Now arises the question as to whether the awardees are also entitled to any further increase on account of the potentialities of the land. According to this principle, "value of land should be determined not necessarily according to its present disposition but laid out in its most lucrative and advantageous way in which the owner can dispose of it. If the land has, what may be called, an adventitious value, i.e., beyond its agricultural or normal value, and that is a marketable value in the sense that persons wishing for a purpose for which the land is particularly applicable to purchase that land, then the Arbitrator has a fair right to take that into consideration, it is a matter, no doubt, contingent, but it is still a matter, not to be ignored or put out of consideration. In other words, the land is not to be valued merely by reference to the use to which it is being put at the time at which its value has to be determined, but also by reference to the uses to which it is reasonably capable of being put in future.
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Patna High Court
Smt. Tribeni Devi Sarawgi And Anr. vs Collector on 19 December, 1979
Equivalent citations: 1981 (29) BLJR 27
Bench: H L Agrawal, S S Sinha
1. Both these appeals which are in the nature of cross appeals, arise out of the judgment and award, made under Section 18 of the Land Acquisition Act by the Second Additional Judicial Commissioner of Chotanagpur, Ranchi. First Appeal No. 14 of 1965 is by the claimants and First Appeal No. 18 of 1965 is by the State, Order 275 acres equivalent to 11979 sq. fit of land appertaining to Municipal Survey Plot No. 1784 bearing municipal holding No. 275-A, having some structures on a part thereon, was acquired by the State of Bihar for construction of a building for Handicraft Sale-curn-Procurement Depot at Ranchi, This land was situate on the "Main Road" of Ranchi town and was classified as homestead and Makan. The relevant notification under Section 4 of the Act was issued on 29-9-1961. The awardees had claimed a sum of Rs. 5,00,000/- as compensation but the Land Acquisition Officer awarded Rs. 25,561, 25 for the land and Rs. 13,000/- for the structures. He also awarded an additional compensation under Section 23 (2) on the market value amounting to Rs. 5,874.19 and Rs. 3,834.19 as damages under the various clauses of Section 23 of the Act. In this way he awarded a total compensation of Rs. 48,179.63. The above award was prepared only in the name of Smt. Tribeni Devi Sarawgi, but her son Harakchand Sarawgi claimed that he was the owner of the structures and accordingly he claimed the compensation awarded for the structures. However, both of them applied for referring the matter to the Court and accordingly the case was referred.
Before the Court below, both of them agreed that compensation to the extent of 10 annas in a rupee would go to Smt. Tribeni Devi Sarawgi and to the extent of 6 annas in a rupee to Harakhohand Sarawgi. The Court below accepted this agreement and has ordered appointment accordingly. It also raised the amount of compensation for land from Rs. 25,561/- to Rs. 97,500/-but refused to make an increase with respect to the compensation for the house. The learned Additional Judicial Commissioner has determined the compensation of the land by adopting the method of capitalisation of the returns actually received from the land and building.
2. Learned Counsel for the State of Bihar argued that the learned Additional Judicial Commissioner has adopted a wrong method of determining the compensation. According to him, he should have done that on the basis of the documents of sale of lands in the locality.
The principles to be followed and matters to be considered in determining the compensation of the land have been indicated in Section 23 of the Act and the first principle of that rule is that the market value of the land should be determined with reference to the date of the publication of the notification under Section 4. In other words, the market rate must be determined with reference to the price which willing vendor might reasonably expect to obtain from a willing purchaser and for ascertaining the market rate, the Court can rely on such transactions which would afford guide to fix the price. Then the transactions must be with respect to comparable lands or sites and must be in a close proximity of the land under acquisition. By 'comparable land' is meant land possessing advantages similar to those of the land acquired in or about the time of the notification. It is no doubt true that the relevant data as indicated above are not always available, and even then it is not possible to reach to a conclusion with mathematical accuracy and the Court is bound to adopt the rule of speculation.
3. In the case before us, however, no sale deed of such a transaction of land was filed, and as it appears from the report of the Land Acquisition Officer (Ext. D) he could find only one transaction of sale with respect to Municipal Plot No. 1786 which was executed on 25-7-1961 at the rate of Rs. 71,500/-per acre. This plot, as has been verified from the plan was not situated on the "Main Road" but was at some distance on a much narrower road. A few other sale-deeds which are exhibited were of lands situated still further and neither the Court below nor counsel for the State placed any reliance on those documents.
