Holding

For land acquired in 1962‑63, the appropriate multiplier is fifteen years' purchase.

Summary

The case concerned lands acquired for the Beas Dam Project that were notified in 1962‑63 under the Land Acquisition Act, 1894. The compensation was fixed using the capitalisation method, multiplying the net annual income of the land by a "years' purchase" multiplier. The Land Acquisition Officer and the District Court applied a twenty‑year multiplier, which the Union of India and the State of Himachal Pradesh challenged, arguing that it caused excessive compensation. The Supreme Court examined the appropriate multiplier for acquisitions made in 1962‑63, considering prevailing interest rates and case law on capitalisation. It held that a fifteen‑year multiplier, not twenty, was the correct rule for that period. Consequently, the Court reduced the compensation by one‑fourth and allowed the appeals in part, modifying the High Court orders.

Issues considered

What multiplier (years' purchase) should be applied for compensation of land acquired in 1962‑63 when the market value is fixed by the capitalisation principle.

Legislation cited

Land Acquisition Act, 1894s. 18, s. 4(1), s. 9(3)
Punjab Reorganisation Act, 1966s. 80

Subjects

Land acquisitionCompensationCapitalisation principleMultiplierYears' purchaseValuation of agricultural landBeas ProjectPunjab Reorganisation Act

Judgment

)

_,' UNION OF INDIA & ANR.

v.

SMT; SHANTI DEVI ETC. ETC.

'>·· October 5, 1983.

[A. P. SEN AND E. S. VENKATARAMIAH, JJ.)

Land Acquisition Act 1894 (I of ·1894) Section 43-Acquisition of land-
Paymen1 of compensatio1J,-Market value of land fixed on basis C'f ~apitalisaJion
prinpiple-Multip/ier to be adopted in determination of con1pensation-Explained.

· Certain lands were notified for.. acquisition in the years 1962 and 1963
under s.4(1) of the Land Acquisition Act, 1894. Oii the question of .payment
of compensation the Land Acquisition Officer, relying on an earlier award in
respect of similar lands acquired for the very same public purpose adopted the
same criteria and fixed the conipensalion. I-Je_ adopted the principal of
capitalisation and determined the compensation at Rs. 650 per kanal, as tbe
value of the best category of land and awarded compensation equivalent to 13
times the net annual income.

On reference under Sec. 18 the District Judge determined the market
value of the land adopting the capitalisation principle, and determined the
conli:>ensation by multiplying the net annual income from each category of
land by 20. rE
The UniOn of India and the State Government preferred appeals and
contended before the High Court that if the principle adopted by the authorities
below was· used the Government would suffer. These appeals were however
dismissed.

... In the meanwhile the High Court in appeals arising out of similar awards
set aside the orders of the District Judge and remanded ·the cases for fresh
disposal for failure to 4e!_ermine whether the exemplars on the record· could
serve as a guide for determining the market value. After remand the District
·Judge arrived at the very same valuation and this was confinned by the·High
Court. '

ln the appeals to this Court on the question ·as to what Should· be the
multiplier to be adopted in determining the compensation payable in respect of
land acquired in the year 19~2-63 where the market valu~ of the land is fixed on
. the basis of the capitalisation principle.

Altowillg the appeals in part,

HELD: 1. The Hi8h Court .and the District Court erred in applying
\h~ twentr )!ears purchase rule in the· case of these lands which were acq,uired
218 si!ilRBMB C:o\l!t'r R.ili>oR.rs il984l i s.c.11..
in the yearJ 1962 and 1963. The proper principle was.fifteen years' purchase 1 .
A rule. [228 HJ

2. The relevant date for determining compensation of a property
acquired under the Act, is the .date on which the notification under s.4(1) is
published. The capitalised value of a property is the· amount of money whose
annual interest at the highest pravailing rate of in.terest at 3.ny given time will
B be its net annual income. The -net annual income from a; land is arrived at by
deducting from the gross annual income all outgoings such as expenditure, on
cultivation, land revenue etc. The net return from landed property, reflects the
prevalent rate of interest on safe money investments. (225 ·o~H; 226 A]

