KOMATH KUMBA AMMA Vs. KERALA STATE ELECTRICITY BOARD

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 Kerala State Electricity Board v. Varghese Thomas, 1961 Ker L T 238 : (AIR 1961 Kerala 237). 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 Ker L T 646 :(AIR 1981 Kerala 223). The principle adopted by the Bench in 1961 Ker L T 238 : ( AIR 1961 Kerala 237) 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 return on 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 in 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 Andhra Pradesh High Court in Bhagwandas v. Mohd. Arif, AIR 1988 Andh. Pra. 99 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 Ker LT 646 :(AIR 1981 Kerala 223) supra, Full Bench found that the question whether it is the 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.) At the outset, we may observe that no dispute is raised before us by both sides regarding the method to be adopted for arriving at the just compensation payable, namely, the method of determining the present value of an annuity which would yield a fair return for a specific period. The limited area of dispute is regarding the rate of return. The learned counsel for the petitioner contended that the rate of return that should be adopted is the one that can be obtained in a stable economy and not the interest offered by the Bank from time to time, which would vary due to serval reasons including the effect of inflation. According to the petitioner, 5% return adopted by 1961 Ker L T 238 :(AIR 1961 Kerala 237) is the real rate of interest which could be obtained in a stable economy. After the judgment of the Full Bench in 1981 Ker L T 646 :(AIR 1981 Kerala 223), the Electricity Board had been uniformly adopting 10% as the rate of return, which according to the petitioners, resulted in substantial reduction in the quantum of compensation in respect of cutting of fruit bearing trees. In the present case, dispute that remains for consideration is one relating to compensation for cutting down palms.