Kerala State Electricity Board v. T. T. P. Kayo — 1996 DIGILAW 8 (KER)

Judgment :- Usha, J. Orders passed by the District Judge in exercise of the jurisdiction under S.16(3) of the Indian Telegraph Act, 1885 read with S.51 of the Indian Electricity Act, 1910 are' under challenge in these revision petitions. In C. R. P. Nos. 99,191, 228, 306, 347 of 1994,1358 and 2079 of 1995 of the Kerala State Electricity Board, hereinafter referred to as 'Board', challenges the quantum of compensation granted by the District Judge as excessive whereas in C. R. P. Nos. 2128 of 1991,1153,1468,1497,1582,1620,1726,1947 & 2049 of 1995 the complaint of the petitioners is that the compensation granted was inadequate. Apart from claiming enhanced compensation for destruction of trees standing on their property, the owners of the property claimed compensation for diminution in value of the land. When these revision petitions came up for admission before a learned Single Judge, the Board took up a contention that dictum laid down by a decision of this Court in K.S.E.B. v. Cheriyan Varghese, 1989(1) KLT 451, in the matter of granting compensation for diminution in value of land is liable to be reconsidered.. The learned Single Judge referred the matter before a Division Bench. In view of the importance of the issue involved, a Division Bench of this Court referred the matter for consideration of the Full Bench. 2. S.51 of the Indian Electricity Act, 1910, empowers the State Government of pass orders in the matter of placing of electricity supply lines etc. authorising any public officer or other person engaged in the business of supplying energy to the public to exercise any of the powers which the telegraph authority possesses under the Indian Telegraph Act, 1885 with respect to the placing of telegraph lines and posts. Section42 of the Electricity (Supply) Act, 1948 provides that the Board shall have all the powers which the telegraph authority possesses under Part - III of the Indian Telegraph Act, 1885 with regard to a telegraph established or maintained for the placing of any wires, poles etc. for the transmission and distribution of electricity. Section 10 of the Indian Telegraph Act, 1885 empowers the telegraph authority to place and maintain telegraph line under, over, along or across and to erect posts in or upon, any immovable property, It is' under the above provisions of law the Board is permitted to place towers and poles and draw electric line across immovable properties. Section 10 of the Indian Telegraph Act, 1885 empowers the telegraph authority to place and maintain telegraph line under, over, along or across and to erect posts in or upon, any immovable property, It is' under the above provisions of law the Board is permitted to place towers and poles and draw electric line across immovable properties. Section 10(d) mandates the telegraph authority to do as little damage as possible, and, when it has exercised those powers in respect of any property it shall pay full compensation to all affected persons for any damage sustained by them by reason of the exercise of those powers. If any dispute arises concerning the sufficiency of the compensation to be paid under Section 10(d) it shall be decided by the District Judge as per Section 16(3). 3. When the electric supply lines are drawn through lands, it. may result in destruction of trees and other improvements standing on the land. It can also result in diminution in value of the land over which the lines are drawn. Question that has come up for consideration before us is whether an owner of a land through which electric supply lines are drawn can claim compensation for diminution in value of the land in addition to compensation for the destruction of the trees and if so, to what extent? In Kerala State Electricity Board & Others v. Varghese Thomas and others, 1961 KLT 238, a Division Bench of this Court had occasion to consider in detail the basis of quantification of compensation for destruction of fruit bearing or yielding or income producing trees standing on the land, through which electric supply lines were drawn. This Court took the view that it is not the rule of capitalisation that has to be followed, but, on the other hand, compensation has to be fixed as the present value of an annuity which gives a return at the rate of 5% per annum. The reason for rejecting the method of capitalisation was that such method fails to take note of what is so obvious, that the tree would cease to be productive after a certain number of years and yet, what is paid, amounts to investment of capital, yielding what is the equivalent of the net annual rental, in perpetuity. 4. The reason for rejecting the method of capitalisation was that such method fails to take note of what is so obvious, that the tree would cease to be productive after a certain number of years and yet, what is paid, amounts to investment of capital, yielding what is the equivalent of the net annual rental, in perpetuity. 4. The principle evolved in 1961 KLT 238 (supra) was affirmed by a Full Bench of this court in/T. S. E. Board v. Marthoma Rubber Company Ltd., 1981 KLT 646. The only modification made by the Full Bench was in respect of interest rates raising it upto 10%. It is the admitted case of both sides before us that compensation is being offered by the Board on the basis of interest at the rate of 10%. 