# STATE OF KERALA v. P. P. HASSAN KOYA

- **Citation:** [1968] 3 S.C.R. 459
- **Court:** Supreme Court of India
- **Decided:** 1968-03-19
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-of-kerala-v-p-p-hassan-koya-4428
- **Pages:** 5

## Headnote

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STATE OF KERALA
v.
P. P. HASSAN KOYA
March 19, 1968
fJ. C. SHAH AND G. K. MITTER, JJ.)
Land Acquisition Act (I of 1894)-Compensation-Jenmi holder
not objecting to qucntunt of con1Pensation-Principle1 of d~termination.
On the acquisition of several units of land with buildino. the Land
Acquisition Officer detmnined the compensation payable to - tho persons
interested at the rate of Rs. 10,000 per acre for the land, and for houses
standing thereon "at their break up value".
The respondent, who held
Kanam rights in one of tho units of the land and te> whom the building
standing thereon belonged, raised objections to the quantum of the oom·
pensation. The Receiver of the Estate holding Jenmi rights in the land
did not object. The trial co.urt disapproved the method adopted by the
Land Acquisition Officer for determining the
compensation and
held
that each unit had to be valued as a com!""ite property. He determined
the market value by capitalising the net rent received from the unit and
taking into consideration tho return fcom gilt-<ldged securities at 3!%
awarded compensation fdr the respondent's unit at 35 times the net annual
rental. The High Court upheld the order of the trial court but reduced
the multiple to 33-1/3. Dismissing the appeal, this Court:
HELD : By the compulsory acquisition of land. all outstanding inter~
ests not vested in the Government are extinguished. It is. therefore. the
duty of the Land Acquisition Officer to determine in the first instance
compensation v.rhich is to be paid for extinction of those interests, and
then to apportion the compensation among the persons known or bc1ieved
to be interested in the land. The rule could not be departed from merely
because the Receiver in whom the Je111ni rights \ve'rc
vested
failed
to
raise an objection to the quantum of compensation awarded to him. The
respondent being a Kane<·mdar has an interest in the land and was entitled
to appaintment of compensation
even
in respect of the land.
f461 H-462 Bl
The method adopted by the ·Land Acquisition Officer for determining
compensation payable for extinction of the interest of the holder of the
land and of the buildings separately was unwananted. In determining
compensation payable in respect of land with buildings compensation c.an·
not be determined by ascertaining the value of the land and the "break
up value• of the building separately. The land and the building constitute
one unit, and the value of the entire unit must be determined with all
its advantages and its potentialities. When the property sold is land with
building, it is often difficult to secure reliable evidence of instances of sale.
of similar lands with buildings proximate in time to the date of the noti·
fication under s. 4.
Therefore the method which is generally resorted
to in dcto:rmining the value of the land 'vith buildings especially
thOCie
used for business purposes, is the method of capitalization of return
actually received or which might reasonably be received from the land
and the buildings. [462 C; 462 H-463 CJ
Rr.ja Vyricherla Narayana Gajapatira}11 v, The
Revenue
Di1·isior:al
Officer, Vitagapatnam, L.R, 66 I.A. 104, referred to.
L7 Sup.C.J·/68-5
t
•
460
SUPREME COURT REPORTS
[1968] 3 S CR.
It cannot be laid down as a general hlle applicable to all situations and
circumstances that a multiple approximately equal to the return fro1n
gilt-edged securities prevail,ng at the relevant time forms
an
adequate
basis for finding out the market value of the land.
But in this case the
trial court and the High Court were of the view that a multiple based ·on
a return from the gilt-edged securities was the appropriate multiple for
determining the V<tlue of the property· under acquisition. and no ground
has been sugge·sN~d fdr not accepting the basis and the rate of capitalization adopted by them. [463 E-F]

## Text

B
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D
E
p
G
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STATE OF KERALA
v.
P. P. HASSAN KOYA
March 19, 1968
fJ. C. SHAH AND G. K. MITTER, JJ.)
