10. “The telegraph authority may, from time to time, place and maintain a telegraph line under, over, along or across, and posts in or upon any immovable property:
7. Provided that………………
(d) in the exercise of the powers conferred by this section, the telegraph authority shall do as little damage as possible, and when it has exercised those powers in respect of any property other than that referred to in clause (c), shall pay full compensation to all persons interested for any damage sustained by them by reason of the exercise of those powers.”
8. Section 16 of the same Act, under which the orders sought to be revised have been passed, enables a party to move the District Judge for adjudication as to the sufficiency of the compensation payable under S. 10 proviso (d).
9. The lands through which the electric supply lines have been taken, are all agricultural lands and in taking them, fruit bearing trees, such as cocoanut, arecanut and jack trees, yielding trees such as rubber trees, and also pepper vines, apart from other non-bearing or non-yieding trees, were destroyed; the destruction of such fruit bearing or yielding trees and pepper vines, constitutes the main item of damage for which compensation is payable.
10. In certain cases, other damage caused to the lands by placing the supply lines across them, had also been set up and in one or two instances, damage had also been awarded, though on a nominal basis. For determining the compensation payable for the destruction of fruit bearing or yielding trees, the District Judges have adopted three methods. One was to fix compensation at 8 ⅓ years' purchase of the annual net yield, following the time-honoured method prevalent in Travancore area for settling compensation payable for improvements, the second, to capitalise the annual net yield at 20 years' purchase, as has been the practice in the Cochin area for awarding compensation for improvements and for the acquisition of lands under the Land Acquisition Act and in between was the third, to capitalise at 15 years' purchase.
11. The learned counsel for the Board took the stand, that all the three methods are faulty, wrong in principle and ought not to be followed; according to him, the proper and the only method for estimating such damage, is to ascertain the diminution in the market value, that the property, as a unit, has suffered, in consequence of the damage; in other words, the difference in the market value of the property before and after the damage was caused, can alone represent the compensation payable.
12. He did not agree, that capitalisation at 8 ⅓ or at 15 years' purchase, is a fair method and aid not rely on capitalisation at 20 years' purchase even, except as furnishing in index as to the reasonable-interest, which the owner might expect on his investment. He maintained, that the Wily alternative principle which may be followed in the case-of trees which are subject to natural decay, is to ascertain the present worth or value at a fair rate of interest, of an annuity which represents the net annual rental, for such number of years as the tree would be productive in future.
13. The learned Government Pleader, while agreeing that capitalisation at 8 ⅓ years' purchase is not fair, also urged, that the market value test formulated above is the valid test and no other. But counsel for the claimants have contended for the position, that damage caused to the trees is ascertainable easily and need not be made to depend on the market value before and after, and pleaded for the rule of capitalisation at 20 years' purchase, regardless of any principle for ascertaining the present worth; but they agreed, that the market value test is useful, when other items of damage are involved, which affect the property or its potential value, and are more readily ascertainable, by applying it. Our endeavour is to lay down, what is the fair method to be followed in such cases.
14. Section 10 proviso (d) of the Indian Telegraph Act, 1885 which has been extracted above provides, that full compensation shall be paid for any damage sustained. It can hardly admit of any doubt, particularly in the case of an agricultural land, that the destruction of a fruit bearing or yielding or income producing tree standing on it, deprives the owner of its usufruct for the period during which it would be productive, and causes damage to that extent; nor is it possible to deny, that it is a specific item of damage which can be valued and assessed, though in a given case, it may be combined with other damage.
15. Compensation, as defined by the Supreme-Court in State of West Bengal v. Mrs. Bella Banerjee, AIR 1954 SC 170 at p. 172, though in a different context, is the “just equivalent of what the owner has been deprived, of”. He may have been deprived of many other things by the electricity service lines being taken across his land; but the deprivation of the usufruct of the tree has to be compensated for. For this, in the generality of cases, the simplest and the straightforward course is to ascertain the yield of the tree during the period of its productivity in future.
16. In such cases, the market value is not a sensitive gauge which can be relied upon to register every small diminution in it. For example, the loss or destruction of a tree in urban land, in which the emphasis is more on its utility or its potential value as a house or building site, may not affect its market value so too perhaps in the case of, say an extensive agricultural land, the loss of one or two trees may not affect its market value, in the sense, of what a willing purchaser would be prepared to offer to a willing vendor.
17. Yet, under Sec. 10 proviso (d), there is no reason why the Board may cause such damage, and yet the owner shall go without any remedy. Such a method of ascertaining the yield is obviously inapplicable, where other kinds of damages consequent on the taking of the electric supply line, are in issue. We do not propose to decide what these are, but we may observe that in certain cases, the market value test may yield satisfactory results and can and ought to be adopted.
