1. This is a reference made under Section 19 of the Land Acquisition Act by the Collector of Bombay on application made under Section 18 of that Act.
2. It relates to an area of 85, 799 sq. yards to the West of Parel Road. This area consists of four plots: the largest admeasures 71,714 sq. yards. It has a frontage of 1.268 feet on the Parel Road, which lies to the East and is about 500 feet deep from East to West, It is convenient to refer to this longest plot as the Front land.
3. On the West of this Front Land there is a Government passage running from North to South approximately parallel with the Parel Road. Beyond this Government passage on its West, lie the remaining three plots, containing respectively 4577. 5747 and 3761 sq. yards.
4. The acquisition of the entire area was made under the Act for the G. I. P. Railway Company, the Notification under Section 6 for the back land being No. 5988 of 3rd September 1903 published in the Bombay Government Gazette, Part I, page 1073 and that for the front land being No. 2722 of 14th April 1904, published in the Bombay Government Gazette, Part I, pp. 431 and 432.
5. The claimants are the brothers Cama. They claimed Rs. 8,37,780 for the Front and Rs. 97,186 for the Back Land.
6. The Collector has awarded Rs. 4,60,826-13-7 for the Front Land and Rs. 51,278-3-3 for the Back.
7. The claimants not satisfied, applied under Section 18 and hence this reference.
8. The reference coming on before Mr. Justice Chandavarkar, the following twenty-three issues were raised. (His Lordship read the issues).
9. The first two issues are as to fundamental principles.
10. Mr. Lowndes for the claimants stated that his clients were prepared to rely on direct evidence of offers and sales to prove market value: thit the Collector rejected this in favour of a hypothetical scheme : and that it is not open to Government alternately to approbate and reprobate by resiling from a principle accepted by their own Agent. No doubt under the ruling of the Privy Council in Ezra v. Secretary of State ILR (1902) Cal. 36 the Collector is an agent for Government for the purposes of determining the price Government should offer. But as that ruling shows his conclusions may be based on materials not judicially ascertained and not disclosed to the claimant. The result embodied in his final offer is binding on Government under Section 25 of the Act. But the Collector's deliberations concern the claimant no more than those of any private individual who makes an offer. They are not judicial, are not necessarily communicat-sd and cannot affect the claimant's action. They cannot, I therefore think, either estop Government or regulate or limit subsequent judicial enquiry. I decide the first issue in the affirmative.
11. On the second issue, the Advocate General contends that valuation by a hypothetical scheme (1) is not permissible under the Land Acquisition Act, (2) that it is in all cases fallacious and (3) at best appropriate only for small areas.
12. As to the first of these contentions, he cites Penny v. Penny (1867) L.R. 5 Eq. 235 Stebbing v. Metropolitan Board of Works (1870) 6 Q.B. 37 City ana S. L. R. & Rector of St: Mary Woolnoth (1903) 2 K. B. 728 and Broilfa and Merthur Col-lieries (1902) 2 K. B. 135- These authorities are cited in Cripps (Cripps' Law of Compensation pp. 95, 107, 4th Edn.) as showing thai compensation is to be based on the value of the land to the owner at date of notice and not on its value after acquisition. This seems obviously the principle in the Land Acquisition Act. But the argument of the Advocate General is this : that as the basis of compensation is the loss the individual sustains by his expulsion from the land, its amount is to be guaged by the value which that individual personally could have obtained from the land by the use to which he personally would have put it. The Advocate General urges that under Section 23 of the Act, market value is a matter to be taken into consideration only and that the real basis for compensation is the loss to the individual. And on these grounds the Advocate General asks the Court to consider as a relevant circumstance the fact that Mr. Cama is not a Mill owner or a speculator and according to his own admission is too old to go in for building. I confess to some surprise at this suggestion.
13. The case of Premchand v. Collector of Calcutta ILR (1876) Cal. 103 has been followed in Collector of Poona v. Kdshinath ILR (1886) 10 Bom. 585, in Munji Khetsey ILR (1890) 15 Bom. 279 and in Government v. Dayal (1906) 9 Bom. L. R. 103 It is consistent with the English authorities. It is irreconcilable with the Advocate General's argument that the personal incapacity of the owner to realize the possibilities of development is to be considered in determining the compensation to be given to him. The English cases cited and the Act, no doubt require that the expelled owner should receive compensation only for the interests of which he personally has been deprived. But they make no reference to the personal equation in determining their value. The second para of Section 24 excludes the pretium afectionis. The phrase 'market value' in Section 23, I think, excludes from consideration all circumstances which would not affect the market as such and the value is to be measured not by the standard of any individual's capacity.
14. Next, the Advocate General objects to the adoption of the hypothetical method in this case. He relies specially on a passage at page 167 of Kerr. As I understand that passage, the objection taken therein is to the substitution of groundless assumptions in place of inferences from ascertained facts. The hypothetical method can, I think, be open to no reproach merely because it is a calculation of the advantages to be gained by the development of particular land for a special purpose. But in establishing the advantages so tobe gained the first essential is to prove the existence of adequate demand for land in thelocality in question for the special purpose contemplated. If demand as the main factor in determining price is assumed the hypothesis must be without foundation and worthless and no doubt a Court must in such a case reject it as affording no basis for valuation. But if demand for the development proposed be established, I do no think that is effect on price, evidenced by calculable returns can be overlooked as a means of determining probable value after full allowance is made for the cost of such development. It does not follow that because development is possible, it would pay. That must depend not only upon its cost but on the demand that can reasonably be expected when the development is completed. Reckless hypothetical development, irrespective of ultimate demand, is the real ground of objection to the employment of this method in the passage cited from Kerr.
15. In dealing with small areas where development would create but a small additional supply, it may without danger be assumed that the additional supply would be readily absorbed by the general public. But where the development proposed is for a special purpose only, so as to appeal to a limited section of the public and the development proposed is on a very large scale, the necessity for establishing the existence and extent of the demand increases in proportion to the extent of the area proposed for development.
16. The first question to consider then I think is the question of demand for the supply which it was proposed to create in the hypothetical development. If that demand is proved, I do not think the sworn estimates and calculations of responsible professional men as to the cost can be dismissed brevi manu. They are entitled prima facie at least to examination. On the other hand, if the demand is not proved, the development would be wasteful and worthless and would detract from and not add to the value of the property to be appraised and in that case further examination into the details of the scheme would be unnecessary and would have to be abandoned. The details in the present case have been so elaborately presented that I may take it that all the considerations which would have influenced a keen practical man of business have been exhaustively enumerated and duly discussed: and the subject to the conditions. I have above stated as to the necessity of establishing the fact of adequate demand. I think there is nothing essentially objectionable in the hypothetical method as a means of ascertaining market value. This does not necessarily involve as a corollary that it is the only method or that it should be applied to the exclusion of the more direct test of actual effers and (sic) showing the highest price offered or given for similar land at the period in question by prudent purchasers in full consideration of the advantages to be obtained.
17. This is my decision on the second issue.
18. The third issue raises the question whether the particular hypothetical scheme accepted by the Collector in this case is practicable in the circumstances established.
19. Mr. Lowndes opened by stating that the rents assumed by the Collector's scheme were not disputed. That scheme contemplates the erection of buildings on the land as follows:-
(1) Front land:-
83 shops at Rs. 17.12=Rs. 1473-4-0
332 double rooms at Rs. 11=Rs. 3652.
2440 double rooms at Rs. 9-8=23180.
192 single rooms at Rs. 6=1152.
(2) Back land.-
390 double rooms at Rs. 9-4=:3607-8-0.
20. The number of shops and rooms is the same as in Mr. Narsinham's scheme Ex. A, para 14. and statement A, but the rentals are reduced. The Advocate General did not dispute the reasonableness of the rents thus fixed by the Collector and Mr. Delves, the expert and principal witness for Government, a witness evidently of remarkable ability, attainments and fair-ness, admitted that the rates were reasonable subject to a deduction for the topmost storey in the front land which he thought would be in excess of normal requirements in the neighbourhood. These admissions, however, appear to have reference only to the rates to be charged as not above the average for the accommodation proposed. For in cross-examination Mr. Delves said:-'Such buildings if erected and occupied would produce these rentals.' In re-examination he stated:-'I do not dispute that the rents which the Collector accepted would be obtainable-I have no reason to suppose they would be. I think they might be eventually obtainable. I mean when roads were made and property laid out, a year after the property was laid out and put on the market, i, e. about six or seven years from the purchase of the estate,
21. Mr. Delves has knocked off the top storey all over the front land:-
83 double rooms at Rs. 11, i.e. Mr. Delves would give Rs. 2,739 instead of Rs. 3,652.
(b) 610 double rooms at Rs. 9-8, i.e. Mr. Delves would give Rs. 17,385 instead of Rs. 23,180.
48 single rooms at Rs. 6, i.e. Mr. Delves would give Rs. 864 instead of Rs. 1,152.
22. Thus making a decrease in the total monthly receipts of Rs. 6,996 or Rs. 83,952 per annum, Mr. Delves estimates the rents for the front land at Rs. 2,2461-4-0 per mensem, or Rs. 2,69,535 per annum, which with Rs. 3607-8-0 per mensem or Rs. 43,290 per annum for the back land would yield a total monthly rental of Rs. 2,60.68-12-0 or Rs. 3,12, 825 per annum as against the Collector's total of Rs. 3,96 777. Thus Mr. Delves would make a very serious reduction of Rs. 83,952 in the gross annual rental.
23. I think there would in 1904 have been little danger of the height of the buildings being restricted by Municipal objections. Interference with the width of private roads was then regarded as ultra vires of the Municipality and buildings of 30 feet in height to a road 20 feet wide were allowed as shown in evidence cited and in Z19 and Z20. And so far as the proportion in the buildings on the Parel Cross Lane frontage is concerned, it is admitted by Mr. Delves that the difficulty could be overcome by increasing the width of that lane to the extent of 8 feet. This could be done by reducing in each of the nine blocks the width of the back yard, the mallet shaped projections being placed more side by side instead of directly opposite each other. The scheme proposed to build only on 55 par cent, of the whole area so that a sufficient margin is left for this suggested rearrangement. The objection that the symmetry of the blocks would be impaired does not seem substantial or likely to affect a man of business.
24. The moat material question is whether demand for chawl accommodation in the neighbourhood would justify so large an addition to the supply as Mr. Narsinham proposed.
25. Mr. Delves's enumeration of the houses over two storeys on the Parel Road is not to ray mind conclusive.
26. The readiness of the public to recognise the advantages of enterprise in chawl building in 1904 can hardly be guaged by the character of buildings erected at earlier dates unknown for purposes not ascertained. If there be a large demand for residential accommodation in that neighbourhood the fact that it has not hitherto been supplied would be rather in favour of Mr. Narsinham's project. That project postulates a demand for the accommodation of no less than 15,000 persons, i, e. 5 to each double room and 3 to each single room. These at the Collector's rates would be housed at a charge admitted-ly not prohibitive for an artisan family drawing collectively Rs. 30 per mensem. I think that class was wisely selected as the one most likely to be attracted by chawls on Mr. Cama's land. For that land according to Mr. Herbert Greaves, a competent authority, is situated in the centre of the mill district. Mr. Engle gives qualified assent to this. Mr. Engle, speaking of a site further north, says chawls are fully let in this neighbourhood. Noor Mahomed Karrim nearer the land in question has it seems no difficulty but he caters for a poorer class. I doubt whether proximity to railway stations would attract mill operatives. I doubt whether proximity to mills would attract other tenants. And it has not been shown what other class of persons in Parel would be attracted in sufficient numbers by the proposed chawls.
