Land acquisition valuation must use a realistic capitalisation multiplier based on prevailing returns, not an outdated years' purchase figure.

Where comparable sales are unavailable in land acquisition valuation, compensation may be based on capitalisation of actual or prospective net income, but the years' purchase multiplier must reflect the return an ordinary investor would reasonably expect from similar agricultural land at the date of notification. The Court held that the multiplier should be fixed by prevailing economic conditions, including safety, liquidity, marketability and risk, rather than by an arbitrary or outdated figure. On that basis, a fifteen-year multiplier was unjustified and could not exceed ten. The compensation awards based on capitalisation were reduced, with corresponding adjustment of solatium and interest.

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Issues: Whether the proper multiplier for capitalising the net annual profits of the acquired agricultural lands should be fifteen or a lower figure having regard to the prevailing rate of return at the date of notification.

Analysis: The applicable method for land acquisition valuation is to ascertain the market value at the date of the notification under Section 4(1) of the Land Acquisition Act, 1894. Comparable sales are the best evidence where available, but where such evidence is absent, capitalisation of actual or immediately prospective net income may be adopted. The multiplier must reflect the return an ordinary investor would reasonably expect from similar agricultural land, taking into account safety, liquidity, marketability, and risk. In the economic conditions prevailing in 1971 and 1972, agricultural investment would ordinarily command a return higher than safe investments, and the adoption of fifteen years' purchase was not justified.

Conclusion: The proper multiplier could not exceed ten, and the adoption of fifteen was erroneous.

Final Conclusion: The appeals were allowed and the compensation awards based on capitalisation were reduced by applying the correct multiplier, with solatium and interest adjusted accordingly.

Ratio Decidendi: Where no comparable sales are available, land acquisition compensation based on capitalisation must be fixed by reference to the prevailing expected return on similar investments at the date of notification, and not by an arbitrary or outdated years' purchase multiplier.

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