Holding

Compensation for trees cut under the Telegraph Act must be determined by applying the purpose and object of the statute to the facts of each case, without a fixed formula, and the High Court’s unauthorised enhancements are set aside.

Summary

The Supreme Court examined appeals by the Kerala State Electricity Board (KSEB) against the High Court’s enhancement of compensation for fruit‑bearing trees cut to lay a 110 kV electric line. The Board had originally determined compensation under Section 10 of the Telegraph Act, 1885, using a 5% annuity rate, but the High Court increased the land value and raised the rate of diminution from 40% to 50% without providing reasons. The Court held that compensation must be fixed by looking at the purpose and object of the Telegraph Act and the specific facts of each case; there is no rigid formula for land value or rate of diminution. Consequently, the High Court’s enhancements were set aside. The appeals were allowed and the matters remitted to the High Court for fresh determination in line with the statutory purpose.

Issues considered

What is the appropriate method for determining compensation for trees cut under the Telegraph Act, 1885?
Whether the High Court was justified in enhancing land value and increasing the rate of diminution from 40% to 50% without reasons.
Which rate of return (interest) should be applied for the annuity calculation – 5% or a higher rate reflecting prevailing bank rates?
Whether the compensation should be based on yield multiplier and other factors such as situs, distance, and extent of the line.

Legislation cited

Electricity Act, 1910s. 51
Electricity (Supply) Act, 1948
Indian Telegraph Act, 1885s. 10, s. 11, s. 12, s. 16
Land Acquisition Act

Subjects

Telegraph Act 1885CompensationTree cuttingElectricity lineAnnuity rateLand valueRate of diminutionStatutory interpretationHigh Court revision

Judgment

A THE KERALA STATE ELECTRICITY BOARD
v.
LMSHA ETC. ETC.

MAY 18,2007

B [S.B. SINHA AND MARKANDEY KA TJU, JJ.]

Telegraph Act, 1885-ss. JO, 11, 12 and 16-Compensation-For
cutting of trees for drawal of Electric Line-Determination of-Held : In
C order to determine the compensation, purpose and object of the statute and
the methodology laid down therein for the purpose thereof should be the
guiding/actor-There cannot be a fixed formula/or that and it would depend
on facts of each case-Electricity Act, 1910-s.5/.

Trees had been cut and removed for drawal of 110 K. V. Electric Line.
D _The Board/Land Acquisition Officer determined the amount of compensation.
Reference Court determined the amount of compensation holding that the
annuity thereof shall be calculated on the basis of 5°h return. In Revision
petitions, High Court enhanced the amount of compensation and the rate of
diminution at 50% from 40%. Hence the present appeals.

E Allowing the appeals and remitting the matter to High Court, the Court.

HELD: 1. No reason has been assigned in supportoftheviewtaken by
High Court in enhancing the land value and by enhancing the rate of the
diminution in land value to 50% from 40%. The materials placed on record
were not analysed. Why such a view was taken also does not appear from the
F records of the case. The amount of compensation is required to be determined
keeping in view the purpose and object of the statute. There cannot be any \;.
raed formula therefor or the other. Although, undoubtedly one formula laid
down, may assist the Board and/or Reference Court to apply the same but
there cannot be hard and fast rule in this behalf. The purpose anil object of
G the Act and the methodology laid down therein for the purpose thereof should
be the guiding factor. [Para 7) [359-B, C, DJ

KS.E. Boardv. Marthoma Rubber Co. Ltd., (1981) KLT 646, referred
to.

