KUMBA AMMA Vs. K S E B

JUDGEMENT

(1.) THE question raised in this Civil Revision Petition concerns the 'just compensation' payable on the basis of annuity principle, when trees in private properties are cut down for the purpose of drawing power lines. About four decades back, this question had come up for consideration by a Bench of this Court in Electricity Board v. Thomas, 1961 KLT 238. THE Bench took the view that the method that can be adopted for computing the compensation is the one by which the present value of annuity which would yield a fair return on the amount for a specified period is ascertained. It was also held that the fair return could be fixed at 5% interest per annum. Two decades later, the question again came up for consideration before a Full Bench in k. S. E. Board v. Marthoma Rubber Co. Ltd. , 1981 KLT 646. THE principle adopted by the Bench in 1961 KLT 238 supra, concerning the mode of determining compensation, was not under challenge before the Full Bench. But, it was contended that the rate of return at 5 % need not be true for all times. Regarding the rate of return, the Full Bench took the view that it would be safe to adopt the return on a fixed deposit for the usual period of 63 months as reasonable anticipated return on a long term basis on a safe and prudent investment. It is this aspect of the judgment of the Full Bench, that is sought to be reconsidered by the petitioners.

(2.) ACCORDING to the petitioners, the Full Bench has erred i n equating the rate of fair return with the prevalent Bank interest instead of adopting the "real rate of interest". In support of the above contention, reliance was placed on a decision of the andra Pradesh High Court in Bhagawandas v. Mohd. Arif, AIR 1988 AP 89 where Jagannadha Rao, J. (as he then was) had considered the question elaborately. It has been held therein that the rate of interest to be adopted for determining the compensation is 'real rate of interest' and not the actual or current rate of interest offered by the Banks. The Civil Revision Petition was therefore referred by a learned single Judge and ultimately, it came up for consideration before a Full Bench. On examining the decision in 1981 KLT 646 supra, Full Bench found that the question whether it is the real rate of interest that should be adopted or the current rate of interest, in order to arrive at the just compensation payable when trees in private properties are cut down for the purpose of drawing power lines was not as such discussed or considered in detail in that decision. Therefore, the Full Bench referred the matter for consideration of a Larger bench.

(3.) THE bone of contention between the parties is whether inflation is an element to be taken into consideration while computing the present purchase value of future annuity. According to the petitioner, if inflation is not taken into consideration, the lump sum paid will not represent an amount as nearly as possible full compensation for the injury which the claimant has suffered. Adoption of real rate of interest or interest obtain able in a stable economy will take care of the effect of inflation. On the other hand, the respondent-Board would contend that the rate of interest that has to be taken into consideration is the one offered by the Banks at the relevant period. If a lesser rate of interest is taken into consideration, the claimant will be over-compensated. According to the respondent, inflation is not a component to be taken into consideration while computing the compensation.