Sharad Manohar, J.
1. This appeal is filed by the Government against the award given by the Joint Civil Judge (S.D.), Kolhapur under the Land Acquisition Act, enhancing the compensation awarded by the Land Acquisition Officer to the respondent/claimant in respect of the land compulsorily acquired for the extension of the industrial estate at Ichalkaranji. The lands in question were originally Jagirs. After the abolition of the Jagir under the Bombay Merged Territories miscellaneous Alienations Abolition Act, 1955, they were regranted to the respondent on certain conditions. There is no dispute before us that lands Survey Nos. 556 & 589 were regranted to him in his personal capacity whereas lands Survey Nos. 588/A and 588/B were regranted to him in his capacity of the sole Trustee of the Deosthan. After the regrant, the relevant notification under section 4 of the Land Acquisition Act was issued. At the time of the said notification there were two tenants on the lands. But in connection with a major portion of the lands, decrees against the tenants had already become final. The tenants have continued to be in possession, as tenants, of about 21 acres of land inspite of the decrees. But admittedly they had no protection of any of the rent or tenancy legislations. The question that is required to be decided is as to what should be the principle upon which compensation for such lands should be paid.
Three questions of quite some importance have been strenuously urged by Mr. Kotwal, the learned Government Pleader appearing for the State viz.:
(a) as to what is the effect of the provisions of section 7(3) of the Jagir Abolition Act upon the market price of the lands in question at the relevant time;
(b) as to what is the effect of the fact that on the relevant date there were tenants over the land, against whom the decrees for eviction were already passed in connection with the major portion of the land and who had no protection under any of the rent legislation so far as the other part of the lands was concerned. One question is as to whether the market price must be deemed to have been reduced because such tenants were in possession of the land on the date of the notification under section 4 of the Land Acquisition Act; and
(c) when plots of land are valued on the basis of 'plotting system', how much should be the deduction allowed for expenses incidental to the development.
What we propose to decide in this appeal are some of the aspects of the above questions which directly fall for our decision. There are other aspects of those questions which may not directly fall for our consideration in this appeal having regard to the nature of evidence on record and having regard to the cases made out by the parties in the courts below. We might give indication of some of those aspects but we will not express any final opinion on the same.
Apart from the above three points, there are a few other questions raised by the learned Government Pleader by way of objections to the judgment of the lower Court. They will be referred to at the appropriate place in this judgment.
2. The facts relevant for the purpose of the present judgment are as follows:
(a) The lands in questions which are the subject-matter of compulsory acquisition are the following lands :
-------------------------------------------------------------S. No. Survey No. Area AssessmentA. Gs. Rs. Ps.-------------------------------------------------------------1. 556 21 - 38 85 - 502. 588/A 30 - 06 84 - 203. 588/B 1 - 00 1 - 004. 589 14 - 38 29 - 12-------------------------------------------------------------(b) Out of the above lands, Survey Nos. 586 and 589 are the personal lands belonging to the respondent/claimant and lands Survey Nos. 583/A and 588/B are the deosthan lands. They originally belonged to the Jahagirdars of whom the respondent/claimant is the dependent; but his predecessor Jahagirdar has settled the lands upon the deosthan trust and the present respondent was, at all the material times the sole trustee of the trust. All the lands are situate at Ichalkaranji, Dist. Kolhapur. The said lands formed part of the Jahagir lands belonging to the Jahagirdar of Ichalkaranji. The last Jahagirdar, through whom the respondent claims, died in or about the year 1943. The present respondent was a minor at that time and hence the lands were in the custody of the Court of Wards. The Kolhapur State merged in the erstwhile Bombay State on 1-5-1949. It appears that the two tenants, whose names will be presently referred to, were there on these lands as tenants even before the year 1949. But since the Bombay Tenancy and Agricultural Lands Act, 1948 (hereafter, the Tenancy Act) did not apply to the Kolhapur State, the said tenants were not entitled to the protection of any tenancy legislation. They would have got the protection of the Tenancy Act on 1-5-1949, when the Kolhapur State merged in the erstwhile State of Bombay but firstly because the lands were in the custody of the Court of Wards, and, secondly, because at all the relevant times before 1-7-1957 and even thereafter the lands were within the municipal limits, the material provisions of the Tenancy Act did not apply to the said lands. It is, further, common ground that under the Bombay Town Planning Act, 1954, a Town Planning scheme had been prepared and by virtue of section 164 of the subsequent Town Planning Act viz. Maharashtra Regional and Town Planning Act 1966, no protective provisions of the Tenancy Act could apply to these lands.
(c) On 3-6-1955, the Bombay Merged Territories Miscellaneous Alienation Abolition Act, 1955, (hereafter, the Jagir Abolition Act) came into force. As a result of the said Jagir Abolition Act, lands Survey No. 556 and 589 held by the respondent personally came to be resumed by the State Government and they vested fully in the State Government. However, the respondent-Jahagirdar had the right to have the same regranted to him under section 5 of the Jagir Abolition Act, subject to the conditions mentioned in section 7(3) of the Act. So far as the deosthan lands, Survey Nos. 588/A and 588/B were concerned, it is common ground that they could not have been resumed by the Government. It appears that some wrong order was passed on that behalf on the assumption that they were resumed, but admittedly the order was later on rectified.
Section 7 and particularly sub-section (3) of the same is the only provision out of the said Jagir Abolition Act which is of relevance for the purpose of this appeal. Hence the relevant portion of said section 7 and sub-section (3) of the same may be set out here. It runs as follows:
Section 7 : 'All lands held under a watan is hereby resumed and shall be regranted to the holder in accordance with the following provisions, namely :
(3) the occupancy of the land regranted under Clause (2) shall not be transferable or partible by metes and bounds without the previous sanction of the collector and except on payment of such amount as the State Government may by general or special order determine.'
The section has one explanation but it was common ground that the explanation has no relevance for the purpose of appeal.
From section 7(3), it will be seen that occupancy of the land which was regranted to the holder such as the present respondent was not transferable without the previous sanction of Collector and Collector could not give sanction unless certain payment was made to the State Government. As to how much the payment was to be made was to be decided by the State Government by general or special order. The general order in this behalf was passed by the Government by issuing a Circular on 1-8-1955. The relevant portion of the said Circular is of crucial importance for the purpose of this appeal. Hence, the relevant portion may be set out, verbatim, as follows :
'The Act provides for the relaxation by the collector of the conditions of inalienability and impartibility, attached at the time of the regrant of any alienated land on payment of such amounts as may be prescribed by Government; Government have decided that the amount to be charged for the relaxation of the conditions of inalienability and impartibility imposed under the Act should be equal to 50 per cent of the market value of the land if the land is or is intended to be used for the purpose other than agricultural and that it should be twenty times the assessment of the land in other cases, provided that if the agricultural use of the land is subsequently changed the holder should be liable to pay under section 65 of the Bombay Land Revenue Code a fine equal to the difference between the market value of the land and the amount already paid viz. twenty times the assessment of the land.' There is no dispute that the occupancy price required to be paid for the purpose of getting the regrant was duly paid by or on behalf of the respondent in connection with both the lands, Survey Nos. 556 and 589. But so far as survey No. 589 was concerned, the amount equal to twenty times the assessment of the land, in addition to the amount required to be paid for regrant, was paid by or on behalf of the respondent to the Government. The record before us does not make it clear whether this amount of twenty times the assessment was paid in addition to the amount paid for the regrant. But the learned Government Pleader did not dispute before us that it was paid in addition. The effect was that so far as Survey No. 556 was concerned, the land continued to be held on the new un-transferable and impartible tenure, but so far as Survey No. 589 was concerned the bar against transferability or impartibility stood lifted provided the land was not to be put to non-agricultural use.
(d) It is, however, to be noticed that all this time the land was in the custody of the Court of Wards and the land was in the actual possession of two tenants. Survey No. 556 was in the actual possession of one Shri G.M. Shendure as tenant, whereas the remaining lands, Survey Nos. 588/A, 588/B and 589 were in the possession of Shri K.D. Kulkarni as tenant. There is some doubt as regards the question whether Survey No. 588/B was in the actual possession of the tenant Shri Kulkarni at the relevant time or not. Appendix 'A' of the award given by the Land Acquisition Officer indicates that he was not in possession of Survey No. 588/B as such. But the other part of the award indicates that he was in possession of that land, Survey No. 588/B, as tenant. Whatever that may be, that question is not of any relevance for the purpose of this appeal.
On 26-12-1956 and 31-12-1956, two notices were given by the Court of Wards to the tenants terminating their tenancy and calling upon them to hand over the possession of the said lands which were in their occupation. But the lands ceased to be in the custody of the Court of Wards with effect from 4th April, 1957. The possession of the lands, however, continued with the tenants. The present respondent, therefore, filed two civil suits against the two tenants for their eviction. Civil suit No. 6 of 1958 was filed by him against said Shri Shendure, who was in possession of Survey No. 556 and Civil Suit no. 95 of 1958 was filed against the tenant Shri Kulkarni, who was in possession of Survey No. 588/A and 588/B. The suit filed against Kulkarni came to be decided earlier by a compromise decree. The compromise decree in that behalf was passed on 17-8-1959. By virtue of the said compromise decree, the tenant was required to hand over the possession of the total area of 35 acres, 4 gunthas out of the total land admeasuring 46 acres, 4 gunthas which was in his possession as tenant and was allowed to retain 11 acres of land with him but only as a tenant. There was some dispute about the interpretation of the compromise decree, but that dispute has now been finally set at rest by the decisions of competent courts and hence one position can be taken as the correct factual and legal position viz. that the tenant became liable to hand over possession of 35 acres, 4 gunthas to the landlord immediately and was entitled to retain with him 11 acres of land with himself.
The suit against Shri Shendure was also decided ultimately by a compromise decree which was passed on 31-7-1965. By virtue of the compromise decree, out of the area of the Survey No. 556 of 21 acres 38 gunthas which was in his occupation as tenant, he became entitled to retain with himself an area of 9 acres, 38 gunthas but only as a tenant as in the case of Kulkarni and he became liable to give back possession of 12 acres of land to the respondent/landlord immediately.
However, one fact needs to be noted here. The compromise decree notwithstanding, both the tenants continued to remain in possession not only of the land which they were entitled to retain with themselves as tenants, but also of the land which they were bound to return to the landlord. As per both the compromise decrees taken together, the tenant Shendure had become entitled to retain with him an area of 9 acres and 38 gunthas and tenant Kulkarni was entitled to retain an area of 11 acres only. All the remaining land was to be returned to the landlord. The point is that the respondent/landlord did not get any part of the land back from either of the tenants and both the tenants continued to be in possession of the entire land between themselves. This position continued even till the time when the possession of some of lands was taken by the Government by applying the urgency clause under section 17(1) of the Land Acquisition Act. So far as the possession of the remaining lands out of the said area of 47 acres, 4 gunthas was concerned, symbolical possession of the same was received by the landlord in the execution proceeding from the Civil Court on 12-7-1973 as per the Kabjepatti, Exhibit 59, in this proceeding.
(e) Coming to the facts relating to compulsory acquisition, the relevant notification under section 4 of the Land Acquisition Act was issued by the Government on 6-2-1969. Section 6 notification was thereafter issued on 18-9-1969. At this stage, the lands under acquisition were divided into two parts :
(a) the arable or waste lands; and
(b) the land other than arable or waste land.
It appears that section 6 notifications in that behalf was issued separately and so far as the arable or waste lands were concerned the urgency clause under section 17(1) of the Act was applied to the same and possession of the same was taken by the Government on 24-10-1969. Evidently this possession was taken from the tenants. The possession in respect of the other lands was taken after the award was passed.
The proceedings for fixation of the compensation started thereafter. There were three claimants before the Land Acquisition Officer, namely, (i) the present respondent/claimant, (ii) the tenant Shri Kulkarni and (iii) the other tenant Shendure. The Land Acquisition Officer was, therefore, required to decide the question of fixation of the total compensation for the entire block of land admeasuring 68 acres, 2 gunthas and was further required to apportion the compensation amongst the three claimants. After examining the material before him in his own way the Land Acquisition Officer made his award on 24-7-1973 but he did not declare the same before 2-4-1974. By the award declared by him on the date, he fixed the total compensation for the entire block of land at Rs. 8, 13, 235.59 ps.
(f) As regards the question of apportionment amongst the three claimants, the Land Acquisition Officer, in the first instance, made separate provision regarding payment of compensation for the standing crops on the land when possession was taken from the tenants on 24-10-1969. So far as the present claimant is concerned, he did not make any claim to the standing crops. The claim relating to standing crops was decided irrespective of the question of compensation to be fixed under the Land Acquisition Act and it may be stated here that there exists no dispute about that aspect of the matter. The Land acquisition Officer's Award shows that out of the two tenants, Shri Shendure was held entitled to the price of a structure on one price of land which was valued by him to be Rs. 9,6677/-. On this amount of Rs. 9,677/- a solatium of Rs. 1451.55 at the rate of 15% was awarded. The award shows that out of the total compensation for land a sum of Rs. 3,843.38 is awarded to this tenant Shri Shendure. But it does not appear that any solatium is made payable on that amount. Likewise, Shri Kulkarni was held entitled by the Officer to a share in the total compensation for land to the extent of Rs. 3,683.82 ps. for Land Survey No. 588/A and Rs. 1903.10 ps. for land Survey No. 589. However, it does not appear that any solatium was made payable on this amount. The entire remaining balance was held to be payable to the respondent/claimant.