27. Mr. Lowndes points out Ex. 229, the census, shows an increase in the population of Byoulla and Parel between 1901 and 1906 of 32,204 persons. This increase is almost without parallel in the other parts of the island. And it is not suggested that it may be due to merely temporary causes, such as the progress of public works, which in some other sections as for instance Sewri, may perhaps account for similar rapidity of growth.
28. Turning to page 142 of Z29, we find the total of male weavers and spinners given as 7000. On comparing this with the number of daily operatives given in Z12 for 1904, the inference is I think that a considerable proportion of the females and dependants in Z29 must be included among the daily hands enumerated in Z12. The total number of the mill workers male and female, with their dependants in Z29 is no less than 1,57,566 and of these 58,053 appear to be credited to Byculla and Parel. Of the balance 50,806 appear to belong to Sion and Varli. I cannot but regard this as a most significant fact. For on turning back to page 19 of Z29 we find that between 1901 and 1906 Sion and Varli had respectively received an accession of 5000 and 24,000. It appears that 37,820 men and women workers with 20,233 dependants elect Byculla and Parel and 34,868 men and women workers with 15,948 dependants account for some of the increase in the population of the more distant sections of Sion and Varli. From page 167 of the C e 0 ht for 1906 it seem the number of male mill opposatives 'at Varli has risen from about 14,000 to 20,000. It wi be seen that the proportion dependants in Byculla and arel to the dependants in Sion and Varli is roughly as 68 to 58. And if the number of dependants a worker can support is as I think some indication of his means, I should infer that the comparatively well-to-do mill operatives prefer Byculla and Parel for residence. I also infer that the increase of population in Sion and Varli is in some measure due to the imigration to those remoter sections of mill hands not equally capable of supporting dependants. These figures I think may be taken as some index of the existence of facts which a keen practical man of business might and very probably would have noted as showing that rents for mill hands quarters were rising and that the supply was insufficient is the preferable centre of the industry. It is necessarily with diffidence that 1 take into consideration statistics so dimly suggesting the tendency of demand I should prefer to have something more definite to go upon. But possibly more direct evidence was not adducible I note that some 10.000 weavers and spinners with their house-hold live at Mahaluxmi, Tardeo and Kamatipura. But for the most part that class seemingly prefer Byculla and Parel to other accessible sections. And as the admitted tendency of mill industry is to the cheaper lands to the north it is at least probable that new quarters at Parel already preferred to Byculla might attract operatives from the latter section as well as from such places as Mazagaon, Mahaluxmi, Tardeo and Kamatipura.
29. The Advocate General cites Maneck Dhunji and Dr. Nariman as evidence that the Parel neighbourhood is not populous. The former, however without effort or development 10 per cent. on his purchase money and Dr. Nariman speaks of the vicinage as not populous, only in the sense that the Fever. Hospital was 100 feet from the road and other residences. On the other hand Z29 shows Parel unquestionably on the increase. Mr. Greaves in his evidence speaks to its central position and to the rise in the price of land and Soraan is to the same effect. Mr. Engle shows land further North doubled in value since Ex. 33. The Advocate General, has laid much stress upon the, depression of mill industry and the failure to pay dividends during the period now in question. No doubt the depression was real. But I cannot but think that it was recognised as temporary. The agents had confidence even in 1902 in its revival and that confidence was general. They readily embarked new capital in it. An unmistakeable index of this confidence is I think to be found in Z12. No doubt as Mr. Wadia says milis and spindles must be kept going even in bad times. But the idea that the feeling of depression was general in the trade is irreconcilable with an increase in the number of looms and spindles and still more with employment of additional hands. And Z12 shows looms rising from 11.985 in 1884 to 2,42.136 in 1904. The spindles from 12, 51, 726 to 25, 34, 230, the average number of hands from 56, 071 to 89, 915. and the number of mills from 43 to 79, in the same period. This does not evidence diminution of enterprise. It may be there was over production in this branch of trade. But there must have been such general prosperity as to encourage this development even if relatively to other industries, mill operations were under a cloud. 1904 verified the more hopeful auguries though not till near its end. I think the depression on which the Advocate General relies had not dulled general enterprise of the demand for labour or for land. Mr. Inverarity shows the neighbourhood has been go built over that the gasometer a prominent object once visible at no great distance is now eclipsed. Thus my conclusion is that there has been for many years a growing demand for mill hands that their preference is for central quarters, specially for Parel and that no position could be more suitable for them than the claimants' hypothetical chawls with their frontage of shops, accessible as must then have been realised, by Tramway and with the amenity of the Victoria Gardens near at hand. It is objected that the site is smoky and dusty. Mr. Hammick says it is not and his mill is near. The smoke and dust come from the east, prevailing winds from the west. Mill operatives would presumably not be sensitive. Mr. Hammick gays there were smells 30 years ago there. Soman's land accounts for these smells better than does Mr. Hammick's who does not remember the position of the unsavoury water to the north-west. Mr Inverarity could detect no ill-odours and Dr. Narim3n thought the vicinage favourable for a hospital. Mr. Hammick, who thought the site ineligible thirty years ago, reported on it in 1900 as fit for the best class of residences. I must note that these objections as to smoke, dust and smells were not put to Mr. Narsinham but seem to have suggested themselves only during the progress of the case. I attach no weight whatever to them. There was every thing I think to attract tenants of the class desired and I think a keen market would have realized this.
30. The next question is what was the extent of the demand to be expected from that class. The evidence offered as to the extent of the demand is unfortunately meagre and indefinite. Possibly this was inevitable. Mr. Narsinham says generally that the supply was not equal to the demand and that rents went up from 1904. Whether before that year he cannot say and what was the amount of the rise he does not say. He made no enquiry as to the number of jobbers and fittersearning Rs. 30 per mensem and admits that those in Parel and Byculla may not exceed 2100. No artizans have been called to speak to the difficulty in finding the suitable houses or to a rise in the rents they have to pay. Some instances have been adduced of increased provision made for chawls, but not, it seems, for the class now contemplated as tenants. Mr. Narsinham has deposed to the expulsion of large numbers by the Improvement Trust demolitions and in re-examination says the demolitions in Girgaum, Null Bazaar, Lohar Chawl, Kalbadevi, Mandvi and Nowroji Hill threw out many times 15000 people. This statement has not been challenged by Government. It leaves however the class of evicted tenants undetermined. I cannot say that the extent of the demand has been definitely established for claimants. The Advocate General has stigmatized the scheme as unreal on the ground that there is no evidence to prove and that it would be unreasonable to assume, the existence of 15,000 jobbers and fitters on Rs. 30 a month requiring house accommodation. It must of course, however, be borne in mind that the number of artizans required to fill the proposed chawls is not 15,000 but only 3354, i. e. one for each room. The rest of the supposed inmates would be wives and dependants. Some of whom it might fairly be assumed could contribute to the family income. This diminishes no doubt the improbability of success in the project.Mr. Engle was called for Government to prove the number of the mill employes with the required wages. He took the average of six mills as 39 and counting 24 mills within a radius of a mile of the land under reference, gave the total of possible tenants as 936. Ex. A10 shows, however, 42 mills within that radius so that the number may be raised to 1638. Mr. Lowndes objected that Mr. Engle omitted workers whose income approached Rs. 30 so nearly that it might fairly be presumed that the deficiency could be supplied either by working overtime or by junior members of the household. Thus comparing Ex. 31 with Z10 page 17 out of the first 13 cases it appears Mr. Engle has omitted seven persons on Rs. 25-5-9: 26-3-3: 27-11-6: 26-13-9: 29-4-0: 27-3-0: 28-2-9 : respectively. On comparing Ex. 31 with the corresponding page of Ex. Z11 eight seem to have been similarly omitted who were so close on the margin that Mr. Lowndes may reasonably claim thorn, as qualified. Ex. 31 gives 38 possible tenants from the Western India Mills.
31. Mr. Lowndes' criticisms suggested that Mr. Engle had greatly underestimated the demand. 1 was at first inclined to think those criticisms were justified. But I have carefully examined Ex. Z10; the only materials supplied as a means of testing the accuracy of the estimates of possible demand. I have counted the number of operatives earning Rs. 22 or more per mensem. A large margin for supplementary earnings would be unsafe. For supplementary earnings would depend on exceptional industry in a class which the books show is not very regular in attendance. Moreover the proposed rent is a large proportion of the total wages suggested. Mr. Narsinham deposed the earners of Rs. 30 would pay Rs. 12 for rent i. e. 2/5ths of their income. In this estimate of the capacity of the wag. -earners to pay such a rent, I cannot feel sure that the contributions of the family have not already been taken into consideration. From Z10, I find a total of 45 possible candidates. The total number of wage carners whose monthly wages exceeds Rs. 22 is 45 in all, but of these 9 marked with asterisks draw wages very considerably over that sum. There is one of 64, another of 78, another of 64. another of 57, another of 166, another of 53, another of 101, another of 57 and another of 61 and I think it probable that persons earning these higher wages would probably prefer better accommodation than would be sufficient for those who earn only Rs. 30 a month and then again it appears that the net earnings occasionally fall considerably below the fixed wages probably owing to irregularity in attendance. The investor on enquiry would probably think it very unsafe to count on the nine cases that I have above referred to and might deem precarious the position of those whose qualifying income depended on extra work or supplement by women and children. Mill hands it seems are irregular in attendance. Women workers are occasionally indisposed, children occasionally truants. 1 doubt, therefore, if the prudent investor could count with anything like certainty even on Mr. Engle's average of. 39 from each of the 42 mills within a mile radius. If 39 be the largest possible contingent to be expected from each mill, l638 tenants would be the utmost number available, even supposing that the chawls attracted every mill hand of the class for which they were erected. But I doubt whether a prudent capitalist would count on all these artizans leaving their present quarters en masse to settle on Mr. Cama's chawls as soon as they were ready. Even if they did the entire number would not half fill the chawls.
32. Possibly annual increments might be expected. But the increase would be almost negligible. For Ex. Z12 shows 89,915 mill operatives in 1904 for 79 mills, i. e. 1138 hands to each mill. Even taking 45 as the number of operatives earning 30 per mensem or more in each mill, that would be only 1/25th on 4 per cent of the average number of 1138 operatives in each mill. Ex. Z12 shows an average annual increase in the nine yars proceeding 1904 of about 1818 operatives. If 4 per cent of these be taken as taming 30 per mensem the annual increase in that class would be only 72 or 73 for the 79 mills. Thus the 42 mills within a mile radius, could not be executed to supply at most more than one additional possible tenant each year. In calculating the average annual increase, I have considered the falling off in 1897 and 1900. Ar this rate of increase it would take 40 years before the required rate of possible tenants reached Bombay. A prudent investor would take note of the reductions of 8925 in the number of hands in 1897 and of 4255 in 1900: and of the almost stationary condition of the industry in 1903. And if he were catering for mill operatives on Rs. 30 and upwards only, he would be most unwilling to risk 30 lakhs on accommodation for 3354 of that class. No other class of tenants has been designated as appropriate. The only class suggested by Z29 in Byculla and Parel is that numbered 29, about 1700 in all. I have no evidence to suggest the suitability of the site for them. And I think the cautious capitalist rather than wait for forty years for his mill hands on Rs. 30 per mensem, would prefer to reduce his plans and content himself with preparing a home for a smaller number.
33. There again I cannot assume that all possible tenants would leave their present quarters for the projected chawls. There is no evidence as to the relative undesirability of present housing. Mr. Narsinham says vaguely there are always a number of insanitary buildings which people are always willing to leave and remove to new and sanitary buildings. The claimants should have adduced definite evidence on that point if they desired the Court to infer that every suitable tenant would prefer the hypothetical chawls to his present quarters In view of the advantages discussed above it may be they all would if their present quarters are bad and the rents no lower. I have no evidence that present housing is unsuitable or inadequate. And before I can say that an investor would have boon satisfied on that point, I should have to be supplied with the information that would have convinced him.
