Land Acquisition Zone Officer v. Damberudhar Pradhan And Others, Orissa High Court, Judgment, Law, casemine.com

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Case Number

First Appeal No. 70 of 1990*

Attorney(S)

S.C.Roy
N.P.Patnaik
G.C.Tripathi
D.Das
B.Patnaik

Judges

S.C Mohapatra
J.M Mahapatra, JJ.

Acts

LAND ACQUISITION ACT 1894

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Smart Summary

Factual and Procedural Background

The State Government appealed under Section 54 of the Land Acquisition Act, 1894. No cross-objection was filed by the claimants. [1]

Following a 1984 notification under Section 4(1), 2 acres and 44 decimals of the claimants’ agricultural land at village Badsar were compulsorily acquired for the Sambalpur-Talchar Rail Link. The Land Acquisition Collector awarded Rs. 31,340 for the land and Rs. 60 for trees. The claimants accepted the amount under protest and sought a reference under Section 18, asserting that the land value should not be less than Rs. 3,000 per gunth. [2]

The claimants examined two witnesses but produced no documents. The trial court adopted the capitalisation method, calculated the net annual yield, and applied a 20-year purchase multiple. The State challenged that method and multiplier. [3]

Legal Issues Presented

Whether the trial court was justified in using the capitalisation method to determine the market value of the acquired agricultural land. [4][5]
What multiplier should be applied to the net annual yield in determining market value under Section 23(1) of the Act. [6][7][8]

Arguments of the Parties

State Government/Appellant

The Advocate General argued that the claimants had failed to prove that the compensation awarded by the Collector was inadequate. [4]

Claimants

The claimants sought higher compensation, classification of the land, and determination of its market value, asserting a value of at least Rs. 3,000 per gunth. [2]

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
The Dollar Company, Madras v. Collector of Madras, AIR 1975 SC 1670	Recent comparable land value is the best evidence of market value; comparable transactions and expert valuation may also assist.	The Court stated that, in the absence of such evidence, capitalisation of net annual yield may be used. [5]
Rustom Cavasjee Cooper v. Union Of India, AIR 1970 SC 564	Different property types may require different principles and multipliers.	The Court noted that the appropriate multiplier depends on the nature of the property and recorded that a multiplier of eight had been accepted in that case. [6][9][10]
Union of India v. Smt. Shanti Devi, AIR 1983 SC 1190	Net annual income is gross income less cultivation expenses, land revenue, and other outgoings; net return generally reflects the prevailing safe-investment interest rate.	The principle informed the Court’s assessment of net annual yield and multiplier. [11][12]
Mirza Nausherwan Khan v. The Collector (Land Acquisition) Hyderabad, AIR 1974 SC 2247	A multiplier of 27 was adopted.	The case was cited to demonstrate that multipliers vary according to circumstances. [10]
The State of West Bengal v. Shyamapada, AIR 1975 SC 1723	A multiplier of 20 was adopted.	The case formed part of the comparative multiplier authorities. [10]
Collector of Kamrup v. Raj Chandra Sarma, AIR 1975 SC 1905	A multiplier of 25 was adopted.	The case illustrated the range of multipliers applied in valuation cases. [10]
Special Land Acquisition Officer, Davangare v. P. Veerabhadrappa etc., AIR 1984 SC 774	The multiplier depends on economic factors, including security, fluctuation, potential increase, collection costs, and the reasonable rate of return.	The Court relied on the case in rejecting an automatic 20-year rule and in adopting a multiplier appropriate to the land’s circumstances. [10][13][14][15][16][8]
State of Orissa v. Bharat Chandra Nayak, AIR 1955 Orissa 97	A multiplier of 16 was adopted for agricultural land in the State.	The Court relied on this local approach in selecting 16 as the appropriate multiplier. [17]
State of Orissa v. Banamali Babu, ILR (1965) Cut 243	A multiplier of 16 was adopted for agricultural land in the State.	The decision supported the established State practice relied upon by the Court. [17]
Surajmal Nagarmal v. Collector of Puri, ILR (1958) Cut 704	A multiplier of 20 was adopted for land having a building.	The case was distinguished by property type from the agricultural land involved here. [17]
State of Orissa v. Bibhuti Bhusan Singh, AIR 1972 Orissa 195	A multiplier of 20 was adopted for land having a building.	The case was cited to show that the multiplier depends on the nature of the property. [17]
Land Acquisition Officer, Rangali and Bhimkund Irrigation Project, Sambalpur v. Rakuli Charan Sahu	A multiplier of 16 was considered proper for agricultural land acquired in rural areas in 1984.	The Court relied on the decision as support for applying 16 in the present case. [8]
State of Orissa through Collector, Sambalpur v. Balaram Babu	A multiplier of 16 was considered proper for comparable agricultural land acquisitions.	The decision was cited with Rakuli Charan Sahu in support of the selected multiplier. [8]
State of Orissa represented by Land Acquisition Officer, Rangali and Bhimkund Irrigation Project, Deogarh	The adoption of a multiplier of 16 was approved by a Division Bench.	The approval reinforced the Court’s reliance on a multiplier of 16. [8]
Smt. Tribeni Devi v. The Collector, Ranchi, AIR 1972 SC 1417	A court may consider special circumstances in valuation.	The Court considered the land’s potential value from its location in an industrial belt. [8]
Krishna Yachendra Bahadurvaru v. The Special Land Acquisition Officer, City Improvement Trust Board, Bangalore, AIR 1979 SC 869	Estimation may involve imponderables and necessarily include an element of conjecture or guess.	The Court used this principle in estimating the appropriate multiplier in the absence of definite data. [8]