(g) Before the Land Acquisition Officer, evidence relating to sale instance was led by the respondent/claimant as well as by the two tenants. The Officer also collected certain instances by himself and after examining the evidence in his own way, as mentioned above, he gave the award. At this stage, it will be worthwhile giving a broad indication as regards the nature of the award. Para 4 of the award relates to the situation and description of the land. It is clearly stated therein that the land forms part of a triangular piece at the end of the town having to its South the Ichalkaranji-Kolhapur road and to its East the Ichalkaranji-Hatkanangale road. But it is specifically stated in the award that the lands under acquisition are the only lands in the triangle which are used for agriculture. The officer has observed that the development of the industry has reached the boundary of the village on this side. The adjoining lands have already been used for non-agricultural use. Further, in Survey No. 586 which is one of the lands under acquisition, there, in fact existed an industrial estate even on the date of the award, if no on the date of notification under section 4. The Award mentions further that the only reason why the land in question could not be put to non-agricultural user till the date of the notification was that the land was under litigation with the tenants. The award further states that the land has even been included in the Town Planning Scheme No. 2 of Ichalkaranji prepared under the Bombay Town Planning Act, 1954 and the entire plot of land is reserved under the Scheme for industrial purpose.
On all these grounds, the award states that the lands in question have, unquestionably, the non-agricultural potential. As a matter of fact, as we go through the award, we find that he has valued them, in fact, on the basis that they are non-agricultural lands. We may state here that the arguments advanced before us by the Government Pleader also proceeded upon the basis that the lands have got to be valued as non-agricultural lands.
The Land Acquisition Officer also valued the various items of the property for which compensation had to be awarded under the Land Acquisition Act at the rate of the market value on the date of section 4 notification. Those items consisted, in the first instance, the structure on the land, the wells in the land, the trees on the land and lastly the land itself. So far as the structures were concerned, it was held by the Officer that only one structure was of any value and that the tenant Shri Shendure was exclusively entitled to the value of the one structure. The present respondent/claimant was held entitled to the value of one well in the land. He was held entitled to the value of all the trees on the land. So far as the land was concerned, the entire land was valued by him at Rs. 6,01,336/- irrespective of 15% solatium. Out of this amount, tenant Shri Shendure was held entitled to a sum of Rs. 3,843.38 ps. and tenant Shri Kulkarni was held entitled to Rs. 3,683.82 ps. and Rs. 1,903.10 ps. The entire balance was held payable to the present respondent.
(h) It would be of some relevance mentioning the reasoning by which the officer persuaded himself to value the land itself as such for Rs. 6,01,336/-. He examined the sale instances relied upon by the claimants, but he rejected those sale instances holding that they were not comparable with the land under acquisition. He relied upon the sale instances collected by himself. He classified the entire block of land under acquisition into four categories. In the first category were included the corner plots fronting the Kolhapur-Ichalkaranji road and the 60` Scheme Road and valued those plots at 60 paise per sq. ft. The second category of the plots were those which fronted on the 60` Kolhapur-Ichalkaranji road and the corner plots fronting the 60` Scheme Road. These were valued by him at the rate of 55 paise per sq. ft. The third category of plots were those which fronted on the 60` Scheme Road and the 30` Colony Road. These were valued by him at the rate of 50 paise per sq. ft. and the fourth category of plots were the remaining one which were valued by him at 45 paise per sq. ft. The total compensation of these plots came to be Rs. 9,78,715.25 ps. But holding that there would be a time-lag of 8 years between the sale of the first plot and the sale of the last plot, he held that the average sale should be deferred by 4 years and allowing reduction of 7% on that account he found the present value of the plot to be Rs. 7,53,670.55 ps. Further deducting from the same the expenditure for architect's fees for the preparation of the layout plans, legal charges and the developer's profit at 15%, he held that the total sum of Rs. 1,52,334/- will have to be deducted from said sum of Rs. 7,53,670.55 ps. The market value of the plot was thus estimated by him at Rs. 6,01,336. This he held was the compensation payable to the three claimants. On this amount, he directed interest to be paid at 4% per annum from the date when the possession of the land was taken by the Government till the date of the award which purports to be dated 24-7-1973 but was declared, in fact, only on 2-4-1974.
(i) The application for reference against this award was filed only by the present claimant and the tenant Shri Kulkarni. No application for reference was made by tenants Shri Shendure. The reference at the instance of the present claimant was numbered as Land Acquisition Reference No. 13 of 1974 and the other reference at the instance of Shri Kulkarni was numbered as Land Acquisition Reference No. 14 of 1974. It is unnecessary to set out the contentions raised by Shri Kulkarni in his application for reference because all his contentions have been negatived by the learned Judge and the reference has been, in fact, rejected by him with costs. There is no appeal filed by Shri Kulkarni against the said award dismissing the reference and hence no further allusion to the same is called for.
In the reference made at the instance of the present respondent, he claimed compensation for the land at the rate of Rs. 2.50 per sq. ft. but, at the same time, he restricted the total claim for compensation to Rs. 60,00,000/- in addition to what was already granted by the Land Acquisition Officer.
(j) Before the Court, evidence was led on behalf of the claimant to prove the various sale instances that he relied upon for the purpose of vindicating his claim for the land at the rate of Rs. 2.50 per sq. ft. On behalf of the Government, evidence was led to prove some of the sale instances relied upon by the Land Acquisition Officer. In addition to this, the Government also examined Shri Prabhakar Govind Menase, Assistant Director of Town Planning. Kolhapur as an expert for the purpose of proving the correctness of the valuation made by the Land Acquisition Officer.
(k) The learned Judge examined the evidence relating to the sale instances led by both the claimant as well as the Government and the Court held that the sale instances relied upon by the claimant were more reliable and were more comparable with the land under acquisition than the sale instances relied upon by the Government. The Court was not satisfied about some of these sale instances relied upon by the Government on account of the unreliable nature of the witness who had been examined by the Government for proving the genuineness of the sale instances. Relying upon the evidence of the claimant in this behalf, the learned Judge held that the average price of Rs. 2/- per sq. ft. would be the correct rate of compensation payable for this compact block of land under acquisition. However, the learned Judge was satisfied that if this entire plot of land was to be sold, then it would be required to be divided into plots before the sale of the same . This meant that certain principles relating to valuation by plotting system would have to be followed. For this purpose, he relied upon the expert evidence of Shri Manase adduced by the Government. Taking cue from this evidence, the learned Judge held that about one-third of the land would be required to be reserved for roads, open spaces hospitals, Government offices etc. About one third portion of the land was, therefore, left out by him from the estimate of compensation. For the remaining of about two-third portion of the land, the learned Judge held that the claimant would be entitled to a compensation at the rate of Rs. 2/- per sq. ft. The learned Judge, therefore, held that the claimant was entitled to an additional sum of Rs. 17,65,152/- as compensation inclusive of 15% solatium for the deosthan lands, Survey No. 588/A and 588/B. The Award made by the Court mentioned that this compensation was to received by the respondent /claimant as the trustee of the deosthan public Trust so far as the remaining two lands Survey No. 566 and 589 were concerned the learned Judge held that the claimant was entitled to an additional sum of Rs. 22,77,055/- inclusive of the 15% solatium.
(l) It must be mentioned here that during the course of the hearing of the reference, an application was made on behalf of the claimant for amendment of the reference. Contention was that though the Land Acquisition Officer purported to award interest at 4% per annum from the date of the taking of possession till the date of the award, the Award itself was declared after a delay of about 8 months. Contention was that the award was made on 24th July, 1973. It was declared on 2nd April, 1974 and since interest was granted till the date of the award, the claimant was deprived of the interest on the huge amount of compensation for a period of 8 months quite unwarrantedly. A contention was, therefore, raised that the interest should be made payable not only till the date of the making of the award, namely 24-7-1973 but till the date of the declaration of the award, namely 2-4-1974. It appears that the learned Judge did not find it possible to accede to this request of amendment of the reference presumably because it would amount to a demand for enhanced claim after the expiry of the period of limitation. However, while considering the question of granting interest on the amount awarded by the Court, the learned Judge directed that the interest should be paid on the total sum of additional compensation at the rate of 6% per annum from the date of the application for reference by the present claimant till the date of realisation of amount by the claimant.
Against the said award given by the Court, the Government has filed the appeal contending that the enhanced rate of compensation awarded by the Court is unjustified. It is also contended that rate of interest of 6% per annum granted by the Court is erroneous in law having regard to the mandatory rate of 4% provided by section 28 of the Land Acquisition Act. The claimant has, on the other hand, filed cross-objections contending that the additional compensation awarded by the Court should bear interest from the date of the taking of possession of the lands in question and not merely from the date of the application for reference as done by the Court.
3. Mr. Kotwal, the learned Government Pleader, who assiduously argued the appeal on behalf of the Government raised five objections before us against the judgment of the learned Judge.
(a) His first contention was that out of the four lands acquired, the lands belonging to the respondent personally namely, Land Survey Nos. 556 and 589 had been regranted to the respondent on new tenure subject to the conditions mentioned in the Circular, the relevant portion of which is already extracted above. Survey No. 556 admeasures 21 acres 38 gunthas and Survey No. 589 admeasures 14 acres, 38 gunthas. Contention is that whatever compensation may be fixed for these two pieces of land, 50% of the same shall have to go to the Government because that much part of the price is something which the claimant will never receive. His contention therefore, is that there is a manifest error committed by the lower Court by awarding to the respondent/ claimant the entire market price of the land together with 15% solatium for the same. He contends that even assuming that the market price of Rs. 2/- per sq. ft. is correctly arrived at by the lower Court, the claimant would be entitled to the compensation, in effect only at the rate of Rs 1/- per sq. ft. together with solatium of 15% on the amount so arrived at.
(b) Mr. Kotwal's second objection to the Court's award is that the date on which the notification under section 4 of the Land Acquisition Act was issued there were the two tenants on the land namely. Shendure & Kulkarni. Under the compromise decree between the landlord Ghorpade (respondent/claimant before us) on the one hand and Shendure & Kulkarni on the other, the landlord became entitled at the most, to the possession of 47 acres, 4 gunthas of land and the two tenants themselves were entitled to retain with them land admeasuring 20 acres, 38 gunthas out of all the four lands admeasuring 67 acres 2 gunthas, It is true that their tenancy in respect of even the land admeasuring 20 acres, 38 gunthas was terminated by the landlord Ghorpade by a notice dated 3-4-1969. But evidently that notice was subsequent to the date of the notification under section 4 of the Land Acquisition Act which was dated 6-2-1969. Contention, therefore, is that at least so far as the land admeasuring 20 acres 38 gunthas was concerned, there were lawful tenants on the land on the date of the notification and if the market price of the land as on that date namely, 6-2-1969 was to be estimated, it would have to be arrived at on the basis that the land was encumbered by the rights of the tenants. Since there were tenants on the land on that date, no willing purchaser would have paid full price for the land on that date. Contention is that such a willing purchaser would necessarily take into account the fact that the possession of the land would not be received by the purchaser immediately even though there was no legal difficulty in the purchase of the lands as such. Since he would not get immediate possession and would probably have to litigate for the possession, he would pay much less price for the land than would be paid by a person in normal circumstances when there is no tenant on the land. Even as regards the remaining land admeasuring 47 acres, 4 gunthas, it is true that the landlord had the present right to recover possession from the tenant. But the fact remained that the land was not in possession of the landlord Ghorpade. The argument is that the price received for the land which is in actual possession of the vendor is substantially more than the price that would be fetched by a land which is not in possession of the vendor, because the time taken for getting possession of even such land over which the vendor has got an undisputable claim is so extensive these days that the price of the land of which possession cannot be delivered immediately becomes substantially less than the price of the land of which ready possession can be delivered to the purchaser. Contention is that these are all facts which have got bearing upon the market price of the land and the grievance is that this aspect of the matter has not been taken into account by the learned Judge.
(c) The third objection of Mr. Kotwal is that the sale instances which have been relied upon by the learned Judge do not justify the rate of Rs. 2/- per sq. ft. arrived at by him. In this connection, he contends that the sale instances which have been relied upon by the claimant/respondent are either not proved or are not comparable with the land under acquisition whereas the sale instances relied upon by the Land Acquisition Officer were, in the first place, more comparable with the land under acquisition and, in the second place, could be said to have been duly proved.
(d) The fourth objection raised by Mr. Kotwal was partly pursued and partly given up. The objection originally raised was that out of the compact block of lands sought to be acquired, the land required for roads, open spaces etc. would have to be deducted. A grievance was sought to be made initially that the learned Judge has deducted the lands required for roads but not the lands required for open spaces. When it was pointed out from the evidence of the expert examined by the Government itself that the deductions were made by the expert not only of the area covered by roads but also of the area covered by the open spaces and when it was pointed out that the learned Judge has deducted everything from the total amount of compensation as was done by the expert, excepting, however, the development charges, this objection was not pursued by Mr. Kotwal. But he still insisted that certain other deductions which were made by the expert were not allowed by the learned Judge. Contention in this connection was that the expert had deducted 20% of the value of the land as development expenses including the architect's fees, legal fees and other development expenses. The contention of the learned Government Pleader was that in addition to the deduction of about one-third area of the land made by the learned Judge, there should be a further deduction of 20% for the above purposes from the compensation payable to the claimant. In other words, according to him the deduction should not only be 33% as done by the lower Court but should be about 53% of the total value of the land. According to him, therefore, the claimant should get only 47% of the total market price of the land as correct amount of compensation.
(e) Lastly, it was contended that the rate of interest of 6% awarded by the trial Court from the date of the application for reference till the date of realisation was wrongly awarded inasmuch as under section 28 of the Land Acquisition Act. The interest could not be awarded at the rate higher than 4% p.a.
However, we will consider this entire question relating to interest when we consider the cross objections filed by the respondent.