34. If the whole area were covered as proposed with building four stories high, shutting out the western breeze and with a five-storied block in front, intersected with narrow surface drained alleys, I do not suppose it would, with its 15000 occupants, have much preference on sanitary grounds in a few years over the most squalid slum in the neighbourhood.
35. However that may be, I cannot record on the third issue a finding in favour of the claimants. They ask me to say that it is not improbable the required tale of tenants would have beer forth-coming. I cannot say that. And having arrived at the conclusion I feel the force of the objection above cited from Kerr and the Tribunal's judgment (104 of 1904) as to the use of the hypothetical method, viz., the danger of accepting a scheme not founded on ascertained facts. In place of proving the number of probable applicants, the claimants ask the Court to imagine their land covered with buildings let at current rentals and then cite the dicta of valuers that ground rents should be taken as a certain proportion of the rack rent or gross rent minus taxes. The authorities cited are Banister Fletcher, page 17 Tarbuck, 161 to 163, Fowler Maitland, 68, Gwilt 1907 edn. of 94, Cragg and Marchant, 542. Now in the first plaec the propositions given in those dicta vary considerably from 1/8th to 1/5th while 1/l0th and 1/2 are recognised as unavoidable extremes in exceptional circumstances. In the second place the dictum seems at most a rough and ready rule baaed on generalisations, the accuracy of which when applied to particular instances can be only approximate. A similar theory as to the proportion between agricultural rents and the capital spent on improvement of the soil is said in the Encyclopaedia Britannica to work very unfairly. In the third place and this is the most important point, it is evident from the authorities, when carefully read, that the dictum is only useful for the determination of the amount which it is prudent to expend in proportion to the value which the land derives from the advantages of its position etc. Thus if the site is valueless, it does not pay to build on it at all just as costly ornamentation of a worthless fabric would be thrown away. In proportion as the ground is attractive or profitable, money may safely be laid out on improvements. The dictum means no more than this that the building on a site should have a certain correspondence with the popularity, of the site, i. e. the demand for the site itself. It is a rule of prudence somewhat similar to the common place that the rent of one's house should not exceed the tenth of one's income. But it would be most unsafe on this to infer the amount of the rent from the expenditure. A palace built in a desert would be no index of the ground rent but only of the imprudence of the builder. Mr. Delves has given an excellent illustration of the danger of such misapplication of the rule in his evidence. The instances he takes are of two structures, in one of which outlay is in proportion to demand while in the other it is not. In the latter there is an increase both in vacancies and expenses. It is clear that the applicability of the ratio depends on the appropriateness of the superstructure to the site-in other words to the demand. The prudence in selection of the site depends on the demand which justifies the selection. The demand must first be established and then the proposition may safely be inferred.
36. This was what the claimants had to establish, instead of asking the Court to infer, the prudence and the demand from the selection of the site. With all respect for the able arguments advanced, I cannot but think this part of them is a vicious circle and rests on a petitio principii. The desired conclusion is assumed and then taken as one of the premises.The demand justifying the buildings is assumed and then the buildings are taken to prove the returns from the demand.
37. If the ground rent is too low, in proportion to the returns expected on bricks and mortar, the building must be out of proportion for sites in the locality. On the other hand if it is too high it will hamper the disposal of property by mortgage or sale. According to the authorities the utmost it is ordinarily safe to allow for the ground rent is one sixth of the total rent) or as Mr. Delves says rack rent, i. e. 1/5 of returns on bricks and mortar. This proposition being observed if profits are 6 per cent and land 4 per cent, the value of the land should be 3/10 of the outlay on bricks and mortar.
B = Outlay Bricks and mortar.
L = value of land.
68 = 4L
--- 5 ----
. 6B = 20L
. L 3B
. . --
38. Mr. Lowndes contends the land should be taken as 1/7th of the rent. That is at least 1/6th of bricks and mortar, the land bearing 4 p. c. interest, the capital 6 p. c. And he claims Rs. 10 all over for the front land : i. e. Rs. 7,17,140. If so, the expenditure on bricks and mortar should not have exceeded four times Rs. 7,17,140.
60 = 4L
--- 6 ----
. 6B = 4L
The proposed expenditure exceeds this by more then one lakh. It can hardly be supposed that the builder's profit rent should be less than 6 per cent. If more than 6 per cent, he should have expended less. Thus, if profits were 8 per cent. his outlay should have been only three times the value of the land.
8B = 4L
. SB = L
.. B = 3L
39. Thus, even accepting claimants' premises, they have over built in imagination. But it seems preposterous to argue the value of land from the money that might be spent on it without regard to prudence (cf. Kerr, page 166). And the authorities cited recommend accordingly a different method for assessing values of building sites (vide Fowler Maitland, p. 68, passage beginning: ' The rental value '; and Kerr 166). Practically they apply Ricardo's theory of Rent and assess the value of the site according to the ascertained additional yield; not according to imaginary and possibly imprudent outlay on it. The method they indicate seems to me, as Mr. Delves describes it, theoretically correct. It requires the returns to be first ascertained and the value of the ground will be the residue left after deducting from those returns the ordinary profit on expenditure, that is the building rent or profit rent. To estimate the returns from buildings, it is necessary first to estimate the demand from the buildings. For it is obviously unprofitable to build tenements which will not let. The demand ascertained as far as possible the hypothetical scheme must be modified in accordance with it-The rates of the hypothetical rents being admittedly reasonable! must be multiplied by the number of tenants reasonably to be expected. And then the capitalised returns minus gross expenditure with profits at ordinary rates, will give the value of the land. This involves a very great modification of the hypothetical scheme.
40. The Advocate General contends that the hypothetical method cannot be applied on so large a scale and that the tribunal never attempts to apply it to areas over 3000 sq. yards in extent
41. One danger in using that method with so large an area, no doubt arises from the complexity and number of the factors to be considered.
42. This case illustrates the still greater danger in using the hypothetical method when dealing with large areas. The ordinary method ascertains the demand direct from the market. The enquiry stops there. The hypothetical method pushes enquiry further back into the causes which would create demand in a reasonable market. The chief of such causes must be the ultimate demand the purchaser can reasonably expect for the use of the purchase. If in pushing back the enquiry, this cause of value is left unexamined, the hypothesis must be without foundation.
43. When the scheme was first propounded no suggestion was made that the shops would not fill. But on my intimating that the 3,440 rooms would be in excess of demand, Mr. Robertson has urged that the clientele expected for the shops would be so reduced as to impair their attractiveness. No doubt the prospects of the shop keepers would be better with 15.000 customers. And I think indeed with such a market close at hand, the shops might well have been classed as an investment worth 18-182 years purchase. But the modification of the scheme does not reduce the market of customers to 332 as Mr. Robertson suggests. Besides the more tenants of the double rooms, there would remain as probable customers, not only the dependants of those tenants, but the families occupying the 192 single rooms and the 390 double rooms of the back land, so that the new local public would still amount to some two or three thousand persons. And moreover the shops would not be limited, as would the projected chawls, to the demand of a small section of the public. In such a high way with trams constantly passing and customers over head and in the rear, I think it may safely be assumed that they would pay. Their number in only 83. To anticipate such a demand in Bombay would not I think be unreasonable, though I think it would be unsafe to regard shops in such a quarter as worth more then 16 % years purchase.
44. Then I go on to consider the question of the principle on which the valuation must be made on abandoning that part of the scheme which relates to 2440 rooms. Mr. Lowndes has admitted, as I have already pointed out, the value of those areas must be gauged by taking the Collector's gross-rental and rack rental and assuming that the ground rent would be 1/7th of that, but the result of applying that system of calculation would be to show the site of 2440 rooms as approximately the same in value as the site of 332 double rooms and even greater than the site of 192 single rooms; whereas accepting as correct the rentals fixed by the Collector the value of the site of the 2440 rooms on the rentals basis would be about 1/5th or less than 1/5th of the value of the site of the shops: and that I think shows that this system of calculation must be erroneous and misleading.
45. Having arrived at these conclusions, I have invited and heard further arguments of counsel. It is now admitted that the frontage shops with their 332 double rooms and the vacant spaces assigned to them would have occupied 8598 sq. yards. To this area I hereafter refer as area I.
46. Mr. Strangman, who appeared for claimants at this stage proposed a rearrangement of this area, reducing very consider-ably the intervals for roads and crowding the buildings together so as to admit a considerable expansion of the frontage scheme. To allow such a radical transformation of the scheme at the stage at which this proposal was put forward, would have involved a re-opening of the whole case for claimants, who had closed their evidence some months before this proposal was made, Moreover, I am convinced that any such additional development would approach if not exceed the margin of demand and imperil the returns on expenditure. The blocking up of access to the land in the rear would further detract from its value and place it on a level with land cut off effectually from the main thorough fare. I declined thereupon to consider area I as occupying less than the 8398 sq. yds. hypothetically assigned to the frontage sites from the outset.
47. The site of the 192 single rooms to which I hereafter refer as area No II is admitted to be 2681 sq. yds. But as someprotection for light and air is required on each side of the b'ocks 74 and 75, Mr. Strangman proposes 15 ft. on the East and West of those blocks should be reserved for that purpose. Mr. Robertson does not offer objections and thus 410 sq. yds. must be added to area II.
48. As I have above indicated, however, the whole of the front land except frontage for shops and superstructure, would be available for the 192 single rooms. And as in hypothetical development it is only reasonable to suppose that no unnecessary expenditure would be incurred, it must he taken that the site selected for the 192 single rooms would be the most accessible that was available so as to diminish outlay on roads. And therefore I assume that those room? would be on the frontage of Parel Cross Lane. Mr. Robertson objects that the hypothetical scheme should be rejected in toto but takes no special objection to this necessary modification in the transposition of plots 74 and 75. But Mr. Strangman suggests that if this be done, the space between blocks 74 and 75 reserved in the original scheme could be utilised as part of a roadway from North to South traversing the vacant area originally assigned to the 2440 double rooms. Mr. Robertson does not assent to this but he assigns no grounds for disputing its practicability. I think it is a perfectly reasonable suggestion which an investor would unhesitatingly adopt as an economy of space. The extent of the space thus capable of being appropriated to roadway between 74 and 75 is not disputed. It would be 245 5/9 sq. yds. This space then must be deducted from the aggregate assigned to areas Nos. I and II. Thus area No. 1 must be taken as 8398. Area II as 2681+410-245 5/9 i.e. 2845 4/9 sq. yds. and the residue of the front land will be 60,470 5/9 sq. yds. henceforth designated as area No III. The values of those three areas taken on the Collector's rentals difier very greatly. But if Mr. Lowndes' computation were accepted that of area III would approach very nearly to that of area I
Rents for area No. I are as follows:
83 shops at 17-l=p. m 1473.4 p. m.=or 17679 per annum.
332 rooms at 11 p.m.=3652 p.m. or 43324 per annum; that is a total of 61563 per annum. The rack-rent (i.e. gross rent minus 14. 76 per cent, for rates and taxes-viz. 9077-1-0) is 52425-2-0
Rents for area II are as follows:-
192 rooms at 6 p.m. = 1522 per mensen or 13824 per annum. The rack-rent (i. e. gross rent minus Rs. 2040-6-9) is 11783-9-3.
Rents for area III are as follows: -
2440 rooms at 9-8-0 p. m. 23180 p. m. or Rs. 2.78,160 per annum gross rent. The rack rents (i. e. gross rent minus Rs. 41,056) is 2,37,104.
49. This shows that if it could be assumed that 1/7 of the regular rental was the ground rent area No. III would be very nearly the same as area No I and I think better than area II. But I think very different results are attained from applying the ordinary test which was adopted by the Collector and generally applied by the Tribunal and by taking the Collector's rentals I arrive at these results.
