Holding

The High Court’s enhancement of compensation to Rs 22,000 per acre is not illegal and is adequate, just and reasonable, so the appeals are dismissed.

Summary

The State of Andhra Pradesh acquired 385.46 acres of land for a reservoir project under Section 4(1) of the Land Acquisition Act, 1894. The Land Acquisition Officer initially awarded Rs 1,026 per acre, which the claimants contested, leading the Reference Court to award Rs 6,000 per acre on a yield basis using a 20‑year multiplier. Unsatisfied, the claimants appealed to the High Court, which enhanced compensation to Rs 22,000 per acre, citing prior compensation levels and a 10% escalation, but gave no detailed reasons and did not deduct cultivation expenses. The Land Acquisition Officer appealed to the Supreme Court, arguing that the multiplier was excessive, cultivation costs should be deducted, and the High Court’s enhancement was unsupported. The Supreme Court held that, despite the lack of detailed reasoning and the higher multiplier, the High Court’s award was not illegal, was adequate, just and reasonable, and therefore dismissed the appeals. The Court emphasized that market value may be determined on a yield basis and that the multiplier of 20, though higher than the usual 10, could be justified by the specific circumstances.

Issues considered

Whether the High Court erred in not deducting cultivation expenses from the compensation awarded.
Whether the High Court erred in enhancing compensation without providing adequate reasons.
Whether a multiplier of 20 years for capitalising agricultural income is permissible under the Land Acquisition Act.
Whether the method of determining market value on a yield basis with the applied multiplier is appropriate.

Legislation cited

Land Acquisition Act, 1894s. 18, s. 4(1), s. 54

Subjects

Land acquisitionCompensationMarket valueYield basisMultiplierSection 4Section 18Section 54Supreme CourtAndhra Pradesh

Judgment

,

\ LAND ACQUISITION OFFICER, A.P. A~
v.
KAMANDANA RAMAKRISHNA RAO AND ANR.

FEBRUARY 7, 2007

[C.K. THAKKER AND LOKESHWAR SINGH PANTA, JJ.] B

Land Acquisition:
"'
Land Acquisition Act, 1894; ss. 4(1) and 18/Notification dated
3.01.1980 issued thereunder: c
Acquisition of land by State Government for a project-Compensation-
Enhancement of-Reference Court enhanced the compensation on yield basis
of crops by applying multiplier of 20 years capitalisation-High Court
enhanced it further on the basis of market value of Land--On appeal, Held:
·. High Court did not commit any illegality in not deducting the amount of
D
.... expenses for cultivation from compensation so enhanced as the claimant was
-(
entitled to compensation at a higher rate than what has been awarded after
enhancement-,-Though High Court did not indicate any reason while
enhancing the rate of compensation but the pith and substance of the order
cannot be found fault with-Jn the facts and circumstances of the case, rate E
of award of compensation so enhanced, is adequate, just and reasonable and
not excessive.

State of Andhra Pradesh issued a Notification under Section 4(1) of the
Land Acquisition Act, 1894 for the acquisition of lands admeasuring 385.46
Acres, which include tands of claimant-respondent, for submersion of a F
Reservior Scheme under a Project. The Land Acquisition Officer awarded
compensation at the rate of Rs.1026/- per acre to the claimants. The claimants
received the amount of compensation under protest and submitted applications
under Section 18 of the Act requesting the Land Acquisition Officer to refer
the matter to Court. The Reference Court awarded compensation at the rate
G
of Rs.6000/- per acre. The claimants, being still dissatisfied with the
'~
.,
r enhancement of the amount of compensation awarded by the Reference Court,
filed two separate appeals under Section 54 of the Act before the High Court.
The High Court observed that for similar lands acquired for the same purpose

327 H
328 SUPREME COURT REPORTS [2007] 2 S.C.R.

A prior to the issue of the Notification in the present cases, the compensation ,_.
was fixed at Rs. 20,000/- per acre. The High Court awarded the amount of
compensation at the rate of Rs. 22,000/- per acre to the claimant. Hence the
present appeals.