4. Coming to the first question raised by Mr. Kotwal, the question has been considered by three Division Benches and one learned Single Judge of this Court. Somewhat significantly, the first judgement on this question, given by the Division Bench, is given in an appeal between the same parties. Other similar jahagir lands, subject to similar conditions under the self-same Jagir Abolition Act belonging to this very claimant, Shri Ghorpade were acquired by the Government under the Land Acquisition Act as per a different notification and the Government contended that in view of the provisions of section 7(3) of the Act read with the self-same Circular mentioned above, the Government was entitled to recover from the claimant/grantee 50% of the amount payable to him as compensation for the compulsory acquisition of land. As a logical consequence of this condition it was argued that amount which was to be paid to the Government by the grantee upon the transfer could be retained by the Government at the time of the compulsory acquisition. The question arose for consideration before a Division Bench of this Court consisting of Kantawalla, C.J, and Sawant, J. in (First Appeals No. 502 of 1969 and 702 of 1969)1. This Court held in that case that the provisions of section 7(3) of the Act had no application to the case where the grantee was not intending to transfer the land voluntarily. This Court held that in the case of compulsory acquisition under the Land Acquisition Act there is no voluntary transfer by the grantee in favour of the Government. It was held that what is contemplated by section 7(3) of the Jagir Abolition Act is a voluntary transfer governed by the provisions of the Acts such as the Transfer of Property. Since the provisions of section 7(3) of the Act did not come into play at all, the question of the Government being entitled to claim 50% of the market price of the land payable by the purchaser to the owner of the land did not arise. The contention that the Government was entitled to an apportionment in the compensation to the extent of 50% of the land on the ground that the Government had one-half interest in the land was negatived by this Court. Assuming that such an interest could be spelt out from section 7(3) of the Jagir Abolition Act, since the said provision did not apply to a compulsory acquisition, the question of the Government's claim for apportionment in the compensation did not arise. We may mention here that this was how Mr. Kotwal read the said judgement of the Division Bench. He conceded that this decision was followed by a subsequent Division Bench of this Court in the case of State of Maharashtra v. Ganpatrao Amritrao Deshpande, reported in 1982 M L J 639. He also further conceded that a learned Single Judge of this Court (Masodkar, J.), had taken a similar view in the case of State of Maharashtra v. Govindrao Narayanrao Ghorpade : AIR1981Bom439 . We propose to examine and follow all these authorities. Mr. Kotwal conceded that these authorities concluded against him in one aspect of the question. But Mr. Kotwal firstly wanted to distinguish these three authorities by stating that there was another aspect of the question which had not been urged before and hence not examined by the said Benches. According to him while deciding the said three appeals, the two Division Benches and the learned single judge were considering whether the Government could be said to be having 50% interest in the land, and as such, was entitled to retain that 50% interest with itself by paying to the claimant only the remaining 50% market price of the land. The point that Mr. Kotwal was raising before us was, according to him, being raised from a different stand point. He contended that the market price of the land would itself be less if the land was subject to such an onerous condition as the one mentioned in the Circular. In this context, that the market price of the land is something which a willing purchaser will pay for getting a valid title to the land. He argued that under said section 7(3), the payment of 50% of the market price was a condition precedent for getting a valid title to the land. It, therefore, followed that if the purchaser wanted a valid title, he would first pay 50% of the market price to the Government, would get the condition of non-transferability relaxed and would pay thereafter the remaining amount of 50% of the market price to the vendor. The purchaser thus pays to the vendor, contends Mr. Kotwal only 50% of the market price and since the compensation is what a willing purchaser will pay to the willing seller, the real market price of the land in the instant case is represented by 50% of what is received by the seller. Mr. Kotwal contends that this aspect of the matter had not been put forth before the three Benches and hence the question was really res integra. For reasons which will be presently mentioned, we were not satisfied about this reasoning and prima facie we were of the view that the fact that the grantee would have to shell out one-half portion of the market price which he receives from a willing purchaser would not reduce the market price of the extent of 50%. In reply to this tentative view put across to him by us, Mr. Kotwal came out with a contention that what was relevant was the consideration that was to be received by the purchaser and not what was to be paid by the vendor. For propounding this proposition, he relied heavily on the observations of Privy Council in the case of Dame Alice Fraser and others v. The City of Fraserville A.I.R. 1918 P C 308. He particularly relied upon the following head note of the said report:
'Held, the value to be ascertained is the value to the seller of the property in its actual condition at the time of expropriation with all its existing advantages and with all its possibilities excluding any advantage due to the carrying of the scheme being a question of fact for the arbitrator in each case. The value to the buyer should not be consider at all though the possibility of an added utility due to existing possibilities may subject to limits be considered.'
Relying upon this position, he contended that the value of the land to the claimant was only 50% of its market value and hence that is what he gets by way of compensation.
We will presently point out that the observations of the Privy Council are being relied upon by the learned Government Pleader by divorcing them from the context. But, at this stage, it has to be noticed that the present contention of the learned Government Pleader is diametrically opposed to his earlier contention with which he embarked upon the task of distinguishing the first Division Bench judgment of this Court, between the same parties, delivered by Kantawalla, C.J. He started distinguishing the said judgment and the other two judgments by stating that we must consider what price the purchaser would pay and contended further that the purchaser would pay half the price to the vendor and the remaining half he would pay to the Government. His contention was that this aspect was not consider by the earlier Benches. His present contention is in the nature of volt face. By the present contention, he wants to argue that the Court must consider as to of what value the lands were to the vendor and not to the seller.
When we pointed out this apparent inconsistency in his agreement, Mr. Kotwal invited our attention to a judgment of another Division Bench consisting of Jahagirdar and Modi, JJ. dated 15th September, 1981, in (First Appeals Nos. 749 of 1973 and 747 of 1973)5. It must be said that the question which we are required to consider in this appeal arose for consideration in the same context before the said Division Bench. However, even though the unreported judgment of Kantawalla C.J, and Sawant, J. between the parties and the judgement of Masodkar, J., reported in : AIR1981Bom439 were delivered quite some time before the matter came up for consideration before Jahagirdar and Modi, JJ., they were not brought to the notice of the said Division Bench. Mr. Kotwal also tried to place reliance upon the judgement of the Supreme Court in the case of The Special Land Acquisition and Rehabilitation Officer, Sagar v. M.S. Seshagiri Rao and another : 2SCR892 . His contention was that if the said judgement of the Supreme Court in Seshagiri Rao's case was brought to the notice of the first Division Bench consisting of Kantawalla C.J., and Sawant JJ., the view of the Court would probably be otherwise. But we may mention here that the said judgement of the Supreme Court in Seshagiri's case was not brought to the notice even of the Division Bench of jahagirdar and Modi, JJ., upon which judgement Mr. Kotwal placed so much reliance.
Mr. Kotwal also relied upon the judgment of the Gujarat High Court in : AIR1972Guj189 , Special Land Acquisition Officer v. Sushilaben Chhaganlal Thakkar and another, and contended that when the land was subject to some restricted tenure, the market price of the land is bound to be reduced. He also relied upon various other authorities, reference to which would be made by us in the course of this judgment. But at this stage, we may refer to the last submission made by Mr. Kotwal. His contention was that in any event there were diametrically opposite views taken by the two Benches on the one hand and third Division Bench on the other and that, therefore, it was necessary for this Court to refer the question to a larger Bench.
We will deal with each of the pleas and contentions of the Government Pleader presently. But at this stage we think it advisable to analyse the very provision of law on the basis of which various contentions are advanced by the learned Government Pleader with a view to claim 50% reduction in the price payable to the claimant.
5. The relevant provisions of section 7 of the Jagir Abolition Act and also the relevant portion of the Circular in question have already been set our above. Section 7(3) of the Jagir Abolition Act no doubt makes the land non-transferable without the previous permission of the Collector and while granting the permission the Collector has to satisfy himself that the condition prescribed by the Government for his sanction has been complied with. The condition prescribed by the Government relates not only to the transfer but also to the partition of the land, but we are not concerned with the effect of the condition so far as the impartibility of the land is concerned. We are concerned only with the question of transfer of the land. As per the Circular, the condition is that for the purpose of relaxation of the condition of non-transferability, a sum equivalent to 50% of the market value should be charged. But one significant aspect is that the Circular does not say as to whom the amount is to be charged; the Circular is totally silent and noncommittal on the question as to whether the sum is to be received from the vendor, that is to say, the grantee or from the purchaser Evidently, this aspect of the provision really reflects upon the real intention of the Government; the real intention is that whatsoever it may be between the vendor and purchaser who gives the amount to the Government, the Government shall give permission for the transfer. In other words, it wants and insists upon a nazarana equivalent to 50% of the market value of the regranted land. This means that the transfer will be a valid transfer. So far as the Government is concerned, its interest lies in the nazrana, neither in the land nor in the person who shells out the nazrana.
But even more significant than the above fact is the fact that what the Government receives is the 50% of the 'market price of the land'. This means that the market price is first determined and thereafter the Government becomes entitled to one-half share in the same. The Circular does not define market price; nor does it imply or mention that the market price of the land means some pre-determined price and that 50% of that per-determined price is to be paid as nazarana. This evidently means that market price has to be determined first on the basis of some well-recognised principles. It is only thereafter that nazrana can be determined and paid. For determining the market price, therefore, the provision of nazrana is irrelevant. Both these aspects of the interpretation of the said Circular lead one to the conclusion that so far as the purchaser is concerned, he is required to pay the full market price of the land to the vendor.. It may be that the vendor cannot retain the entire market value of the land with himself; but the fact remains that the purchaser pays the full market value.
6. The question can be looked at also from a different angle. We have to consider as to what is the market price of the land which is subject to the said provisions of section 7(3) of the Jagir Abolition Act read with the above mentioned Circular. If the purchaser has to purchase such land, he will naturally and evidently pay only the market price for the same. If similar other land which is not subject to such condition is also available in the market if the purchaser has to make choice between the two, he will naturally consider as to what is the price he is required to pay for either of the lands. If he is required to pay anything more for the land which is subject to the provisions of section 7(3) of the said Act than for the other similar land which is not subject to such provision, he will naturally not purchase the land governed by it. Now if we assume that as per the circular 50% nazrana is to be charged upon the purchaser, what the purchaser will do for the purpose of getting a valid sale deed in his favour would be that he would agree to pay the market price for the purchase, but out of the market price he will pay 50% to the vendor and the remaining 50% to the Government as nazarana upon which payment he will get a valid sale-deed. This evidently means that the market price of the land is represented by the total amount spent by the purchaser and not by the amount which is retained by the vendor.
7. If we analyse the Circular further the point becomes clearer still. It will show that, by and large, it would be the vendor/re-grantee who will initiate the process of getting relaxation of the restrictive condition imposed by the Circular. The analysis will also show that what he duly lawfully and finally pays as nazrana is not necessarily related to what he receives as the price of the land when he sells it and it is not as if that whenever he sells the land, he has to shall out 50% of it to the Government.
Let us proceed with the analysis. Under section 7(3), the land is inalienable and impartible until the condition of inalienability and impartibility is relaxed. But the circular does not mention as to when relaxation can be asked for nor does it specify as to with reference to which date the market price for the same is fixed. The Circular does not even show that the holder/re-grantee can ask for relaxation only at the time of alienation or partition. This clearly means that he can apply for relaxation of the condition of non-transferability at any time he chooses. All that he has to show is that he intends to sell the land and wants the condition to be relaxed. Upon such an application, the Collector will be duty-bound to grant the relaxation by directing the applicant/re-grantee to deposit into the treasury 50% of the market price of the land as it then exists. It will be noted here that we have mentioned these considerations for relaxation as nazrana. We have done so because this is nothing but nazrana. The holder/re-grantee may not be intending to sell the land at any time in the near future. He only wants to have the restrictive condition relaxed. If he wants it, the Collector must grant that request provided the holder complies with the requirement of payment of 50% of the market price then existing. It may be that the holder re-grantee may not sell the land for 50 years to come. But the Collector is duty-bound to grant relaxation if the nazrana is paid by the holder and once the condition is relaxed, the land ceases to be subject to the restrictive condition.
A question must arise : If the holder/re-grantee wants to have the condition relaxed and hence makes a declaration that he wants to sell the land, with reference to which date the market price is to find two answers are possible :
(i) the date when the relaxation is asked for; and
(ii) the date of the Circular, namely. 1-8-1955.
No third answer is conceivable because the Circular does not make it incumbent upon the holder/re-grantee to sell the land to anybody immediately, upon the heel of the relaxation. But even out of the above two answers, to our mind, the first answer is a more rational answer. To our mind, the market price shall have to be fixed by the Collector with reference to the date when the application for relaxation is made, The relevant date for fixation of the market price not necessarily being the date of sale, the 50% of the market price as nazrana has to be computed by the Collector with reference to the date when the relaxation is asked for. Usually, it will be necessary for him to hold an appropriate enquiry for that purpose more or less in the same manner in which the Land Acquisition Officer fixes the market price under the Land Acquisition Act.
The above discussion leads to the following conclusions :
(i) once the nazrana is paid, the relaxation has got to be granted by the Collector;
(ii) once the relaxation is granted by the Collector, the holder can sell the land, which is now free from the restrictive condition, at any time;
(iii) since there is no condition restricting the sale of the land to any particular person or within a particular period, it follows that the holder can sell the land, after he obtains relaxation, at whatever price he asks for; and
(iv) until relaxation is asked for, the holder is under no liability whatsoever for payment of the nazrana.
So far as the present discussion is concerned, it is the last conclusion, which is the inescapable conclusion if our analysis is correct, which is of utmost importance in deciding the question under consideration. We repeat the holder is under no liability to pay the nazrana until he has asked for relaxation of the condition.
If this much of the conclusion is correct, then it is a small step to the further conclusion that vis-a-vis the acquisition proceedings, the question of deprivation of the 50% of the market price to the holder can never arise. He has never asked for relaxation of the condition. The Collector was never required to grant relaxation either to him or anybody else. No question of nazrana, therefore, arises. The logic upon which the answer to the Government Pleader's plea is based is as simple as that. The logical basis for the first Division Bench Judgment of Kantawalla, C.J. as also for that Bharucha, J. in the ultimate analysis is this reasoning. We may that the third Division Bench judgment of Jahagirdar and Modi, JJ., which takes a contrary view and to which we will presently refer mentions this to be the factual position. The relaxation of the restrictive condition was obtained in that case long before the intendment of sale in that case.