(1) Area No. I.85 shops and 332 double rooms-outlay 4,15,000Gross rental from shops 17679-0-0Deductions for taxes,Vacancies, InsuranceSinking Fund etc. 5379-5-4----------Net rental 12299.46Capitalized at 16 2/3 yearsPurchase 2,0,4, 909. 0036Gross rental from rooms 43824Deductions as above 14859.54---------------Net rental 28964 46Capitalized at 16 2/3 yearspurchase 482547.9036-----------Total 687456. 9072Deduct outlay 415000--------------Land value 272456.9072
50. Then from that land value arrived at entirely on the Collector's data and figures there must be certain deductions made which I proceed to discuss.
51. I have to deduct from the site values above calculated, all necessary additions to constructional outlay as estimated by the Collector. And first comes the question of the cost of the buildings themselves. This is a question upon which I have'not yet touched. I think it is one which requires no lengthy discussion. Mr. Narsinham has estimated the cost at 3 as per cubicfoot. Government contend that the chawls could not be built for that Vaidya, the Government witness, work out Sidik's chawls at 3 as per cubic foot or even less. Nur Mahomed's are much less but are no doubt very inferior. Reference 23 of 1904, page 19 of the File, states the Improvement Trust chawls to have been built at a cost of 2.57 per cubic foot. The estimate was in June 1901 and Mr. Delves admits that they worked out below 3 as. Measurements were taken from ground level so that the cost was not minimised by measurement (vide Mr. Hall's evidence). They were built with good teak. That Mr. Hall could spend more on the chawls erected by him is not to the purpose. Mr. Narsinham deposes he built in June 1904 at 3 as Confirmation is given by Mr. Gokhale and by Mr. Sorabjee and Ramchandra. As Mr. Lowndes urges, the site is favourably situated for bringing materials, stone, wood etc., I therefore think no addition should be made to the estimate of constructional cost on account of building. The contracted scheme is not on such a scale as would be likely seriously to affect the cost of labour or the difficulty of storing materials.
52. Next, I consider the vexed question of 'filling in'. I discuss it at present solely with reference to areas I and II.
53. The Advocate General contends that outlay on this item would be indispensable for the whole area which he describes as a swampy marsh. It was never put to claimants or to Mr. Narsinham that this was the condition of the land. Mr. Gray's evidence to that effect surprized but did not convince me. It seems hardly conceivable that land with nothing but its own rain-water on it could remain in the condition Mr. Gray describes up to March under a Bombay sun. And my impressions were confirmed rather than removed by the evidence of Sheikh Abdul Rehman that he can mention no land in Bombay in such a condition in March. On the other hand Dr. Nariman who was in charge of the Fever Hospital and concerned to note sanitary environment, knows nothing of a swamp nor does Mr. Inverarity who visited the spot. Mr. Hammick supports the description of the swamp, yet he reported in 1900 as above noted that the land was ripe for residential quarters of the best class. If water lay there, I doubt if this could be ascribed to the lie of the land which had been used for the compound of a Member of Council. And the only inference as to the origin of such water is that it must have come from Parel Road, as evidence indeed indicates. I agree with Mr. Lowndes that claimanti were not abound to drain off outside water. I think they could easily have shut it out from the Parel Road and other sources by filling up their frontage. It was not suggested that there was any easement compelling the claimants' land to receive such water. And there is certainly no evidence to favour such a suggestion. The Railway no doubt incurred great cost in filling in. But they began at the Western side and as Mr. Lowndes suggests this would act as a dam to accumulate water received from Parel Road and its tributaries. If the filling up had been made on the frontage the water would have had to return to the Municipal drains and other sources whence it came. Mr. Narsimham's view was that the necessary filling in could be done with earth excavated for foundations. He is supported by witness Ramchandra Balaram Naik and so far as I can see that evidence has neither been shaken by cross-examination nor rebutted aliunde. Indeed I do not know what could be done with the excavated earth except to spread it over the surrounding area. It would be, as Mr. Lowndes suggests, senseless to remove it and then buy other materials in its place for filling in.
54. I therefore think claimants ought not to be charged for materials which their foundations will supply.
55. The next extra items of cost suggested are for roads, lighting, sewerage and drainage. These would be no doubt inevitable for III which is not accessible from any main thoroughfare as buildings on I and II would be. I can see no justification for charging these two small developments with roads leading no-whither. The shops have the main road. The tenants of the rooms would not need to use the Maidan but would have sufficient space for such inter-communication as was necessary. The tenants of the single rooms would not be of a class requiring elaborate foot paths. No vehicular traffic is contemplated. The Collector does not seem to have debited the undertaking with anything for roads. And though I fully realise that roads would have been inevitable if the whole estate were developed, I cannot reasonably suppose that they would be needed merely to traverse the depth of blocks provided with central passages and fairly deep verandahs. I therefore discard the suggestion of extra cost on this account for Areas I and II.
56. Next I consider the question of the inducement required by a speculator or investor. Mr. Kent puts the profits which would be demanded for this purpose at 8 per cent, on capital outlay. Mr. Delves would increase this to 10 per cant. And I have no doubt that a speculator building over the entire area of 71714 as proposed in Ex. A, would require a very large inducement indeed. It is very different when unquestionably remunerative development of comparatively small areas is concerned. The Tribunal in Reference 67 of 1904, Goswami Damodhar's case, allowed one year's rental to 'induce the purchaser to face the risk of development.' The rental was Rs. 7036.78. The capitalized value 1,30,302. Thus risk was calculated at 5 1/5 per cent, of capitalized value. In Reference 9 of 1904. 10 per cent, on outlay was allowed: but this was because the investment was of a highly speculative character for a very limited class. In 63 of 1904, 15 per cent was allowed but in circumstances which were also exceptional. In 12 of 1904 the purchase was regarded as purely speculative-'not to hold but to sell'. In 134 of 1904 investor's profits at 10 per cent was allowed: but it was on the admission of Mowji Hirji that he was a speculator in land and buildings; and expected that rate of profit. In 36 of 1902 on the other hand no allowance was made for risk at all.
57. Mr. Lowndes contends that his rents have been cut down, that his constructional cost is estimated at 3 annas per cubic foot when the buildings might have been erected for 2.57 as Improvement Trust chawls have been, that he has been most moderate in not claiming as he might for hypothetical shops on Parel Cross Lane frontage and has taken no credit for possible rent for the Fever Hospital pending progress, that neither Sidik nor Noor Mahomed allowed for risks, that Vaidya, called three times and Mr. Shroff, a practical expert, were not asked and that Mr. Delves who has but recent practical experience in Bombay is the only witness who suggests that such risks are in practice taken into account by purchasers. I think that it would be sanguine to expect any builder to develope claimant's land merely in order to obtain investment at 6 per cent on his outlay. And if he undertook to spend as Mr. Narsinham proposes Rs. 29,70,200 on the development, he would insist on an inducement quite as great as, if not much greater than, the Tribunal has ever allowed in smaller schemes. But if building operations were contracted to such comparatively small areas as I and II with a practical certainty that the investment would be remunerative, he would naturally require a very much more moderate inducement. Having regard to the reasonable prospect of obtaining full rentals without effort and to the fact that 10 per cent, on gross rentals have been allowed for vacancies even in the case of shops as against 6 per cent, generally allowed by the Tribunal, I am not convinced that the risks should be estimated at a higher per centage than that allowed by the Tribunal on the less risky of the schemes submitted to it. In Anandrao Vinayak's case the deduction necessary 'to induce the purchaser to embark upon an expenditure which the actual owner had never cared to incur' was estimated at 2/3 of the net annual income, i. e. 4 per cent, of the value of the undertaking capitalized at 16 2/3rds years' purchase. This case came up on appeal and the deduction was maintained. I therefore allow the same rate for Investor's profits namely 2/3rd years' purchase or 4 per cent on the capitalized value of the net rentals in respect of the 83 shops and 332 double and 192 single rooms. The deductions are as follows:-
Area I } 4 p. c. on 6, 87456.907883 Shopss }332 rooms } =27, 498, 266.Area II } 4 per c. on 1, 50, 108. 89192 rooms } =6004. 3556
58. The next item to be considered is the period of construction and loss during that period of interest on capital and land lying idle. Mr. Narsmham estimates that the whole land might be covered with his hypothetical buildings in four years. Mr. Delves thinks it would take seven years in all. He objects that so large a sum could not be spent in four years on buildings in Bombay. Mr. Lowndes refers to Z31 showing that the Port Trust apprehend no difficulty in spending 50 lakhs per annum. I think however the peculiar character of their project a d the establishment at their disposal make it dangerous to reason by analogy from that instance. It is indeed difficult to assume from rate of progress by the Trust or private enterprise, the time required for erecting a given building, for the data as to urgency and delays are not available. Sidik in three years has built six out of 16 blocks on his 9311 sq. yards. Ramchandra Balaram. thinks, but for delays, Sitaram Buildings covering 5000 sq. yards and begun in 1900 might have been finished 2 years ago. I think therefore Mr. Narsinham was probably somewhat sanguine as to the rate of progress. Indeed in Anandrdo Vinayak's case 12 months were allowed for a very much smaller development scheme. On the whole it seems therefore Mr Delves' estimate is not too pessimistic and as area I is about 1/7th of the whole scheme in value, it seems fairly safe to allow one year for its completion and deduct on interest on building capital and land value for half that period. On these grounds deductions must be made:-
Area I.83 shops 332 rooms6 per cent on capital (Rs. 415000) lying idle far half year...12,4504 per cent on land lying idle far half year 5, 449. 1381.
59. Then with regard to Area II it might be calculated at 6 per cent for outlay and 4 per cent for value of land for half year in each case for capital and land lying idle.
60. In those circumstances no deduction in rents as realizable for that period could be allowed. It has been admitted that no deduction on account of sewerage would be necessary on account of the frontage, i. e. areas I and II. House connections would be included in cost of construction.
61. The results so far in reducing the price for areas I and II are as follows:-
Area I.Land value after deducting constructional costfrom capitalized net rentals 272456Deductions:-Inducement to investor 4 p.c. on 687456.9072(capitalized net rentals) = 27498.2868Capital and land lying idle } 6 p.c. on capital 12452for half year pending develop } 4 p. c. on land.ment...5449.1381-----------Total deductions... 45,397.4043Balance... 227058.5903Area II.Land value after deducting constructional cost fromcapitalized net rentals 34906.82Deductions :-Inducement to investor. 4 p. c. on 150108.89(capitalized net rentals)... 6004.3550Capital and land lying idle 6 p.c, on capital 3458.for half year pending develop 4 p.c. on land.mint...698.1778-----------Total deductions 10158.5334Balance 24750.3566
62. Then the total of areas I and II will be 251808. 1247, that is, I think, about Rs. 23-6 annas per square yard. This no doubt seems a very high price but it must be remembered that it is for the best portion of the whole area. This comparatively small portion has a double frontage, with tramways in front, Victoria Gardens near at hand, with frontage shops below and an industrial district all round. And it is well established that for Ardesir's land bought at Rs. 13-8 per square yard in 1895 offers of Rs. 16000 and Rs. 17000 and even recently Rs. 27000 have been made, that is to say, Rs. 23, Rs. 25 and even Rs. 39-11-3, per square yard. This shows the enormous appreciation of frontage land in Parel of recent years. And I think it justifies the result at which I arrived on the Collector's data and system of computation which follows that generally by the Tribunal. From that result however must be deducted the brokerage and fees for legal expenses calculated at the rates in Ex. 13 which would be considered by a purchaser in determining what it would be wise to offer. These areas must also be charged in proportion to their extent with the 500 Rs. allowed by Mr. Kent in item (e) at page 15 of Ex. 13.
