Jaganmohan Reddy, J.
1. This appeal and the cross-objections are against the judgment and decree of the Subordinate Judge, Masulipatnam in O. P. No, 18 of 1957 awarding Rs. 90,000/- as compensation together with 15% solatium for lands and buildings known as the Lady Ampthil Government Secondary School for Women. Masulipatnam, acquired under the Land Acquisition Act, (hereinafter called 'the Act') pursuant to the notification published on 7-10-1955 under Section. 4(1) of the Act. The Revenue Divisional Officer, Bandar (Masulipatnam) awarded compensation on the basis of capitalisation of rent of Rs. 200/- per month, fixing the compensation at Rs. 76,250/- including solatium. Inasmuch as the appellant was aggrieved, he asked for a reference under Section 18 of the Act claiming Rs. 1,65,678/- as the market value of the land to which the appellant is entitled.
2. The appellant is the Church Mission Society represented by E. H. Hambcrger, Dioceasan Treasurer and Power of attorney-holder. The Society was the owner of two pieces of land bounded by fencing. The inner compound is comprised of land Acs. 6-10 cents, while the outer compound is a vacant land comprised of Acs. 5-49 cents. The acquisition in question relates to the area of the entire inner compound together with the buildings plus the area of 1775 sq. yds. from out of the outer compound. The total land thus acquired is Acs. 6-52 or 31,557 sq. yds. At this stage, it may be stated that there were prior negotitions in respect of the acquisition of this land and it would, therefore, be pertinent to state the facts relating thereto. The Mission Society the appellant, leased the buildings on rent in or about 1941 fur a favourable rent of Rs. 200/-, probably having regard to the fact that the Government was running a school for girls and they themselves had a similar institution previously. Some years thereafter the Society decided to sell those properties and were receiving substantial offers by purchasersintending to develop it into building sites, but the Society was keen on selling it to the Government, because it was running a school. The Government evinced interest in the purchase of these buildings and negotiations started between them. The appellant had got a valuation made by a retired. Superintending Engineer (C. W. 1) one Sri Ganaprakasam in order to obtain the necessary and requisite sanction from its Society in London. The Government in its turn had a valuation of the building made in 1951 through its subordinates, the Tahsildar and the Executive Engineer, P.W.D. According to this valuation Ex. B.6, the land of the inner compound as it is called was valued at Rs. 3/- per sq. yd. while the land o the other compound valued at Rs. 2-8-0. The buildings some of which were recommended for purchase and the' others not so-recommended were aso valued. The total value-of the lands and the buildings according to Ex. B.6 is Rs. 1,93,516/- which was rounded to Rs. 1,93,500/-, The basis of the Tahsildar's valuation of the land is set out in Ex. B.4 dated 20-4-1951. which is a letter from the Tahsildar, Bandar, to the Asst. Enigneer, P. W. D. Bandar, and it would appear that he was basing this rate per sq.yd. on a sale deed No. 1082/51 of 19-4-1951 of lands situated within 100 yards from the site inquest ion. The Executive Engineer also seems to have valued these lands about the same time. The-net result of this valuation is stated in Ex. B.6. Thereafter the Revenue Divisional Officer, Bandar, by his letter L. Dis. 13302/54 dated 27-11-1954 wrote to Mr. B. L. Long Ford Attorney for Church Missionary Trust, intimating to him that the Government had sanctioned the acquisition of the site-and the buildings in which the present Lady Ampthil Government Secondary Training School for Women is situated and that the P.W.D. had estimated the value of the site and the buildings at Rs. 1,93,500/-. He enquired of the Trust whether the amount was acceptable to it. Thereafter he stated thus :
'I am awaiting the application together with land plans and schedules from the Executive-Engineer, Krishna Eastern Division, Vijayawada as directed in Collector's D. Dis. 24396/54 dated 10-10-1954. I shall initiate Land Acquisition Proceedings on receipt of the application from, the Executive. Engineer, Krishna Eastern Division, Vijayawada whom you may contact if necessary.'