18. The matter may be examined also from another point of view. For ascertaining the market value, especially of agricultural lands with fruit bearing trees, it is a recognised method to capitalise the net annual yield. Applying this method, the market value after the destruction of a fruit bearing tree, must necessarily be less than what it was before, and the difference can easily be ascertained. In such cases, whichever test is adopted, the same result can be reached.
19. It follows therefore, that the contention of the learned counsel for the Board, that the difference in the market value, can alone furnish a test in all cases, irrespective of the nature of the damage caused or of other considerations, cannot be accepted. In assessing damage on account of the destruction of fruit beaning or yielding trees, it is a permissible and often a simple method to base it on the usufruct of which the owner has been deprived, without embarking upon an enquiry as to the market value of the land before and after the damage was caused. Bui this does not preclude the Court, from applying the market value test, in appropriate cases.
20. We are fortified by the following observations in 61 Harward Law Review 161:—
“The possibility of diverse results from the use of the diminution or cost-of-repair test for determining damages becomes pronounced in cases of injury to improvements to land. Where, as is often the situation, demand for land is not related to the existence of the improvements, injury to them may cause no decrease in the over-all value. Few Courts would be likely to deny any right of recovery; instead of applying a test of over-all diminution. Courts generally will evaluate separately the damage to improvements. While refusing to value improvements separately might tend to cause the land to be used for those purposes for which it is economically best suited — since such purposes determine the market price, and thereby the amount of diminution — such refusal would be inconsistent with our individualistic ideas of property rights……… Probably the best over-all results are reached by those Courts using a flexible approach by which in any particular case the measure which most fairly compensates plaintiff for his loss is used.”
21. We do not understand the passages in 10 Hals-bury's Laws of England 161 and 11 Halsbury's Laws of England 267, on which some reliance was placed, to lay down an invariable rule, that the depreciation in the market value is the only test for assessing damages. Gibson v. Norfolk County Council, (1941) 1 All ER 252, which accepted this test, turned on the application of a specific statutory provision in restriction of Ribbon Development Act, 1935, Sec. 9 sub-section (4) of which provided, that compensation shall be equal to the difference in the market value, when the piece of land is subject to the restriction and when it is not so Krishna Lal Saha v. Radhika Mohan Das, AIR 1931 Cal 462 and Ayodharamayya v. Venkata Krishnam Naidu, AIR 1952 Mad 656, were decided on a different basis; in the former, damage was by the excavation of a tank which caused the land to subside, and in the latter, the land was dug, out of the earth taken bricks were made and a claim by way of compensation made for the value of the bricks, was negatived. The learned counsel for the Board also drew our attention to Hussain Baksh v. Secy. of State, AIR 1935 Lah 982, which was decided under Section 16 of the Indian Telegraph Act, 1885, but in which, as appears from the judgment, the demolition of the building and damage to crops, were recognised as an item of damage for which compensation was to be paid for and the only question considered was, whether the presence of the aerial lines which rendered the site useless for building purposes, might not also constitute damage. The Court observed that
“this would depend on the circumstances existing at the time when the line was laid and can best be determined by considering whether there would have been any loss on the sale of the land from this cause if the land had been sold at that time.”
22. We do not think, that our conclusion is in any way affected by these pronouncements or observations.
23. On the pleadings and, on the materials on record, the cases before us are not all fit subject for the application of the market value test. What then is the mode of computation on the yield basis? The first step is to ascertain, what rate of interest on capital investment, the annual net yield may be taken to represent. In Travancore area, from very early times, for assessing the value of improvements, a rule of Capitalisation at 8 ⅓ years' purchase was being followed, on the basis, that interest at 12 per cent per annum on the capital was a fair return on the investment.
24. No direct decision, as to how far this rule was adopted, in cases arising under the Land Acquisition Act, was brought to our notice, apart from the observations in Sirkar v. Narayana Iyer, 30 Trav LJ 324 (FB), though we are aware, that in several cases under that Act, bearing trees were valued on this principle. In the Cochin area, however, in Diwan of Cochin v. Anantha Shenoi Krishna Shenoy, 12 Cochin 128, capitalisation at 20 years' purchase was regarded as not “an uncommon or necessarily unreasonable standard of their value as such ‘arazcha’ trees”.