63. There was some discussion during the course of argument at to whether brokerage fee should be charged or not and reference was made to the treatment of that question by the Tribunal. After considering the matter I come to the conclu-lion that the brokerage fees are not to be deducted where the price is taken from an ascertained market price, because it must then be assumed that the purchaser has already taken that item into consideration. But when the Court has to arrive at the market price by calculating each successive item that would be considered by the intending purchaser, brokerage fees must not be omitted from the computation and therefore I think this item must be deducted from the market price thus artificially computed.
64. The result above given approximately corresponds with that to which the second method adopted in Ex. 15 would lead. That method consists of deducting the building rent or profit rent from the aggregate net returns and capitalizing the balance, Mr. Delves says this is theoretically the correct way. It is ia accord with the dicta of authorities; Fowler Maitaland 68, Cragg and Merchant, p. 404 at seq., Tarbuck, 162 etc. The Tribunal accept it in reference 62 of 1904. And it is in accord with the theory of economic rent as stated by Ricardo and adopted by other economists. But it is of course subject to the condition noted by the tribunal that the aggregate net returns must be those from buildings which the site is ' reasonably capable of receiving.' That phrase I understand to limit the application of the test to cases in which the buildings do not exceed the demand for such buildings on that particular site. The rule may safely be applied I think to the 83 shops, 332 double and 192 single rooms: certainly not to the 2440 rooms. Applying it to the former I find aggregate net rentals Rs. 50274.
Shops 12299.46382 double rooms 28964.46192 single rooms 9010.1376-----------50,274.0576
Deduct building or profit rent 7 per cent, on outlay Rs. 37114 :
Outlay83 shops 41,500532 double rooms192 rooms 115,200---------5,30,2007---------3711400(50274-37114) 20=268200.
site rent 13160: capitalized at 20 years purchase Rs. 263200 Mr. Delves takes 7 per cent, as reasonable profit on outlay. The higher rate is expected for buildings of a lower class-Hurst, 410 and Cragg and Merchant, 415. The question of years purchase has been much discussed and Mr. Lowndes contends that secured ground rents should be capitalized at 25 years purchase. He instances the practice of Government, The Port Trust Municipality and Improvement Trust. As to the last mentioned body's invitations to bidders, I think the witness Mr. Watson has reasonably explained that the reference to 4 per cent, in the conditions, has no connection with the price, or value of the land, but is only for the purpose of fixing the rent. The views of Government and public authorities and bodies are not necessarily an index; of the views of the market. Instances of private transactions are more in point. But that The Mumcipal Corporation of Bombay v. Cuverji Hirji (1) is only as to the vendor's estimate and the price is not 25 years purchase of the annual returns. The offer for Dayabhai's land is noidoubt in Mr. Lowndes' favour and so are the instances in Mr. Engle's evidence. On the other', hand Mr. Shroff called by claimants''as a competent expert and evidently qualified by long and wide experience, speaks of unsecured ground rents at 20 years purchase at the most, for places outside the Fort and says it is not easy to dispose of large areas. Mr. Delves, who has ILR (1895) 20 Bom. 198 apparently experience in these matters, points out that superior investments in Bombay such as Municipal, Port Trust and Improvement Trust Bonds, pay 4 per cent and are easily transferable, so that secured ground rents could not be taken at 25 years purchase. On the whole I am not satisfied that 20 years purchase for capitalization of ground rents in Ex, 15 is too low. The result approximately corresponds with that obtained from applying the method adopted by the Improvement Trust and the Collector and I think confirms the estimate of the sites now in question.
65. It remains to ascertain the value of the rest of the front land which according to my view is not yet in demand for chawls and must be regarded as capable of ordinary user only. That remaining area it is now admitted is 60470 5/9ths square yards. The Advocate General has elicited from one of the claimants very painful admissions as to the valuation put by him on this land in 1894 in his petition for probate, Exs. 10 and 11. No doubt a claim comes ill-accredited with such antecedents. And it is not matter for surprise that the present claim should be severely questioned. But I am not now concerned with the integrity of those who prepared or authorized that petition. Mr Lowndes shows by subsequent sales how gross was the undervaluation of the areas in that petition. It is no guide whatever as to real value. For due allowance made for the buildings, much of the land would work out at a minus quantity. Its present market price must be ascertained by reference to offers and sales which form the subject of issues to be discuseed later on. For the purpose of the third issue I find that it is improbable that tenants could have been found at the Collector's rents for more than the 83 shops at 17-12 and 332 double rooms at 11 per mensem and 192 single rooms at 6 per mensem.
66. Having thus disposed of the third issue, I find on the fourth, that the rents accepted by the Collector are not disputed as to rates, but would not in the aggregate amount to more than Rs. 75,327 per annum.
67. On the fifth issue, I find no allowance need be mada for rents realizable pending construction. That issue only referred to the larger scheme.
68. Issue 6 becomes inappropriate by reason of the decision on isue 5.
69. The seventh issue I find it unnecessary to decide. No interest can be allowed as the rentals are not deducted.
70. On the eighth issue I find no difficulty from Ex. B, Ex. Z35, Ex. 50 and Mr. Cama's evidence, in accepting as proved the offers to which they refer. The first offer was on the 6th November 1886 for 20,000 square yards opposite the great mill on perpetual lease at five annas per square yard. The Advocate General urges this must have been for frontage only as the description opposite the great mill would only apply to frontage land and the distance from the north wall to the claimant's adjoining land being 848, the depth could have been only 212 feet. This is plausible but not conclusive as against Mr. Cama's assertion to the contrary. Five annas at 18 years purchase would be 5-10 per sq. yard at 20 years, purchase 6/4 and this was unsecured ground ront. The next offer was 9th November at Rs. 1 per every 3 sq. yard, i.e. 5 annus 4 pies per sq. yard, which at 18 Y. P. is 6 per sq.yard, at 20 Y. P. 6/10. 8. The offer of 22nd was for 6 annas per sq. yard, for as much as the landlord might choose to give. This is at 18 Y. P. 6/12, at 20 Y- P. 7/8, at 25 Y. P. 9/6. The Advocate General suggests this offer must have meant as little land and not as much as the owner chose to give. This seems rather a strain of the words which left it to the owner to say how much he would part with at that rate, offering to take as much as he would give. Mr. Lowndes contends this is a clear offer of Rs. 9-6 per sq. yard and that land has gone up since. The Advocate General's suggestion that the land was required for a mill and that the subsequent depression of mill industry would have lowered the price by 1904, does not seem to me of much weight. Advantages of situation do not come into consideration for mills which seek cheap land and tend North to unoccupied tracts. In the next place as already observed I doubt whether the depression of the mill industry dulled enterprise, having regard to Z12 and the yearly increase there shown in spindles looms and daily operatives. But on the other hand I think 25 Y. P. would be far too high for unsecured ground rents on perpetual lease and would estimate this offer as Rs. 6-12 or Rs. 7-8, i. e. 18 or 20 years purchase utmost. But my difficulty in attempting to regard the offer as a clear guide is this, that it appears only from a brief note in the diary used to refresh Mr. Cama's memory and the very terse statement in Z35 giving no details and it is impossible to conjecture what the final terms might have been as to selection on clinching the bargain. It probably contemplated a considerable frontage and I have no doubt that fr ontage land might have been worth considerably more than Rs. 6-12 or Rs. 7-8 and would thus have raised the average price of such back land as the lessee would have taken. It is most improbable that at anytime the same price would have been given for the rear as for the frontage and this is admitted in Z35 This deposition was admitted under Section 33 of the Evidence Act, partly on the ground that under Section 50 (2) of the Land Acquisition Act, the acquiring company could have appeared and partly because it is understood that Government can and often does appear in references under that Act. The Collector is a Court within Section 3 of the Evidence Act. In Z35 the back land is said to be worth 3/4 of the front land. But this evidence was not subjected to cross-examination. It could not possibly be true I think of land on the extreme west of the 71714 sq. yards. Apparently it was intended to apply to the land to west of the Government passage which is even more remote. It could certainly not be applied to rear land in the front area when a hypothetical scheme demonstrating a most exceptional value for a limited area in the front, proves wholly inapplicable and disastrous for this rear land. No reasons are given in Z35 for the apparently conjectural estimate of this rear land on lease and I cannot give much weight to it. It would assign a manifestly low rate to the frontage in comparison to land diminishing in value as it becomes more remote. I am unable to treat this offer as one at 9-6 per sq. yard for the whole area. And on the ninth issue I am unable to say that the offer was intended to apply to the whole of the rear land.
71. On the tenth issue I have no doubt that the value of land has increased in Parel since 1887 as Mr. Greaves, a competent observer, says. This is confirmed by Mr. Engles and by the increase of buildings and Ardesir's evidence. But as I still see reason to doubt what would have been given in 1887 for the rear land taken by itself, I can base no appraisement on this fact.
72. On the eleventh issue, I am unable to say that Rs. 10 would be a moderate price per sq. yard for the whole of the 71714 sq. yards, which constitute the front land. Though some of the land on the extreme east would no doubt be double that average.
73. The twelfth issue refers to Dayabhai's land. Mr. Lowndes lays great stress on the offer for this site which is just opposite the claimants' land on the other side of the road. The plan is Ex. G. The area is about 9542 sq. yards with 200 feet of frontage the mean depth being about 470 feet. Ex. H of 18th March 1903 is the offer of 15 Rs. per sq. yard in all Rs. 1,42,500 at 550 per mensem : a later offer advancing the offer for rental to Rs. 600. A later offer was made in 1096 by Vinayakrao witness Ex. J. offering 15 per sq. yavd for 5000 sq. yards. This and Ex. K subsequent offer of 17 per sq. yard, are relied on to show that the offers by Gokhale were not unreasonable. Deducting the value of the buildings, Rs. 30,600 (Ex. M), the first offer would seem to be Rs. 11-4 for the land. The second Mr. Lowndes works out at Rs. 13 42 per sq. yard. This land very nearly equals in extent area I, above discused. It is true it has a comparatively small frontage and it is for this reason probably that its value was every much lower than that which I deduce from the admittedly reasonable rentals for claimants' frontage. Mr. Kent and Mr. Delves did not consider this instance when preparing Ex. 13 and no doubt the omission affected their low appreciation of the claimants' land. I think, however, that so small an area with a frontage on the Parel Road cannot be taken as any guide to the price of the very large space of land (area No, III) that lies behind the frontage of claimants' land. It is conceivable that the 9542 sq. yards of Dayabhai's land might have been utilized in the same way for chawls as the site of the shops on claimants' land though not with equal profit, the frontage being so much less; But there the demand would have stopped. It could not be assumed that every 9,000 sq, yards would have yielded, even approximately similar rentals. It was intended to erect 60,000 Rs. worth of chawls on Dayabhai's 9542 sq, yards (Ex. H), whereas on a corresponding area of claimants' land 4,15,000 were to be expended. And this circumstance indicates that land with little frontage cannot be utilized in any thing like the same proportion as land abutting upon the road. And it seems not improbable that the lucrative part of Dayabhai's premises was the frontage which raised the general average of the whole. In the same way the exceptionally lucrative character of area I as above discussed, must raise the average value of the 71714. But it does not follow that it would raise that average to 11 or 13-S per sq. yavd. Mr. Delves admits that if 13-8 was fair value for Dayabhai's land in 1903 Rs. 10 would be fair value for claimants' land in 1904 but not at the same rate for the whole of the land. And this I think seems reasonable.
74. On issue 12, I, therefore, find thatthe offer in 1903 for 9542 sq, yards belonging to Dayabhai is not a clear indication that claimants' front land is worth Rs. 10 all over, that is, for area III as well as for areas I and II.
75. On the 13th issue Mr. Lowndes did not lay much stress nor do I think temporary arrangements of the nature referred to in the issue can be taken as a safe guide. The northern land has a frontage moreover of which I have already taken account.
