UNION OF INDIA & ANR. versus SMT. SHANTI DEVI ETC. ETC.

Citation: [1984] 1 S.C.R. 217 · Decided: 05-10-1983 · Supreme Court of India · Bench: A.P. SEN · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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... 
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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. 
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 
rE 
A 
B 
c 
D 
E 
F 
G 
H 
218 
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in the yearJ 1962 and 1963. The proper principle was.fifteen years' purchase 
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 
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-
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 
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 
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] 
" , 
(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

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