By this letter, the Revenue Divisional Officer had intimated the decision of the Government to acquire-this land, that the value of the land and buildings-was fixed at Rs. 1,93,500/- which was the price-at which the Government were offering to acquire-the property and enquired whether that offer was-acceptable. He further intimated that he would initiate acquisition proceedings which was in the contemplation of the officer, notwithstanding the fact that the offer might be accepted by the Trust. In the circumstances, we can only think that the proceedings which he ultimately initiated were formal in order to give legal validity to the acquisition. In reply to this letter, the trustees replied that the estimated value of the P. W. D. at Rs. 1,93,500/- is acceptable to the trustees. He further stated that he had already consulted the members of the local property committee and thatthey had agreed that the valuation be accepted. He further stated thus:
'I think therefore yon may consider the figure as agreed. I will take immediate steps to seek formal approval by the Trustees and will communicate with you again as soon as I have something definite.'
Thereafter by his letter dated 15-2-1955 the Trustee communicated formal acceptance in these terms: 'I am pleased to able to inform you that Inow have the certified copy of the necessary resolution of the trustees, enabling me as their Attorney to complete the sale of this property to Government with the figure of rupees one lakh ninety.three thousand five hundred only (Rs. 1,93,500) as the agreed value for the purposes of transaction. With the General Power of Attorney already held end this certified resolution I am now fully empowered to execute whatever documents may be needed and to complete the transaction as soon as you are in a position to do what is needful onyour side.'
3. It appears thereafter that the Governmentchanged its mind and decided only to acquire the inner compound and about 1700 and odd sq.yds.of the outer compound and not the entire outercompound as originally contemplated and published a notification under Section 4(1) as stated already,on 7-10-1955. During the proceedings before the Revenue Divisional Officer, the trustee raised severalcontentions, but these contentions were negatived and the Tahsildar's report and the sale deed mentioned therein were ignored. The Land Acquisition Officer proceeded to award compensation only on the capitalisation basis of the rent and adopted Rs. 300/- suggested by the Collector as the basis of 20 years purchase, because the buildings were old. He arrived at the figure of Rs. 76,250/-. The Subordinate Judge also rejected the contention thatthe market value should form the basis of the acquisition and ignored the evidence led on behalf of the appellant, He too based his decree on the basis of rental value, but increased the compensation by Rs. 27,250/- including the solatium, but did not give any interest, which is also one of the objections raised before us.
4. In this appeal, the appellant has claimed the balance of what was awarded and what was claim-ed by it, namely, Rs. 1,65,678/- minus Rs. 1, 03, 500/- the amount allowed by the low-er Court: Rs. 62,178/- with interest at 4% amounting to Rs. 2,725/- making a total of Rs. 64,903/-. The Government challenges the decree of the lower Court in the Cross-objections and wanted the amount awarded by the Land Acquisition Officerto be confirmed.
5. The simple question in this case is whatis the basis for fixing the compensation? It is the number of years purchase of the rental value or the market value of the land and building? Now it is contended by the learned Government Advocate Mr. N.V.B. Shankara Rao that notwithstanding the fact that there may be evidence of com-parable sales of land, where however the propertyconsisting of laud and buildings fetches rent, it is only the capitalised value of the land for a number of years that should be the basis, whileMr. Balaparameswari Rao on the other hand contends that the basis for fixing the compensation on the capitalised value is only resorted to where there are no comparable sales or other evidence of the market value. At any rate, where there is land and buildings situate in an urban area where the price of land is high or is siutate in the built up area, even though the buildings have been let out in rent, capitalisation method ought not to be adopted. In order to decide between these rival contentions, it is first necessary to determine whether there are any comparable sales or other evidence. We have already referred to the report of the Tahsildar, Ex. B.4 and the valuation based thereon Ex. B.6. That report has referred to a sale deed of 1951. The number of the sale deed for 1951 adverted to in that letter shows that the land in question is situate five miles away from Masulipatnam in the village or Mukkollu and is not obviously the same land as referred to by the Tahsildar. The date of the sale deed is also not the same and consequently that sale was not taken as an indication of comparable value.
An application (C.M.P. No. 3816 of 1963) for admission of additional evidence has however been made in this Court supported by an affidavit in which it is stated that the reference in the Tahsildar's letter of 1951 is a mistake and actually the sale deed No. 1082 is the one executed in 1950 and not in 1951. Not only the number of the Sale deed tallies, but also the area mentioned and the situations described all accord with the description given by the Tahsildar of the Sale deed mentioned in his letter Ex.B-4. For these reasons tbe additional evidence is sought to be admitted. The learned Government Advocate opposed this petition, but was unable to support that objection on any substantial ground. A copy of the real sale deed was not in the possession of the appellant at the time of the trial before the Court and it is only after considerable effort that the mistake was discovered and the appellant is in a position to say that the reference to the year 1951 in tbe Tahsildar's letter is a mistake and that Ex. B. 16 is not the sale deed referred to by him. This would amount to discovery of new material which cannot be said to have been in the possession of the appellant, nor could it be said that he could have discovered it by any diligency. The appellant Tike the Court was only guided by the reference in the letter and could not at that stage think that it was a mistake. In the circumstances we have no hesitation in allowing this application for additional evidence.