Appellant contended that the High Court has committed an error of law
B in not deducting amount towards cost of cultivation and no reasons whatsoever
are given by the High Court in its order for enhancement of the compensation
from Rs. 6,000/- per acre to Rs. 22,000/- per acre; and that the Reference
Court had erroneously applied multiplier of20 for capitalizing the income. )-

Such multiplier should not be more than 10.
c Dismissing the appeals, the Court

HELD:l.1. In the facts and circumstances, the ratio laid down in Rama
Rana's 1:ase would not strictly apply in the present cases in as much as in
fruit growing trees, expenses would not be 50% as held by this Court.
Moreover, the High Court also considered an important fact that the
D
claimants-respondents would be entitled to much more than Rs. 25,000/- per
acre on yield-basis but has fixed the market value of the land at the rate of >-
Rs. 22,000/- per acre. It, therefore, cannot be said that by not deducting the ~

amount of expenses for cultivation, the High Court had committed any illegality.
[Para 13] [332-D-E]
E
State a/Gujarat v. Rama Rana, [1987] 2 SCC 693, held in applicable.

1.2. The High Court committed no error of law or any perversity in
awarding the amount of compensation at the rate of Rs. 22,000/- per acre to
the claimants-respondents. It is no doubt true that the High Court has not
F given adequate and proper reasons in its order, but the pith and substance of .
the order cannot be found to be faulty. [Para 18] [333-F]

Special Land Acquisition Officer, Bangalore v. T. AdinaraYan Setty,
[1959) Suppl. 1 SCR 404:AIR (1959) SC 429; Smt. Tribeni Devi v. Collector
of Ranchi, (1972) 1 SCC 480; Special Land Acquisition, Davangere v. P.
G Veerabhadarappa & Ors., (1984) 2 SCC 120; Special Land Acquisition Officer
v. Virupax Shankar Nadagouda, (1996] 6 SCC 124; Krishi Utpadan Mandi
,i
Samiti v. Malik Sartaj Wali Khan & Anr., (2001] 10 SCC 660 and Assistant
Commissioner-cum-Land Acquisition Officer, Bellary v. S. T. Pompanna Setty,
[2005) 9 sec 662, relied on.
H
LAND ACQUISITION OFFICER, A.P. "· KAMANDANA RAMAKRISHNA RAO (LOKESHW AR SINGH PANT A, J.] 329

1.3. The computation of compensation for determination of market value A
\ may be carried out on yield basis, the multiplier of20 adopted by the Reference
Court in the cases on hand is on the higher side and contrary to the well-
settled proposition of law as laid down by this Court However, this Court is
not precluded from taking into consideration other circumstances such as,
the potentiality and utility of the land acquired and awarding just compensation
to the claimants who are deprived of their lands and other property. Keeping B
in view the facts and circumstances of these cases, the amount ofcompensation
awarded by the High Court at the rate of Rs. 22,000/- per acre to the claimants-
'A
respondents is adequate, just and reasonable and cannot be said to be excessive
or unwarranted. [Para 20) (334-G-H; 335-A)

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 6489-6490 of
c
2000..

From the Final Judgment/Order dated 11.11.1998 of the High Court of
Andhra Pradesh at Hyderabad in Appeal No. 1999/1996 andA.S. No. 31/1998.
D
Rajnish Singh, Manoj Saxena, Rahul Shukla and T.V. George for the
Appellant.
.....
-< Y. Raja Gopala Rao, Y. Ramesh, Y. Vaihni, RV. Naren, V. Sridhar Reddy
andd V. N. Raghupathy for the Respondents.
E
The Judgment of the Court was delivered by

LOKESHWAR SINGH PANTA, J. I. These two appeals are directed
against a common order dated 11.11.1998 passed by the High Court of
Judicature, Andhra Pradesh at Hyderabad in AS No.1999/96 and AS No. 31/
98. By the impugned order, the High Court enhanced the amount of F
-I
compensation to Rs. 22,000/- per acre as against Rs. 6,000/- awarded by the
learned Subordinate Judge, Eluru, West Godavari District.

2. These appeals are taken up and heard together and are decided by
this common judgment.
G
3. The facts, in brief, are that the State of Andhra Pradesh issued a
,.~,
Notification dated 03.01.1980 under Section 4(1) of the Land Acquisition Act,
1894 (hereinafter referred to as 'the Act') for the acquisition of lands
admeasuring Ac 385.46 in Borrampalem village of Chintalapudi Taluk for
foreshore submersion of Yerakalva Reservoir Scheme under Vengalaraya Sagar
H
330 SUPREME COURT REPORTS [2007] 2 S.C.R.