5. In Malankara Rubber & Produce Company Ltd. v. Slate of Kerala & Others, 1967 KLT 938, petitioner put forward a claim for enhancement of compensation for the trees cut and removed and also for diminution in value of the lands over which transmission towers and electric posts were erected and electric wires were drawn. While rejecting the prayer for enhancement of the compensation in respect of trees, a Division Bench of this Court remanded the matter for fresh consideration by the lower court as to whether (a) there has been a diminution in the market value of the lands in consequence of the acts of the respondent and if so (b) what was the quantum of such diminution and the compensation which may be allowed to the petitioner on the account. This Court had thus accepted in principle that an owner of a land is entitled to compensation for diminution in value of the land even when he has been granted compensation for the trees destroyed. 6. In K.S.E.B. v. Cheriyan Varghese, 1989 (1) KLT page 451, this specific question came up for consideration of a Division Bench. It was held as follows: "17. We are clearly of the view that apart from the compensation for the damage done by the cutting of trees, the owner of the land is also entitled to compensation for any diminution in value of land that he has suffered for the reason of the drawal of overhead power lines across his land. It was held as follows: "17. We are clearly of the view that apart from the compensation for the damage done by the cutting of trees, the owner of the land is also entitled to compensation for any diminution in value of land that he has suffered for the reason of the drawal of overhead power lines across his land. The diminution in value is to be determined with reference to the market value of land without trees before and after the drawal of the lines". This decision is sought to be reconsidered by the Board. 7. It is contended on behalf of the Board before us that once the compensation is fixed on (he basis of the yield from the trees standing on the property the owners of the land are no longer entitled to further compensation for diminution in value of the land. In support of this contention the learned counsel appearing on behalf of the Board drew the analogy from land acquisition cases and submitted that it is an accepted mode to value the property acquired on the basis of yield from the trees standing thereon. It was submitted that most of the properties which are involved in the cases before the Full Bench are agricultural properties. Merely because the trees are cut, towers and poles are erected and electric lines are drawn, there is no diminution i n the value of the property as an agricultural property. It will be still open to the owners of the land to continue to cultivate that portion of the property subject to the restriction regarding the open space to be left below the electric line and on its sides. The owner of the land cannot seek compensation in respect of an agricultural property contending that he has suffered diminution in market value of the land as a building site, or as an industrial or commercial site. The market value has to be fixed for the purpose of assessing diminution in value of the properly if at all allowable, only by taking into consideration (he potentiality of the property. Since no principle has been evolved by this Court as to how compensation on account of diminution in value of the land by drawing the electric line is to be quantified, District Judges have been granting compensation on this account without any uniform basis. Since no principle has been evolved by this Court as to how compensation on account of diminution in value of the land by drawing the electric line is to be quantified, District Judges have been granting compensation on this account without any uniform basis. The allegation is that amounts ranging between 40 to 60 % of the market value had been granted as compensation for diminution in market value on the ground of drawing the electric line across the land. Such fixation of percentage is criticised as unjust and arbitrary. We too felt that percentage of diminution of land value was fixed without any rhyme as rationale in many cases. 8. According to the claimants, the dictum laid down in the decision reported in 1989(1) KLT page 451 (Supra) does not require reconsideration. They submit that the contention that no compensation for diminution of land value can be granted once compensation for destruction of the trees is granted, is raised on a mis-apprehension regarding the manner of quantifying compensation for cutting and removing of the trees. The compensation for cutting and removing of the trees is granted on the annuity basis and not on capitalisation basis. For the purpose of computation on annuity basis the life span of the particular tree is taken into consideration and an amount is fixed on which the owner of the land is to get return on the basis of interest at 10% till the end of the life span of the tree concerned. By that time there will be nothing left out of the capital. In order to expatiate their contention learned counsel appearing on behalf of the respondent in C. R. P. No. 306/94 filed a statement showing how the capital investment is exhausted by the end of the life span of the tree: Table showing