Land Acquisition Act (I of 1894)-Compensation-Jenmi holder
not objecting to qucntunt of con1Pensation-Principle1 of d~termination.
On the acquisition of several units of land with buildino. the Land
Acquisition Officer detmnined the compensation payable to - tho persons
interested at the rate of Rs. 10,000 per acre for the land, and for houses
standing thereon "at their break up value".
The respondent, who held
Kanam rights in one of tho units of the land and te> whom the building
standing thereon belonged, raised objections to the quantum of the oom·
pensation. The Receiver of the Estate holding Jenmi rights in the land
did not object. The trial co.urt disapproved the method adopted by the
Land Acquisition Officer for determining the
compensation and
held
that each unit had to be valued as a com!""ite property. He determined
the market value by capitalising the net rent received from the unit and
taking into consideration tho return fcom gilt-<ldged securities at 3!%
awarded compensation fdr the respondent's unit at 35 times the net annual
rental. The High Court upheld the order of the trial court but reduced
the multiple to 33-1/3. Dismissing the appeal, this Court:
HELD : By the compulsory acquisition of land. all outstanding inter~
ests not vested in the Government are extinguished. It is. therefore. the
duty of the Land Acquisition Officer to determine in the first instance
compensation v.rhich is to be paid for extinction of those interests, and
then to apportion the compensation among the persons known or bc1ieved
to be interested in the land. The rule could not be departed from merely
because the Receiver in whom the Je111ni rights \ve'rc
vested
failed
to
raise an objection to the quantum of compensation awarded to him. The
respondent being a Kane<·mdar has an interest in the land and was entitled
to appaintment of compensation
even
in respect of the land.
f461 H-462 Bl
The method adopted by the ·Land Acquisition Officer for determining
compensation payable for extinction of the interest of the holder of the
land and of the buildings separately was unwananted. In determining
compensation payable in respect of land with buildings compensation c.an·
not be determined by ascertaining the value of the land and the "break
up value• of the building separately. The land and the building constitute
one unit, and the value of the entire unit must be determined with all
its advantages and its potentialities. When the property sold is land with
building, it is often difficult to secure reliable evidence of instances of sale.
of similar lands with buildings proximate in time to the date of the noti·
fication under s. 4.
Therefore the method which is generally resorted
to in dcto:rmining the value of the land 'vith buildings especially
thOCie
used for business purposes, is the method of capitalization of return
actually received or which might reasonably be received from the land
and the buildings. [462 C; 462 H-463 CJ
Rr.ja Vyricherla Narayana Gajapatira}11 v, The
Revenue
Di1·isior:al
Officer, Vitagapatnam, L.R, 66 I.A. 104, referred to.
L7 Sup.C.J·/68-5
t
•
460
SUPREME COURT REPORTS
[1968] 3 S CR.
It cannot be laid down as a general hlle applicable to all situations and
circumstances that a multiple approximately equal to the return fro1n
gilt-edged securities prevail,ng at the relevant time forms
an
adequate
basis for finding out the market value of the land.
But in this case the
trial court and the High Court were of the view that a multiple based ·on
a return from the gilt-edged securities was the appropriate multiple for
determining the V<tlue of the property· under acquisition. and no ground
has been sugge·sN~d fdr not accepting the basis and the rate of capitalization adopted by them. [463 E-F]
CIVIL APPELLATE JURISDICTION : Civil Appeal No, 588 of
1965.
Appeal from the judgment and decree dated June 21, 1962
of the Kerala High Court in Appeal Suit No. 602 of 1958.
B. R. L. Iyengar and M. R. K. Pillai, for the appellant.
5. V. Gupte, Vishnu 8. Saharya, Yougindra Khushala11i, Sardar Baizadur Saharya and T. L. Viswanatha Iyer, for the respondent.
