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Land Acquisition Officer Vs. Jamnabai - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtMumbai
Decided On
Case NumberFirst Appeal No. 360 of 1941
Judge
Reported inAIR1946Bom142; (1945)47BOMLR893
AppellantLand Acquisition Officer
RespondentJamnabai
DispositionAppeal allowed
Excerpt:
.....and not prospective loss.;the expression 'loss of earnings', appearing in section 23(iv) of the land acquisition act, 1894, means loss of earnings from a business which at the time of the acquisition is a going concern.;where the claimant's business is a going concern on the land which is the subject-matter of acquisition, he is entitled to damages for loss of earnings. a compulsory change of a place of business may result in a serious loss to the person concerned. locality often possesses an element of convenience which has an important value in connection with business, and if a person enjoys such special advantage through having established himself in a particular site, it may be for a long period, he is entitled to compensation when he is disturbed for the benefit of the general..........land was notified for acquisition on june 15, 1937, and the notification under section 6 of the land acquisition act, 1894, was published on december 2, 1937. the land was actually taken possession of by the authorities on october 5, 1938.2. the contention of the claimant was that he owned a cigarette factory at santa cruz, and in order to expand his business he had purchased the land in question in 1935 with the object of building thereon a factory for manufacturing cigarettes. this factory was intended to be capable of manufacturing three times the quantity of cigarettes manufactured in the santa cruz factory. for this purpose the claimant had obtained a license from the collector of bombay and had also got certain plans prepared and sanctioned by the authorities concerned. the work.....
Judgment:

Rajadhyaksha, J.

1. The only question in this appeal is as regards the claimant's right to receive compensation for the loss of prospective earnings. The land involved in this case is the southern half of survey No. 176 of Juhu, which belonged to one Narsi Monjee. The land was notified for acquisition on June 15, 1937, and the notification under Section 6 of the Land Acquisition Act, 1894, was published on December 2, 1937. The land was actually taken possession of by the authorities on October 5, 1938.

2. The contention of the claimant was that he owned a cigarette factory at Santa Cruz, and in order to expand his business he had purchased the land in question in 1935 with the object of building thereon a factory for manufacturing cigarettes. This factory was intended to be capable of manufacturing three times the quantity of cigarettes manufactured in the Santa Cruz factory. For this purpose the claimant had obtained a license from the Collector of Bombay and had also got certain plans prepared and sanctioned by the authorities concerned. The work of building the factory had proceeded up to three feet above the plinth level when the land was notified for acquisition. By reason of that notification the work of erecting the factory could not be proceeded with, and ultimately owing to the land being finally acquired, the project of building a factory thereon had to be given up. For this reason the claimant contended that he should be compensated for the loss of his prospective earnings for a period of one year on the basis of the profits which he made on the Santa Cruz factory. He, therefore, claimed, on the estimate made by his experts, Rs. 1,84,500 for the loss of earnings.

3. The Land Acquisition Officer considered that the claim made by the owner was fantastic and grossly exaggerated, He thought that the claim was purely hypothetical, based as it was on so many uncertain factors such as the probable cost of constructing the buildings, the cost of erecting machinery which would turn out three times the product of the Santa Cruz factory, the difficulty of getting sufficient labour in these days of labour unrest, and, lastly, the difficulty of raising enough capital at a reasonable rate of interest. He considered that if the factory had been a going concern, the claimant would have been justified in basing his claim for loss of earnings. Even so he thought that the claimant had suffered some damage and was entitled to be compensated therefor. He, therefore, allowed six per cent, interest on the capital invested in the land, the incomplete building and the materials which had been locked up in this business, and he awarded compensation at this rate of interest from June 17, 1937, up to the date of payment as damages due to the acquisition against the claim for loss of earnings. This amount came to Rs. 4,610. Against this award the claimant applied to the District Court of Thana, and the learned Assistant Judge who heard the reference was of opinion that the provisions of the Land Acquisition Act should be liberally construed in favour of the claimant and that the claimant was entitled to the damages which he had suffered owing to the land being acquired, even though the buildings had not been completed and the business had not been started. He thought that if the land had not been acquired, the buildings would have been constructed and the factory would have been started, and that as the claimant was prevented by reason of the acquisition from making profits out of the business, he was entitled to be compensated for the loss of his prospective earnings. Having come to this conclusion, the learned Assistant Judge examined the profits which the claimant made from the Santa Cruz factory, and after making due allowance for the various items of expenditure, he thought that the claimant might have been expected to make a net profit of Rs. 18,600 per year. On this basis he made an award for the loss of earnings for a period of eight months. This amount came to Rs. 12,400, and allowing for interest on the extra amount awarded he increased the award made by the Land Acquisition Officer by Rs. 8,240. It is against that order that the Land Acquisition Officer has filed the present appeal.