8. The importance of the above-mentioned legal position can be noticed by taking another illustration. The legal position as set out above is that as per the Circular, 50% nazrana is not to be paid necessarily at the time of the sale; it may be paid long before the actual date of sale because it is to be paid at any time the grantee asks for the relaxation. Suppose, therefore, that the grantee asked for the relaxation in the year, 1960. The Collector makes the requisite enquiry and finds the market price to be Rs. 1000/-. The grantee, therefore, pays Rs. 500/- and gets the order of relaxation. He may do nothing for, say, 10 years. In the year, 1970, the market price of the land becomes Rs. 10,000/- . He sells it and gets Rs. 10,000/-. Has he to pay anything further to the Government The answer clearly is : No. In 1970, he may even gift the land. If he had gifted in 1960, he would have been required to pay Rs. 500/- although he had got no return from the done. In the year, 1970, he gifts it and he has to pay nothing further to the Government. Point is that the process of land acquisition leaves no scope for such spacing between relaxation and the transfer.
9. The anomaly of the Government Pleader's contention can be ascertained also by taking into account the extreme position. It is no doubt a hypothetical position., but all the same, a perfectly conceivable position, conceivable within the framework of the Jagir Abolition Act. In the instant case the Circular requires the nazrana to be of 50% of the market price. The Circular postulates that once the relaxation is made, the sale can be effected at any time. It would be, therefore, perfectly open for the Government to prescribe a condition for relaxation of the restriction that not only 50% but 100% of the market value then existing should be paid to the Government as nazrana. The Government can make it 25% but the Government can also make it 100%. Now, if a person wants to get the relaxation by payment of 100% nazrana and sells the land immediately, he will get in his hand nothing. But as illustrated above, he might get relaxation of the land by payment of Rs. 1000/- in 1960 and might sell the land in 1970, when the price is Rs. 10,000/-. He, therefore, still gets a profit of Rs. 9000/-. But if the plea of the Government pleader is to be accepted, the anomalous situation would be that even though the grantee never wanted to have the condition relaxed and wanted to peacefully cultivate the land and go on getting income from the same, the Government would acquire this valuable piece of land which gives to the grantee the income for his livelihood and may still not pay anything to him because the nazrana is 100% of the market value. We have mentioned this as an extreme case. But as stated above, it is not an inconceivable case. In theory, it is a perfectly conceivable case and if the contention of the Government Pleader is to be accepted, theoretically deprive the holder of his income earning property by paying, him nothing. Such a state of things is not contemplated either by the Land Acquisition Act nor by the Jagir Abolition Act.
To our mind, this analysis sufficiently answers the Government Pleader's plea justifying 50% deduction in the compensation payable to the claimant.
10. It will be now easier to examine the arguments advanced by the learned Government Pleader in support of his plea that from the amount of the market price payable to the claimant as compensation, a deduction of 50% must be made. In addition to the analytical conclusion referred to above, he had three other formidable difficulties in the form of three judgments of this Court which have, more or less, followed the same analysis though with different expressions. The first authority is the judgment of the Division Bench consisting of Kantawalla, C.J., and Sawant, J., between the same parties relating to the self-same statutory provision. Reference to the said judgment is already made above. When the other lands subject to the similar restrictions were acquired by the Government, the Land Acquisition Officer made a deduction of 50% of the market price of the land and offered to pay the balance as compensation on the ground that in the market price of the land, at any given time, the Government was entitled to an apportionment to the extent of 50%. This view of the Land Acquisition Officer was not approved of by the Court and the Court gave an award rejecting the Government's claim for 50% deduction. Against the award, the claimant had filed an appeal to this Court because the claimant did not agree with the market price fixed by the Court. The Government filed a cross appeal contending that whatever may be the market price arrived at by the Court, the Government was entitled to retain 50% of the same with itself under section 7(3) of the said Jagir Abolition Act read with the above mentioned Circular and that, hence, the claimant was entitled to only 50% of the market price of the land ascertained by the Court. While dealing with these arguments, the Division Bench observed as follows :
'If Government by statutory exercise of powers want to acquire a claimants land for using it for non-agricultural purpose like construction of a filter house, it cannot be said that the terms of the re-grant would be attracted in such a case. Government after it becomes the owner of the property can use the property in such manner as it likes, but it could not be said that obligation has arisen in view of the terms of the order of re-grant because of no time in respect of any portion of the required land was any application made by the claimant for its conversion to N.A. purposes. Thus the trial Court was right in setting aside the apportionment made by the Land Acquisition Officer in respect of the amount of compensation. In fact the claimant was entitled to the whole of the amount awarded as compensation by the Land Acquisition Officer.'
The same view is taken by the learned Single Judge, Masodkar, J., in the case of State of Maharashtra v. Govindrao Narayanrao Ghorpade, reported in : AIR1981Bom439 as also by a Division Bench (Masodkar and Bharucha, JJ.), in the case of State of Maharashtra v. Ganpatrao Amritrao Deshpande, reported in 1982 Maharashtra Law Journal P. 639. We will briefly refer to the latter two judgments also. But at this stage, we may refer to the arguments advanced by the Learned Government Pleader in connection with the first Division Bench judgment by Kantawalla, C.J.
11. His contention was that, in the first place, one important aspect of the question was not argued before and hence not considered by the said Bench. According to him, the value of the property has to be arrived at from the stand-point of the purchaser. The purchaser will pay to the vendor only the market price. In the instant case, the purchaser, if he has to get relaxation of the condition, has to pay 50% to the Government and 50% to the vendor. According to the learned Government Pleader, the market price of the land is something which the purchaser pays to the vendor and since, in the instant case, the purchaser will pay to the vendor only 50% of the total price packet, the market price must be held to be only the 50% fraction. The said argument was sought to be expatiated upon by him by relying upon the judgment of the Supreme Court in the case of The Special Land Acquisition and Rehabilitation Officer, Sagar v. M.S. Seshagiri Rao and another, reported in : 2SCR892 . In fact, this judgment of the Supreme Court seems to be the sheet-anchor of the learned Government Pleader's argument. The facts of that case were that certain land was granted by the Government to the claimant with the condition that the Government could take possession of the land at any time it desired and whenever the Government expressed its desire, the grantee was to surrender the land to the Government without claiming any compensation. But although the Government had this power of resuming the land without payment of compensation, the Government did not exercise that power, but decided to acquire the same under the Land Acquisition Act. While fixing the compensation for the lands, the Land Acquisition Officer took the view that since the land could be resumed at any time by the Government without compensation, the claimant was not entitled to any compensation of the land even in the land acquisition proceeding. It was this contention which was negatived by the Supreme Court. The Supreme Court held that once the Government decided not to exercise the option to resume the land without compensation and decided to proceed for acquisition under the Land Acquisition Act which requires payment of compensation, it was not open for the Government to deny compensation to the claimant. But while making this observation, the Supreme Court made an observation to the effect that :
'The measure of that compensation was the market value of the land at the date of the notification, and the measure of that market value was what a willing purchaser might at the date of the notification under section 4 pay for the right to the land subject to the option vested in the Government.'
Relying upon the said observation of the Supreme Court, the learned Government Pleader contended that just as the price of the land which could be taken by the Government without compensation at any time was bound to be reduced likewise the price of the land which was subject to payment of 50% of the nazrana was bound to be reduced in the eyes of the purchaser and since what the purchaser pays is the market value, the compensation must be deemed to have been curtailed by 50%. The learned Government Pleader contended that the attention of the first Division Bench was not invited to this judgment of the Supreme Court given as early as on 31-1-1968 and that, hence, the said judgment is not binding upon this Court and the entire question is at large once again.
12. To our mind, the argument is susceptible to several answers; but we indicate only a few. In the first place, even assuming that the entire question is at large, still the analysis of the statutory provision given by us shows that the conclusion arrived at by the Division Bench is, with respect, perfectly correct and we cannot find any fault with the same even assuming that it is open for us to do so. Secondly, the question is no longer res integra. The question has been considered by the two Benches whose judgments are already referred to by us above. The contention that the judgment of the Supreme Court in Seshagiri's case was not considered by the first Division Bench need not be taken seriously because the effect of the said Supreme Court's judgment has been fully considered by the last mentioned Division Bench judgment of this Court in the case of State of Maharashtra v. Ganpatrao Amritrao Deshpande, reported in 1982 Maharashtra Law Journal, P . 639 and the learned Judges in fact rely upon the said Supreme Court judgment in Sheshagiri's case in support of the claimant's case, not in favour of the Government's plea. The plea that the value is to be fixed from the stand point of the purchaser was urged before the last mentioned Division Bench in Ganpatrao Amritrao Deshpande's case and in support of that plea, the Supreme Court's judgment in Seshagiri's case was relied upon. After fully hearing the Government Pleader this Court negatived the contention by fully analysing the statutory provision. In this view of the matter we have no doubt that the question is fully covered by all the tree said judgments. We are, therefore, left wholly unimpressed by the distinction sought to be made by the learned Government Pleader in the argument that is being advanced by him today and the arguments that were being advanced before the first Division Bench.
But even on principle, we are of the opinion that the argument is not sound. The market price of the land is what the willing purchaser pays for getting complete and absolute title to the land. What he pays has to be computed having regard to the totality of the payment made by him and not with reference to persons to whom the payment is made. Suppose the land is subject to a mortgage held by 'A', a charge held by 'B' and tenancy rights held by 'C'. The purchaser shall have to pay off everybody before he gets complete title to and possession of the land. For him, the price of the land is the totality of the interests of all. It may be that the owner of the land as such will be getting only a tiny fraction of the price and the major portion might go to the mortgagee, the charge holder and the tenant. But that doesn't mean that the market price is something which is only received by the owner. The market price of the land is the totality of the payments made by the purchaser for getting an absolute title to the land and with the title goes the possession also. To our mind, the fallacy in argument advanced before us by the learned Government Pleader lies in assuming that the amount received by the owner ultimately represents the totality of the market price. Such argument proceeds upon the assumption that he is the person having exclusive interest in the land. Once we appreciate the legal position that the ownership consists of a bundle of rights and compensation for totality of the bundle of rights has to be computed. Then it will be realised that what is paid to the owners of the other interests such as the mortgagee the charge holder and the tenant are sums which are part and parcel of the market price of the entire land.
We are therefore, of the opinion that the distinction sought to be made by the Government Pleader between the arguments sought to be advanced before the first Division Bench and those sought to be advanced by him before us is a distinction without any legitimate principle.
We may now briefly refer to the other two judgments which have taken the same view to which we have arrived at after exhaustive analysis of the statutory provision. The first one is the judgment of Masodkar, J., in case of The State of Maharashtra v. Govindrao Narayanrao Ghorpade A.I.R. 1981 Bom 438. We may mention here that though the judgment is of a learned Single judge still the parties in the said case are the same and the statutory provision which was being construed by the learned Judge is the self-same one. The first Division Bench which we have referred to was sought to be distinguished before the learned Single Judge also. We may incidentally mention that Mr. Kotwal was himself the Government Pleader who advanced the arguments before the learned Judge and who tried to distinguish the earlier Division Bench judgment. We may mention here that the learned Judge in the first instance analysed the statutory provision and arrived at the same conclusion to which we have arrived after fresh analysis. It was only thereafter that he referred to the earlier Division Bench judgment to which reference has been made by us. It will be thus seen that not only on authority but also on principle, conclusion that was arrived at by the learned Judge is the same at which we have arrived.
But this is not all. The question fell for consideration before the third Division Bench consisting of Masodkar and Bharucha, JJ. 1982 M L J 639. The Bench has also considered the effect of the judgment of the Supreme Court in Seshagiri's case. After examining the entire question, the Bench came to the conclusion that compensation which a claimant of restricted tenure must get is its market value and the measure of that market value is what a willing purchaser will pay for the land subject to the restriction. It contemplates the determination of market value of a restricted land in the manner in which the market value of land which is subject to no restrictions is ascertained.
13. The learned Government Pleader thereafter relied upon another Division Bench judgment of this Court which has struck a discordant note. Alongwith the said judgment, he also relied upon the judgment of the Gujarat High Court reported in : AIR1972Guj189 . But we may mention here that these judgments were not relied upon by the learned Government Pleader with a view to take a view different from the earlier mentioned judgments. He relied upon these two judgments with a view to persuade us to refer this question to a larger Bench. His contention was that on the same point there were diametrically opposite views held by the two Division Benches of this Court or rather by the two Benches on the one hand and one Division Bench on the other. The latter view held by one Division Bench consisting of Jahagirdar and Modi, JJ., could find support also from the view taken by the Division Bench of the Gujarat High Court. Contention, therefore, is that this was the case which must be placed for hearing before a Full Bench of this Court.
We are not inclined to accede to this request. So far as the note of discord struck by the judgment of Jahagirdar and Modi, JJ., in First Appeal No. 747 of 1973 is concerned, we may point out that this authority was cited before the last mentioned Division Bench of this Court in the case of State of Maharashtra v. Ganpatrao Amritrao Deshpande, reported in 1982 M L J 639. The Court exhaustively examined the entire question and arrived at conclusion to which we have arrived and so far as the judgment of the Division Bench hearing First Appeal No. 747 of 1973 is concerned, the Division Bench found that the said Division Bench hearing First Appeal No. 747 of 1973 has no opportunity to consider the earlier Division Bench judgment delivered by Kantawalla, C.J. It is also observed that the judgment of the Supreme Court in Seshagiri's case was in fact an authority for the proposition that the fact that the Government may resume the land without compensation does not give an authority to the State Government under the Land Acquisition Act to acquire the land without compensation. The Supreme Court judgment is, therefore, thus one more authority in favour of the claimant's contention than the Government's contention. The last mentioned Division Bench found that the attention of the Division Bench hearing First Appeal No. 747 of 1973 was not invited even to this Supreme Court decision in Seshagiri's case. The Division Bench had, therefore, decided to follow the earlier Division Bench and not the later Division Bench and we find no reason to disagree with the view taken by the last Division Bench particularly when we are fully satisfied that the legal position has been correctly analysed and expounded by the said Bench by taking into account not only the legal provision but also all the authorities having bearing upon the same. We may also mention that this request was made before us for reference this question to a larger Bench only after the appeal was exhaustively argued and the entire statutory provision was analysed thread-bare.
So far as the Gujarat judgment reported in : AIR1972Guj189 Special Land Acquisition Officer, Baroda v. Sushilaben Chhaganlal Thakkar, and another, is concerned, we may mention here that the view expressed therein is dissented from by the earlier Division Bench of this Court in the case of State of Maharashtra v. Ganpatrao Amritrao Deshpande 1982 M L J 639. It is, therefore, unnecessary for us to refer to and examine the said authority afresh.