3. (i) In India the multiplier which is' adopted in determining the com-
c pensation by the capitalisation method has varied from time to time. The num-
ber of years purchase bas gradually dCcreased as the prevailing rate bf interest
realisable from safe investments has gradually increased, the higher the rate of
interest, the lower the numbet of years pufcbase .. This method, of vaJuatiOn
inVolves capitlilising the net income that the property can fairly be expected to
produce and the rate of capitalisation is the percentage of return on iO.vestment
that a wilJiog buyer would expect from _the property during the relevant
D period. [227 G·H; 228 A]

(ii) In the years 1962 and 1963 an :nvestor in agrjcultura1 land expected
annual net return of at least 8%. If ·the land yielded a net annual income of
Rs. 8 a willing buyer of land would have paid for it Rs. 100 i. c. a little more
t.han 12 times the annual net income. The _multiplier for purposes of
E capitalisation would be at>Out thirteen. [228 D-EJ

(iii) In these cases there was no evidence about the potential value of
the lands. [228 F]
",
F (iv) Jn the instant cases neither the Land Acquisition Officer nor the
High Court nor the Distric.t Court has adopted the other well-known methoc;ls
of valuation of land namely, the price paid within a -reasonable· time in bona
fide transactions in ;espect of the land acquired or adjacent l~nd·s which possess
similar a,dvantages, the price which a willing buyer was prepared to pay to
a willing seller of such land or the opinion of valuers or experts. In the
absence of any reliable evidence to adopt the other methods of valuation the
G very·same capitalisation method was applied and the Court adopted fiftc'!:n
years' purchase rule for deterfuining compensation bas ~o be adopted. [225 C-E]

The Collector, Raigarh v. Dr. Harisingh Thakuar and An. a'!d Vice .Vers~,
( 1979] I S.C.C. 236; State of Kera/a v. Hassan Koya, [1968] 3 S.C.R. 459; The
H State of We.I Bengal v. Shyamapada etc., A.LR. 1975 S.C. 1n3; Oriental Gas
Ltd. & Ors. v.. State of West Bengal, [1979] 1 S.C.C. 171, r~ferred to.
\JNioil v. SHANTI DEVI (Venkatqramiah, J.)

•• 1981.
C1v1L APP~LLATB JURISDICTION : Civil Appeals Nos. 51-72 of

Appeals by Special Leave from the Judgment and Order dated
the 22nd September. 1980 of the High Court of Himachal Pradesh at
Simla in 'R.F.A. Nos. 262, 249, 251, 252, 261, 265, 266, 267, 280,
281, 292, 297, 299, 300, 307, 308, 352, 355, 356, 366, 370 and 220 of
B
1980 respectively. •

M.M. Abdul Khader and Ms .. A Subhashini. with him for the
Appellants.

' K.R. Nagorgia, Mr. Naresh Kaushik 1and Krishna Prasad for the c
Respondents.

The Judgment of the Court was delivered by

VENKATARAMIAH. J. What should be the true multiplier to be D
adopted in determining the compensation payable in respect of land
acquired in ot about tHr year 1962-63 where the market value. of
the land is to be fixed on the basis of the capitalisation principle, is
the question which arises for consideration in these appeals.

The construction of the Beas Project was commenced in the
year 1960 as 11joint venture of the erstwhile State of Punjab and the
State of Rajasthan by mutual agreement between the two States. All
decisions on· the policy and administrative matters were takan by a
Board known as the Beas Control Board which was set up by the
Central Government in consultation with the two States on February.
- 19, 1961. The Beas Project Board was presided over by the Governor
of the then State of Punjab.and its members included Ministers of the
States cf Pnnjab and Rajasthan and senior officers of the Central
Government and 'of the two States. The decisions of the Beas
Control Board used to be iJl1plemented by the Punjab Governµient
which was administering and executing the works oil the Project. G
The expenditure on the Project was shared by the Rajasthan .
Government. , '