25. Under Article 278(4)(c) of the General Instructions relating to acquisition of lands for public purposes (Cochin Land Revenue Manual, Revised Edition 1105, page 166) Compensation for trees other than cocoanut and arecanut trees, is payable according to their timber value, in addition to ten times the value of the annual usufruct, while bearing cocoanut and arecanut trees have to be valued, at 20 times the net annual yield.
26. In Shunmuga Velayudha Mudaliar v. Collector of Tanjore, AIR 1926 Mad 945 (2), cocoanut trees were valued at ten years' purchase, but no de finite principle was evolved. That case was no followed by the Andhra High Court in Nagaswar Rao v. Special Deputy Collector, Land Acquisition Bapatla, AIR 1959 Andh Pra 52. There are cases in which mango trees have been valued at 20 years' purchase. In State Of Madras… v. Aissabi…., 1957 Ker LT 1076 : (AIR 1958 Kerala 67), though the actual decision was rested on other grounds, this Court took the view, that in the case of agricultural lands, Capitalisation at 20 years' purchase may be regarded as reasonable.
27. We may at once point out, that we are not here concerned with an acquisition under the Land Acquisition Act, and do not, by this judgment, intend to lay down or unsettle any principle which has established itself in such cases. At the same time, we are free to formulate principles, which we consider just and proper in cases like the present, under the concerned enactments, where most often, bearing trees have to be compensated for, apart from the land on which they stand as on land acquisition.
28. We think, that the rule of capitalisation at 8 ⅓ years' purchase, based as it is, on 12 per cent interest, and formulated decades ago, ought not to be followed in these cases and at the present time. Having regard to the condition of the money market and the value of the security afforded by investment on land, which as is generally held, is inferior to what are called gilt-edged securities, we venture to think, that a rate of interest at 5 per cent per annum may be considered to be reasonable and fair, from all points of view.
29. We also note, that the rate of interest sanctioned by the provisions of the Kerala Agriculturists Debt Relief Act, 1958 (Act 31 of 1958) is 5 per cent. In fixing the compensation at 20 years' purchase, one of the District Judges has applied, in entirety, the provisions of the Travancore-Cochin Compensation for Tenants Improvements Act, 1956 (Act 10 of 1956), which are substantially the same, as those of the Kerala Compensation for Tenants Improvements Act, 1958 (Act 29 of 1958).
30. While we may look for guidance or assistance to these provisions, in our attempt to derive a principle, we cannot apply them bodily to a wholly different situation, which they were not intended to meet. The learned counsel for the Board, then pressed for our acceptance, a principle, which, from the cases cited before us, does not appear to have so far received judicial recognition where valuation of trees is concerned, but nevertheless in spite of its novelty, strikes us, as sound and reasonable.
31. It has to be observed, that the rule of capitalisation as followed and applied, fails to take note of what is so obvious, that the tree would cease to be productive after a certain number of years and yet, what is paid, amounts to investment of capital, yielding what is the equivalent of the net annual rental, in perpetuity. This was indicated in a very early case decided by the Travancore High Court to which our attention was invited; we refer to the following observations in Issakki Issakki v. Bheeman Kulasekharan, 10 TLR 7 at 11:
“It is to be borne in mind that the trees, unlike the land on which they grow, are not everlasting and a mode of valuation which has been found by experience to answer the purposes of fixing the value of landed property, is not necessarily suited for the purpose of fixing the capital value of the trees alone.”
32. To give an illustration, under the rule of capitalisation, a bearing tree with 30 years of productive life before it, would have the same value as a tree of the same yield, with but three more years only. This is certainly anomalous and was conceded to be so, by the learned counsel appearing for one of the claimants. It was contended for the Board, that compensation payable for bearing or yielding trees ought not to be the capitalised value, but only the present value of an annuity at a fair rate of interest, which represents the annual net yield. In AIR 1959 Andh Pra 52, cited above the Andhra Pradesh High Court adopted as the multiple for capitalisation, the number of years, that the tree was expected to bear fruit in future. This is not capitalisation, as it ignores the rate of interest which is the true basis of capitalisation, but the case is important, as it lays emphasis on the future productive life of the tree; at the same time, we cannot accept the multiple chosen as valid, for it gives to the owner of the tree, immediately and in a lump, and without any deduction, what represents the usufruct for the entire period during which the tree would have borne fruit, which he cannot justly claim. The learned counsel appearing for the Board, and counsel for parties in these cases, did not themselves Contend for such a principle. The only other principle, which can be accepted, is to ascertain the present value of an annuity, which represents a fair return on the amount at 5 per cent interest per annum. The idea is nothing new, and was recognised in a very early enactment, Malabar Compensation for Tenants' Improvements Act, 1899 (Madras Act 1 of 1900), Sec. 9 of which provides, that:—
“When the improvement …… has caused an increase in the value of the annual net produce of the holding, the Court shall determine, as nearly as may be, the average net money value of such increase and the number of years during which such increase may reasonably be expected to continue, and shall then ascertain the present value, at 6 per cent of an annuity equal to such money value for such number of years…………”
33. For giving effect to this, a learned commentator, Kozhikot Madhavan Nair, has furnished a table in his work on the Malabar District Compensation for Improvements, but the present value is calculated at 6 per cent interest for different periods of time, ranging from one year to 50 years. But in Park on Principles and Practice of Valuations, more comprehensive tables are furnished, which give the present value of Re. 1 per annum for various years at different rates of interest and it is easy to ascertain, the present value in a given case. Under Act 10 of 1956 and Act 29 of 1958, referred to above, Enough there is no specific provision for ascertaining the present value as in Madras Act 1 of 1900, Sec. 7 in each of the enactments, Explanation 2 provides, that:—
“In determining the net value of the increase, regard shall also be had to the condition of the improvement and probable duration of its effect………”.