14. We now go to the last leg of the Government Pleader's argument relating to this point. He relied upon the judgment of the Privy Council in the case of Dame Alice Fraser and others v. The City of Fraserville A.I.R. 1918 P C 308 and relied upon certain observations of the Privy Council which are already referred to above in support of his contention that for fixing compensation what is to be taken into account is the value of the land to the owner and not to the purchaser. Applying this proposition to the facts of the case, his contention is that whatever may be the market value of the land in question, so far as the claimant is concerned, he is going to get only 50% of the same and hence that is the compensation which must be paid and nothing more than that.
Even at first blush, this agreement appears to be quite anomalous. The well settled law is that the compensation is the market value of the land which a willing buyer will pay to a willing seller. At least prima facie, therefore, it is a somewhat startling proposition that what is expected by the seller is relevant but what a willing buyer will pay not relevant. The argument is anomalous even otherwise, because it is inconsistent with his initial proposition, viz. that value to the purchaser ought to be ascertained. In fact he exhorted us not to rely upon the Division Bench judgment of Kantawalla, C.J., on the only ground that the value from the purchaser's standpoint was not considered by the Bench. Evidently, by citing the above mentioned Privy Council authority in support of the new proposition, he is jettisoning the proposition of law which he started with.
But that apart, the new line of argument purporting to be based upon the above mentioned Privy Council Judgment in Dame Alice Flaser's case has a neat answer on principle. Even assuming that the Privy Council's decision goes to state that what is expected by the vendor is the real test, still it can be safely said in the case such as the present one that the vendor cannot expect anything less than the market price. To take an illustration, let us assume that there was no compulsory acquisition and the present respondent wanted to sell the land in the open market. He knows that he would have to shell out half of the market price which he gets to the Government. Let us assume that the market price is Rs. 1,000/-. Would he sell the land of Rs. 500/- He would sell it for Rs. 1,000/- only. He would have to part with Rs. 500/- out of that amount. But does that fact after the basic position that the market price of the land was Rs. 1,000/- not Rs. 500/- ?
But apart even from that, to our mind, the Government Pleader's reading of the Privy Council judgment in Dame Fraser's case is incorrect. Upon closer examination of all the relevant authorities on the question, we are satisfied that the judicial committee was aiming at doing no such thing as proclaiming that the value of the land to the seller alone is relevant and not the value of the land to the purchaser. We will briefly examine those authorities.
Dame Alice Fraser's case reported in A.I.R. 1918 P C 308 arose from the judgment of the Superior Court in Canada. The facts may be briefly stated as follows :
One `X' was the original owner of certain waterfalls and the lands surrounding them. Both the waterfalls and the lands were given on lease from time to time. Ultimately these lands and the waterfalls came to the ownership of four persons and this property was required to be acquired compulsorily. The question was as to how the compensation was to be fixed So far as the City Municipality, who wanted to acquire this property, was concerned, the property was of great importance of them for the particular project for which it was to be acquired compulsorily. The project was of a scheme for generation of electricity. The scheme could be undertaken and implemented only by the Municipality, not by the owner of the land and waterfalls. Out of the three arbitrators who were required to fix the compensation, two arbitrators ignored the peculiar value that would be put upon the property by the acquiring body. The acquiring body could get enormous income from the property by undertaking the electricity scheme which evidently the owners could not have implemented. The third arbitrator, however, gave an award giving them compensation arrived at by evaluating the value of the property to the acquiring body with reference to the scheme and on that basis enormous compensation was awarded by the third arbitrator to the original owners. It was in the context of these facts that the judicial committee observed that the value to be ascertained is the value to the seller of the property in its actual condition at the time of expropriation with all its existing advantages and with all its potentialities but excluding any advantage due to the carrying out of the scheme for which the property is compulsorily acquired. The judicial committee's observation that the value to the buyer should not be considered at all has to be read in the context of these facts. By buyer, the judicial committee meant the acquiring body and the value to the acquiring body is, they held, was not the criterion. As a matter of fact, the judicial committee has proceeded further to observe that though the value to the buyer, meaning thereby, to the acquiring body is not to be considered still the possibility of an added utility for such scheme can be to some extent taken into account.
The judicial committee has in fact declared the same law as is contained in section 24 of the Land Acquisition Act. Under said section 24 'any' increase to the value of the land acquired likely to accrue from the use to which it will be put when acquired,' has to be ignored while computing the compensation. In other words, the value of the land to the acquiring body has to be ignored because the acquiring body has a greater value only with reference to the project under hand.
As a matter of fact, the English Law on this aspect is the same and really speaking India's Land Acquisition Act has, in this connection drawn upon the English Law only. The reason why this law was required to be declared afresh by the judicial committee was that the appeal had come from Canada and under the Canadian Law, as it then stood, the land acquisition proceedings did not commence exactly in the manner in which they do in India. When acquisition is for a Municipality, the proceedings commence in India with the notification under section 4 of the Act. Under the Canadian Law, the Municipality could make an offer straightaway for purchase of the land. The offer mentioned the amount at which the Municipality would purchase the land. If the offer was accepted, there was a regular transaction of sale and purchase and no question of compulsory acquisition arose. If, however, the offer was not accepted, then the Municipality had the power to refer the question to compulsory arbitration and in those arbitration proceedings the compensation of the land had to be estimated by fixing its value as it existed on the date of the offer. It was in this sense that the Municipality was described as the buyer and the owner was described as the seller as in the case of private sale of land. In Dame Alice Fraser's case, the third arbitrator had taken into account the value of the land to the buyer Municipality in connection with the project. Naturally, the value was very high so far as the purchaser Municipality was concerned. It was in this context that the judicial committee held that the Canadian Law was not different from the English Law in this respect and that in the matter of compulsory acquisition the value of the land to the buyer, that is to say, the acquiring body, was not relevant. It is not the value to the ordinary buyer and the ordinary seller in the open market that the judicial committee was having in mind. The value to the buyer referred to by the judicial committee was the value to the acquiring body in connection with the project for which the land was sought to be acquired.
If we refer to the authorities which the Privy Council relied upon, this question becomes further clear.
The first authority is Lucas v. Chesterfield Gas and Water Board 1909 K B D 16. This is what the Court of Appeal has observed in that case :
'In determining the value arising from such special adaptability the Tribunal should have regard to the contingent value arising from the possibility of the land coming into the market when required for the particular purpose, and not to the value of the realised possibility arising from the fact of the promoters having obtained statutory powers for the construction of the reservoir.'
In other words, what the Court of Appeal laid down is that while the adaptability value of the land for some project cannot be fully ignored, the value to the promoters of the project who become the acquiring body because of the statutory powers for acquisition has got to be ignored. The same position is reiterated in the judgment of the Privy Council in the case of Cedars Rapids Manufacturing and Power Company v. Lacosta and others 1914 A C 569. It may be mentioned here that the said appeal had also come from Canada. In that case, the appellants were the Company empowered to construct and develop water power projects near the river St. Lawrence and to acquire the lands required for the project. The Company gave notice of acquisition which was in the form of the offer as mentioned above and it was in this context that the judicial committee held that the law of Canada as regard the principles upon which compensation for the land compulsorily acquired is to be awarded was the same as the law of England. The following observations denote the ratio of the case :
'For the present purpose it may be sufficient to state two brief propositions.---(1) The value to be paid for is the value to the owner as it existed at the date of the taking, not the value to the taker, (2) the value of the owner consists in all advantages which the land possesses, present or future, but it is the present value alone of such advantages that fails to be determined. (Emphases supplied.)
Where, therefore, the element of value over and above the bare value of the ground itself (commonly spoken of as agricultural value) consists in adaptability for a certain undertaking (though adaptability, as pointed out by Fletcher Moulton, L.J., in the case cited, is really rather an unfortunate expression) the value is not a proportional part of the assumed value of the whole undertaking, but is merely the price, enhanced above the bare value of the ground which possible intended undertakers had secured the powers, or acquired the other subjects which made the undertaking as a whole a realised possibility.'
The words underlined above vouch for our conclusion. The relevant word used is 'taker'. It is used in the same sense as 'buyer' and evidently also in the same sense as the 'acquiring body.' It is, thus, evident that by this word 'buyer', what the judicial committee contemplates is the acquiring body. The third authority relied upon in Dame Alice Fraser's case is Sidney v. North Eastern Railway Company (1914)3 K B D 629. It is unnecessary to refer to the ratio of that case separately. It is enough here to mention the interpretation of all these authorities by the Privy Council in Dame Alice Fraser's case. This is what the Judicial Committee stated :
'The principles which regulate the fixing of compensation of lands compulsorily acquired have been the subject of many decisions, and among the most recent are those of Lucas v. Chesterfield Gas and Water Board (1); Cedars Rapids Manufacturing Company v. Lacosta (2); and Sidney v. The North-Eastern Railway Company (3). The principles of those cases are carefully and correctly considered in the judgments, the subject of appeal, and the substance of them is this: that the value to be ascertained is the value to the seller of the property in its actual condition at the time of expropriation with all its existing advantages and with all its possibilities excluding any advantage due to the carrying out of the scheme for which the property is compulsorily acquired.'
We may lastly refer to the judgment of the Privy Council in the case of Vyricherla Narayana Gajapatiraju v. Revenue Divisional Officer, Vizagapatnam . Headnote `B' of the judgment correctly summarises the view of the Privy Council. Headnote `B' runs as follows :---
'The compensation must be determined by reference to the price which a willing vendor might reasonably expect to obtain from a willing purchaser. The disinclination of the vendor to part with his land and the urgent necessity of the purchaser to buy must alike be disregarded. Neither must be considered as acting under compulsion. This is implied in the common saying that the value of the lands is not to be estimated at its value to the purchaser. But this does not mean that the fact that some particular purchaser might desire the land more than others is to be disregarded. The wish of a particular purchaser, though not his compulsion, may always be taken into consideration for what it is worth. To say that it is the value of the land to the vendor that has to be estimated is however not in strictness accurate. The land, for instance, may have for the vendor a sentimental value far in excess of its 'market value.' But the compensation must not be increased by reason of any such consideration. The vendor is to be treated as a vendor willing to sell at 'market price.'
In this connection, we may also refer to the observation of Fletcher Moulton, L.J., which observation is relied upon by Lord Romer in the above mentioned Privy Council judgment. Fletcher Moulton, L.J., quoted as follows :---
'The decided cases to his mind laid down the principle that when the special value exists only for the particular purchaser who has obtained powers of compulsory purchase it cannot be taken into consideration in fixing the price, because to do otherwise would be to allow the existence of the scheme to enhance the value of the land to be purchased under it.'
As already stated above, this is really the law contained in section 24 of our Land Acquisition Act. It is, therefore, a fallacy to rely upon the above Privy Council authority in Dame Alice Fraser's case in support of the contention that what is received by the purchaser is the criterion for fixing compensation and that what is paid by the vendor is to be ignored.
15. The second ground upon which the enhancement allowed by the Lower Court is challenged relates to the fact that on the relevant date, 6-2-1969, the respondent/claimant was not in actual possession of any portion of the land. Contention is that the entire land was in possession of the two tenants. Out of the total land admeasuring 68 acres, 2 gunthas, Shendure was in possession of 21 acres, 38 gunthas and Kulkarni was in possession of 46 acres, 4 gunthas. Out of this 21 acres, 38 gunthas Shendure was in lawful possession as tenant of 9 acres and 38 gunthas, whereas his possession in respect of remaining 12 acres was, as per the compromise decree, unlawful. So far as Kulkarni was concerned, he was lawfully in possession of 11 acres as tenant of the land as per the compromise decree, but his possession in respect of 35 acres, 4 gunthas was unlawful.
The contention in this behalf is two-fold. The first contention is that when the land is not in the actual possession of the claimant but is in the possession of the tenants, the buyer is chary of going into the transaction of purchase of the land. It he wants the possession of the land as the owner, he would like to get it immediately and if there is a tenant on the land, whether lawful or unlawful, the delivery of the possession is bound to be delayed, more often than not, for quite uncertain period. Contention is that this experience does have a telling effect upon the price of such land and it is contended before us that this aspect has been lost sight of by the Court.
The contention raised by Mr. Kotwal may not be without substance in the context of some other facts; but in the context of the facts of the present case it will have to be rejected. In the instant case, the respondent/landlord had the right to get into the possession of an area of 47 acres and 4 gunthas immediately. Had not the land acquisition proceedings intervened, the respondent/claimant would have got into the possession of the much portion of the land just by the execution of the decree. As a matter of fact, the decree was ultimately executed on 12-7-1973, and in fact symbolical possession of the land was received by the landlord. We are told that it was symbolical because the actual possession was already taken by the Government by applying the urgency clause. But no light could be thrown by either of the learned Advocates as to for what purpose, then the decree was sought to be executed and symbolical possession was sought to be taken by the decree-holder. But we need not enter into that controversy. Point, however, remains that so far as this area of 47 acres and 4 gunthas is concerned, it need not detain us very long. As regards the other land of which the tenants were lawfully in possession, the Land Acquisition Officer has himself stated that the tenants were not entitled to protection of any of the tenancy laws or the rent laws. Their tenancy could be terminated by just a valid notice. The Land Acquisition Officer, therefore, did not think necessary to take this aspect into account at all and hence he did not hold that the price of the lands would be reduced by virtue of the mere fact that the actual possession of the land on the date of section 4 notification was with the tenants. In this connection, it is to be noted that Shendure did not apply for any reference to the Court against the Land Acquisition Officer's Award. Reference was asked for by Mr. Kulkarni. In reply to the application for reference by Shri Kulkarni, a written statement was filed by the Government and the Government in so may words stated in the written statement that the principle followed by the Land Acquisition Officer for fixation of price payable to the clamant was the correct principle. Even at the cost of re-petition, the principle that commanded itself to the Land Acquisition Officer should be restated. The principle, according to him, was that the tenants' possession of the land on the date of section 4 notification made no difference whatsoever. It is this principle which must be deemed to have been acquiesced in by the Government. If the Government specifically acquiesced in the same, it is not now open for the Government to look askance at the same.