With the coining into force of the Punjab· Reorganisation Act, B
1966 (Act 3.J of 1966), the new State of Haryana and the Union
Territory of Chandigarh CIPI!e into being, having been formed out
o f the territory of the erstwhile State of Punjab. A l'llrt of the Pun~ab
L" ~ } . . ' .. ' .
220 . SUPREME COURT REPORTS [i 9841 i s.c.Ji..
territory was also transferred to what was then the Union of Terri-
. tory of HimachalPradesh. What remained with Punjab became the
new State of Punjab.
. ' '
Sub-section (I) of section 80 of the Punjab Reorganisation-Act,
1966 provided that the construction· including the completion of any
work already commenced of the Beas Project should on and from
B
November 1,1966 be undertaken by the Central Government on.
'

behalf of the successor States (as defined under that Act) and the
State of Rajasthan should provide the necessary funds to the Central
Government for the expenditure on the Project including the expenses
of the Beas Contruction Board. For the discharge of its functions,
c sub-section (1) and sub-section (2) of .section 80 of the Punjab
Reorga~istation Act empowered the Central Government in consulta-
tion with the Governments of the successor . States and the State of
,Rajastlian to constitute a Board to be called the Beas. Construction
Board, Thus by the Punjab Reorganisation Act,' 1966, the entire
expenditure for the constr,uction and completion of the Beas. Project
D was to be shared by the successor States and the . State of Rajasthan
' . ' I .
but the responsibility of construction and completion of the' Beas
Project was entrusted to the. Central Goyernment.

About 70,000 acres of land had to be acquired· for the Beas
E Dam Project which was located .in the Kangra area of the erstwhile
State of Punjab which stood transferred to the then Union Territory
. of Himachal Pradesh under thi: Punjab Reorganisation· Act, 1966.
The necessary 'notifications under section 4 (I) of the Land Acquisi-
. tion Act, 1894 had deen 'issued by the appropriate Government for
that purpose. We are concerned in these cases with lands which were
'

notified for acquisition in the years 1962 andl963 under section 4 (I)
of the Land Acquisition Act. The acquisition proceedings in respect
of the lands which stood transferred to the Union Territory of the
Slate of Himachal Pradesh, as m.eritioned above, were to be com-
pleted by its officers.· The land in question are situated in"Tikka
G Bhararian, Mauza Dhameta, Tehril Del)ra, District Kangra.
Himachal Pradesh. The ·Land Acquisition'- Officer ·issued notices
·under. section 9 (3} of the Land Acquisition Act to the interested
persons inviting their representations and objections with regard to
the determination and payment of the compensation. After receiving .
H the representations and objections, the Land Acquisition Officer
(Shri Didar Singh) passed a common award on January 31, 1972 in
respect of an extent of 1125.33 acres of,Jani:I in Tikka Bhanlrian
.... UNION v. SHANTI DEVI (Venkataramiah, i.)

which had been notified on April l,1963. It would appear that ano-
ther ·Land Acquisition Officer, Shri Jaswant Singh, had passed an
award earlier on Apr_il 2,1969 in respect of certain lands situated in
Tikka · Bihari which has been acquired for the the very same public
purpose. Tbe Land Acquisition Officer who had to pass the award
·in these cases being of the opinion that the fertility, pro'ductivity and
potentiality. of land in Tikka Bhararian (the. lands in question) were
more or less comparable with those of the lands situated in Tikka B
Bihari and that the classification and valuation of lands in the award
.passed by Shri Jaswant. Singh were quite fair, adopted the same for
the purpose of passing the award in respect of the lands in question.
I.t may be mentioned here that Shri Jaswant Singh had adopted for
the purpose of valuation of lands the principle of capitalisation. He·
was of the view that the rule of 20 years purchase was to be adopted.
c
He acpordingly after determining the net annual profit per kanal of
land of the best category at Rs. 50 and multiplying it by 20 arrived at
.Rs.' 1,000 as the value of one kanal of the best .variety of land. In
·Order to..determine the net annual profit from the land, it appea.rs
that· he had .car~ied out a crop cutting experiment.on some Plot of D
,land after the. publication of the notification under section 4 (1) of
.the 1;.:and Acquis,ition Act. It would· appear that on behalf 6fthe
Department, a statement had been filed showing that the lands of
similar quality were being sold at or about the time of publication of
.the notification under section 4 (I) of the Land Acquisition Act at
E