Court's Reasoning and Analysis

The Court rejected the State’s contention that inadequacy of compensation had not been proved because the assessment report lacked considerations relevant to determining market value. It held that the trial court was justified in using the capitalisation method. [4]

The Court identified a hierarchy of valuation approaches: recent acquisition prices, contemporaneous comparable transactions, expert valuation, and, in their absence, capitalisation of net annual yield. The appropriate multiplier varies from case to case. [5]

Both parties accepted the capitalisation method; the dispute concerned only the number of years’ purchase. The Court explained that the multiplier depends on the type of property and economic factors such as security of income, fluctuations, potential increases, collection costs, and prevailing investment returns. [6][9][13][14][15][16]

The trial court’s calculation of net annual yield was supported by oral evidence and was not shown to be erroneous. However, the trial court gave no reason for selecting a 20-year multiplier, and there was no acceptable evidence that the annual yield would increase. [7]

For agricultural land in the State, prior decisions supported a multiplier of 16. Although the land’s location near urban areas could reduce collection expenses and might ordinarily support a lower multiplier, its potential value from being situated in an industrial belt and the gradual increase in land rates justified special consideration. In the absence of definite data, the Court estimated that 16 times the net annual yield was appropriate. [8]

The claimants were also entitled to the statutory benefits permissible under the Act as amended by Act 68 of 1984. [18]

Holding and Implications

Appeal partly allowed. The trial court’s award was set aside, and the trial court was directed to make a fresh award under Section 26 by treating 16 times the net annual yield as the market value under the first clause of Section 23(1). Statutory benefits were to be added in accordance with law, with no order as to costs. [19][20]

The direct effect was a recalculation of compensation using the 16-year multiplier rather than the trial court’s unexplained 20-year multiplier. The opinion does not state broader implications or purport to establish a new precedent.

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Land Acquisition Zone Officer v. Damberudhar Pradhan And Others

S.C Mohapatra, J.:— This is an appeal u/S. 54 of the Land Acquisition Act, 1894 (hereinafter referred to as ‘the Act’) on behalf of the State Government. No cross-objection has been filed by claimants.