Moreover, even assuming that the existence of the tenants on the land is likely to have the effect of reducing the price of the land, still it is a matter of evidence. No evidence is led by the Government to prove the extent to which the market price would be affected by the existence of such tenants on the land. No sale instance is produced by the Government of any land over which there was a tenant and for which a lesser price is offered by the purchaser because there was a tenant on the land. The entire question will depend upon a number of circumstances such as the nature of protection the tenant has under the rent legislation, the nature of protection he has got under the tenancy agreement, the amount of rent paid by the tenant etc. To our mind, this question cannot be argued in the air. This plea was never raised before the courts below and to our mind, it would not be proper for us to allow the Government to raise this plea for the first time in the appeal. If such permission is granted to the Government, substantial injustice is likely to be caused to the claimant because he is deprived of an opportunity of leading appropriate evidence in this behalf.
We are, therefore, not inclined to entertain this plea of the Government Pleader.
16. But even apart from the above evidential difficulty, there is a competent answer given by Mr. Abhyankar to this plea. He pointed out that when a land is to be valued, an assumption has got to be that the land is being sold in the market free of all encumbrances. If there is a mortgage of the land, it has to be assumed that the mortgage is redeemed. If the land is subject to any easement, the easement has to be ignored. The price of the land is required to be arrived at by ignoring these encumbrances and the owners of the encumbrances are given right to prove their claim in the proceeding for apportionment. All the owners of the various encumbrances such as the mortgage charge, leases or easements are persons interested in the land or persons interested in the compensation within the meaning of the Land Acquisition Act. The total value of the land in respect of the encumbrances is, therefore, required to be arrived at by applying the recognised test viz., the price that would be paid by a willing buyer to the willing seller of such land. The total market price that will be arrived at is thereafter shared by the owners of the various interests and encumbrances. If any authority is necessary for this proposition, it is to be found in Government v. Century Spinning and . A.I.R. 1942 Bom 105. To our mind, this is quite a rational approach towards this question.
However, Mr. Kotwal invited our attention to the well-known phenomenon that the lands are in possession of the trespassers such as the squatters or hutment-dwellers. It is well-known, he contends, that the price of a vacant land unencumbered by the squatters or hutment-dwellers in the city such as Bombay is immeasurably more than the price obtained by the lands over which there are such encroachers and trespassers squatting. Mr. Kotwal stated that this clearly means that a land in the possession of the trespasser is likely to fetch much less value in the open market because a willing buyer will pay much less price for such land than the unencumbered land.
Mr. Kotwal may be right on this point. It may be that for considering this question, a distinction shall have to be made between persons in occupation of the land with interest therein and those in occupation without any such interest. It may be that a rank trespasser cannot make any claim in the land acquisition proceeding for compensation because he is in no sense a person interested in the land as per the real import of the term. The interest contemplated by the Land Acquisition Act is the legal interest and not the trespasser's illegal desire to squat upon the land. But, to our mind, so far as the present case is concerned, we are not required to decide that question. In the instant case, we are satisfied that the interest of the tenants was not in that sense illegal interest. On a part of the land, they had the right to continue as tenants through without any protection from the rent or tenancy legislation. As regards the other land, there were decrees against them and they had no answer to the decrees. In these circumstances, the general point raised by Mr. Kotwal does not fall for our consideration in this appeal.
17. This brings us to the third ground on which the lower Court's award is assailed. The contention is that :
(a) the sale instances relied upon by the Government and not those relied upon by the claimant were really the reliable and comparable ones and since those instances show the market price to be only 00.50 ps. per sq. ft., the award given by the Land Acquisition Officer should not have been interfered with by the Court;
(b) while making contentions relating to development expenses certain expenses are ignored, and if they are taken into account then further deduction of at least 20% would have to be made.
18. We will first deal with the argument relating to sale instances. This question has been dealt with by the learned Judge in paragraphs 26 and 27 of the judgment. He has examined the evidence led by the claimants as well as by the Government and has held that the Government's evidence was unreliable whereas one given by the claimant was quite satisfactory. We ourselves examined the entire oral evidence and we agree with the conclusion arrived at by the learned Judge. The conclusion needs no interference even if we confine ourselves to that part of the evidence on record which was examined fully by the learned Judge; but we find that the conclusion is more than reinforced by the other evidence on record consisting of the two earlier awards given by the courts. The lower Court's attention does not seem to have been drawn to those awards. We will presently refer to them.
As regards the sale instances relied upon by the claimant, there were six sale transactions about which the evidence was led. It is unnecessary to refer to the nature of the evidence in detail because it has been correctly summarised by the learned Judge in paragraph 26 of his judgment. Out of the said six sale instances, five show that the value of the similar lands at about the contemporaneous time ranged between Rs. 2/- and 2.50. Out of the said six sale-deeds, three have been executed in favour of the Municipality. The price of two of them, Exhs. 46 and 47 worked out to Rs. 2.25 per sq. ft. The last sale-deed, Exh. 54, was also in favour of the Municipality but the price per sq. ft. worked out in that case to Rs. 5.25. However, on this plot there was also a construction which perhaps accounted for the steep excess in the price.
The Government on the other hand relied upon two sale-deeds as per which the price worked out at 00.50 ps. per sq. ft. One of the sale-deeds, Exh. 77, was sought to be proved by the purchaser Sunanda Shinde, D.W. 2. But she admitted in her evidence that she had no personal knowledge whatsoever about the real terms of the sale-deed and that the entire transaction was looked after by her husband. Her husband was, as a matter of fact, admittedly present in the Court even at the time when she was giving her evidence. Still he was not examined on behalf of the Government. It was the emphatic contention of the claimant that the price shown in the sale-deed, Exh. 77, was not the real price the real price being much higher and that the lower price was shown, inter alia, to avoid the stamp duty. Inspite of this unconcealed allegation, the Government chose not to examine the witness's husband who could throw light upon the correct position. The next witness, Bora, was examined for the purpose of proving the other sale-deed, Exh. 79. The said Bora was no doubt the purchaser under the sale-deed; but the vendor and the purchaser were from the same community which was a trading community and the contention was that the real price of the land was not reflected in the sale-deed at all with the obvious purpose of avoiding stamp duty, not to mention the imposts under the income-tax law. The learned Judge had observed the demeanour of the witness and found that the evidence of the witness was wholly unconvincing. As against this evidence, he has read the evidence led by the claimants and found that the sale instances in respect of lands of comparable position were duly proved by the claimant. The learned Judge, therefore, chose to rely upon both the instances. Those instances show that the price varied between Rs. 2/- and Rs. 2.50 ps. He did not rely upon the last sale-deed, Exh. 54, in favour of the Municipality as per which the price in fact worked out to Rs. 5.25 per sq. ft. evidently because there was some construction on that land. Even from proved price range between Rs. 2/- and Rs. 2.50 ps. sq. ft., he took the lowest price and hence he fixed the price at the rate of Rs. 2/- per sq. ft.
19. Mr. Kotwal, the learned Government Pleader contended that so far as the said two sales in favour of the Municipality were concerned, only the person who scribed the sale-deeds has been examined. His grievance was that if the criticism against the evidence of D.W. 2, Sunanda Shinde was correct on the ground that her husband was not examined, likewise the two sale-deeds. Exhs. 46 and 47, in favour of the Municipality could not be relied upon because the scribe could not give evidence showing the real circumstances in which the price was fixed at Rs. 2.25 per sq. ft.
We do not think Mr. Kotwal's contention to be correct in the instant case. So far as the evidence relating to the sale-deeds, Exhs. 46 and 47 in favour of the Municipality was concerned, in the first place, it is hardly likely that the Municipality who was the purchaser would either undervalue or over-value the land in the sale-deed. Moreover, what is significant is that the Government's own expert witness Manase has referred to these two sale-deeds and has in fact relied upon them even while giving his report.
Moreover, the evidence relating to the other three sale-deeds, namely, Exh. 54 under which the price worked out at Rs. 2/- per sq. ft., Exh. 50, under which the price worked out at Rs. 2.25 per sq. ft. and Exh. 72, under which the price worked out at Rs. 2.50 per sq. ft., fully support the conclusion arrived at by the Court.
But over and above this we have the evidence in the form of the two awards between the same parties. The other portion of the same land which is the subject-matter of the present dispute was acquired by the Government itself and the award given by the Land Acquisition Officer himself in the year 1964 was for Rs. 1.25 per sq. ft. The expert witness has admitted in her evidence that the prices were constantly on the rise at the rate of 10% per year. It is to be noted that the award given in the year 1964, was the award of the Land Acquisition Officer. Unfortunately, no reference has been asked for against the same. But even assuming that the award reflected the correct price, if we take into account the annual 10% rise, the price of the land, around 1968-69, would be on the higher side of Rs. 2/- per sq. ft., not on the lower side.
If we take the second award between the same parties for other portion of the same land which was given in the year 1972, we find that the matter has come up to the Court and the Court awarded compensation at the rate of Rs. 5/- per sq. ft. in the year 1973. If we calculate 10% deduction backward, once again we find that the estimate would be a larger sum than Rs. 2/- per sq. ft. in the year 1968-69. The fact that the awards given by the Land Acquisition Officer and by the Government are not only relevant but good pieces of evidence, was common ground before us. In fact, the award for the year 1964, as also the judgment of the Supreme Court in the case of The State of Madras v. Shri A.M. Nanjan and another, reported in : 3SCR356 , was relied upon before us by the Government Pleader himself. The evidential value of the awards under the Land Acquisition Act is recognised in the said judgment.
Having regard to all these aspects of the matter we are fully satisfied that the rate of compensation the rate of Rs. 2/- per sq. ft. awarded by the Court is not only not excessive but is quite just and proper. As a matter of fact, in the context of the sale instances, it can be said rather to be more in favour of the Government than otherwise.
20. The second part of the Government Pleader's attack concerns itself with the percentage of deduction in the price on account of development expenses. As a matter of fact, this question arises essentially when a large chunk of undeveloped land has to be valued. What the learned Judge has done is that he has arrived at the price with reference to the sale instance in the first instance. On this basis he arrived at the price of all the lands at the rate of Rs. 2/- per sq. ft. But from the total area for which compensation was payable, he deducted about 1/3rd of the total area on account of the fact that about 1/3rd area of the land would be required for roads, open spaces etc., and he gave to the claimant value for 2/3rd portion of the land at the rate of Rs. 2/- per sq. ft. In reality, therefore, the rate works out to about Rs. 1.33 per sq. ft. There is no appeal filed by the claimant against this part of the decree and, hence, we are not called upon to go into the question whether such omnibus deduction is justified in the context of the evidence in the instant case or not. Such a course may be justified in the instant case. But in conceivable cases, it may give rise to injustice. Whether this will be so or not will depend upon the nature and extent of development of the plots which are compared with the instant plot. Supposing the price of the entire land is fixed at the rate of Rs. 2/- per sq. ft., because the adjoining small plot had fetched the price of Rs. 2/- sq. ft., and supposing that the said adjoining plot was a fully developed plot, then in order to fetch not large price the instant plot shall have to be developed to that extent. Such development will necessitate expenditure on the plot valuation and this necessity is bound to result in reduction in its price. But on the other hand if the comparable plot itself needs extensive development its price will be more or less a comparable price so far as the instant plot under valuation is concerned and the reduction in the price of the large plot under valuation may be much less. Everything will, therefore, depend on the nature of evidence led for the purpose of determining the extent of development of the compared plot and of the comparable plot.
The grievance as regards this was, however, made before us by the Government Pleader not by the claimant. His contention was that even though there is an omnibus deduction of 1/3rd of the value of the land computed at the rate of Rs. 2/- per sq. ft. still there should have been an additional deduction in connection with open spaces which are required to be kept aside having regard to the Town Planning Scheme. A further deduction was urged on account of architect's fees, legal fees, development profits etc. The deduction on account of legal expenses including registration expenses were claimed to be to the extent of 5% and the architect's fees and builder's profits, termed as development profits, were claimed to be to the extent of further 15%. The extent of deduction on account of compulsory open spaces was not quantified by the learned Government Pleader, but that item of deduction was later on given up by him. This he did in view of the evidence given by the Government's own expert. In his evidence, the expert has admitted that while calculating the 1/3rd deduction, he had already taken into consideration the deduction occasioned by roads and open spaces. The plea for reduction on account of compulsory open spaces was, thus, specifically given up by the learned Government Pleader. All the same, he insisted that in addition to the 33% reduction granted by the Court there should be further 20% reduction made by the Court for the legal expenses and the builder's profits etc. According to him, therefore, about 53% reduction should be made when a large chunk of land is required to be valued and not only the 33% as was allowed by the Court below. When called upon to cite any instance where 53% deduction was made by the Court in this account while valuing a large chunk of land, he stated that about 45% deduction is generally made. He was, however, unable to put his finger upon any standard book on valuation or a decision of a Court or upon any Award of the Court to substantiate this contention. However, since he insisted that in addition to 33% deduction already given by the lower Court, the Government was entitled to further 20% deduction, we have to decide whether any additional deduction would be justified. Before proceeding to decide the question, let us refer to the contentions of Mr. Abhyankar in this behalf.
His first contention was that the deduction of the above-mentioned items was wholly uncalled for. So far as the legal expenditures were concerned, his contention was that in these days of sellers' market, the legal expenses including the expenses for registration etc., are borne by the purchasers themselves and, hence, there arises no question of deduction of those expenses from the sale price paid by the willing buyer. As regards the development expenses or the builder's profits, he pointed out that this deduction is claimed on the assumption that some other developer would be entrusted with the work of development of the land and that the owner of the land would be required to share the profit of development with the developer. Mr. Abhyankar contended that there was no justification for such assumption. As regards the architect's fees, he contended that they were locked after by the 1/3rd deduction already allowed by the lower Court.