4. The main ground taken by the learned Government Pleader is that as the business was not a going concern at the date of the acquisition, the claimant was not entitled to anything by way of damages for the loss of earnings. Two points arise for consideration in this appeal: (i) whether the claimant was entitled to any compensation in law for loss of earnings in view of the fact that the construction of the buildings had just started and the business was not a going concern ; and (ii) if the claimant was entitled to damages, on what basis should those damages be assessed. There is no doubt that if the claimant's business was a going concern on the land which was the subject-matter of acquisition, then he would be entitled to damages for loss of earnings. A compulsory change of a place of business may result in a serious loss to the persons concerned. Locality often possesses an element of convenience which has an important value in connection with business, and if a person enjoys such special advantage through having established himself in a particular site, it may be for a long period, it seems to be reasonable that he should be entitled to compensation when he is disturbed for the benefit of the general public. Any probable diminution in the value of the claimant's goodwill in his trade consequent on the taking of the premises in which such trade is carried on and the consequential loss of his earnings would come within the meaning of the word 'earnings' and there are well recognised rules for calculation of loss of earnings in such a case. As pointed out at p. 260 of Rai Bahadur Gupta's Land Acquisition Act:

Apart from coat, of removal and expenses incidental to the business itself which are dealt with in clause fifthly [of Section 23 of the Land Acquisition Act] matters far consideration in estimating injury to earnings, (or what is commonly called 'loss of earning'), may be analysed thus:

(a) Depreciation of fixtures,

(b) Depreciation of stock,

(c) Loss on account of 'good will',

(d) Loss on account of credit-sales.

All these elements which go' to constitute loss of earnings presume that there is in existence a going concern the transfer of which is necessitated by the acquisition of land. But we have not been referred to a single case where there has not been in existence any going concern when the land is acquired, and a claim has been made and allowed for the loss of prospective earnings on account of a business which was intended to be established on the acquired land ; and we consider that this paucity of authorities for the proposition of this kind is not without significance. In our view the expression 'loss of earnings' used in Section 23(iv) of the Land Acquisition Act means loss of earnings from a business which at the time of the acquisition was a going concern. The learned advocate for the claimant gave an illustration of how such a view of law would result in substantial damage to the claimant himself, He gave an instance of a building which had almost been completed in January, in which a business was intended to be started in March and which was notified for acquisition in February. He argued that in such a case, the compensation for the land itself with the buildings thereon under Section 23(i) would not be an adequate compensation, and the claimant would be entitled to ask for damages for the loss of earnings under Section 23(iv) even though the business had not actually commenced at the time when that land together with the building was notified for acquisition. We are not sure that the illustration given by the learned advocate is altogether in point. In a case such as the one contemplated by the learned advocate, the claimant would get full compensation under Clause (i) of Section 23 because the compensation would be given not only for the land itself but also for the buildings thereon, and the potentiality of using those buildings for the purpose of business would be a factor governing the market value of the building: and we are not sure that if a claim were made for the loss of earnings in a case of this type, that claim would be admitted in Court. If the line of reasoning adopted by the learned advocate were to be carried to its logical conclusion, it would mean that if the land was acquired immediately after it was purchased by the claimants for the purpose of erecting a factory, the claimant would be justified in putting forth a claim for the loss of earnings by saying that he intended to build a factory thereon, and that the factory when completed would bring him profits at a certain rate. And the learned advocate was not prepared to say that in such a case the claimant would be justified in making a claim of this kind. Between these two extremes there may be various gradations, and in our view the claim made in the present instance comes nearer to the latter class than to the former class. Nothing had happened in this case except the purchase of land, preparation of plans and the obtaining of the sanction from the Collector for erecting the factory. But, as pointed out by the Land Acquisition Officer, there were numerous other uncertain factors which made the completion of the building, the starting of the business and earning profits therefrom largely a problematical affair, and we do not think that in a case of this kind the claimant would be justified in claiming compensation for damages for loss of earnings. Although no case precisely in point has been brought to our notice, there are observations in one or two cases which came before the Calcutta High Court which show that the loss of earnings for which a claim can be made under Section 23(iv) of the Land Acquisition Act must refer to the loss resulting from acquisition of land with a going concern, One such case is of Suresh Chandra Banerji v. Secretary of State : AIR1927Cal357 . In that case the claimant had leased his lands to Bull Brothers for the purpose of manufacturing bricks. The lease was to last for ten years; but after five years the land was acquired by Government, and the Collector awarded compensation on the basis of the rent reserved by the lease in favour of the Bull Brothers and allowed twenty years' purchase-money to the claimants. But a claim was made that damages should have been awarded by reason of the acquisition injuriously affecting the earnings of the claimants. It was contended that in addition to the market value of the land as ascertained the claimants were entitled to damages for the loss of any profits they might have made if they had engaged in the business of brick-manufacturing after the expiry of the lease in favour of the Bulls. In support of that contention a reference was made to trie case of Ripley v. Great Northern Railway Company (1875) L.R. 10 Ch. 435. In dealing with this argument, the learned Judge observed as follows (p. 359):

It seems to me that the principle laid down in that case has no application to the circumstances of the present case. It is no doubt well-settled that in ascertaining the market value of the land the Court has to ascertain what is the market value of the property not according to its present disposition, but laid out in the most lucrative and advantageous manner in which the owner can dispose of it. A familiar example is that of lands in or near a town which are agricultural, but capable of being used as building sites. But when once you assess the market value of the land by taking every circumstance into consideration, I do not think that the person interested may again ask for damages on the ground that he might have made profits by engaging in a certain trade or business on the land in question.