A Project. Land of the claimants-respondents to the extent of Ac 9.53 each was
acquired for the said purpose. After completion of the proceedings under the
Act and after observing all formalities, the Land Acquisition Officer awarded
compensation at the rate of Rs. I 026/- per acre to the claimantsrespondents
vide his Award dated 18.05.1984. The claimants-respondents received the
amount of compensation under protest and submitted separate applications
B under Section 18 of the Act requesting the Land Acquisition Officer to refer
the matter to the Court. The matter was accordingly referred to the Court of
the learned Subordinate Judge, Eluru. The Reference Court observed that the
Land Acquisition Officer had not considered the potentiality of the acquired
land with other lands of similar quality and potentiality. However, taking into
C consideration the trend in the increase of the prices of the lands, compensation
is awarded at the rate of Rs. 300/- per acre on yield basis of the crops and
multiplier of 20 years capitalization was applied and an amount of Rs.6000/-
per acre has been awarded to the claimants-respondents. The Court also
found that there were no fruit-bearing trees on the acquired lands.

D 4. The claimants-respondents, being still dissatisfied with the
enhancement of the amount of compensation awarded by the Reference
Court, filed two separate appeals under Section 54 of the Act before the High
Court.
)

5. The High Court has come to the conclusion that the Reference Court
E did not adopt the correct procedure in determining the compensation; as the
lands are situated in the important area of West Godavari District, for which
the compensation ought to have been not less than Rs. 25,000/- per acre. The
High Court observed that for similar lands acquired for the same purpose prior
to the issue of the Notification under Section 4 of the Act in the present
p cases, the compensation was fixed at Rs. 20,000/- per acre. If that is taken into
consideration as the basis for giving I 0% escalation, the compensation will
be at Rs. 24,000/- per acre. However, the High Court awarded the amount of
compensation at the rate of Rs. 22,000/- per acre to the claimants-respondents,
besides other benefits as prescribed under the law.

G 6. The Land Acquisition Officer, being aggrieved against the order of
the High Court, has filed these appeals.

7. We have heard learned counsel for the parties. The learned counsel
for the appellant raised two contentions. Firstly, he submitted that the High
Court has committed an error of law in not deducting amount towards cost
H
LAND ACQUISITION OFFICER. A.P. •·. KAMANDANA RAMAKRISHNA RAO [LOKESHWAR SINGH PANTA, J.J33 l

of cultivation and no reasons whatsoever are given by the High Court in its A
order for enhancement of the compensation from Rs. 6,000/- per acre to
Rs. 22,000/- per acre. Secondly, it was contended that the Reference Court had
erroneously applied multiplier of20 for capitalizing the income. Such multiplier
should not be more than I0. On both these grounds, therefore, according to
the learned counsel for the appellant, the impugned order is liable to be set B
aside and the order passed by the Land Acquisition Officer deserves to be
restored.

8. Learned counsel for the claimants-respondents, on the other hand,
submitted that having considered the rival contentions of the parties and
keeping in view the evidence on record, the High Court awarded just and C
reasonable amount of compensation to the claimants-respondents. The present
appeals, therefore, deserve to be dismissed.

9. Having given our careful consideration to the submissions of the
learned counsel for the parties and after having gone through the material on
record, and having considered the relev:::nt decisions of this Court, we are of D
the view that the appeals deserve to be dismissed.

10. So far as the first point is concerned, the learned counsel for the
appellant re lie~ upon a decision of this Court in State of Gujarat v. Rama
Rana, (1987] 2 SCC 693. In that case, compensation was awarded to the
claimant on yield basis. There was no' sufficient evidence as to the income E
from agriculture and the Reference Court noticed that the witnesses exaggerated
the yield. In the circumstances, the Reference Court determined the market
value after deducting 1/3rd towards cultivation expenses and awarded
compensation on that basis. The High Court dismissed the appeal and
confirmed the order. The State approached this Court. Allowing the appeal F
and reducing the amount of compensation, this Court observed that it is
common knowledge that expenditure is involved in raising and harvesting the
crop and on an average, 50% of the value of the crop realized would be spent
towards cultivation expenses. Deduction of 1/3rd, in the circumstances, was
improper in determining the compensation of the land on the basis of yield. G
The Court also applied multiplier of I 0.