But this apart, Mr. Abhyankar contended that even the 1/3rd deduction allowed by the Court was made more by the rule of thumb than by any evidence adduced by the Government justifying such deduction. He conceded that certain portion of the land are to be kept aside for roads and for that portion the seller will not be entitled to get price from anyone as a purchaser; but he did not agree that for open spaces such as parks etc., any deduction could be claimed. Moreover, he further contended that even assuming that deduction on account of roads and compulsory open spaces was necessary still there is nothing on record to show that this would amount to 1/3rd deduction. His contention, therefore, was that the 1/3rd deduction allowed by the Court takes care even of the additional items on account of which deduction is claimed by the Government. In other words, he contends that though 33% deduction is granted by the Court, not more than about 20% deduction would be justified having regard to the comprehensive requirement of roads and open spaces and the balance of 13% deduction looks after the items such as the architect's fees, legal and other expenses etc. Thus, he supported the ultimate resultant award of the lower Court and wanted us not to interfere with the decision of the Court deducting 33m and nothing more from the total price of the land.
21. To our mind, there is great force in the argument of Mr. Abhyankar and we see no justification for making any further deduction of 20% as urged by the learned Government Pleader in addition to the 33% deduction already made by the Court.
In this connection, we must once again bear in mind the basic rule. This basic rule is that the Government is bound to pay to the owner of the land such price as a willing purchaser would have paid to him in open market on the date of the notification under section 4 of the Land Acquisition Act. When a large chunk of land is marketed for sale, question is bound to arise for the vendor as to what is the minimum price he should insist upon and for the purchaser as to what should be the maximum price that he should be prepared to pay for the plot. The usual method of taking guidance from the comparable sale instances is generally of no avail because comparable sale instances for such large segments of land are rarely available. The device employed, therefore, as a method of valuation, is to divide the land into various plots and to find out the value of each plot by reference to comparable plots of similar sizes which are already sold in the neighbourhood. The plot in the neighbourhood is quite often what is called the 'developed plot'. The concept of 'developed plot' or of 'development of plot' is something about which a few words will be said by us presently. But at this stage, we may refer to the contention that was sedulously urged by the learned Government Pleader in this connection before us. Contention was that if the land is sold plot-wise, one has to budget for :
(a) the development expenses;
(b) the area required to be left out for internal roads and, further
(c) if the plotting is governed by the Town Planning Act, the area required to be left out for parks, gardens, hospitals, markets, schools etc.
The contention of the Government Pleader was that the 33% deduction allowed by the lower Court and the 20% deduction insisted upon by him, taken together, looked after the above requirements.
To our mind, this reasoning involves quite a few fallacies. We must hasten to add that some deductions have to be made and, a large chunk of undeveloped plot will not fetch the price at the same rate at which a small developed plot will be sold. But it must be borne in mind that there is no hard and fast rule that deduction will always be to the extent of 33%. It is here that we are required to deal with the concept of 'developed plot' or of 'development of plot'. The quality and extent of development envisaged for comparisons will necessarily vary with the human development itself. The minimum requirements of land development as at present are :
(a) sufficiently wide and conveniently laid out internal roads;
(c) water-connection; and
Two hundred years ago, if a new colony of township was intended to be formed, it was thought enough if a few narrow, meandering roads, enough for passage of horse-drawn buggies and bullock-carts were allowed to exist. Electricity was unknown and, hence, its availability was never correlated with the concept of land development, rivers and well supplied water. Nearness to the river or availability of a well with enough water supply must, therefore, have been looked upon as an insignia of the 'development' of any residential plot in those times. Underground drainage was of course, unknown in those days at least in India. Provision for open drainage must have been regarded as an element of 'development' of the land.
The pace of human development has quickened immeasurably. Perhaps just within a hundred years hereafter the land development could be better described as metamorphosis. Larger open spaces will be compulsory for providing launching pads for the helicopters which might become as much a part of the transport system as the motor-cars are at present. An, area having no such launching pad or having insufficient launching pads may be looked down upon as a comparatively 'undeveloped' area. Roads might have to be much wider than those in existence in today's 'developed' localities. Gas supplied by L.P.G. cylinders may be replaced by gas recovered from sea beds supplied to each home in the cities and townships by special system of gas pipes and the plots which do not have this facility will be pitied at as comparatively 'under developed' plots. Some kind of transfiguration of the drainage system, in a variety of ways, is readily conceivable and if that takes shape, the present drainage system would not only be obsolete but will be the totem of backwardness. The point is that the process of development, in the first place, is a continuous process and hence, secondly, it is bound to be in stages. When a developed plot is compared with an undeveloped plot offered for sale, the extent of its development has got to be taken into account. In comparison with fully developed and highly developed plot, the wholly undeveloped plot will fetch much lesser price. But if the comparable plot is itself lingering near the primitive stage of development, there will not be much difference between the price of that plot and the price of the plot which is the subject-matter of the acquisition. The proposition that a large chunk of land can in no case fetch a price at the same rate at which a small plot is sold need not command unqualified acceptance.
We do find support to this view of ours in the judgment of the Division Bench of this Court in the case of State of Maharashtra v. Baburao Dayanoba Chiddarwar and others, : AIR1973Bom231 . It is enough to refer to the observations of this Court in Para 18 of the said judgment which are as follows :
'The proposition that large area of land cannot possibly fetch a price at the same rate at which small plots are sold is not an absolute proposition and in given circumstances in our view it would be permissible to take into account the price fetched by small plots of lands, especially in a case where compensation of land with building potentiality is to be determined and the land is to be valued. Having taken into account this building potentiality of S. No. 2 the prices fetched by neighbouring plots would serve as a good guide for determining the compensation. It cannot be forgotten that Survey No. 2 which is the land in question is situated within the Municipal limits of Pusad. On two sides it is surrounded by residential buildings occupied by well-to-do people. There appears to be a scarcity of accommodation in Pusad as deposed to by N.A.W. 2 Dattatraya Sarnaik. These facts must be taken into consideration while determining the compensation for Survey No. 2. In our view, the proper method of determining compensation in respect of such a land situated within the Municipal limits in a place where there is scarcity of housing accommodation and the land is surrounded by residential localities would be to find our how many residential plots of a reasonable size could be made out of the field in question. Allowance should be made for the land which would be required to be left vacant on account of roads, lanes, park etc. and the land which would then be available for being sold as plots should be taken into account and to this land must be applied the rate at which normally plots were sold at about the date of notification under section 4 of the Land Acquisition Act in adjoining areas, but from the price so calculated the cost of development should be deducted and the price so arrived at could be treated as compensation for the whole of the acquired land. Such manner of determination of compensation is in our view clearly permissible. Merely because the land is agricultural and it is labelled as such does not necessarily mean that the land must be valued as agricultural land.'
In the instant case, after finding that the neighbouring plot had fetched price at the rate extending even upto Rs. 2/- the Court has awarded compensation to the claimant ostensibly at the rate of Rs. 2/- per sq. ft. Assumption is that upon expenditure of about 67 paise per sq. ft. each of the plots out of the land under acquisition will reach that stage of development as is reached by the plot of land which sells in the market at about Rs. 2/- per sq. ft. But there is no reason to believe that the roads required to be laid out and open spaces required to be left out will call for 1/3rd area of the land. For showing that proposition, it was incumbent upon the Government to show that the developed plot in the neighbourhood, sold at Rs. 2/- per sq. ft. had this facility of being adjacent to the wide roads and the amenities of being in the vicinity of the open spaces used for parks and gardens. In the absence of any such evidence on the part of the Government, it must be held that 1/3rd deduction takes care of all those requirements of internal roads, legal and other development expenses etc. As held by the Supreme Court in the case of Vijay Kumar Moti Lal v. State of Maharashtra : AIR1981SC1632 a deduction of 1/3rd of its price is reasonable for the purpose of bringing undeveloped plot on par with the developed plot.
22. This takes us to the question as to whether the additional deductions as claimed by the Government are justified. We will also deal with the contention of the learned Government Pleader relating to certain other items of deduction. His contention was that apart from the area required to be left out for internal roads, as per the scheme framed under the Town Planning Act, certain areas are required to be left for parks, markets, hospitals, gardens, school etc., and hence those areas have got to be excluded. To our mind, this plea involves fallacies more than one. When a scheme is framed under the Town Planning Act and certain areas are earmarked in the scheme for parks, gardens, hospitals, markets, etc., those areas are not required to be gifted away by the owner to the Municipality or to any other authority. When a Town Planning Scheme is prepared under the Bombay Town Planning Act, 1954, as also under the Maharashtra Regional Town Planning Act, 1966, the Scheme has an in-built machinery for determination of the price payable for the land which is intended to be acquired for parks, gardens, hospitals, markets, schools, etc., and the compensation determined under the Scheme is paid to the owner concerned. Sometimes it so happens that the draft scheme made under the Act provides for acquisition of land for parks, gardens, hospitals markets, schools, etc., but as per the above-mentioned Town Planning Act, the land deemed to have been acquired by the local authority or the Planning Authority only on the date when the scheme comes into force. There is, therefore, an inevitable time-lag. If in such a case, the authority desires to start hospitals, markets, gardens, schools, etc., immediately, the authority has to take recourse to the provisions of the Land Acquisition Act. In such a case, the land is acquired under the Land Acquisition Act in the first instance, the compensation is paid to the owner concerned and the parks and markets are brought into existence and the hospitals, markets, schools, etc., are thereafter. Point is that when the area is ear-marked for these purposes, compensation is paid to the owner, more or less, in the same manner in which it is paid under the Land Acquisition Act. The contention that when an area is ear-marked for these purposes, the value of that much land is to be deducted from computation of compensation is, therefore, a fallacious plea.
23. Moreover, a significant aspect of the expert evidence led by the Government is that the expert is himself an Assistant Director of Town Planning. It is admitted that the land included in the Town Planning Scheme is prepared or deemed to have been prepared under the Town Planning Act, 1954. All the same, the relevant portion of that scheme is not produced before the Court. The result is that it is impossible for the Court to know whether the kind of plotting prepared by the expert is in consonance with the Town Planning Scheme or not. For ought we know, larger and wider number of roads may have been prepared under the lay-out prepared by the expert for the hypothetical plotting system. It is quite possible that under the Town Planning Scheme itself there is no requirement for parks and gardens so far as this area is concerned or it may be that larger area is earmarked under the lay out for this purpose than is required under the Town Planning Scheme. The procedure followed by the Government in this behalf appears to be somewhat strange. Instead of producing this Town Planning Scheme and showing that the lay out prepared by the expert on the basis of plotting system is necessitated by the Town Planning Scheme and that it does not go a step further than the requirements of the Town Planning Scheme, the Government has rested content with examining the expert and getting proved through him the lay out prepared by him for the purpose of proving the hypothetical plotting method. In the first place, it is necessary to draw an adverse inference against the Government for not producing the Town Planning Scheme. In the second place, the evidence of the expert led by the Government becomes, more or less, ineffective on account of the above mentioned serious defects in the said evidence.
24. The deduction claimed on account of legal expenses and architect's expenses, etc., are susceptible to the similar answers. Reliance is placed on the opinions expressed in the Treatise of Park on Valuation (4th Edition, P. 132-134) by the learned Government Pleader in support of his contention that the legal costs, developer's profits and other incidental expenses (including even advertisement costs) must be deducted from the total price arrived at Rs. 2/- per sq. ft. We are afraid the reliance is quite misplaced. There is nothing in the opinion expressed by the learned Authors to justify an inference that the deduction for the expenses such an Solicitor's costs, advertisement expenses and developer's profits are to be made over and above the 1/3 deduction already allowed. The acquiring body can claim deductions in one of the two ways :
(a) It can lead positive evidence, by reference to the Town Planning Scheme or by reference to the Scheme prepared by the owner himself, that a particular percentage of the land shall have to be sacrificed for the internal roads, meaning thereby, that he could not expect any return for the same and lead further evidence as regards these various expenses. The value of this portion of the land together with all these normal or inevitable expenses will have to be deducted from the gross value of the land (arrived at, in the instant case @ Rs. 2/- per sq. ft. for the entire land) or else;
(b) if such positive evidence is not available, it may choose to follow the tough and ready method of claiming 1/3 deduction for bringing the undeveloped plot on par with the neighbouring developed plots.
But these are alternatives, not additions, to each other. The fallacy in the Government Pleader's argument lies in the fact that he wants the best of both the words; wants to eat the cake and also have it. That is the reason why, by virtue of his reasoning, a preposterous deduction of 53% is claimed by him. Mr. Abhyankar is right in contending that so far as the expenses of registration etc., are concerned, in these days of seller's market those expenses are not generally required to be borne by the vendors of the plot. The architect's expenses are manifestly the part and parcel of the expenses of lay out and they must be deemed to have been covered by the 1/3 deduction already allowed by the Court. Same is the position of the builder's profit or developer's profit. So far as this item is concerned, there is, in the first place, no warrant for assuming that development would be carried out by an independent agency. What is meant by development is getting electricity connection, water connection, laying down water pipes and electricity cables and laying down of drainage pipes. The plans for doing all these things is complete when the lay out is prepared. The actual expenditure on these items is covered by 1/3 deduction. The only way in which the Government can prove that this expenditure does not form part of the 1/3 deduction is to show that the area covered by the internal roads would be 1/3 of the entire area. To our mind, that would be too tall a claim, not being made good by any evidence. It is on this account that, to our mind, the Supreme Court has held in the case already referred to above Vijay Kumar Moti Lal v. State of Maharashtra : AIR1981SC1632 , that a deduction of 1/3 of the price is reasonable for the purpose of bringing the undeveloped plot on par with the developed plot.
25. While justifying the claim for 53% the learned Government Pleader argued that the claim was based upon recognized method of valuation viz., the plotting system. He contended that this is what is followed by the Government expert, that he has made out a lay out of the entire land under acquisition and has estimated the cost of development; that he has thereafter valued each plot; from the total value the development expenses and unsaleable portion of roads, etc., is deducted and the ultimate net value is arrived at. According to the Government Pleader, if these deductions amount to 53% in the instant case, that cannot be helped because it is the scientific way of valuation.