It seems to me that a person is entitled to claim damages for loss of earnings if he carries on some business in the acquired premises and by virtue of the acquisition he is deprived of his profits by reason of the fact that he cannot find another place where he can carry on the business in which he was engaged on the acquired premises ; for example in this case, if the claimant had carried on the trade of brick-making and had proved that after the acquisition he was unable to find a suitable field for carrying on his business of brick-making and by that reason would lose his customers or suffer damage in any other way, he might have made a claim for such damage.

A similar question arose before the same learned Judge in the case of Madhab Gobinda, Ray v. Secretary of State for India in Council I.L.R (1928) Cal. 819. the learned Judge observes as follows:

Loss of business' means that a man pursuing some trade or business is compelled to give it up or to carry it on elsewhere, which would give him less profit than what he was making at the former place. In that case he would be entitled to compensation on that account.

These observations appear to us to support the view we take, and in our opinion the claimant in this case was not entitled to damages for loss of earnings.

5. Even if we are wrong in our view that the expression 'loss of earnings' in Section 23(iv) refers to loss caused on account of acquisition to a running business and not to prospective business, we think that the damages must be proximate damages and must not be too remote. As has been pointed out in Section 56 of Vol. VI of Halsbury's 'Laws of England', 2nd edition, 'if the right to compensation is established, the amount of compensation is commonly determined by the ordinary rules applicable to damages in actions of tort'. And as stated in Section 51 of the same volume, 'damages which would foe too remote to be recovered in an action cannot be recovered by way of compensation.' In the present instance we consider that the damages claimed by the respondents are too remote. In this case only the foundation of the building in which a business was to be run subsequently had been laid. There were numerous uncertain factors which would have come into play before the building could be completed and business begun. The loss on account of acquisition in the earnings of such a business must, in our opinion, be regarded as too remote to justify any compensation being granted.

6. The learned advocate then contended that even if he was not entitled to damages for loss of earnings under Section 23(iv), the compensation granted to his client for the value of the land might be enhanced by the amount which the learned Assistant Judge has awarded in addition to the amount given by the Land Acquisition Officer. The land itself was purchased by the claimant at Rs. 3-8-0 per square yard in 1935. The Land Acquisition Officer valued the land at Rs. 4 per square yard and the learned Assistant Judge valued it at Rs. 4-8-0 per square yard. The possibility that the claimant may not be able to justify his claim for loss of earnings was visualised by the claimant himself; for the learned Assistant Judge observes in para. 46 of his judgment as follows:

No plotting scheme is prepared for survey No. 176 south as on behalf of the claimant Narsi compensation is claimed on the basis of his prospective factory. That claim will be considered later, It is, however, urged that if Narsi cannot be given compensation on the basis of his prospective factory, the scheme applicable to Bhabha's land would equally apply to Narsi's land.

Therefore the claim of the respondent in the alternative was that if he was not entitled to compensation for loss of earnings under Section 23(iv), his land should be valued in the same manner as that of Mr. Bhabha, i.e. the northern half of the same survey number. The learned Judge has in fact valued both the lands on the same basis and awarded Rs. 4-8-0 per square yard for both the northern and the southern halves of survey No. 176. It would appear therefore that the alternative contention of the claimant was accepted by the learned Judge although he has also proceeded to award compensation for the loss of earnings under Section 23(iv) of the Land Acquisition Act. It is not therefore open to the claimant to ask that his land should be valued at a still higher figure because it possessed any special potentiality on account of its situation. The learned advocate for the respondent argued that the land was specially suited for a cigarette factory, but we do not think that there is anything in the situation of the land which makes it more suitable for a cigarette factory than for any other kind of business. We are therefore not prepared to increase the award made by the learned Assistant Judge in respect of the land on account of this alleged special potentiality.

7. Although in our opinion no compensation can be granted either under Section 23(i) or Section 23(iv) of the Land Acquisition Act, we consider that the claimant was entitled to some compensation. The provisions of Section 23 of the Land Acquisition Act are not exhaustive, and we think that under the circumstances of the case, the Land Acquisition Officer was justified in awarding compensation by way of six per cent. return on the locked up capital over and above the value of the land and the materials thereon.

8. The result, therefore, is that this appeal must be allowed and the award of the Land Acquisition Officer restored. The appellant will get his costs of this appeal and of the proceedings in the District Court from the respondent who will bear his own.


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