H 356
KERAlA STATE ELECTRICITY BOARD v. LIVISHA ETC. ETC. [S.B. SINHA, J.] 357
..... -< 2. The situs of the land, the distance between the high voltage electricity A
line laid thereover, the extent of the line thereon as also the fact as to whether
the high voltage line passes over a small track of land or through the middle
of the land and other similar relevant factors would be determinative for
paymeni: of compensation. The value of the land would also be a relevant factor.
The owner of the land furthermore, in a given situation may lose his
substantive right to use the property for the purpose for whk:h the same was B
meant to be used. So far as the compensation in relation to fruit bearing trees
are concerned the same would also depend upon the facts and circumstances
"'-. of each case. High Coart should consider the matter afresh on the merits of
each matter having regard to the fact situation obtaining therein.
[Paras 10, 11 and 13) (361-G-H; 362-A, B, F) c
Land Acquisition Officer, A.P. v. Kamandana Ramakrishna Rao and Anr.
(2007) AIR SCW 1145; Kapur Singh Mistry v. Financial Commission and
Revenue Secretary to Govt. of Punjab and Ors., [1995) Supp. 2 SCC 635;
State of Haryana v. Gurucharan Singh and Anr., [1995) Supp. 2 SCC 637
and Airports Authority of India v. Satyagopal Roy and Ors., [2002) 3 SCC D
..._.., 527, referred to•

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 289 of 2006.

From the Final Judgment and Order dated 28.3.2005 of the High Court
ofKerala at Emakulam, in C.R.P. No. 1279 of20')3. E
WITH

CA. Nos. 2774, 2773, 2772, 2771 of2007

- ,.
M. T. George for the Appellant.

Baby Augustine, Eby Augustine, M.K. Michael for the Respondent.
F

The Judgment of the Court was delivered by

S.B. SINHA, J. 1. Leave granted in SLPs.
G
2. These appeals involving common questions of law and fact were
taken up for hearing together and are being disposed of by this common
-..., judgment. What would be the amount of compensation for the trees cut and
removed by the Kerala State Electricity Board, a body corporate, constituted
and incorporated under Electricity (Supply) Act, 1948 is the question involved H
358 SUPREME COURT REPORTS [2007] 7 S.C.R.

A in these appeals. Indisputably, amount of compensation for the said plirpose
is determined in terms of the provisions of Section I 0, Part III of the Indian
Telegraph Act, 1885.

3. Before we embark upon the said question, we may notice the.amount
of compensation that has been determined by the Appellant-Board as also by
B the Reference Court being the District Judge.

4. Trees have been cut and removed for drawal of 110 K.V. Electr_ic Line.
The Board/Land Acquisition Officer determined the amount of compensation
whereupon reference was made. The learned District Judge while determining
.
\ ...'<-'",

C the amount of compensation followed a judgment of 5 Judge Bench of the
Kearla High Co·n in Kumba Amma v. KS.E.B., (2000) I KLT 542, holding that
annuity thereof shall be calculated. on the basis of 5% return. Revision
applications having been filed thereagainst. The High Court in some cases,
as noticed hereinbefore, enhanced the amount of compensation, fixing the
rate of diminution at 50% instead of 40%.
D
5. It is not in dispute that the High Court of Kerala at different point
of time took different views in the matter. To begin with, in Kera/a Electricity
Board v. Thomas, ( 1961) KL T 23 8, it was held that the principle which should
be resorted to for the said purpose is annuity method. Fair return of 5%
interest per annum was held to be reasonable for calculating the amount of
E compensation. Allegedly, the Board was following the principle laid down in
the said judgment in determining the amount of compensation.

6. The question again came up for consideration before the High Court
in K.S.E. Boardv. Marthoma Rubber Co. Ltd, reported in (1981) KLT 646,
F wherein a Full Bench of the said Court opined that it would be safe to adopt
the means of return on a fixed deposit for the usual period of 5 years or 63 > .)-.

months whichever is held reasonable and anticipated return for long term
basis. The usual bank rate of interest at the relevant point of time was I 0%
for long term deposits, i.e., over 5 years. The said rate of interest was adopted
by the Board to be a fair return and the amount of annuity was being
G calculated on the said basis. However, in Kumba Amma (supra), a 5 Judge
Bench of the High Court opined that inflation was a relevant factor which
should be taken into consideration while computing the amount of
compensation for destruction of trees.