34. In the absence of any other method, we think, that if regard is to be had “to the condition of the improvement and probable duration of its effects.” the approach must be to the principle of present worth. We have referred to these enactments, not as having any binding effect on the decision of these cases, but only as indicating, that the principle which we propose to lay down, is nothing strange or novel, though no doubt, it may not be familiar to those who are now engaged in the task of valuation, and a table as in Park's book or in any other book giving it, would be helpful. Aggarwala in his commentaries on Compulsory Acquisition of Land, 1950 Edition at page 259, has worked out an example as follows:—
“Suppose, over a period of years the owner has received annually as an average, ‘X’ rupees……. has incurred by way of annual expenditure ‘a’ rupees, and his interest and depreciation on his plant amount to V. Then ‘X — (a+b)’ will be the net return. The average future fruit bearing life of all the trees is say ‘c’ Find by the tables for ‘c’ years the present value of Re. 1 and multiply the net return by his Y.P …………….”
35. The same author at page 257, when dealing with land having bearing trees, has enumerated the factors to be considered, such as “the age of the different trees and their average economic life, the most economical number of which kind of tree to plant per acre”, etc. and quoted from Mirams' Valuation of Real Property, that “the average life and age of the trees is required to be known, as the period of future bearing is fundamental to the calculations.” The productive life of various categories of fruit bearing trees, as a matter of common knowledge and experience, though subject to variations depending on local conditions, can be estimated, as also the age of a particular tree at the time of its destruction. We therefore think, that apart from other damage which may have been caused, it is a safe rule to lay down, that compensation payable on the destruction of a bearing tree, is the present value of an annuity which gives a return at the rate of 5 per cent per annum.
36. Apart from lack of practice and familiarity, we do not conceive any serious difficulty in applying the rule as stated above, to fruit bearing trees such a cocoanut, arecanut, jack trees, etc. With respect to rubber trees and pepper vines, though for ascertaining the value of improvement and for the purposes of the Land Acquisition Act, a different rule of capitalisation is in vogue, none of the counsel pointed out any fallacy in applying the rule of present worth at 5 per cent per annum.
37. The duration of productive life being smaller, in their case, the multiple for capitalisation will be proportionately lower. We therefore think, that the same rule may apply to rubber trees and pepper vines. With regard to coffee plants, counsel were not able to furnish adequate data and we do not propose to lay down in this case a principle applicable to them.
38. As observed, a third view was taken in some of the cases by one of the District Judges, by capitalising at 15 years' purchase, on the basis, that whereas under the Statutes relating to compensation for tenants improvements, where the rule of capitalisation at 20 years' purchase is followed, the land does not belong to the tenant to whom compensation is paid, in the case of an owner of land whose tree is destroyed, the land is available for him. This in our opinion, cannot make any difference in the rule, and none of the learned counsel appearing in these cases was prepared to support this proposition. We need not pursue the matter, as we are laying down a different principle of valuation. To summarise our conclusions, the market value test is not the only test for assessing damages, and in the case of damage by destruction of fruit bearing or yielding trees, such as cocoanut, arecanut, jack and rubber trees and of pepper vines, the compensation payable may be deemed to be the present worth ascertained as above. We shall now dispose of the cases one by one but in doing so, we are confronted with one difficulty, that the necessary data are lacking, as to the age and the duration, of the productive life of the trees and pepper vines, and are no longer available.
EF/C.
39. Order accordingly.