4. The question now arises as to what procedure should be adopted in determining the compensation of the lands under acquisition. It has been seen that part of the land under acquisition was built up area having shops and godowns (front side) and part of it was vacant (near side). The Court below has adopted the method of capitalisation. Learned Counsel for the State, however, vehemently contended as stated above that the Court below should not have adopted this method and should have valued the land according to the sale rate obtaining in the area with reference to the sale-deeds filed on behalf of the State of Bihar. The land in question is situated on the Main Road having a width of about 120 feet and is located in the hub of the town in a busy and commercial area.
5. The Supreme Court in the State of Kerala v. P.P. Hassan Koya . has held that when the property sold is land and building, it is often difficult to secure reliable evidence of instances of sale of similar lands with buildings proximiate in time to the date of the notification under Section 4. Therefore, the method which is generally recorted to in determining the value of the land with buildings, specially those used for business purposes, is the method of capitalisation of the returns actually received and which might reasonably be received for the land and the buildings. It is not possible to accept the contention of the learned Counsel for the State that the Court below has committed any error in determining the compensation on taking recourse to the method of capitalisation.
According to the case of the awardees, a part of the vacant land was given on rent to one Sardar Autar Singh Vedi under lease with permission to construct houses thereon. Vedi constructed houses and let out a part to the Government and kept a portion for his own residence. When his lease expired in the year 1951, he surrendered the land and a sum of Rs. 13,00/- was paid by the awardees for the materials of the structures, Thereafter the Government started paying rent to the awardees, which was in possession of two blocks of the structures under two separate tenancies. The plinth area of the blocks under the possession of the State Government was 3300 sq.ft. as is evident from the evidence of AW.4. Shri J. Tripathi, a First Class Magistrate, who had held local inspection in July, 1963, of the building in question under the orders of the House Controller before whom the awardees had filed eviction case under the Bihar Building (Lease, Rent and Eviction) Control Act. The said report has been marked Ext. 3 in this case. The Government was paying under the agreements, a sum of Rs. 200/- per month. Two suits were separately filed by Harak-chand Sarawgi for eviction of the State of Bihar from two blocks as aforesaid. The learned Additional Judicial Commissioner has raised the monthly rent of Rs. 200/- which was fixed in the year 1952, to Rs. 325/- per month on the basis of the evidence of A.W. 4 that the rent of a part of the premises in question in occupation of Sardar Surendra Singh was increased on the recommendation of A.W. 4 from Rs. 160/- to Rs. 260/- per month. He adopted the same ratio in fixing the monthly rents of Rs. 325/- and on that basis calculated the annual income at Rs. 3,900/- and multiplied the same by 25 which came to Rs. 97,300/-. He has awarded this compensation for the land but at the same time maintained the compensation for the structure at Rs. 13,000/-.
6. Since the learned Additional Judicial Commissioner adopted the method of capitalisation, he was not justified in maintaining separate compensation for the structures as in this method, compensation cannot be determined by assessing the value of the land and the break up value of the building separately as the land and the building then happen to constitute one unit and in determining the value of one unit, the advantage of the land and the buildings automatically goes to the awardee as the rental income is a return for the land as well as the building. The Supreme Court has taken this view in the State of Kerala's case (supra), No error was pointed out by learned Counsel for either side in making the calculation by the Court below while coming to the figure at Rs. 97,500/- nor any contention was advanced on behalf of the State that the Court below should have multiplied, by a lesser number of years.
7. The learned Additional Judicial Commissioner has, however, awarded the compensation under an assumption that the total area of the land under acquisition was only 3300 sq.ft. Learned Counsel for the awardees seriously contended that the Court below has committed a serious error of record in holding that the total area under acquisition was only 3300 sq.ft., namely the area which was under the tenancy of the State Government. He referred to us the letter of reference made under Section 18 as also the very first paragraph of the judgment from which it is clear that the total area under Acquisition was 0,275 acres equivalent to 11979 sq.ft. but in Paragraph 10 of his judgment the learned Judicial Commissioner has assumed that "only the portion which was in occupation of Government and yielded monthly rent of Rs. 200/- has been acquired."