7. We may, however, notice that in one of the impugned judgments, a
H learned Single Judge of the High Court held :·
KERALA STATE ELECTRICITY BOARD v. LIVISHA ETC. ETC. [S.B. SINHA, J.] 359
.... .. "The court below has fixed the land value at Rs.20,000/- per cent and A
the rate of diminution at 40%. Taking Exhibits A I and A2 produced,
the lower court is correct in fixing the land value at Rs.20,000/- per
cent cannot be the reasonable land value in this case. Hence I fix the
land value in this case at Rs.30,000/- per cent. So also the rate of
diminution in land value is fixed at 50% instead of 40% fixed by the
court below. The order passed by the court below is modified
B
accordingly."
J
.: No reason has been assigned in support of the above view. The materials
placed on record were not analysed. Why such a view was taken also does
not appear from the records of the case. The amount of compensation is
required to be determined keeping in view the purpose and object of the
c
statute. There cannot be any fixed formula therefor or the other. Although,
undoubtedly one formula laid down, may assist the Board and/or Reference
Court to apply the same but there cannot be hard and fast rule in this behalf.
A fixed formula for determining the amount of compensation although may
make the task of the Land Acquisition Officer or the Reference Court easier D
. but in our opinion each case is required to be taken on its own merit. We may
(
hasten to add that the purpose and object of the Act and the methodology.
laid down therein for the purpose thereof should be the guiding factor. The
5 Judges Bench of the Kerala High Court referred to a large number of
decisions which are applicable in the cases of death or fatal accident. It is E
from that point of view that the 5 Judges Bench proceeded to consider as to
what is meant by 'real rate of interest'. Ultimately opining that 5% return as
held in the case of Thomas (supra) and not a higher rate of interest as
observed in K.S.E Board (supra) should be the guiding factor, it was held :-

- _.,,
"The dispute in this case arose when trees standing in petitioners' F
property were cut down on 9.9.1980. The respondents have not made
available before us any material to show that the real rate of interest
~ in 1980 was something different from 5%. Their only contention based
on 1981 KL T 646 is that what is relevant is the prevalent rate of
interest which was 10%. This contention we have already rejected, as
such rate does not take into account the factor of inflation. Under
G
these circumstances, we hold that the rate of interest to be applied in
the present case is 5%. We hasten to add that we should not be
--,. understood as having laid down 5% as the real rate of interest for
subsequent period. The rate of interest applicable in India has been
held as 4% by Jagannadha Rao, J. in AIR 1988 AP 89. 11 years have H
360 SUPREME COURT REPORTS [2007] 7 S.C.R.
·,
·A lapsed after the above judgment. Whether it should be the same rate
of return that has to be applied for the period before and after the
above judgment or whether a higher or lower rate, is a matter to be
decided in appropriate cases where relevant data is available. Till such
time, the Board will adopt 5% as rate of return. But, we make it clear
that cases finally concluded by decisions of the Court will not be
B reopened."

8. The Indian Telegraph Act was enacted to amend the law relating to
telegraphs in India. Section 51 of the Indian Electricity Act, 1910 reads as
under:-
c "51. Exercise in certain cases of powers of telegraph authority.-
Notwithstanding anything contained in sections 12 to 16 (both
inclusive) and sections 18 and 19, the State Government in the case
of intra-State transmission system, may, by order in writing, for placing
of electric supply-lines, appliances and apparatus for the transmission
D of energy or for the purpose of telephonic or telegraphic communication
necessary for the proper coordination of works, confer upon any
public officer, licensee or any other person engaged in the bu~.~ness
of supplying energy to the public under this Act, subject to such
conditions and restrictions (if any) as the State Government may think
fit to impose, and to the provisions of the Indian Telegraph Act, 1885
E (3 of 1885), any of the powers which the telegraph-authority possesses
under the Act, with respect to the placing of telegraph-lines and posts
for the purposes of a telegraph established or maintained by_ the
Government or to be so establishment or maintained."