-
Rs. 300 per kanal. Shri Jaswaiit Singh (the Land Acquisition Officer)
found tha.t a mean beween the valuation arrived at by him by adopting
. the principle of capitalisation i,e. Rs. 1,000/- per kanal and Rs. 300/-
per kanal which, according to the Department was the, value bf . the
best category of land in the area would be a reasonable compenstioil.
Acyordingly by adding the above two figures and ·dividing the total
·by two: he arrived at Rs. 650/- per kanal as the value of the best
category of' land and reduced the value proporti~nately in respect ·of
'other categbries of land which were lower in quality. Virtually what
·was awarded was equivalent to thirteen times the net annual
income.
G
Aggrieved by the award passed by the Land Acquisition Officer,
the claimants demanded that a reference should be made under
section 18 of the Land Acquisition Act to the Civil Court for the
deter.mination of proper compensation payable to them. Accordingly
the ~ases were referred to the · District Court of Kangra at Dharam-
H
sala.' Alorigwith th.es~ references, several other references also bad
. ',,
··~
... "" ~.
1 SUPREME COU&T REPORTS (1984) i" s.c.t.

been made to that Court in respect of several other bits of lands
situated at T.ikka Bihari Tikka Bhararian which had been acquired
at or about the same time. The learned District Judge who tried
' the cases was of the view that the oral evidence adduced by the
owners of the land on whom the burden of proof lay could not be
relied upon.' After discarding the oral evidence, the learned District:
B 'Judge determined the market value of the land by adopting the·
capitalisation principle. He determined the c0_mpensation by ·
multiplying the net annual income from each category of land by 20. ·
Accordingly· he fixed the compensation of the best category of land
at Rs. l,000 per kanal having held. that the net annual income per
kanal of that class 'of land was Rs. 50. For this purpose be appears
c to have relied on the result of 'the crop cutling experiment about ·
which there was n~· evidence before him H~ rejected the reason
given by the Land Acquisition Officer for reducing the compei;isation
from Rs. 1.000 to Rs. 650 on the ground that the _Department had
asserted that the land of similar quality was being sold at or- about
D the relevant time.at Rs. 300 per kanal. The comp~nsation was fixed
a( comparatively lower rates in respect of other classes of land which
were involved in-these cases except in the case of G.M. abadi land
for which he fixed ai Rs. 650 per kanal. Aggrieved by the decision
of the District Judge, the Union of India and the State of Himacbal
Pradesh preferred appeals before the High Court of Himachal
.
Pradesh. The appollants contended that ·the' methods adopted by
'

·-
Land Acquisition Officer and the District Judge were. both faulty
and if the principle adopted by them was used in respect of all the ·
70,000 acres of land acquired, the Government would suffer a huge
loss.

' ·It i~ necessary to state here that in the meanwhile the High
Court disposed of two appeals being R.F.A. Nos. 16 and 17 of 1970
in respect of the same fands in Tikka Bihari where the two learned.
Judges (R.S. Pathak, C.J. (as be then '-':as) and D.B. Lal, J.) who
heard the said appeals by their separate judgments dated January
G 14, 1976 set aside the judgment of the District Judge and remanded
the cases for fresh disposal to the District Court. Pathak, C.J. in
'the course of his judgment observed :

11 "In my opinion the position is this. Tbe Collector
had determined the market value at Rs. 1000 per kanal
of'the best category of land. He did this on the basis of
a Q!.Qthod recognised in law. He then toolc into. account
UNION v. SHANTI DEVI (Venkata~amiah, J.)

an offer of Rs. 300 per kanal made by the State. He did
not, when taking that rate into account, ·determine whether A
it was based on valid material on the record. He acted
arbitrarily in taking that offer into .account. Moreover,
although he took that offer into account, he did not
accept it as a proper basis for determing the market
value. He embarked on the novel method of adopting a
mean between the market value of Rs. 1000 per . kanal
B
determined by him and the offer of Rs. 300 per kanal
m_ade by the, State. The· learned Additional District
Judge was entirely right in holding that the award of the ·
Collector was misconceived. But the learned Additional
District Judge then proceeded wholly on the basis of. the c
market value of Rs. 1000 per kanal determined by the
Collector. What he should also have done was to deter·
mine wheth~r the exemplars on the record could serve as
a guide for determining the market value. It is this error
which has vitiated the .decision ·of the learned Additional
District Judge". D

After remand the claimants in those cases adduced some
evidence which was not of much value. Again the District ·Judge
arrived at the very same valuation which ,had been determined by E
that Court earlier. The appella,nts once again· prefet1ed appeals
before the High Court. The High Court dismissed those appeals
in. /imine by a short order dated May 20, 1981. ·The appeals filed
against that order are alw before us now.