11. Learned counsel for the appellant submitted that in the instant
cases, no deduction whatsoever has been made by the Reference Court or by
the High Court. It was submitted that only on the basis of yield and gross
income, the Reference Court granted compensation to the claimants, which H
332 SUPREME COURT REPORTS [2007) 2 S.C.R.

A was enhanced by the High Court without giving any plausible and tenable
reasons. He, therefore, submitted that the Award deserves interference. r

12. Learned counsel for the claimants-respondents, on the other hand,
submitted that the decision in Rama Rana's case (supra) does not apply to
the facts of these cases. In the present matters, upon some portion of the
B acquired land cashew nut bearing trees were planted and in the rest of the
land, different variety of crops were grown. It is in the evidence that the trees
were sufficiently old and grown up and were giving fruits and it has been
deposed by the claimants-respondents in their evidence. Thus, there was
evidence on record to that effect. In the circumstances, there was no question
C of deduction of any amount towards expenses and the order passed by the
High Court cannot be said to be incorrect.

13. In the facts and circumstances, in our opinion, the ratio laid down
in Rama Rana's case (supra) would not strictly apply in the present cases
inasmuch as in fruit growing trees the expenses would not be 50% as held
D by this Court. Moreover, the High Court also considered an important fact
that the claimants-respondents would be entitled to much more amount of
Rs. 25,000/- per acre on yield-basis but has fixed the market value of the land
at the rate of Rs 22,000/- per acre. It, therefore, cannot be said that by not
deducting the amount of expenses for cultivation, the High Court had )

E committed any illegality. The first contention, therefore, in the facts of the
present appeals, is rejected.

14. Let us now consider the second point. This Court in Special Land
Acquisition Officer, Bangalore v. T. Adinarayan Setty, [1959] Suppl. 1 SCR
404 : AIR (1959) SC 429 held that in awarding compensation under the Act,
F the Court has to ascertain market value of the land as on the date of
Notification under Section 4( I) of the Act. It was observed that there were ....
several methods of valuation, such as (I) opinion of experts, (2) the price paid
within a reasonable time in bona fide transactions of purchase of the lands
acquired or the lands adjacent to the lands acquired and possessing similar
G advantages, and (3) a number of years' purchase of the actual or immediately
prospective profits of the land acquired.

15. In Smt. Tribeni Devi v. Collector of Ranchi, [1972] 1 SCC 480, this
Court reiterated the methods of valuation and also stated that those methods
do not preclude the Court from taking into consideration other circumstances,
H the requirement being always to arrive at the nearest correct market value. It
LAND ACQUISITION OFFICER, A.P. '· KAMANDANA RAMAKRISHNA RAO [LOKESHWAR SINGH PANTA. J.) 333

was also indicated that in arriving at a reasonably correct market value, it may A
~ be necessary to take even two or all of those methods into account since the
exact valuation is not always possible as no two lands would be the same
either in respect of the situation or the extent or the potentiality nor would
it be possible in all cases to have reliable material from which such valuation
can be accurately determined.
B
16. In Special Land Acquisition, Davangere v. P. Veerabhadarappa
and Ors., [ 1984] 2 SCC 120, this Court held that when capitalization method
for valuation is applied, proper multiplier should be 10. Similarly, in Special
'1'. Land Acquisition Officer v. Virupax Shankar Nadagouda, (1996] 6 SCC 124,
relying on P. Veerabhadarappa 's case, this Court determined compensation
on the basis of IO years' multiplier. In Krishi Utpadan Mandi Samiti v. Malik
c
Sartaj Wali Khan and Anr., (200 I] 10 SCC 660, this Court held that computation
of compensation for determination of market value may be carried out on yield
basis and multiplier of 10 should be applied. Since multiplier )f20 was applied
by the High Court it was set aside by this Court by reducing the amount of
compensation. D
17. Again in a recent decision in Assistant Commissioner-cum-Land
-< Acquisition Officer, Bel/ary v. S.T. Pompanna Setty, (2005) 9 SCC 662 it is
~ reiterated that where compensation is awarded on yield basis, multiplier of 10
is considered proper and appropriate.
E
18. Applying the ratio of the decisions of this Court in the above-said
cases, we are of the view that the High Court committed no error of law or
any perversity in awarding the amount of compensation at the rate of
Rs. 22,000/- per acre to the claimants-respondents. It is no doubt true that the
,
1 High Court has not given adequate and proper reasons in its order, but the
F
-.I, pith and substance of the order cannot be found to be faulty.