In this connection the report (Ext. 3) already referred to earlier may also be noticed. According to this report, the house in question was divided in three blocks having a plinth area of 4950 sq.ft., out of which two blocks having a plinth area of 330 sq.ft. were in possession of the State Government for which the Government was paying rent at the rate of Rs. 200/- per month. In one part of the house the Government was running a sale emporium of toys. The remaining portion of 1650 sq.ft. was in possession of Vedi.
8. The decrees passed in the title suits along with the sketch maps (Exts. 15 and 15(a)) of the holding in question have been also exhibited in this case. In the maps the entire land which belonged to the awardees has been shown in scale. The areas in occupation of the State has also been fully indicated therein. From the said map it appears that the show room in which the "Toy Centre" is being run, measures 60 ft. X40 ft. (2400 sq. ft.) and the two smaller blocks adjacent to the show .room, which are, perhaps, in the nature of store rooms and were subject-matter of the second title suit, measure 900 sq.ft. These two blocks, therefore, make a total of 330 sq.ft. From this map it will also appear that on the west of the big show room there are further structures.
9. It is obvious that 3300 sq.ft. would not make the entire area of 275 decimals of the acquired land. Something, therefore, was certainly left out from consideration by the learned Additional Judicial Commissioner in awarding compensation, I find on the records of this case, which are flood affected, that a plan of the land acquired for the scheme in question was also prepared and was handed over to the Land Acquisition Officer, Ranchi on behalf of the Deputy Commissioner. According to the area under acquisition delineated in this map, it measured 96 ft. on the front, 100 ft. on the back and 122 ft. on the sides. On calculation it comes to about 11979 sq.ft. In the map the structures have also been indicated. On a reference to these materials, I do not feel any hesitation to come to the conclusion that the total area under acquisition was 11979 sq.ft. Out of that 4950 sq ft. was constructed portion and the remainder, namely, 7029 sq.ft. was vacant land which was situated on the back side of the constructed portion. The awardees, therefore, have not been paid for 1650 sq.ft. of the built up area and 7029 sq.ft. of vacant land. The left out area of the built up portion apparently is just half of the area for which compensation has been awarded. It would, therefore, be just and fair that compensation for this area be fixed just the half of the said compensation. Constructions on the vacant land were made by lessees themselves. The income from the rental to the awardees was not as the lessees undertook to pay all the outgoings including the cost of maintenance of structures. Municipal taxes and other Government. rates, if any, which might be payable with respect to the leasehold, as appears from the terms of the deed of lease (Ext. l(f)).
10. Now remains for consideration as to what amount should be awarded to the awardees for the vacant land measuring 7039 sq ft. equivalent to 91/2 kathas approximately. This is a "back land" and there is no evidence regarding any rental income from this land. The principle of capitalisation, therefore, cannot be applied. We have, therefore, to find out the "sale rate" of comparable land. Three sale-deeds are on the record which were filed on behalf of the State. They are Exts. E series. Two of them, namely, Ext. E and E/l as stated earlier, have already been rejected from consideration. The only document which may be called somewhat relevant and useful is Ext. E/2. This is a sale-deed dated 25-7-1961. Under this document 5 kathas and 8 dhurs of land were sold for Rs. 6,500/- which were situated on a bye road at some distance from the land in question. We were also shown the map showing the location of this land and its distance from the land under consideration. The sale rate according to this document roughly comes to about Rs. 1,280/- per katha. Although the vacant land under considaration is situated by the side of the Main Road, its that advantage is naturalised to a great extent on account of the fact that it falls behind the built up area. Learned Counsel for the awardees, however, contended that the awardees had still other land contiguous to the land under acquisition and, therefore, this land was also capable of being utilised for building purposes and an approach road can well be provided and, therefore, compensation for this land also should be given on the same basis It is difficult to accept this contention as this argument of the learned Counsel would only entitle the awardees to the claim of the potentiality of the land and nothing beyond that. As already said earlier, the price indicated by Ext, E/2 does not furnish the exact data which could be adopted for fixing the price of the vacant land in question. In my view, some rise is necessary over the said rate to determine the compensation of the land under consideration on account of the better situation In my judgment, Rs. 1,800/- per katha would be quite reasonable rate of compensation for this land. I would accordingly award compensation for this 91/2 kathas of land at the rate of Rs. 1,800/- per katha.