F
· Now coming back to the present appeals which arise out of
R.F.A. No. 262 C!f 1980 and connected cases which were disposed of
. by a common judgment dated September 22,· 1980, the High Court ,
dismissed all the said connected appeals. The present appeals are
filed against that common judgment after obtaining the special leave
of this Court under Article 136 of the Constitution. Although the G
award passed by the Land Acquisition Officer deals with 18 classes
oflands, we are coneerned in this case with some of them only. The
rates of compensation awarded by the Land Acquisition Officer and
the District Judge for the following classes of land involved in th~se
cases are as follows : ·· B
A
224

Class of Land
SUPREME COURT REPORTS

Rate per kanal
fix~d in the award
of the Land
(1984) 1 s.C.ll.

Rate per kanal
fixed by the
. District Judge
..
i--

Acquisition Officer
Nehriawal Rs. 650 per kanal Rs. 1000 per kanal
Nehri Bramdi Rs. 520 -do- Rs. 800 -do-
B Barani Dofasli Rs. 455 rdo- Rs. 700 -do-
I Barani Ekfasli ·Rs. 390 -do- Rs. 600 -do·
· Banjar Kadim Rs. 260 ·do· Rs. 400 -do·
G.M. Abadi Rs. 650 ·do· Rs 1000 ·do·
(In Himachal Pradesh, 1 acre = 8 kanals)

c
Judge.
The High Court has confirmed the rates fixed by the District
I
-·
'
At the outset we should state that we are not happy about the
manner in which the proceedings have gone on in these and other
D similar. cases relating to the acquisition of land for the Beas Project.
As m_entio~ed earlier the total extent of land acquired is 70,000 acres.
We are told there are nearly 800 cases before this Court arising out
of those acquisition proceedings.· There may be many others which
have not yet reached this ;court. The only method of valuation
adopted in all cases appears to be the capitalisation method. The
E evidence regarding the crop cutting experiment said to have been
conducted is not satisfactory. The crop in question is said to have
. been grown after the acquisition proceedings commenced only for
·the purpose· of determining the compensation. Naturally if such
crop is grown by the owner, there is bound to be some anxiety on his
part to adopt extraordinary agricultural practices to show a bigh~r
yield than what would be the normal yield of the land. It is seen +•
that the directi_on given by Pathak, C.J. in the order of remarid
passed in 1976 in the cases pertaining to lands in Tikka Bihari
·.referred to above appears not to have been kept in. view either by
the District Court and by the High Court . when they subsequently
G disposed of hundreds of cases arising out of these land acquisition
proceedings. The approach on their part has been very casual. The
fact that any error committed in one of these cases would affect the
·compensation payable in respect of 70,000 acres of land does not ·
appear to have weighed with the District Court and the High Court.
The spirit behind the observation made by one of us (A.P. Sen, 'J,} '
on the question of fixing the compensation for lands acquired under
th,e L~nd Acquisition Act in the minority judgment of this Court
I
UNION v. SHANTI DEVI (Venkataramiah, J.) 225

in The Collector. Raigarh v. Dr. Harisingh Thakur and Anr. and Vice
Vtrsa( 1 ) to the effect that A

"While it is not suggested that unfairly low value.
should be offered, on the other hand the temptation to
over-generosity must be equally resisted. Such_ generosity
• at the public expense reacts against the development and
against the prosperity of the country and imposes an B
unnecessary burden on the taxpayer"

appears to be lacking in the disposal- of these cases by the Distrfct
Court and the High Court.

In these and other connected ca~s, neither the Land Acquisition
c
Officer nor the High Court and the District Court have adopted the
other welHnown methods of valuation of land namely,' the price paid
within a reas.onable time in bona fide transactions in respect of the
bnd acquired or adjacent lands which possess similar advantages, the
price which a willing buyer was prepared to pay to a willing seller of D
such lands or the opinion of valuers or experts. They have· .all '
followed the capitalisation method by adopting the 20 years' purchase
rule. In the absence of any reliable evidence to adopt the -other
methods of valuation, we are also driven in these cases to adopt the
very same capitalisation method in disposing of these appeals.
Although we are not satisfied with the determination of the net E
annual profit from each plot of land acquired in these proceedings,
• we have io adopt the finding of the District Court which has been
affirmed by the High Court on the. facts and in the circumstances
of these cases as none of the parties has 'questioned it.
F
+ The only question which remains to be determined is the
appropriate number of years purchase that should'be followed in
the case of acquisition made in.the years 1962 and 1963. '