exhausting of capital investment of Rs. 5,279.12 in the first year at 10% annuity basis for a period of 30 years. Data relied on. A 30 year old coconut tree yielding 250 nuts per year, value of nuts Rs. 4/- per nut and future life 30 years. Annuity factor is 9.427. Gross Annual yield : 250 Net annual yield : 250x9/16=140.625 : 140 Net annual income : 140x4=560 Total income to be obtained for 30 more years : 56000=16,800 Amount to be deposited at 10% interest rate to yield Rs. 4/- per nut and future life 30 years. Annuity factor is 9.427. Gross Annual yield : 250 Net annual yield : 250x9/16=140.625 : 140 Net annual income : 140x4=560 Total income to be obtained for 30 more years : 56000=16,800 Amount to be deposited at 10% interest rate to yield Rs. 560/- per annum for a period of 30 years according to Park's Table. : 140x4x 9.427 = Rs.5279.12 The above would show that by the end of 30 years nothing is left out of the capital and he would have received a total amount of Rs. 16,800 during the entire period of 30 years. 9. It is then contended by the claimants that in view of the restrictions imposed by the Board the owner of the land will not be able to plant or grow coconut trees or other trees under or by the side of the line within the prohibited distance and thus the 1 and owner is disabled to utilise the property as an agricultural property by growing coconut palms or other trees due to the stringing of the electric line. The claimants pointed out that even in the Manual of Instructions issued by the Kerala State Electricity Board in connection with compensation for land acquisition and tree cutting, reference is made to diminution of land value on account of installation of electric line over private properties. It is provided that the actual extent of land for which compensation can be claimed on account of drawing of the line is only the area covered by the length multiplied by the width of the lines plus the horizontal clearance on either side. The compensation which may be allowed shall be assessed with reference to the nature of the land, the use to which it was and could be put, its future utility and such other relevant factors. The value for the diminution in the use of land should as far as possible be assessed at the same time as the value of the trees are assessed. According to the claimant the above provision in the Manual, though not having statutory force, would indicate that the Board has not accepted in principle the claim for diminution in land value as a consequence of drawing electric lines. 10. According to the claimant the above provision in the Manual, though not having statutory force, would indicate that the Board has not accepted in principle the claim for diminution in land value as a consequence of drawing electric lines. 10. It is further contended by the claimants that even an agricultural property can be enjoyed as a building site or commercial or industrial site. If overhead electric line is drawn through the property, no construction will be allowed within the prohibited distance. Therefore, the owner of the land suffers diminution in market value of the property even as a building site or commercial or industrial site, contended the counsel. 11. We find merit in the contention of the claimants that since capitalisation method is not being adopted for assessing the quantum of compensation for cutting trees it is open to the land owners to claim compensation for diminution in market value of the property. S.10 proviso (d) makes it mandatory that while drawing the line through any property in exercise of the powers given under S.10 the authority shall pay full compensation to all persons interested for any damage sustained by them by reason of the exercise of such power. In 1961 KLT 238 (Supra) the Division Bench of this Court observed that destruction of trees standing on agricultural land is one of the items of damage, which can be valued and assessed. We are in agreement with the view. It would mean that apart from the compensation for damage done to the trees there can be other damage to the land for which compensation can be claimed. As mentioned earlier, in 1967 KLT 938 (Supra) a Division Bench of this Court has accepted the principle that even after granting compensation for destruction of the trees owners of the property can claim compensation for diminution in market value of the land by the erection of transmission towers and of electric posts and by the stringing of electric wires. As mentioned earlier, in 1967 KLT 938 (Supra) a Division Bench of this Court has accepted the principle that even after granting compensation for destruction of the trees owners of the property can claim compensation for diminution in market value of the land by the erection of transmission towers and of electric posts and by the stringing of electric wires. The same view was taken in 1989(1) KLT 451 as follows: "Since the compensation payable under S.10(d) of the Telegraph Act is die just equivalent of what the owner has been deprived of, he is entitled also to any diminution in value of land for the reason of the drawal of overhead power lines across the land." We are in full agreement with the above view taken by the two Benches of this Court regarding the eligibility for compensation on diminution of land value. 