11. Now arises the question as to whether the awardees are also entitled to any further increase on account of the potentialities of the land. According to this principle, "value of land should be determined not necessarily according to its present disposition but laid out in its most lucrative and advantageous way in which the owner can dispose of it. If the land has, what may be called, an adventitious value, i.e., beyond its agricultural or normal value, and that is a marketable value in the sense that persons wishing for a purpose for which the land is particularly applicable to purchase that land, then the Arbitrator has a fair right to take that into consideration, it is a matter, no doubt, contingent, but it is still a matter, not to be ignored or put out of consideration. In other words, the land is not to be valued merely by reference to the use to which it is being put at the time at which its value has to be determined, but also by reference to the uses to which it is reasonably capable of being put in future.
No authority, indeed, is required for this proposition, but if any one is needed, reference can be made to two decisions of the Supreme Court, (1) M/s. The All India Tea and Trading Co. Ltd. v. The Collector of Darrang and Anr. A.I.R. 1971 S.C. 1235., and (2) Smt. Padma Uppal v. State of Punjab and otlters A.I.R. 1977 S.C. 530.
With respect to the front portion, namely, the built-up area measuring 4950 sq.ft., there is not much scope for awarding any additional compensation on the ground of potentialities as the compensation has already been awarded on account of the additional advantange that the awardees could derive out of the land by building structures thereon. From the judgment it also appears that the monthly rent of Rs. 200/- which was fixed several years before the acquisition was also increased by more than 50%, the basis being the increase of rent of the premises under the occupation of Vedi on the recommendations of A.W. 4, which was also quite close to the date of the acquisition. Therefore, there does not appear to be much scope for making any increase. One point that, however, appears to me in this regard in favour of the awardees is that according to the case of the awardees they had let out the vacant land to the lessees to build their own structures and pay all the outgoings and taxes. In that view of the matter, the rental agreed to between the parties must be considerably lower than the rental that the awardees were likely to get had they built up pucca structures of permanent value as the lessees must be putting flimsy structures as they were supposed to remove them on the expiry of the period of the lease, as is also evident from the case of Vedi that the awardees paid Rs. 13,000/- to him. In this regard I also cannot lose sight of the fact that the recommendation of A.W. 4 in the fair rent proceeding was based upon the municipal assessments which are usually on the lower side and in any event it was not an assessment made in a close proximately of the date of his report. I would, therefore, award an additional compensation at the rate of 5% on the compensation for the entire built up area (4950 sq. ft.) which will bring the compensation to a closer proximity of the date of the acquisition.
12. Coming, however; to the vacant land measuring 91/2 kathas, in my view it had the possibilities of its use for building purposes and let out at lucrative rents. I would, therefore, award additional compensation at the rate of 15% over and above the compensation already rwarded for this land.
The awardees will get the statutory compensation of 15% on the compensation increased by me as also interest at the rate of 6% per annum from the date of the grant of interest by the trial Court till the date of payment.
13. Some argument was also made by Mr. Rajgarhia on behalf of the awardees that a strip of about 4 ft. wide land on the western side of the land acquired, was left out from acquisition although that was included. in the notification. He contended that that place of land has been rendered quite useless and, therefore, the State may be directed to acquire that land also. It is not possible to accept this argument as this Court, cannot issue any such direction. It was pointed out before us that that area was covered by drains and the like and, therefore, that might be quite necessary for the awardees themselves. However, the Court below has already awarded a compensation of Rs. 14,624/- for the severance. This compensation, in my view, would be quite appropriate.
14. The result of the foregoing discussions is that I would disallow the sum of Rs. 13,000/-allowed by the Court below for the structures, and allow the awardees a further compensation of Rs. 48,750/- for 1650 sq.ft. of built-up area and Rs. 17,100/- for the vacant land along with the additional and statutory compensations respectively as indicated above. The above amounts will also Carry interest at the rate of 6% per annum in similar terms as awarded by the trial Court. Both the appeals, therefore, succeed in part to the extent indicated above. In the circumstances however, I shall make no order as to costs.
Sia Saran Sinha, J.
15. I agree.
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