The Judgment of the Court was delivered by
Shah, J. On December 8, 1954, the Government of Madras
issued a notification under s. 4 of the Land Acquisition Act notifying for acquisition for a public purpose, viz.
widening the
Madras-Calicut Road at Palyam, seven units of land with buildings. One of the units was T.S. No. 298/2 admeasuring 3911 sq.
ft. together with a building standing thereon used for business
purposes. No!ification under s. 6 of the Act was issued on December 12, 1954, and possession of the land was taken soon
thereafter.
The Receiver of Patinhare Kovilakam Estate held T.S. No.
298/2 in Jenmi right.
The respondent in this appeal held in
that land the rights of a Kanamdar under a deed dated March
27, 1954.
The buildings constructed on the land belonged to
the respondent and were let out to tenants at an aggregate monthly
rent of Rs. 332.50.
The Land Acquisition Officer determined
the compensation payable to the persons interested at the rate of
Rs. 10,000/- per acre for the land, and for the houses standing
thereon "at their break-up value". In a reference at the instance
of the respondent under s. 18 of the Land Acquisition Act (in
which the Receiver of Patinhare Kovilakam Estate did not join)
the Subordinate Judge, Kozhikode,
was of the view that the
method adopted by the Land Acquisition Officer for determining
compensation by separately valuing the lands as garden lands and
the break-up value of the houses was "manifestly unjust and improper". In his view, each unit had tt· be valued as a composite
property. He then procee.:!ed to adopt the method of determining
the market value by capitalizing the net rent received from the
unit, and taking into consideration the retnrn from gilt-edged
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KERALA v. HASSAN KOYA (Shah, J.)
461
securities at 3-112 per cent. at the relevant date, the learned Judge
awarded compensation for the unit in which the respondent was
interested at 35 times the net annual rental.
Against the award of the Subordinate Judge, the State of
Kerala appealed to the High Court of Kerala at Ernakulam. The
High Court determined compensation by multiplying ~e net ~ent
33-1/3 times that being in their view the true multiple denved
from the return based on the current return from gilt-edged securities. Against the award made by the High Court, this appeal
has been preferred by the State of Kerala with certificate under
Art. 133(l)(a) of the Constitution.
Two questions were urged in support of the appeal :
(1) that the Receiver having accepted the award of
the Land Acquisition Officer, the respondent could
Claim compensation only for the right which he had in
the land and the buildings and the method adopted by
the Land Acquisition Officer was in the circumstances
the only appropriate method; and
(2) that the rate of capitalization was unduly high.
In our judgment, there is no force in either of the contentions.
When land-which expression includes by s. 3(a) of the Act benefits to arise out of land and things attached to the earth or fastened to anything attached to the earth-is notified for acquisition,
it is notified as a single unit whatever may be the .interests which
the owners thereof may have therein. The purpose of acquisition
is to acquire all interests which clog the right of the Government
to fuU ownership of the land, i.e. when land is notified for acquisition, the Government expresses its desire to acquire all outstanding interest collectively.
That is clear from the scheme of the
und Acquisition Act. Under s. 11 of the Land Acquisition Act,
the Collector is required to enquire into the objections raised by
the persons interested in the land anp into the value of the land
at the date of the publication of the notification under s. 4, subs. (1), and into the respective interests of the persons claiming
the compensation, and then to make an award determining-(i)
The true area of the land; (ii) the compensation which in his
opinion should be allowed for the land; and (iii) the apportionment of the compensation among all the persons known or believed t? be interested in the .land, whether or not they have respectively appeared before him. By the compulsory acquisition of
land, all outstanding interests not vested in the Government are
extinguished. It is therefore the duty of the Land Acquisition Officer . to determine in the first instance compensation which is to be
paid for extinction of those interests, and then to apportion the
compensation among the persons known or believed to be interest-
..
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462
StJPUJOI. cooaT uroan
(1968) 3 S.C.R.
eel in the land. The Subordioate Judge had also, when a referA
encc was made to him, to assess the value of the unit and· then
to apportion the compensation amoag pcnons entitled tba'eeo.