76. The 14th issue relates to the offer made by the Thana pleader, Damodher Amersey, who deposes to having first proposed giving 8 annas and subsequently 12 annas pcr sq. yard for 500 sq, yards in 1903, i.e. Rs. 12-8 and Rs. 18-12 per sq. yard at 25 years' purchase. This was frontage land and the owners, I think, very reasonably declined and asked Re. I which does not seem excessive for land such as areas I or II. The Advocate General has endeavoured to discredit this witness both as an intimate of Mr. Narsinham's and as having made no real effort to change his residence. But I see nothing improbable in his offer or his resignation and I think he would hare been fortunate to secure 500 frontage yards at the price he offered. This does not touch the back land area III or raises its average at all.
77. On the 15th issue, I have already expressed my opinion in discussing the first and the third. The hypothetical method appears to me open to no reproach if the hypothesis is based on inferences from ascertained facts. But it cannot assume the existence of demand from the possibility of offering supply
78. On the 16th issue, I reserve my finding for the present.
79. On the 17th issue I have already held that I see no reason for disputing the estimate of constructional cost at 3 annas per cubic foot.
80. On the 18th issue I have already stated Mr. Lowndes' con' tentions that on areas I and II filling in could be effected with tarth from the excavations and that claimants are under no obligation to receive and drain water from outside their estate, I reserve for discussion the necessity of filling in area III.
81. On the 19th issue I have accepted Mr. Lowndes' contention, that speculator's risks, or investor's profits should not be calculated in excess of the rate adopted in Anandrao Vinayak's case in respect of areas I and II, that is 2/3rds of the net rental or 4p. c. on the land valued at 16 2/3rd years purchase.
82. On issue 20 a finding is unnecessary as I think the hypothesis of developement could not reasonably be applied to the area III for which alone the roads, lighting &c.; proposed would be required. For sewers as I have already noted it is admitted no deduction is to be made in respect of areas I and II.
83. On issue 21, I must reserve discussion.
84. On issue 22, I have allowed one year for the erection of 83 shops 332 double rooms and 192 single rooms.
85. And on issue 23, I have already decided by following the Tribunal in allowing 6 per cent. on building capital and 4 per cent, on land lying idle pending construction.
86. I now proceed to discuss the issue 16 which raises the general question as to the sufficiency of the Collector's award. This question so far as area III is concerned survives the demolition of the hypothetical scheme. This involves the consideration of sales and offers for land in the vicinity and especially to those to which Exs. S and 19 refer. And first of all I must note the objection taken by Mr. Lowndes that in all cases where the reasons for fixing the price has been in question, he has called the purchaser to explain the high appreciation of land on which he relies and that Government in proposing to minimize the price, should conversely have called the seller to explain, under cross-exmination, the reasons for the low value accepted. I think there is some force in this objection.
87. Next I must note the argument of the Advocate General that as a rule a much higher price appears from the statements put in to be realized on small plots than on large areas and that claimants instances are for the most part cases of small plots. Large plots require means of access, drains, sewerage, lighting and other conveniences which are ordinarily available for small plots in vicinage already existing. The position and comparative sizes of the respective areas to which Exs. S and 19 refer are indicated in Ex. T. The claimants' instances are therein coloured yellow, the numers Arabic in red ink. The Government instances are numbered with blue ink in roman characters on a pink ground. To start with Ex. S for the purpose of appraising area III, I attach but little weight to the sales by the Municipality in 1894-96 except in so far as they indicate active enterprise and expansion in the vicinage. For the plots concerned are in positions of exceptional advantage With exceptional amenities.
88. They form part of a site with a double frontage and adjoin the Victoria Gardens on one side and abut on the Parel Road on tha other. They are all small plots and apparently for use as residential quarters of a higher class than operatives' chawls. For these reasons I think they cannot show the price of land that has low frontage : while for claimants' frontage the date of the sales would make them inappropriate guides. These remarks apply to numbers 14, 20A, 20B, 200, 19 a, 19b. 32, 16a, 16b, 33, 15 and 17 on Ex. T. The owner of land which has no frontage could not cater for the class of tenants that would be attracted by the residential sites bordering on the Parel, Sussex or Connaught Roads. The evidence does not show there is any other class sufficiently numerous to require the whole of area III for residential purposes. That tract does not possess the attractions offered by the small plots to which I have referred) nor can I take the contiguous area 31 including Maneck Dhunji's as a guide. It has Sussex Road to the South and Parel Road to the West. The purchases are small and Maneck Dhunji says it would not pay 6 per cent, as yet to erect the building he proposes. It is noteworthy however that it yields him 11 per cent with present use. It thus appears that expensive building is not the only way of, or in some circumstances even a reasonable way of, making the best out of a site before it is ripe for development. Maneck Dhunji's land affords an index of the value of frontage lands only and its price is about the same ag that at which the site of the shops &c.; has been estimated above.
89. No. 9 is the plot of 2209 sq. yards taken up by Government for the Fire Brigade Station in 1888 and formed the subject of the case of In re Land Acquisition Act X of 1870 ILR (1880) 15 Bom. 279. It has a double frontage and very little depth. For the frontage on Parel Road Rs. 9 and for that on Chinchpokli Road, a less important thoroughfare, a difference of Re 1 per sq. yard was made. The Court observed :-'The evidence shows that it is only land immediately adjoining and having a frontage on the road which is of particular value. The land behind that is in abundance and of comparatively little value'.
90. No doubt frontage land has gone up since that decision as shown by the instance of Ardesir's purchase. But I do not think the price of frontage land of the depth required for ordinary buildings is a proper guide to the price of rear land, or that a rise in the former necessarily implies a corresponding increase in the latter. For the demand for frontage land is more than a mere demand for a building site. It is the demand for residence in a street with concomitant advantages. Streets are not made for isolated buildings. And back land is not ordinarily affected by a demand for residential quarters. The demand must be not merely for more building sites but for new streets and neighbourhoods before it can have directly an appreciable effect on large areas of vacant back land.
[Note:-Arguments on brokerage fees and costs of conveyances of purchases to be discussed at the time when, arguments on costs are heard. ]
91. The property bought in 1991 by Messrs. E. D. Sassoon is No. 22 on Ex. S and No. 10 on Ex. 19. la Ex. 19 it is stated that this land comprises buildings worth Rs. 8515 as estimated by Vaidya reducing the site value to about 6-8 per sq. yard : vide Ex. Z4, The Advocate General says it was evidently a purchase of necessity for mills and therefore falls within the class described by Farran J. at the top of page 284 of 15 Bom. Having regard however to Mr. Eagle's evidence as to negotiations for the Swan Mill, the price paid for No. 22 does not seem excessive and Mr. Engle's evidence as to the rise in value of the land in Ex. 33, the position of which is correctly marked on Ex. 35 by Vaidya, shows how land even 3/4 of a mile north of claimants' estate is rising in value. I think therefore No. 22 may fairly be taken into consideration as showing the price to be realized on plots of about 6000 sq. yards if ready for use and not very well situated. No. 34 is a little more remote than the land now under discussion and is on the South while No. 22 is on the north. It is the subject of Z13 and its purchase is mentioned by Goverdhan Khatau, who considers the rise in price to have extended north as far as claimants' land. Meherally thinks (it may be noted) there has been no rise in price for mill land in the last 20 years. But however this may be, the price of land to the south in a more populous neighbourhood is not likely to be lower than that to the north and it may be fairly inferred therefore that the price for No. 22 was not unusually high for land on the north. All the areas in Ex. S hitherto considered except No. 22 are small parcels of some hundreds of square yards only in extent. The same remark applies to the 402 sq. yards and the 680 sq. yards respect ively purchased at Rs. 8, Rs. 13-8 by Savaksha and Ardesir. The last mentioned plot is No. 14 on Ex. S and Ex. T. It is in an exceptionally choice corner. This instance affords no criterion for back land. Instance No. 24 on Ex. S is 1001 sq. yards. It fetched only 6-4 per sq. yard. It is much more remote than No. 22 and this may account for its price being 4 or annas per sq. yard less than was given for No. 22. The area of No. 24 however is only about 1/5th the extent of No. 22. It probably sold at a higher rate than could have been realized for an area of 5000 sq. yards in that situation. It is no doubt inferior in position to the site now in question. But this defect is to some extent counter-balanced by its much smaller size. No. 11 on Ex. S. is much nearer. It is on the Sopari Baugh Road. It fetched Rs. 7. It is 1820 sq. yards and was bough t in 1892. It abuts on a road, Comparing it with No. 22 which was sold 9 years later, I think it confirms the impression that it is much more easy to secure a purchaser for a plot of 1820 sq. yards than for a plot of over 5000. And it follows I think that the price for the actual land in instance No. 22 is a bettei guide than instance No. 11 to the price realizable for large plots. No. 21 on Ex. S is by far the largest area mentioned in that Ex. It is 12,035 sq. yards. Its position is shown in map Ex. T. It is back land with a straggling narrow approach to the Chinchpokli road. It was bought in 1896 at Rs. 5 per sq. yard. I think the claimants' land immediately behind the shops is entitled to a higher price both on account of position and date of transfer. I do not however draw the inference that because 12000 sq. yards of claimants' land, just behind the frontage would probably command a higher rate than land so far back as No. 21 therefore a whole of the 60,000 or more yards in area III now under consideration would fetch even as high a price. The purchase by Messrs. Sassoon in 1901 of 5830 sq. yards is nearer in point of time. The situation of their land differs less than does instance No. 21 from that part of claimants' land which is just behind their frontage. I think that it would be fair to take Messrs. Sassoon's purchase as some indication of what that part of claimants' land which is immediately behind area I might have been expected to realize in 1904. Messrs. Sassoon's land is further north but it has the compensating advantage of some frontage. The claimants' land adjoining the frontage is not remote from the road. It is admittedly only 60 feet back. I think therefore that parcels adjoining the frontage of about the same extent as those that have been purchased in the neighbourhood for general and not residential purposes, might be expected to reach the same price when ready for sale. It must however of course be borne in mind that claimants' land would require even for such general purposes, to be filled and supplied with means of access sufficient to connect with the main road the areas to be sold. The more remote land would necessarily fetch I think a much lower price than that which is contiguous to the sites for the shops. And in disposing of so large a tract I think the claimants would have had to content themselves with rates more nearly approaching the minimum for land in the neighbourhood. As I have above observed for any of this land to be saleable at all it would certainly require filling. And this could not be done as in areas I and II (the sites for the shops and single rooms) from excavations. The cost of filling would have to be deducted from whatever might proved to be the market price of saleable plots. The actual outlay incurred by the G. I. P. Railway on this work seems to have been about Rs. 67,970. But this seems to include the cost of the back land including the Marwari's land and to have been done on a far more costly scale than would be necessary to render the land saleable for ordinary purposes. The Railway filling also extends I think further east than plot III. The land was filled according to Mr. Gray on an average to a depth of four feet. But curiously enough Mr. Gray says he filled in more before May, than Mr. Delves found filled in in July. Mr. Lowndes complains and with justice that no effort has been made to facilitate enquiry on this point by recording levels or by preparing a model as was done in a case before the Tribunal. It would in my opinion be impossible for any one not a specialist to draw any inferences of value from Y4 and the only conclusion I can come to is that the Collector's estimate has not been shown to be unreasonable and must be applied in proportion to the area. The Collector's estimate was Rs. 38725 for the 71714, sq. yards, i. e, at about 8 annas 7 pies per yard. Mr. Strangman contends that Railway filling was effected at Rs. 2-7 the brass. But it seems that the G. I. P. Railway company could provide their own ashes and had facilities of transport &c; which the claimants would not have had. I attach little weight to the instances of leases in S. All except No. 35 are for comparatively small parcels. The first four leases on Ex. S. are for 99 years only and no certain index for sale. No. 18 is a considerable distance south of claimants' land and is no better test than No. 34. Nos. 27, 28 and 29 are certainly not well situated. But I cannot infer that a very large area unprepared for use would fetch those prices all over. As for No. 10, the prices are such as might be expected from contiguity to the main thorough fare. No. 35 shows a smaller price given for a large area but it is remote and the transaction was in 1892 and it would be difficult to say whether the ruling price for land in so remote a locality 12 years previous to 1901 would or would not apply to the matter now in question.