F 9. Both telegraph lines and electrical lines are required to be drawn over
the agricultural lands and/or other properties belonging to third parties. In
drawing such lines, the entire land cannot be acquired but the effect thereof
would be diminution of value of the property over which such line is drawn.
The Telegraph Act, 1885 provides for the manner in which the amount of
compensation is to be computed therefor. Section 10 of the Act empowers the
G authority to place and maintain a telegraph line under, over, along or across,
or posts in or upon any immovable property. Section 11 empowers the officers
to enter on property in order to repair or remove telegraph lines or posts.
Section 12 empowers the authority to grant pennission for laying down such
lines to a local authority in terms of clauses (c) & (d) of the proviso to Section
H 10 of the Act subject to reasonable conditions as it may think fit. Section 16
KER.\LA STA TE ELECTRICITY BOARD'" LIVISHA ETC ETC [S.B. SINHA J.) 361
of the said Act reads as under :- A
'' 16. Exercise of powers conferred by section I 0, and disputes as to
compensation, in case of property other than that of a local authority. -
(I) If the exercise of the powers mentioned in section IO in respect of
property referred to in clause (d) of that section is resisted or obstructed,
the District Magistrate may, in his discretion, order that the telegraph B
authority shall be pennitted to exercise them.

(2) If, after the making of an order under section (l ), any person
resists the exercise of those powers, or, having control over the
property, does not give all facilities for their being exercised, he shall
be deemed to have committed an offence under section 188 of the C
Indian Penal Code, 1860 (45of1860).

(3) If any dispute arises concerning the sufficiency of the compensation
to be paid under section IO, clause (d), it shall, on application for that
purpose by either of the disputing parties to the District Judge within D
whose jurisdiction the property is situate, be determined by him.

..._. J (4) If any dispute arises as to the persons entitled to receive
compensation, or as to the proportions in which the persons interested
are entitled to share in it, the telegraph authority may pay into the
court of the District Judge such amount as he deems sufficient or, E
where all the disputing parties have in writing admitted the amount
tendered to be sufficient or the amount has been determined under
sub-section (3), that amount; and the District Judge, after giving
notice to the parties and hearing such of them as desire to be heard,
shall determine the persons entitled to receive the compensation or,
as the case may be, the proportions in which the persons interested F
are entitled to share in it.

(5) Every determination of a dispute by a District Judge under sub-
section (3), or sub-section (4) shall be final:

Provided that nothing in this sub-section shall affect the right of G
any person to recover by suit the whole or any part of any
compensation paid by the telegraph authority, from the persons who
has received the same."

IO. The situs of the land, the distance between the high voltage electricity
line laid thereover, the extent of the line thereon as also the fact as to whether H
362 SUPREME COURT REPORTS [2007] 7 S.C.R.

A the high voltage line passes over a small track of land or through the middle
of the land and other similar relevant factors in our opinion would be
determinative. The value of the land would also be a relevant factor. The
owner of the land furthermore, in a given situation may lose l'lis substantive
right to use the property for the purpose for which the same was meant to
B be used.
~
1--

11. So far as the compensation in relation to fruit bearing trees are '+-
concerned the same would also depend upon the facts and circumstances of
~
each case. ...... )

~

C 12. We may, incidentally, refer to a recent decision of this Court in Land
Acquisition Officer, A.P. v. Kamandana Ramakrishna Rao & Anr., reported
in (2007) AIR SCW 1145 wherein claim on yield basis has been held to be I
~

relevant for determining the amount of compensation payable under the Land
Acquisition Act, same principle has been reiterated in Kapur Singh Mistry
v. Financial Commission & Revenue Secretary to Govt. of Punjab & Ors.,
D [1995] Supp. 2 SCC 635, State of Haryana v. Gurcharan Singh & Anr., [1995]
Supp. 2 SCC 637, para 4, and Airports Authority of India v. Satyagopal Roy
& Ors., (2002] 3 SCC 527. In Airport Authority (Supra), it was held :- . "· '-

"14. Hence, in our view, there was no reason for the High Court not
to follow the decision rendered by this Court in Gurucharan Singh 's
L
E case and determine the compensation payable to the respondents on
the basis of the yield from the trees by applying 8 years' multiplier.
In this view of the matter, in our view, the High Court committed error
apparent in awarding compensation adopting the multiplier of 18."

F 13. We are, therefore, of the opinion that the High Court should consider
the matter afresh on the merit of each matter having regard to the fact
_,_
situation obtaining therein. The impugned judgments, therefore, cannot be >

sustained. These are set aside accordingly. The matters are remitted to the f
High Court for consideration thereon afresh. The appeals are allowed. In the · ;~
facts and circumstances of the case, there shall be no order as to costs.

K.KT. Appeals allowed. .~
~

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