The relevant date for determining compensation of a property
acquired under the Land Acquisition Act, 1894 is the date on which G
the notification under section 4 (I) is published. The capitalised value
of a property is the amo_unt of money whose annual interest at the
highest prevailing interest at any given time will be its net annual
income. The net annual income from a land is arrived at by deduct-
ing from the gross annual i11Q<?me ~II 01,1t ~oin~s such. as expenditure
H

(1) [197911 s.c.c. 236,
•
226 SUPREME COURT REPORTS (1984) 1 s.C.l.

on cultivation, Land revenue etc. The net return from landed property
A, generally speaking, reflects the prevalent rate of interest 'on safe money
investments. It is on~t1ils basis, Rajamannar .offg.. C. J. held in
T. Radhakrishna Chetttar v. The Province of Madras\1) that the number
r
of years' purchase to be adopted was 33 where the interest paid on
gilt-edged securities at the time of acquisition i. e. in 1942 was 3% per
annum. But the same learned Chief Justice held in Sri Lakshmi
B Narasimha Devaru & Anr. v. The Revenue Divisional Officer.
Manga/ore & Anr.(') that 20 years' purchase was the appropriate rule
to be followed in determining the value of agricultural Land acquired
in the year 1943 by capitalisation method •. In Stale of Kera/a v.
Hassan Koya (8) in the case of a Land with building acquired in the
c year 1954 when Government securities were yielding Ji% per annum,
...,__.'
this Court upheld'the decision of'the Kerala High Court which had
adopted 33 J as the multiple for determining compensation payable in
respect of it. For a land acquired in the year 1952. this Court in The
· State of West Bengal .v. Shyama Pada etc.(') awarded compensation
ai 20 times the net annual income. In Varadarajulu Naidu· v. ·The
D
Revenue Divisional Officer, Tirukoilur,( 5 ) the High Court of Madras ·
in the case of a land acquired in the year 1956.. adopted the rule of
1 J years' purchase. In Oriental Gas Ltd. & Ors. v. State of West
Bengal,(') the Constitution Bench of this Court speaking· through
E Chinnappa Reddy, J. obser~ed ; .

"The next target of Mr. Sen's attack was the ·choice

,
F
of the multiplier. He submitted that in the year 1962
gilt-edged securities were fetching no more than six per
cent per amium and therefore, not eight, but some other
. higher multiplier should have been specified.
-·
The argument of Shri Seq is based on the observation
of Shah, J., in Cooper's case that 'capitalisation of the
-net annual value of the property at a rate equal in normal
cases to the return from gilt-edged securities' was an
G important .method of determination of compensation.
The very use of the word normal by Shah J., indicates

(I) A.1,R. 1949 Madras 171. ·
(2) A.LR. 1949 Madras 902.
H (3) [1968! 3 S.C.R. 459.
(4) A.LR. 1975 S.C. 1723.
(5) [1970] 2 Madrft Law Journal 67.'
(6) (1979j I s,c .c. 111.
.-

UNION v. SHANTI DEVI (Venkataramlah, J.) 227

that itwas not intended to lay dow~ any invariable rule
that whenever a method of capitalisation of net profit A
was adopted, the return ffom , gilt-edged ·securities was
to be the basis. That should depend on· a·. variety of
circumstances such_ as the nature of the property, the
normal return which may be expected on like .investment,·~
the siate of the capital market and several' such factors. B
For example, it is 'well known that" a large investment
-·yields a higher' return that a smaller ;investment' and
similarly a long terin. investment yields· a better return
.. than a short term investment. A different p#.nciple and
a different multiplier may have to be applied to different
kinds of property, such as, agricultural _land,- residential -
bulidings, industrial undertakings etc. In the -case of-·
a going busine« or industrial undertaking the appropriate ·
multiplier_m1y b6 determined O'!_tjie basis of tire annual
retiirn of an undertaking with 'similar capital investment.
If the Legislature thinks that a return of· 12 !% .in the
· case ·of a large industriaf undertaking such_ as the D
petitio11er'sis reasonable and on. that basis adopts the
multiplier 'eight', it is not for this Court to sit in judgment ·
and attempt to determine a more· appropriate. multiplier.
We are unable to see how the adoption of the particular
multiplier in the present case is the . result of the appli·. E
cation of any irrelevant principle. We do not, therefore,
·agree with the submission of Shri Seo.,' -
, In the above case the Court felt 'that lf 12 i% ·was the annual .
return, the adoption of multlplier 'eight' could not be unreasonable
J in the year )962 in the case. of an industrial undertaking.
~\ /
A.perusal of the decisi~ns referred to above and some • others
-which have not been dted · here· shows that in India · the
multiplier which is ~dopted in !letermi?ing the compensatio:'l
by the capitalisation method has been . 33 . 1/3, 25, 20, 16 3/2
t I . and 8. The number . of years' purchase has gradually,
decreased as the prevailing _rate - of · interest realisable from
•afe investments has gradually increased the higher the rate ·of
interest; the lower the number of years' purchase. This method of
valuation involves capitalising the net income that the property can
fairly be exp~cted to produc~ and the rat~ of capitalisation is the per..r-
cantage ·of return on hi~ inyeH\D.~n.~ iii~~ a,willin~ bu~er wo1'1d expec~.