12. The further question to be considered is whether by following annuity method in granting compensation, the claimant is getting compensation for diminution in land value also as alleged by the Board. 13. The difference between capitalisation method and the annuity method has been explained in para 6 of the judgment reported in 1981 KLT 646 (Supra) as follows: "If we capitalise the income for the number of years during which the tree is expected to yield in future at die prevalent rate of interest the capitalised value will represent not only the return for these years, but in addition the capital that would remain in tact at the end of die period. To put die same idea in a different way, it would present such recurring return for all time and not for the limited period during which alone (lie trees would have contained to yield income. Therefore, that would not be just equivalent of die compensation. If 5 % return would be a reasonable return and die trees would normally be expected to yield, say for 25 years more what is paid as compensation must yield die annual return at 5% which would be equivalent of what die owner of die trees would have obtained had diesel trees continued to stand in die property for 25 years but since the trees would cease to yield income at the end of 25 years the amount paid as compensation must exhaust itself by the end of that period. In other words, it will be as if the amount of income-is received only for a period of 25 years. In that event die determination should be as if an annuity for 25 years is provided for. What amount invested today will yield annuity for a specified period will have to be computed. The present value of recurring payments for a specified number of years will have to be worked out. It will be easy to work it out on the basis of the valuation tables provided in die Appendix in "Parks on Valuations Land and Houses". The present value of Re.1 per annum at specified rates of interest return for a specified number of years could be easily found from the table. That would serve as die basis for determining what such value will be applying die multiplier representing the specified number of years". From the above it is clear that by applying the annuity method no compensation is paid for the land being made unfit for growing trees after the life span of the existing coconut tree or other trees in view of the tower or posts erected and the electric line drawn on the land. 14. It is die case of the claimants that diminution in market value of,the land as an agricultural property arises due to-their disability to continue die cultivation after die life span of die existing trees in view of die prohibition against planting and growing trees under and by die side of electric line. Therefore, the loss which they suffer is a loss arising out of non-utilisation of the land as an agricultural property. If the amount of compensation computed on annuity basis and paid to the land owner is not to be depleted completely by die end of the life span of the tree it can be taken that die owner of the land is compensated for the diminution in the land value as an agricultural property. This can be demonstrated as follows: Therefore if 6.06 per cent age of compensation on annuity method is also paid it will cover the period after the life time of the tree. The per cent age will vary according to the period. of remaining life span of the trees. 15. This can be demonstrated as follows: Therefore if 6.06 per cent age of compensation on annuity method is also paid it will cover the period after the life time of the tree. The per cent age will vary according to the period. of remaining life span of the trees. 15. We are of the view that in order to ascertain the compensation to be paid for diminution in land value as an agricultural property the above method can be generally accepted, except when the life span of the trees is almost over and also in cases where the trees have not started yielding. In such cases, the diminution in land value as an agricultural property has to be computed not on the above mentioned basis but on the basis of general principles. It is for the Board to issue regulations invoking power under clause (a) of S.79 of the Electricity (Supply) Act, 1948 laying down the norms to be applied for assessing diminution in land value resulting from destruction of trees. While issuing such regulations the Board will take into consideration the observations contained this judgment regarding the nature of additions to be made while calculating compensation for diminution in land value as above. 16. When the land is substantially planted with trees its potentiality can be taken as an agricultural land. On the other land, if the land is sparsely planted with trees, its potentiality need not be taken as an agricultural land. In such cases diminution in land value can be claimed as a non-agricultural land. However, we are not inclined to accept the contention of the claimants that even the properties which are essentially agricultural properties, compensation can be claimed for diminution in market value as a building site or commercial or industrial site. 17. The point stressed by the Board that even if trees are not permitted to be grown below or by the side of the electric lines within the prohibited distance it is open to the owner of the land to raise other agricultural crops and thus