We have grave doubt as to whether this submission is quite correct. It is true that when large pieces of land are to be evaluated, one of the methods followed is of plotting system; but the plotting has got to be done in such a manner and the plots are to be laid out in such away that maximum price will be recovered by the owners of the plot. The attempt to recover maximum value for the plot will always be made by the owner; not by the acquiring body. If the owner leads evidence about the value with reference to the plotting system, the Court can always rely upon the fact that the plots laid by him are to his maximum advantage. No such inference can be drawn in the cases where the responsibility of preparing the lay out is undertaken by the Government's own expert. If the Government expert's lay out is to be accepted as true, the Government must prove that no better lay out could have been made in view of the provisions of the relevant Town Planning Scheme. For doing so, the relevant extract of the Town Planning Scheme must be placed before the Court. We have grave doubt whether, in the absence of such evidence, the evidence of the Government expert relating to the plotting system followed by himself, without the concurrence of the claimant, would have any evidentiary value at all. However, we wish to express to final opinion on this point because, the question has various facets and no arguments were advanced before us in that behalf.
26. This brings us to the last question relating to the rate of interest and the period for which the claimant was entitled to claim it on the total award passed by the Court. About certain factual positions there is no dispute before us. The Land Acquisition Officer awarded a total sum of Rs. 5,99,444.02 to the respondent/claimant inclusive 15% solatium and awarded interest on the same at the rate of 4% from the date when the possession was taken or was to be taken by the Government from the claimant. So far as the lands to which urgency clause was applied, possession was already taken by the Government on 24-10-1969. The possession of the other lands was taken by the Government after the passing of the award and the Land Acquisition Officer granted interest on the compensation for those other lands from the date of the award. Unfortunately though the award purports to be dated 24-7-1973, it was not declared by him till 2-4-1974. The result was that the tenant was unjustifiably denied compensation for those lands from the interregnum between 24-7-1973 to 2-4-1974. At least this was the grievance entertained by the claimant. But when he applied for reference under section 18 of the Act, this grievance was not alluded to. So far as the interest on the compensation of the other lands was concerned, the interest was duly awarded at 4% from the date of taking of possession of those lands and hence the claimant had no occasion to make any grievance in that behalf. As already seen above, the Court enhanced the compensation to a very substantial extent. The question arose as to what rate the interest should be made payable on the enhanced amount of compensation and as to from which date the interest should be made payable. The claimant had no grievance as regards the principle for payment of interest in relation to the lands of which possession was already taken on 24-10-1969, as per the urgency clause. He was entitled to expect the Court to award interest on the enhanced compensation on the same principle on which it was awarded by the Land Acquisition Officer. But so far as the other lands of which possession was taken after the award were concerned, he was of the opinion that he should have got interest at the rate of 4% from the date when the award was passed and not from the date on which the award was declared. He, therefore, made an application for amendment of the reference, inter alia, for the purpose of getting interest on the enhanced amount of compensation as regards the above mentioned lands, the possession of which was taken after the award, from the date of the passing of the award, that is to say, from 24-7-1973.
The Court, however, held that amendment application not to be maintainable. But, presumably the Court was satisfied about the injustice done to the claimant and hence, what the Court did was that the interest was made payable on the entire amount of the enhanced compensation from the date of the application for reference at 6% per annum till the date of repayment. Presumably, the Court had tried to do some kind of rough and ready justice to the claimant.
Against this order, a grievance is made by both, the Government as well as the claimant. The claimant has, in fact, filed the cross-objection contending that he was entitled to interest from the date when the possession of the land was taken by the Government from the claimant till the date of payment. The Government, on the other hand, contends that as per provisions of the Act, it is not open for the Court to award interest at any rate higher than 4% per annum. The award of excess rate of 2% per annum from the date of the reference till the date of payment is, therefore, strongly objected to by the Government. What is noteworthy is that both the learned Advocates have placed heavy reliance upon the provisions of section 28 of the Act only.
27. Section 28 of the Act runs as follows :
'If the sum which, in the opinion of the Court, the Collector ought to have awarded as compensation is in excess of the sum which the Collector did award as compensation, the award of the Court may direct the Collector shall pay interest on such excess at the rate of four per centum per annum, from the date on which he took possession of the land to the date of payment of such excess into Court.'
The contention of the Government Pleader is that the granting of the interest may be and is in the discretion of the Court. But if it decides to award interest, it is not open for the Court either to grant lesser rate of interest or higher rate of interest; it must award interest at the uniform rate of 4% per annum.
Mr. Abhyankar, on the other hand, countered and contended that even assuming that 4% is the mandatory rate of interest, still equally mandatory is that portion of section 28 which commands that the interest shall be awarded from the date when the possession is taken by the Government. Contention is that it is not open for the Court to substitute any other date as terminus ad quem for the calculation of the interest.
Mr. Kotwal joined issue with Mr. Abhyankar on this point. His contention in this behalf by way of reply, was two-fold :
(a) that since the granting of the interest is itself discretionary, it must be held, in the instant case, that interest from the date of possession till the date of reference was denied by the Court to the claimant and that no ground for interference with that part of the order is made out by the claimant; and
(b) the claimant has made no claim to the interest on the enhanced compensation from the date of possession till the date of payment in his application for reference. Contention is that it was incumbent upon him to make such a claim before the lower Court and failure to make such a claim disentitles the claimant to set up such a claim in appeal against the award passed by the Court denying the interest or any part of it.
28. We will first deal with the contention raised by the Government Pleader in the appeal which relates to the rate of interest. The simple contention is that the interest can be awarded by the Court only under section 28 of the Act and under section 28 even though the Court has discretion either to award interest or not to award interest, once the Court decides to award interest, it has no further discretion in the matter of rate of interest, the rate of interest must be 4% in every case on the enhanced amount of compensation by the Court.
We must State that this part of the contention of Mr. Government Pleader has got to be accepted. This question is no longer res integra. It has been held by the Supreme Court in the case of Raghubans Narain Singh v. The Uttar Pradesh Government A.I.R. 1967 S.C.P. 465 that to grant or refuse to grant interest is discretionary for the Court. But once the discretion to grant interest is exercised by the Court, it has no further discretion and interest, if awarded, has to be at 6% per annum. The Supreme Court in that case was dealing with the provisions under the Central Land Acquisition Act. The provision for 6% interest obtaining under the said Act is substituted by the provisions for 4% of interest under the Bombay Land Acquisition Act. The two provisions are in all other respects absolutely identical. This being the position it must be held that the Court has no discretion to grant interest at any rate other than the rate of 5% per annum. This much contention of the Government Pleader must, therefore, be accepted and it must be held that if interest is payable from the date of reference till the date of payment, it can be paid only at 4% and not at 6% per annum.
29. However, the Government Pleader's argument can take the Government's case thus far and no further. We are wholly unable to accept his contention to the effect that interest is rightly rejected by the Court from the date of taking of possession till the date of application for the reference. To our mind, there was neither any jurisdiction of the Court to deny interest from the date of possession nor did it have the justification for doing so. To our mind, if under section 28 of the Act the rate of interest is mandatory, the point of time from which the interest becomes payable under section 28 is equally mandatory. Section 28 leaves no room for doubt that the Collector shall pay interest on such excess at the rate of 4% per annum from the date on which he took possession of the land to the date of payment of such excess into Court. The word `shall' indicating the mandatory part of this section applies with equal force to the starting point of payment of interest which in his case is the date of taking of possession as to the rate of interest. To our mind, this is the plain interpretation of section 28 and if this is the position, the decision of the lower Court to grant interest only from the date of the application for reference and not from the anterior date of taking of possession cannot be justified.
30. The second part of the Government Pleader's argument is equally unacceptable. His plea is that it was necessary for the claimant to make a claim in the application for reference for interest on the enhanced sum of compensation at the rate of 4% per annum from the date of taking of possession of the land and the failure on the part in doing so disentitles him to ask for such interest. In the first place, it is not open for the State to raise this contention. This is so because the Court has actually granted interest on the enhanced compensation. The Government has filed an appeal against that part of the award, but the dispute in the appeal is on the question as to whether it should be 4% interest or 6%; dispute is not as to whether interest on the enhanced compensation should be paid to the claimant at all.
That apart, even if it was open for the Government to urge this point in appeal, to our mind, the point is devoid of any substance. To our mind, in the first place, there was no occasion for the claimant to make any grievance about interest before the Court. The reference was against the principle upon which award was given by the Land Acquisition Officer. So far as the principle relating to the payment of interest was concerned, the Land Acquisition Officer had applied the correct principle. The claimant, therefore, had no occasion to entertain and ventilate any grievance against that part of the award of the Land Acquisition Officer.
31. Moreover, the payment of interest is as much the statutory part of the compensation as is the payment of solatium. It is true that so far as solatium is concerned, the Court has no jurisdiction not to grant the same or to vary the percentage of the same and in the case of interest, section 28 no doubt gives some discretion to the Court to award or not to award it. But even in this case it is to be noted that once it is decided by the Court to award interest, there is no discretion left with the Court in the matter of rate of interest.
32. In this connection, a few authorities can be service ably referred to. In J. Pattammal v. The Collector of Madras and another : AIR1972Mad158 , the Full Bench of the Madras High Court has observed as follows :
'The moment an award is made by the Collector, he is entitled as of right to take possession. The right of the Collector does not depend upon whether he has paid the compensation awarded by him. It follows, therefore, that interest is required to be paid under section 34 not as a kind of compensation for taking possession, but because the amount of compensation to which the claimant is entitled is not paid or deposited on or before taking possession. The implication is that interest is related to the amount of compensation and not to deprivation of possession, which as a matter of right follows the moment an award has been made. When the matter comes in the form of an appeal before Court under section 54 of the Act, we fail to see why a different result should follow merely because section 28 makes the power of the Court to allow interest on the excess compensation granted by it discretionary. In fact, but for Raghubans Narain v. Government of Uttar Pradesh, A.I.R. 1967 S.C. 465, we would be inclined to think that the power under section 28 should not be read in any way differently from the power under section 34, notwithstanding the use of the word 'may' in section 28. Anyway, the discretion contemplated by section 28 is judicial discretion which naturally cannot be exercised arbitrarily. Once it is found that a claimant is entitled to a sum of money and for its payment on or before the date of delivery of possession and there is a default, he will, more often than not be entitled to interest thereon. There may, however, in a few cases, be circumstances which may indicate that the claimant is not entitled to interest. It is perhaps for this reason the Supreme Court was inclined to think that the power under section 28 was discretionary. Even so, we think that in the absence of special reasons, where excess compensation has been awarded by the Court, interest thereupon cannot reasonably be denied. In our opinion, interest under section 28 is not awarded as part of the compensation for acquisition of land, but only as interest on the amount of compensation for the said land, which the owner is entitled to payment when possession is taken but which the Collector has failed to pay on the due date.'
With great respect, we fully concur with the view taken and the observations made by the learned Judges of the Madras High Court.
The Patna High Court had occasion to examine the similar question in a slightly different context. In Smt. Siawati Kuer v. The State of Bihar, : AIR1972Pat294 , it was held by the Patna High Court that the statutory compensation allowed under section 23(2) of the Act does not form part of the compensation awarded. While referring to the statutory compensation, no doubt the Court had in mind the requirement of solatium contained in section 23(2) of the Act; but as stated above, the principle relating to solatium stands on the same footing as the principle relating to interest although the word `may' is used in section 28 of the Act. The word 'may' is used in the context of the obligation of the Court and being a judicial obligation it can never be arbitrary. For all practical purposes, the grant of interest will be the rule and depriving of interest will be a matter of exception to be confined to special circumstances. That apart, the interest becomes payable only when the amount of enhanced compensation becomes crystalised. Since section 28 contains a direction to the Court in the similar manner in which section 23(2) of the Act contains a direction for payment of solatium and since a specific demand for solatium is not necessary, to our mind, specific demand for interest is likewise not necessary so far as the reference to the Court under section 18 is concerned.
It is unnecessary to multiply the authorities. We called upon the learned Government Pleader to cite any single authority which has taken a contrary view and has held that unless interest on the enhanced compensation to be awarded by the Court was asked for in the application for reference, the Court had no jurisdiction to award such interest. The learned Government Pleader was unable to put his finger on any authority to that effect. We are not surprised because, to our mind, the contention is untenable.
33. In the context of the peculiar circumstances mentioned above, we are required to allow not only the cross objections filed by the respondent but also the appeal filed by the Government. The Government's contention that the rate of interest of 6% awarded by the Court is contrary to law has got to be accepted and it has to be held that the rate of interest on the enhanced amount of compensation shall be paid by the Government to the claimant at the rate of 4% per annum and not at the rate of 6% per annum as required by the lower Court. The order passed by the lower Court to that extent is modified. But at the same time we also set aside the order passed by the lower Court directing that the interest on the enhanced amount of compensation shall be paid only from the date of application for reference. We direct that the interest at the rate of 4% shall be paid by the Government from the date when possession of the lands in question was actually taken by the Government from the claimant or from anyone else on behalf of the claimant. We make it clear that so far as those lands, possession of which was taken on 24-10-1969, are concerned the claimant who is deprived of interest for all those years from 1969 to the date of payment would no doubt be benefited by virtue of the grant of interest even @ 4%. So far as the remaining lands are concerned, all that we know is that the possession was taken after the date of the award ; but it is not clear as to on which exact date it was taken and particularly whether the possession was taken before the date of the application for reference or after that date. In the later case the claimant may find himself somewhat at a losing end so far as interest on compensation for these lands is concerned. But whatever that may be, the order shall be that the claimant shall be entitled to interest on the enhanced compensation in respect of all the lands from the date when the possession of the land is taken from the claimant. Except for the modification in the rate of interest as mentioned above, the appeal filed by the Government fails and the same is dismissed with costs. So far as the cross objections are concerned, they are allowed to the extent that the claimant shall be entitled to interest on the enhanced sum of compensation from the date of taking of possession till the date of payment of enhanced compensation to him but only at the rate of 4% per annum. However, there shall be no order as to costs as regards the cross-objections.