The rule could not be departed from merely because the ReceiYer
in whom the lenmi rights in T.S. No. 298/2 were veatcd failed
to. raise an objection to the quantum of compcnsatioll awarded
to him. Again the respondent was the holder of kanam rights in
B
the land, and the bui!dingi; on the land belonged to him. The
respondent being Kanamdar, ho had an interest in T.S. No. 298/
2, and as Kanamdar the respondent was .entitled to apportionment of compensation even in respect of the land.
We agree with the trial coun and the High Court that the
method adopted by the- Land Acquisition Officer for determining
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compensation payable for extinction of the interest of the holder
of 'the land and the buildings •rate wu unwarranted. In determining compensation payable m respect of land with buildings,
compensation cannot be determined by ascertaining the value of
the land and the "break-up value" of the building separately.
The land and the building constitute one unit, .and the value of
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the entire unit must be determined with all its advantages and its
potentialities. Under s. 23 of the Land Acquisition Act compensation has to be determined by taking into consideration the market value of the land at the date of the publication of the notifi•
cation under s. 4(1) and the damage, if any, sustained by the
persons interested under any of the heads mentioned in secondly
to sixthly in s. 23(1) of the Land Acquisition Act.
E
As observed by the Judicial Committee in Raia Yyriclier/a
Narayana GujapatirajtJ, v. The Revenue Divisional Officer, Vizagapatnam(') at p. 114:
"There is not in general any market for land in the
sense in which one speaks of a market for shares or a
market for sugar or any like commodity. The value of
any such article at any particular time can readily be
ascertained by the prices being obtained for similar articles in the market. In the case of land, its value in
general can also be measured by a consideration of
the prices that have been obtained in the past for land
of similar quality and in similar position, and this is
what must .be meant in general by "the market Vall,IC"
in s. 23."
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An instance of a sale which is proximate in time to the date of
the notification under s. 4(1) of the Land Acquisition Act in resH
peel of land similarly situate and with similar advantages and
which is proved to be a transaction between a willing vendor and
(!) L.R. 66 I.A. 1~.
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KERALA v. HASSAN KOYA (Shah, !.)
A
a· willing purchaser would . form a reliable guide for determining
the market value. The value which a willing vendor might reasoaably expect to receive from a willing purchaser in respect
of · a house generally depends upon a yariety of circumstances
including the nature of the consll'llction; 'its age, situation, .the
amenities available, its special advantages and a tiost of other
circumstances. When the property sold is land with building, it
is tiften difficult to secure reliable evidence of instances of sale of
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siniilar lands with buildings proximate in time to the date of the
notification under s. 4. Therefore the method which is generally
resorted to in detenniliing the value of the lan<,i with buildings
especially those used for biisiness purposes, is the method of
capitalization of return actually received or which might rea5onably be received from the land and the buildings.
That method was rightly adopted by the trial court and the
High Court. The unit under acquisition is used for business purposes and has a prominent situation in the town of Calicut.
·~ There was clear evidence about the rental of the building, . and
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the trial court proceeded to capitalize the net annual rental,
having regard to the rate of return of 3t per cent from gilt-edged
securities, by multiplying it by 35 timCll. The High Court has
slightly reduced the multiple.
It cannot be laid down as a general rule applicable to all
situations and circumstances that a multiple approximately equal
E
to the return from gilt-edged securities prevailing at the relevant
time forms an adequate basis for finding out the market value of
the land.
But in this case the trial court and the High Court
were of the view that a multiple based on a return from the giltedged securities was the aJipropriate multiple for determining the
value of the property under acquisition, and no ground has been
F
suggested for not accepting the basis and the rate of capitalization adopted by them. It is relevant to note that the same multiple which has been adopted in other cases relating to lands and
buildings acquired under the same notification under which the
land of the respondent was acquired has not been challenged by
the State.
G
The appeal therefore fails and is dismissed with costs.
Y.P.
Appeal dJsmiS#tl.