2. On basis of notification u/S. 4(1) of the Act published in the year 1984, land of different categories in various villages of various owners were acquired for Sambalpur-Talchar Rail Link. Two acres 44 decimals of cultivable agricultural land belonging to the claimants in village Badsar were acquired compulsorily. In near past, land in the nearby villages were acquired for National Alluminium Company. Rates of various categories of land were fixed by the Land Acquisition Collector for purpose of compensation accordingly. Land Acquisition Collector awarded compensation determining market value of land acquired at Rs. 31,340/- and for trees Rs. 60/-. Claimants received the compensation awarded u/S. 11 of the Act under protest claiming higher compensation and desired a reference to Court u/S. 18 of the Act for determination of classification of the land and its market value. In the petition they asserted that rate would not be less than Rs. 3,000/- per gunth. (1 acre 25 gunths = 100 decimals).

3. Claimants examined only two witnesses in support of their claim for higher compensation. No document was filed. In absence of any other material trial court adopted capitalisation method and determined the net annual yield on the basis of which it adopted multiple of 20 years purchase value of net annual yield and determined the market value. This is grievance of appellant.

4. Although learned Advocate General submitted that claimants have not been able to prove that compensation awarded is low, we are not inclined to accept the same. On perusal of the report of assessment we find that considerations germane to the issue for determination of market value are wanting. Trial Court is justified in adopting the capitalisation method to determine the market value in this case.

5. It is now the settled position that value of the land acquired shortly before the notification u/S. 4(1) of the Act is the best evidence to determine market value. See AIR 1975 SC 1670 (The Dollar Company, Madras v. Collector of Madras). In absence of such material, contemporaneous transaction of lands having similar advantages would give good guidance for determination of market value. Opinion of experts on valuation of land can be adopted as a method for determination of market value. In absence of any of these methods, market value can be determined by capitalising number of years purchase of net annual yield. What would be the multiple on basis of which capitalisation method would be adopted would very from case to case.

6. In this appeal both parties do not dispute the correctness of adopting the method of capitalisation. Only dispute relates to determination of number of years purchase. Considering the case of suitable multiple to be adopted, Supreme Court in the decision reported in AIR 1970 SC 564 (Rustom Cavasjee Cooper v. Union Of India) observed:

“A different principle and a different multiplier may have to be adopted to different kinds of property, such as agricultural land, residential buildings, industrial undertakings etc….”

Nature of determination of net annual yield has been explained in AIR 1983 SC 1190 (Union of India v. Smt. Shanti Devi) by observing:—

“The net annual income from a land is arrived at by deducting from the gross annual income all outgoings such as expenditures on cultivation, land revenue etc. The net return from landed property generally speaking, reflects the prevalent rate of interest on safe money investment.”

7. In AIR 1970 SC 564 (supra), Supreme Court accepted multiple of eight only. In AIR 1974 SC 2247 (Mirza Nausherwan Khan v. The Collector (Land Acquisition) Hyderabad) multiple of 27 was adopted. In AIR 1975 SC 1723 (The State of West Bengal v. Shyamapada), multiplier of twenty was adopted. In AIR 1975 SC 1905 (The Collector of Kamrup v. Raj Chandra Sarma) multiplier of 25 was adopted. In AIR 1983 SC 1190 (Supra) multiplier of 15 was adopted. In AIR 1984 SC 774 (Special Land Acquisition Officer, Davangare v. P. Veerabhadrappa etc. etc.) multiplier of 12 was adopted.

8. In this State, in respect of agricultural land multiplier of 16 has been adopted. See ILR (1956) Cut 113 : (AIR 1955 Orissa 97) (State of Orissa v. Bharat Chandra Nayak) and ILR (1965) Cut 243 (State of Orissa v. Banamali Babu). In respect of land having building, multiplier of 20 was adopted in ILR (1958) Cut, 704 (Surajmal Nagarmal v. Collector of Puri) and in AIR 1972 Orissa 195 (State of Orissa v. Bibhuti Bhusan Singh).