92. I now turn to Ex. 19. No. 1 on that list is near Chiuchpookli station and sold at 1 rupee sq. yard. It is close to the G. I. P. Railway and so far as I can see has no outlet except by a foot path to two not important roads, one of which is at a considerable distance. I do not think it is entitled to serious consideration. No. 2 is little better off on the East but its frontage on Delisle road secured it more than G times the price. Its position on the west of the railway makes it inferior to claimants' land as it is cut off from access to the main thoroughiart. It has its compensation however in its frontage on the Delisle road. I could not make use of this instance with any confidence, as there appear to be buildings on the land and their value is not stated. No. 3 and No. 4 are open to the same objection as No. 1. The higher prices they realise show the price of No. 1 is exceptional. The position of No. 5 is decidedly better, but frontage on the Arthur road does not seem to have been appreciated that thoroughfare passing through a less developed tract than Parel Road. No. 6 was bought from the Receiver and in the absence of evidence I cannot take it as an index of market value. As to No. 7 it would be unfair I think to regard the purchase money quoted as the market value without taking into consideration the fact that nearly double the amount was offered and refused shortly after the purchase. The recent history of this land is an important indication of the value for chawls of land abutting on the Parel road. The price which Sidik paid was Rs. 3-10-9 per sq. yard. This was apparently an exceptionally advantageous bargain for him. This is I think clear not only from the subsequent offer made to him for the back portion, which offer he refused, but also from the offers made to Dayabhai and from the price at which Noor Mahomed bought. It is evident I think that when Sidick bought, the public had not realised the possibility of profitable development in that locality to which Sidick's enterprise seems to have drawn attention. I cannot take the price which he gave viz. Rs. 3-10-9 to be an index of the maximum market value of the frontage land on Parel road. For many other instances show such land commanded much higher prices. I take the price at which Sidick bought as an index rather of the minimum price at which land could be bought in that neighbourhood before the market had realized the potentialities of development. And this is borne out I think by instance No. 8 on Ex. ]9. That instance is one of a very large area over 2200 sq. yards with three very inferior frontages and much more remote than the most western portion of the claimants' front land. I think then that when rendered saleable, even the most remote, i. e. the western moiety of claimants' front land must be credited with a market value above the price given for instance No, 8. For no part of claimant's land is so remote from the main thoroughfare of Parell road as No. 8. The eastern boundary of area No. III is within 60 feet of the Parel Road. Plots which could be connected with that main thoroughfare by roads only GO feet in length should not be classed I think even with land which is 4 or 5 times that distance from that thoroughfare. Nor do I think that land within 400 or 500 yards of the Parel Road and having direct access to it should be classed with land so remote as instance No. 8 in Ex. 19. In instance i) the price was Rs. 8 but the plot is only 1000 sq. yards and there is a frontage. It shows I think that Sidick's purchase was at a rate much below the normal and that small tracts fetch better prices than large. In Ex. 19 No. 9 is credited with buildings. But these it seems have been erected since the conveyance. This instance shows only the price of comparatively small frontage plots, ready for use and not very well situated. It is in the neighbourhood of No. II, a very small plot. Both fetched the same price Rs. 8 and both are near No. 10 (22 on S) which after deducting buildings fetched but 6-8. The difference in rates accentuates the necessity of a reduction in dealing with large quantities. As to No. 12 the circumstances of its purchase, Soman shows, were very exceptional. He gave only 2-15-10 but he bought from vendors who were in difficulties. He deposes that he would not now part with the land for three times the price he paid. Prices in the neighbourhood I think justify his statement. No. 13 is the Marswari's plot in the back land. The price cited is 2-11-6. But the Collector has awarded at a higher rate than this for the back land and I cannot suppose that any portion of the claimants' front land is worth less per sq. yard than the back land. I think on the other hand that it would be unreasonable to value the western moiety of the area III which is only separated from the back land by the Government passage, at the same rate, as would be appropriate for plots close to the frontage. I must therefore differentiate between the land contiguous to the frontage and that contiguous to the Government passage on the West. Noor Mahomed Karrim's land has inconsiderable frontage. The Advocate General relies on it as showing the value of the front land. The buildings on it are estimated at Rs. 7415 which would reduce the site price to about 6-9, about the same as that for Messrs. Sassoon's land. The position of Noor Mahomed's land is marked with yellow pencil on Ex. 16 and is certainly good. But as Mr. Lowndes urges the tenements are almost beggarly with Bamboo partitions and mud floors: the frontage is narrow and the depth comparatively great. Still without further development Noor Mahomed obtains sufficient by way of rental to be fully satisfied with it and he seems to have bought it cheap. It could not be utilized as claimants' frontage could and I think shows about the price for land not well circumstanced as to frontage but ready for building. Thus it confirms the impression I derive from No. 10 on Ex. 19 (22 on Ex. S) that about 6-8 is a fair price for parcels from 3 to 6 thousand sq. yards with negligible frontage but ready for sale. The last instance on Ex, 19 at 2-2 per sq. yard is I think irrelevant having regard to its position and Mr. Engle's evidence as to the rise in values.
93. On a review of Exs. S and 19 I find land of three classes. First, exceptionally attractive frontages on the main road, attracting maximum prices of Rs. 23 to 25 per sq. yard. Second, land either at some distance from the busiest part of the main road but accessible to that road or having negligible frontages the maximum price of which I take to be that of Sassoon's and Noor Mahomed's purchases viz. 6-8 per sq. yard. Third, land remote from the main thoroughfare or having such depth in proportion to frontage as to fetch the minimum price for land in the neighbourhood. I take No. 8 in Ex. 19 as an extreme instance of the minimum price at which land at the furthest limita of the locality could be procured and the price given by Sidiok as the lowest in the neighbourhood for land not so remote but evidently depreciated by the remoteness of its back portions from the road. That is to say I take 3-10 as the minimum for land not more than 500 feet from the main road. This is the rate at which the Collector appraised the back land in this case. These three classes may be taken as corresponding approximately in their conditions respectively with area I, the Eastern moiety of area III and the Western moiety of area III. The frontage area I have already assessed at the maximum for class one i.e. at about 23 per sq. yard. Eastern moiety of area III is only GO feet from the road and may be estimated as in no worse position than the more remote land bought by Sassoon or the nearer land bought by Noor Mahomed which derives little, if any, advantage from its frontage: and I assess this land at Rs. 6-8 when ripe for sale. The residue can have but little convenience of access to the main road but is not more remote from it than the rear part of Sidik's land and is much nearer than instance No. 9, It would not be reasonable to appraise it at a lower rite than the Collector gave for the land on the other side of the Government passage. I could appraise it at a higher rate than was given for Sidik's land before he had enhanced its value by his enterprise in development. I therefore take 3-10 as the rate for this western moiety when rendered ripe for sale. Plots not suitable for residences sell in this neighbourhood, in areas of 3 to 9 thousand sq. yards and do not require the elaborate provision of roads suggested in Ex. 13.1 think all they would need would be means of access to the main thoroughfare. This I think would be fully provide! by the roads North and South and East and West suggested by Mr. Strangmaa.The cost has admittedly been calculated by Mr. Delves on the basis of Reference 97 of 1904 and I have no evidence to controvert the estimate Mr. Watson supplied of the cost of surface drains. No doubt purchasers might make their own surface drains. But in ordinary plots, the road with a drainage system would be contiguous and available. To place purchasers in area III on the same footing, I think the cost of such surface drains for the roads must necessarily be debited and I therefore deduct from the total price of area III the cost of roads of 30 feet width and drains therewith indicated in the statement which accompanied the letter of the 27th June 1907 from the Solicitor to the Government to the Prothonotary now filed as Ex. 54. Cost of filling at 8.7 per sq. yard must also be deducted. The surveyor's fees as in Ex, 13 (e) at page 15 must also be deducted. But brokerage fees cannot be so deducted as the valuation is based on market price. As to deferred value I have no very definite evidence. Mr, Dalves took seven years as the time required for disposal. Mr. Narsinham estimated four years No special reasons for fixing either periods are adduced and I think no reason has been sown for holding that Mr. Narsinham's estimate is too low and I allow 4 years as the period for disposal and present value must be calculated according'y, I take this as a mean between two professional estimates neither of which appears to me to have been supported by any special reasons which should induce me to prefer either one or the other. I do not know of any risks being incurred simply by filling in and constructing roads in area III. Nine months interest must be allowed at 6 per cent, on outlay and 4 par cent on the value of the land for half the period necessary for development by construction of roads and storm water drains on area III and the price of the land must be taken as deferred for four years i.e. the present value will be calculated as deferred for two years.
94. Subject to what may be said on arguments on costs, deferred value to be calculated at 6 per cent for two years.
95. I disallow brokerage fees because that is an item presumab'y included in considering the market price as in this case I proceed on the basis of an assumsed market price and there-fora, on the same grounds, I must I think, disallow also legal expenses.
96. Surveyors' fees must be allowed as well as the proportionate amount of Rs. 500 for preparing the scheme as a whole. Areas I & II being similarly debited for all these items.
97. The cost of the roads North and South will be Rs. 5568 and East and West Rs. 2374 ; and the cost of the surface stop water drains will be North and South Rs. 557 and East and West Rs. 2377.
98. 200 sq. yards must be defeneted from the road area which totals 5786 sq. yards. This is admitted.
99. The cost of constructing the No.-th a- d South roads must be deducted from the price estimated for Area III. i.e. Rs. 5568 plus Rs. 2374: but the Area No. III ward be 60470 5/9 sq. yards minus the area of the roads exclusive of 200 sq. yards.
100. From the 60470 5/9sq. yards must be deducted 5568 for the roads that is to say 200 sq. yards of the road are not deducted from the 60470 5/9 sq. yards. The balance will be divided by 2 and the costs of these roads which I have already stated would be divided between the 2 moieties of area III.
101. Then it remains to consider only, I think, the value of materials and value of the back land.
102. I now come to the allowance for the value of materials. Mr. Lowndes complains that the G. I. P. Railway had the disposal of these and give no account of realizations. In opening Mr. Lowndes stated with the Advocate General's concurrence that Rs. 73500 should be taken as the original cost and the only-question is whether 10 per cent or 15 per cent should be allowed on present value. Mr. Lowndes says in Ex.41 value new totals Rs. 95368-present value Rs. 71960 and that the Collector by mistake gave 10 per cent, on present value i.e. of materials as depreciated instead of on Rs. 95368 value new. His contention is that 10 per cent, is the rate only on value new and that in Nagpada instances 14 per cent, 15 per cent., 20 per cent and even 30 per cent, were realized on the materials of mere rookeries, while the house now in question was a fairly finished Parsi gentleman's. Turning to Q-serial No. 115-and comparing it with Z17 and Z18 there can, I think, be no doubt the estimated value of 12583 in Q corresponds with Rs. 13621 as value new in Ex. Z18 and not with present value given in Z17 and 18 as 5555. The reserved price in Q which may be taken as the minimum fixed, is therefore 10 per cent on value new and about 15 per cent viz. Rs. 1850 was the price realized. Mr. Delves says the Trust has of recent years estimated value of materials as 10 per cent cost new. The instance above given certainly supports Mr. Lowndes' contention that 10 per cent is allowed on value new, No. 117 in Q seems from Mr. Delves' deposition to show as the estimated value 8640, the present or depreciated value, Rs. 9410 being cost new and realization was over 24 per cent on present value. I understand serial No. 121 in Q to give also depreciated value with realization. The percentage on cost new no doubt must vary as Mr. Delves says according to the age of the buildings and ranges from 18 per cent up to 30 per cent. But there is not the same uncertainty as to per centages on ascertained present value and I think having regard to the instances in Ex. Q, it would be only fair to allow claimants the higher per cent-age on present value which seems consistent with prices realized. I think this is the more reasonable because the action of the G. I. P. Railway in keeping no account of realizations has made it impossible for claimants further to establish their right to compensation for the materials so!d. And I think it probable that as Mr. Lowndes urges, the materials of claimants' houses would have fetched more than those of the houses at Nagpada. The amount for materials must be taken then at 15 per cent Rs. 71960 their depreciated value. This I make Rs. 10794 in lieu of 7576.