continue to utilise the land for agricultural purposes has a material bearing on the question. Thus argument is based on the rule of mitigation of damage. Thus argument is based on the rule of mitigation of damage. This rule is explained in McGregor on Damages (14th Edition, page 214) as follows: "The extent of damage resulting from a wrongful act whether tort or breach of contract, can often be considerably lessened by well advised action on the part of the person wronged. In such circumstances the law requires him to take all reasonable steps to mitigate loss consequent on the defendant's wrong and refuses to allow him damages in respect of any part of the loss which is due to his neglect to take such steps". Thus it is open to contend that if the land on which electric lines are drawn are lit for other cultivation which would not conflict with the requirement of open space to be left from the electric lines and if such cultivation can be carried on in a reasonably profitable manner, the claimant is expected to carry on such cultivation. If he does not do so, it is a factor which has to be taken into consideration. at the time of qualification of the compensation for diminution in land value. 18. In Thomas v. Countryside Council, for Wales (1994 (4) AH ER (Page 853) Rougier J. of Queen's Bench Division had occasion to consider a similar issue. In the above case, due to a statutory restriction of use of land the appellants who were running a sheep farm had to limit drastically the posturing of the sheep in the area where they had grading rights. This resulted in their radically altering the farming policy reducing" their folks and covering much of the inland acreage to arable use. While deciding on the compensation which they are entitled to on their deducing sheep farming activity, the court considered the rule of mitigation of damage and it is observed as follows: "Under the normal law of Contract and Tort the fundamental basis for the measure of damages is compensation for pecuniary loss which directly and naturally flows from the breach .... There is, however, a qualification that a plaintiff suing for breach of contract or for that matter or tort cannot call upon a defendant to pay the full direct consequences unless he him self has acted reasonably to mitigate loss. It is sometime loosely described as a plaintiffs duty to militate." 19. In Sorliros Shipping Inc. There is, however, a qualification that a plaintiff suing for breach of contract or for that matter or tort cannot call upon a defendant to pay the full direct consequences unless he him self has acted reasonably to mitigate loss. It is sometime loosely described as a plaintiffs duty to militate." 19. In Sorliros Shipping Inc. and Aeco Maritime S. A. v. Sameiet Solholt (The "solholt"), (1983) 1 e.p.605, it is observed by, Sir. John Donaldson M. R. as follows: "A plaintiff is under no duty to mitigate his loss, despite the habitual use by the lawyers of the phrase "duly to mitigate". He is completely free to act as he judges to be in his best interests. On the other hand, a defendant is not liable for all loss suffered by the plaintiff in consequence of his so acting. A defendant is only liable for such part of the plaintiffs loss as is properly to be regarded as caused by the defendants' breach of-duty." The principle has been explained by Viscount Haldancc, L.C. in British Westinghouse Electric and Manufacturing Company Ltd. v. Underground Electric Railways Company of London Ltd., (1912) A. C. 673, as follows: "The fundamental basis is thus compensation for pecuniary loss naturally flowing from the breach; but this Thirst principle is qualified by a second, which imposes on a plaintiff the duty of taking all reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any part of the damage which is due to his neglect to take such steps." The above principle has been accepted in Indian Courts also. In M/s. Murlidhar Chiranjilal v. M/s. Harishchandra Dwarkadas and another, AIR 1962 SC 366, Wanchoo, J. (as he then was) has made specific reference to the above mentioned decision and further observed that the two principles follow from the law as laid down in S.73 of the Indian Contract Act read with Explanation thereof also. Much earlier Privy Council had also taken the same view in Jamal v. Moola Dawood Sons & Company, 43A. I.10. In M. Lachia Selty and Sons Ltd. v. The Coffee Board, Bangalore, AIR 1981 SC 162, it was clarified that the principle of mitigation of loss does not give any right to the party who is in breach of .the contract but it is a concept that has to be borne in mind while awarding damages. I.10. In M. Lachia Selty and Sons Ltd. v. The Coffee Board, Bangalore, AIR 1981 SC 162, it was clarified that the principle of mitigation of loss does not give any right to the party who is in breach of .the contract but it is a concept that has to be borne in mind while awarding damages. 