,.
228 SUPREMB COURT REPORTS lt984) 1 s.c.R.

from the property during the relevant period. It was once felt that
·the relevant rate of interest that should be taken into consideration
was the interest which gilt-edged securities or Government bonds
would normally fetch. The safety and liquidity of the investment in.
bonds were relied on as the twin factors to take the view that the
interest on gilt-edged securities should alone be taken into conside-
B ration. This was at a time when there were not many avenues of
safe investments .and investment in private commercial concerns was
not quite' reliable. But from the year 1959-60 circumstances have
aradually changed. There are many State Banks and nationalised
banks in which deposits made are quite safe. Even in the share market
we have. many ,blue chips' which command stability and other attend-
as
ant benefits such the possibility of issue of bonus shares and rights
shares and appreciation of the value of the shares themselves. . They
arc attracting a lot of capital investm.ent. A return of 10% per annum
on such safe investments is almost assured. Tody · nobody thinks
of investing on land which would yield a net income of just 5% to 6%
per annum. A higher return of the order of 10% usually antici-
D pated. Even in the years 1962 and 1963 an investor in agricultural >
land expected annual net return of at least 8%. It means that if the
land yielded a net annual income Rs. 8 a willing buyer of land would
have paid for it Rs. 100 i.e. a little more than 12 times the annual
net income. The multiplier for purposes of capitalisation would be
about thirteen.

On the question of the potential value of the lands involved in
these cases, we may state here that there is no evidence suggesting
that the lands.were likely to be in deinand for any other purpose.
They were all agricultural lands or banjar lands on which no
F agricultural operations could be carried on. They were situated in
a hilly tract. There were no potential buyers who were i.n need of
this vast tract of 70,000 acres. If the project work had not been·
undertaken possibly Jhere would have been no Oc:cassion for the sale
of all tbe~e~ in .one lot. ·
G Having regard to all the facts and circumstances of the case
we feel that the High Court and the District Court erred in applying
the twenty years, purchase rule in the case of these lands which
were acquired in the years 1962 and 1963. The proper principle was
fifteen years' purchase rule. The District Judge awarded
H compensation in all these cases at Rs. 1,000 per kanal for the land of
the first category by applying the twenty years' purchase rule and .
!las fi4ed the coupensation for other lands on the above basis. Thr,
UNION ii. SH>l.NTI DEVI (Venkataramiah, J.)

High Court has affirmed it, Since we have held that the proper
basis of fixing compensation in these cases was fifteen years' purchase A
rule, the compensation awarded for lands in these cases should be
reduced by one-fourth i.e. for lands of the first category compensa-
tion payable should be Rs. 150 per kanal instead of Rs. 1,000 per
kanal. . Similarly in the case of other lands also there should be a
reduction of the compensation awarded by one-fourth. The claimants B
shall get solatium of 15% on the compensation computed on the
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/ above basis and they shall be paid interest at the rate ordered by the
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District Judge on the aggregate amount from the date of taking
! possession of the land till the date of ·payment. The orders passed
' by ·the High Court in all these cases shall stand modified
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accordingly .. c
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I The appeals are accordingly allowed in part.
I their own costs throughout.
Parties shall bear
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' N.V.K. Appeals partly allowed.

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