103. I now pass on to the back land, still reserving the question of costs and brokerage fees. As to this Mr. Lowndes says he accepts the Collector's valuation except that the Collector gave four annas less for double rooms here than on the front land. In my opinion, however, the rate at which the Collector has valued this land is very liberal. I doubt very much if the hypothetical scheme could have been carried out on it without very great risk of loss, for which an investor would have required extraordinary inducement. But if regarded as undeveloped, I think the price realizable would certainly not have exceeded the rate allowed when the cost of filling in at 8. 7 per sq. yard is taken into consideration. I do not consider the claimants could have expected more and cannot ascept the suggestion that they could have obtained the same rents for the rooms on the back land as for those on the front from the dwindling market that would have been open to them. Apparently, I cannot go into the question whether the Collector's award for the back land could be reduced as it appears to have been separately notified and the award for this land is therefore complete by itself and Section 25 (1) would apply. But however that may be, I find no warrant in the evidence for supposing that any land that had such direct approach to the Parel Road-which is not 200 yards off-would fetch a lower sum than the Collector has awarded. Rs, 3-2-5 is the rate exclusive of 15 per cent and if 8.7 per sq. yard be added for filling the price would be 3-11 Having regard to the price of the site on the Gorupdev Road No. 8 on Ex. 19, I do not think the Collector's award can be deemed unreasonably high.
104. The question of costs under Section 27 (2) will also have to be considered specially with reference to the proposal of a hypothetical scheme put forward entirely irrespective of the existence and extent of the demand that would make it worthy of consideration. I do not think, it will be reasonable to take into account the investor's risk in filling or in making the two roads in area III.
105. The basis of my valuation having been determined, the case was adjourned for final arguments on costs, brokerage fees and the consideration of any other matters for which I had not already provided.
106. Arithmetical errors in calculating the value of sites 1 and 11 on the rental basis have now by consent been corrected, the result being embodied in Ex. 55, the figures in which subject to determination of the points now to be decided, must be substituted for those at which I had erroneously arrived. That is to say the land value of Area I ascertained by capitalising at 16 2/3 Y. P. the net annual returns Remaining after deduction of annual outgoings from the gross rentals accepted by the Collector and after deducting from the net rentals so capitalised the constructional cost, is to be taken at 274026. instead of 272456.
107. The investor's inducement is to be taken as 27561 instead of 27498 and the loss on land idle for six months is 5480 instead of 5449. The loss of intrest on coastractional cost for six months is 12450 as calculaed by me.
108. In Area II the land value is to be taken as 35329. Loss of interest for 6 monrh on constractional cost Rs. 3156. Investor's inducement Rs. 6021. Loss on land idle for 6 months Rs. 707. Brokerage on those 2 areas is to be taken as 5073 6 and Surveyor's fees as Rs. 84. These figures are accepted by both sides and the valuation of the areas I and 11 upto this point it is understood work out at 26.65 and 8.65 respectively per sq, yard. I take these two areas as separately valued. They are to be regarded as distinct areas with sepatately ascertained values. The expenses of filling roads and drains in Area III are also set out in Ex. 55.
109. Further questions were raised for claimants as to.
I. Brokerage fees.
II. Surveyors fees.
III. Valuation of land on the Parel Cross Lane frontage.
IV. Filling in the whole of area III.
V. Discount for present value and (by Mr. Robertson for Government.
VI. Cost of upkeep of Roads etc.
110. The point as to brokerage was this. Mr. Strangman claimed that no brokerage should be charged at all. Mr. Robertson contended it should be charged not only on purchase but on resale by purchaser.
111. As to Mr. Strangman's contention I have already explained that in dealing with Areas I and III have proceeded not on ascertained market price, but on a calculation of items that the market would presumably consider in determining price. The purchaser could not afford to base his offer on rentals and returns without considering expenses and would have therefore after settling in his own mind what the investment would bring in have to deduct each item of expenditure necessary to secure its benefits to himself. Brokerage fees on pur-chase I understand to be included in such necessary expenses and allow them therefore when the appraisement is based on an analysis of considerations that would presumably constitute the decision of the market. This is not necessary when the market price is known for then the market has presumably already considered such items. I think therefore one set of brokerage fees, that is to say, those payable on purchase, must be deducted when the price is estimated by capitalising returns and deducting inevitable outgoings. But then Mr. Robertson contends the purchaser would also require to be indemnified for brokerage fees he might have to pay if he wanted to resell. If this were the case deductions of brokerage fees through an infinite series of sales and resales would have to be considered. If such expenses be deducted on each possible transaction, the price might be indefinitely reduced. Mr. Robertson contends that whether such deductions from the capitalised value of the returns should be made or not, would depend on whether the purchaser bought to hold or bought merely to sell again for profit. I do not think this reasoning sound. For it involves a confusion of two different systems of computing price. When the estimate is on the rental basis the purchaser looks to annual returns minus outgoings as the value he gets for his money. If he does not look to those annual returns but only wants to sell again, then the value he expects to get is not estimated on the rental basis but upon the future market price which he speculates on obtaining from some third person and in determining how far that future price will pay him, he must reckon on recouping himself from it, for all expenses which that transaction will involve and therefore will not buy unless he thinks that on resale, he can realise price which will pay him back more than the market price at date of purchase. He cannot beat down the present market price which others would give on the rental basis, merely because he has personal views of his own as to his dealings with the property. The competition of buyers on the rental basis would not allow him to get the land cheaper in order that he may resell. I therefore disallow the second sat of brokerage fees charged in Mr, Kent's estimate Ex. 13.
112. As to as the second point of surveyor's fees, there is now no dispute. Areas 1 and II entail no such outlay for roads and drains as does area III and the surveyor has nothing to do with architectural or building outlay which are included in, constructional cost. Areas I and II are not debitable therefore with the Surveyors 21/2 per cent fees.
113. As to the 3rd point I have decided for reasons orally given that the land in area III fronting on Parel Cross Lane cannot all be valued, as Mr. Strangman urges, at the same rate as the sites for 74 and 75. I estimated 74 and 75 on the rental basis of the hypothetical scheme for the 192 rooms. No extension of that class of buildings was suggested in the hopothetical scheme and it would involve a reopening of the whole case to consider now whether more buildings of the same class could be safely regarded as equally remunerative when extended operations for roads &c.; might be necessary. Moreover, in estimating the value I assign to area III on a consideration of prices in the neighbourhood, I took into account the advantages which a part of that area would derive from access to Parel Cross Lane and think the allowance already given is liberal in relation to those advantages.
114. On the 4th point Mr. Strangman urgea that the cost of filling in should be debited only in respect of three quarters of the whole of the front land, as Mr. Narsinham estimated that the site of the southern bungalows was a quarter of the whole and required no filling. This statement, Mr. Strangman contends. I have already accepted by taking excavations in areas I and II as sufficient for the filling of these areas. Although he contends they would suffice only for 3 1/2ths on the assumption that the remaining 4 1/4th consisted of the site already levelled. I however regarded the Collector's estimate based as the total cost for what was necessary in filling and distributed that over the whole area, the Collector having assessed that sum. without reference to the variations in the requirements of the different parts at Rs. 38725 in the aggregate. The Collector did. not specify the area that would require filling in and it does not appear that he accepted the Rs. 38,725 as the cost of filling in only |ths of the front land. He took that sum as a lump sum for all that was necessary. It is only by distributing the cost of filling over the whole area for the purpose of apportioning the burden that I have taken 8 as. 7 pies as the average payable on each square yard. Some square yards have cost more, some less and some nothing at all. But I cannot exempt any portion, without either reducing the total estimate or increasing the burden on other portions. I have taken the Collector's estimate of the total cost simply because there was no convincing by definite evidence of the correctness of any alternative estimate where buildings were not to be erected. No issue was raised as to the extent of the area to be filled in and there was no evidence led to show what it would cost to fill in if there were no buildings. If I have erred it is in favour of the claimants for according to Mr. Strangman I should have distributed the Rs. 38725 over fths instead of over the whole of the land. The average rate per sq. yard would obviously be higher if the total cost were charged on about 54,000 sq. yds. only instead of on nearly 72,000. I accepted Mr. Narsinham's statement that the earth from the foundations for buildings would suffice to fill the roads and spaces, which are 45 per cent, of the whole area. The average rate on the portion actually requiring to be filled in, would of course be very much higher than 8 as. 7. ps. per sq. yard of the roads and spaces. Indeed the total cost for filling in area III might have been estimated at a much higher figure, as the whole of that area and not only 45 per cent, for roads and spaces will require fillings. Certainly no reduction can be claimed on that head. As to discount for present value, the 5th point above noted-Mr. Strangman says the purchaser having the land its deferred value should be discounted at 4 per cent only. These are however unsecured ground rents and ex hypothesi realisation is deferred. Having regard to References 97 of 1904, 68 of 1904 and 86 of 1904, Mr. Strangman is unable to press this. In. calculating present value therefore the interest must be taken as 6 per cen t for 2 years.
115. The last point raised by Mr, Robertson for Government relates to the up-keep of roads.
116. I have no doubt that the purchasers of plots in area III might find up-keep of the roads some small additional expense but what the amount would be there is no evidence to show. It certainly would not be comparable with that which would have been entailed by the far more elaborate scheme originally put forward and yet no charge for up-keep was suggested by the Advocate General although Mr. Lowndes contended throughout that his roads were not intended to be handed over to the Municipality. I can only infer that up-keep of the two roads now proposed would be a negligible quantity and could not reopen the case at this stage to take evidence on a point not raised in respect of the much larger road scheme.
117. It now remains to consider costs. The Back Land as above, noted properly formed the subject of separate award and no enhancement having been obtained in this Court claimants must pay the costs arising out of and incidental to their claim in respect of that land, that is all costs not incurred solely in respect of or incidental to the claim for compensation for the front land and in respect of costs incurred partly on account of the back land and partly on the other land and not otherwise provided for the claimants will pay in proportion to the amounts awarded for the back land and front land respectively. As to the front land, I think there can be no doubt that the claim was extravagant within the meaning of Section 27 (2) of the Act and when regard is had to the prices at which claim-ants' property was valued for purposes of probate, I can hardly ascribe the over estimate to ignorance or innocent mistake. No doubt according to my valuation Government went to the other extreme in underestimating the land. And I give that circumstance some consideration. I direct that claimants should bear all costs of and incidental to all hearing since the Vacation up to but exclusive of this date. Government must pay the rest of the costs. Interest it is agreed will run at 6 per cent from date when the Collector took possession which is understood is 24th March 1905 to date of payment less the period between the 1st October 1906 and 26th November 1906. In order to avoid difficulties in taxation of costs which might arise in carrying out the above, Mr Strangman suggests that Government should pay 9/10th of the claimants' costs and claimants should pay 1/10 of the Government costs. Mr. Robertson not opposing the direction is made accordingly.
118. The 15 per cent on the market value must of course be paid by Government in addition to the market value.
119. Interest at 6 per cent from date of possession taken by Collector is to be calculated on the excess of this award over that of the Collector as provided by Section 28.