20. In the light of the above discussion we are inclined to take 'the view that the claimants have duty to mitigate the damage by resorting to any other cultivation which is reasonably possible in the land covered by the electric line and can be carried on economically. Of course the Board cannot compel the claimants to carry on cultivation underneath the electric line. But if such cultivation is reasonably possible and at the same time they failed to carry on such cultivation it will be a factor for consideration at the time of quantification of the damages. But the claimants are expected to do such cultivation which is reasonable. While considering the question whether the farming system adopted by the appellant was a reasonable one in Thomas and another v. Countryside Council for Wales (1994) 4 All ER 853, the relevant considerations are stated as follows: "Put another way, was the appellant's decision to adopt the farming system which they did a reasonable one? That question is not to be answered solely in terms of the commercial optimum. Obviously profitability is a factor, and an important one, but in an occupation such as farming any test of reasonableness should take some account of other circumstances including individual personal factors of amenity, even of aesthetic preference. The question of what is reasonable is entirely one of fact for the arbitrator". 21. The next question to be considered is on whom is the onus of proof on the issue of mitigation of damage. Under English Law, the position is well established. The burden is on the defendant. If he fails to show mat the plaintiff ought reasonably to have taken certain mitigating steps then the normal measure will apply - Roper v. Johnson, (1873) LIZ 8 CP 167, and Gamac Grain Company v. Faure & Fairclough, (1968) AC 1130. But in Indian Law, there seems to be conflict of decisions. The burden is on the defendant. If he fails to show mat the plaintiff ought reasonably to have taken certain mitigating steps then the normal measure will apply - Roper v. Johnson, (1873) LIZ 8 CP 167, and Gamac Grain Company v. Faure & Fairclough, (1968) AC 1130. But in Indian Law, there seems to be conflict of decisions. The Allahabad High Court, Oudh Chief Court and Madhya Pradesh High Court had taken the view that it' is the burden of the plaintiff to prove that he took steps to mitigate the loss. (Vide Prabhu Lai Upadhya v. District Board, Agra, AIR 1938 All. 216, Aliya Begum v. MohiniBibi, AIR 1943 Oudh 17 and PannalalJugatmal v. State of Madhya Pradesh, AIR 1963 MP 242). But a contrary view has been taken by the High Court of Madras, Calcutta and Bombay in Sundaram Chettiar v. Chokalaingam Chettiar, AIR 1938 Mad. 672, Pratfall Ranjan Sarkar v. Hindustan Building Society, AIR i960 Cal. 214 and K. G. Hira Nandani v. Bharat Barrel and Drum Mfg. Company, AIR 1969 Bombay, 373. In sagarmullagarwala v. Union of India, AIR 1980 Sikkim 22, the Sikkim High Court took the view that if it was necessary to decide this question it would have agreed with Madras, Calcutta and Bombay. In the Bombay decision the entire case-law on this aspect had been considered in detail. Reference is also made to Mayne on Damages, Chitty on Contracts and C. Kameshwarao's Law of Damages and Compensation. Cheshire and Fi foot in their Law of Contract, Eighth Edition, Page 593, have observed as follows: "Whether the plaintiff has failed to take a reasonable opportunity of mitigation is a question of fact dependant upon the particular circumstance of each case and the burden of proving such failure rests upon the defendant". It is true that when the plaintiff comes to court seeking damages on breach of a contract for service it may be possible to contend that the plaintiff is the best person to adduce evidence as to whether he had made any successful attempts to get another employment which could have mitigated damage. Some of the decisions where the burden is cast on the plaintiff are cases seeking damages for breach of contract for service. 22. Some of the decisions where the burden is cast on the plaintiff are cases seeking damages for breach of contract for service. 22. In this case, it is the claimant who knows, best as to how his land could be cultivated with other crops which would not violate the restrictions regarding open space to be left from the electric lines, towers and posts. It is quite plausible that every landowner would be using the land beneath the electric lines (be they of high tension or low tension) to raise cultivation or for some other purpose except of course for growing tall trees or constructing high structures. Thus, regard being had to the common course of natural events, the court can draw a presumption that agricultural operation in a reasonably profitable manner can be carried on in the affected land except growing tall trees. Hence the burden is on the claimant to rebut the said presumption. 23. The upshot of the above discussion is that it is open to the owners of the land to' claim compensation for diminution in land value when towers and poles are erected on and electric lines drawn over their lands subject to the conditions detailed in this judgment. The quantum of damages shall be fixed on the basis of the principles enunciated hereinabove. Whether claimants had taken reasonable steps to mitigate the damage or not is a question to be considered by the District Judge on the evidence in each case and subject to the presumption and onus indicated above. 24. We direct the Board to take steps to issue the regulations (as indicated in this order) within 6 months from today. With these findings and directions we answer the points referred to the Full Bench. All these Civil Revision Petitions can now be boarded on the list of the learned single judge concerned for disposal.