19. The claimants-respondents have placed on record Ex. A-2, a certified
copy of the Agreement to sell and Ex. A-3, the Registration Extract of the Sale
Deed in pursuance to Ex. A-2. PW-2, the purchaser of the land, has purchased
one acre of land for Rs. 19,800/- from Durga Prasad, a resident of G
Mathannagudem village. PW-I has placed on record a copy of the Award in
O.P. No. 88 of 1982 (Ex. A-4), whereby and whereunder the Reference Court
. - -··~t enhanced the amount of compensation at the rate of Rs. 22,000/- per acre for
the land in Mathannagudem village, which was acquired for the same purpose.

H

~
·~.

334 SUPREME COURT REPORTS [2007] 2 S.C.R.

A A copy of the Award in O.P. Nos. 70of1982 and 71of1982, marked as Ex.
,..-·
A-5, would reveal that the Reference Court awarded a sum of Rs. 22,000/- per
acre for the lands acquired for the same purpose in village Borrampalem. It
has come in the evidence of PW-I that against the said Award the State
Government preferred an appeal, which came to be dismissed by the High
Court on 10.02.1989, a certified copy whereof was placed on record as Ex.
B A-6 in support of the claims by the claimants-respondents. The claimants-
respondents made the claim of their lands at the rate of Rs. 40,000/- per acre.
The Reference Court has noticed in its order that village Mathannagudem,
village Tada vi and village Borrampalem in which the lands of the claimants-
respondents were acquired are quite adjacent to each other. The Land
c Acquisition Officer himself awarded compensation at the rate of
Rs. 12,000/- per acre for the lands covered by S. No. 98 of village Borrampalem
vide Award Ex. A-5. The Reference Court has rejected the claim raised by the
claimants-respondents for compensation of cashewnut plants planted in an
area to an extent of Ac. 4.50 cents in the acquired lands, merely on the ground
that no trees were found in existence on the lands at the time of the Notification
D under Section 4 of the Act or at the time of passing of the Award. The High
Court has not recorded any finding in respect of the cashew nut plants grown
by the claimants-respondents on some portions of the acquired land. >-
~
20. The Land Acquisition Officer in his order has recorded that rain-fed
crops such as horsegram, bobbara, cholum were grown by the claimants-
E respondents in the acquired land No. F. 1384 to 1388 and in F. 1388, cashew
nut plants were raised in some parts of the land to the extent of about Ac.
9.00 cents. Therefore, the finding of the Reference Court that there were no
cashew nut trees found on the acquired land is factually incorrect and cannot
be sustained. It has come in the evidence of the claimants-respondents led
F before the Reference Court that they had raised maize crop at one time, which
~
would have fetched Rs. 4,000 to Rs. 5,000 per acre to them and other crops
jowar and bobbara in the next season. The computation of compensation for
detennination of market valile may be carried out on yield basis and multiplier
of 20 adopted by the Reference Court in the cases on ha:id is on the higher
side and contrary to the well-settled proposition of law as laid down by this
G Court. However, this Court is not precluded from taking into consideration
other circumstances such as, the potentiality and utility of the land acquired
and awarding just compensation to the claimants who are deprived of their .~ ...
lands and other property. Keeping in view the facts and circumstances of
these cases, as discussed above, we are of the view that the amount of
H '
LAND ACQUISITION OFFICER, A.P. '· KAMANDANA RAMAKRISHNA RAO [LOKESHWAR SINGH PANTA, J] 335

-'{ compensation awarded by the High Court at the rate of Rs. 22,000/- per acre A
to the claimants-respondents is adequate, just and reasonable and cannot be
said to be excessive or unwarranted.

21. For the foregoing reasons, the appeals are, accordingly, dismissed.
The parties shall bear their own costs.
B
SKS. Appeals dismissed.