9. In AIR 1984 SC 774 (supra) it has been observed (at p. 777 of AIR):—

“…….In valuing land or an interest in land for purposes of land acquisition proceedings, the rule as to number of years' purchase is not a theoratical or legal rule but depends upon economic factors such as the prevailing rate of interest in money investments. The return which an investor will expect from an investment will depend upon the characteristic of income as compared to that of idle security. The main features are:— (1) Security of the income; (2) fluctuation (3) Chance of increase (4) cost of collection etc. The most difficult and yet the most important and crucial part of the whole exercise is the determination of the reasonable rate of return in respect of investment in various types of properties. Once this rate of return and accordingly the rate of capitalization are determined there is no problem in valuation of the property.”

It was further observed (at p. 780 of AIR):—

“…. Some 20 to 30 years back i.e till the early ‘50s, it was taken as a settled rule of practice that the capitalized value of agricultural lands should be arrived at 20 years' purchase having regard to the rate of interest on gilt-edged securities at five per cent. That rule no longer can be adhered to in view of the changed economic situation…….. A person investing his capital in agricultural lands would ordinarily expect a return of 2% to 3% more than what he could obtain from gilt-edged securities or other forms of safe investment such as fixed deposits in scheduled banks. National Savings Certificates, Unit Trusts et cetera or on blue chips i.e on stocks and shares in the public or private sector which yield a much greater return.”

10. No reason has been given by the trial court why it adopted multiplier of 20 years purchase. There is no scope to interfere with the determination of net annual yield by the trial court which is supported by oral evidence. There is no acceptable evidence that annual yield from the land acquired would have increased. Thus, net annual yield as determined by the trial court would be the basis in this case for determining the market value u/S. 23(1) first clause.

11. Even in respect of acquisition of agricultural land in rural areas in the year 1984 where expenses for collection of investments would be higher, one of us (S.C Mohapatra, J.) in two decisions in F.A 218 of 1986 and batch (Land Acquisition Officer, Rangali and Bhimkund Irrigation Project, Sambalpur v. Rakuli Charan Sahu) decided on 11-11-1987** and F.A 30 of 1989 (State of Orissa through Collector, Sambalpur v. Balaram Babu) decided on 18-2-1991, held that adopting multiple of 16 would be proper. This has been approved by the Division Bench in the decision in F.A 155 of 1986 (State of Orissa represented by Land Acquisition Officer, Rangali and Bhimkund Irrigation Project, Deogarh) decided on 25-4-1989. In this case the land is agricultural land situated near urban areas where expenses for collection would be less as banking facilities are available near at hand. If annual yield of investment is taken to be rate of interest in fixed deposit less than 10 would be the multiple since an amount equal to less than 10 times would give interest equal to net annual yield. Being agricultural land 2 to 3 per cent more even if added would also not be of any assistance to the claimants. However, in AIR 1972 SC 1417 (Smt. Tribeni Devi v. The Collector, Ranchi), it has been held that Court is not precluded from taking into consideration any special consideration. Potential value of the land being in the industrial belt is a special consideration which weighs with us. Besides we can take note of gradual increase in rate of land year to year, though annual yield may not increase. In absence of any definite data, we would have to make an estimate. Estimation in many cases depend largely on evaluation of imponderable and it must necessarily be to some extent a matter of conjuncture or guess as has been held in AIR 1979 SC 869 (Krishna Yachendra Bahadurvaru v. The Special Land Acquisition Officer, City Improvement Trust Board, Bangalore), we feel, 16 times the net annual yield would be the proper multimate to be adopted in this case.

12. It goes without saying that claimants are entitled to permissible statutory benefits under the Act as amended by Act 68 of 1984.

13. In the result, appeal is allowed in part. Award is set aside and trial Court is directed to make an award under S. 26 of the Act taking 16 times net annual yield to be the market value under S. 23(1) first clause. Other statutory benefits are to be added in accordance with law. No costs.

J.M Mahapatra, J.:— 14. I agree.

Appeal partly allowed.

Land Acquisition Zone Officer v. Damberudhar Pradhan And Others

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

State Government/Appellant

Claimants

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Land Acquisition Zone Officer v. Damberudhar Pradhan And Others

Comments