The sale being a certified copy of the registration extract is admissible in evidence and there being no question as to its genuineness, its authenticity and proof is undoubted. This sale deed shows that the land in question amounted approximately to 666 sq. yds. It hsa a double storeyed building, which according to the Tehsildar was stated to be Rs. 8,232/-, The sale consideration was for Rs. 12,000/-, so that if the value of the building as stated to him probably by the vendees is deducted, the value of the land would come to Rs. 6/- per yard. For this reason the Tahsildar expressed the opinion having inspected the site and the building covered by the document that the building was of a higher value. He accordinglyfixed Rs. 3/- per sq. yd. for the site occupied by the building and Rs. 2-8-0 per sq. yd. for the remaining site. This rate seems to have been accepted by the Revenue Divisional Officer and the Executive Engineer and seems to have formed the basis of the offer made by the Revenue Divisional Officer to the appellant. The learned Government advocate raised some doubt as to whether the land, the subject matter of the sale deed mentioned in Ex. B. 4 was situate in the neighbourhood of the acquired land. But that doubt has been cleared by the documents produced by the appellant by tbe certified copies of Municipal registers relating to the new and old door Nos. and the number of the ward. A comparison of this data with the registered lease deed of the acquired land shows that both these lands are situated in Ramanajdupet in Ward No. 17 of Masulipatnam.
Even the door numbers show that they are near about. Apart from this, there is another sale deed, Ex. A. 37 which was already on record. This also shows that an extent of 666 sq. yds. was sold for Rs. 2,665/-. This site is also situate in Ramanaidupet and is in Ward No. 17. The document itself in Telugu shows that the old Ward is No. 5 and the new Ward No. is given as 17. There was misapprehension in the mind of the learned Advocate for the Government that this is not situated in the same ward, a mistake which probably is responsible for the lower Court in. not giving sufficient weight to this document. According to this sale deed, the rate per sq. yd. would be Rs. 4/-. No doubt the date of the sale is 1957 about two years after the notification. No doubt this may not be a precise indication of the actual value of the land on the date of the notification but nonetheless, it cannot be completely ignored, having regard to the facts and circumstances of the case. Firstly^ it cannot be said that the land value in the surrounding area had increased by reason of this acquisition, for the Secondary School for women was already in existence. Even assuming it to have increased somewhat, the value itself is higher than what was existing in 1951. We are therefore not precluded from taking this into consideration in determining the value on the date of the notification and in coming to the conclusion that the sale deed mentioned in Ex. B. 4 gave an indication of the value of the neighbouring land in 1951. Even if there is some increase in 1955, we can say that the value of the land was between Rs. 3/- and Rs. 4/- and probably in 1955 it is less than Rs. 4/-and more than Rs. 3/-. This sale deed also justifies our conclusion that there were comparable values.
Apart from this, there is the evidence to which we have already referred, to an offer and acceptance by the Government and the appellant and though no formal agreement was drawn up and entered into, it does not preclude the Courts from giving due weight to that evidence as indicating the market value of the property which in some cases is a better guide. After all, even tbe award of the Land Acquisition Officer is only an offer and is an administrative act. If the owner accepts that that is the end of the matter. But if be does not accept it and asks for the case tobe referred, then it will be for him to show that the value of the land is, just in the same way as a plaintiff when he comes to Court has the burden of establishing his case. All that the appellant in this case is seeking is to give effect to that offer which was accepted by it and to have the lands and the buildings valued at that rate. It appears to us that the appellant's attitude is very reasonable.
In so far as the legal position is concerned, it is sufficient just to notice a few cases on this aspect of the matter. Their Lordships of the Privy Council in Fort Press Co. Ltd. v. Municipal Corporation of the City of Bombay, ILR 46 Bom 767: (AIR 1922 PC 365) were considering the effect of an agreement fixing the value of the property acquired by them prior to the notification and subsequent thereto. It was contended by the Municipal Corporation of the City of Bombay for whom the land was acquired that there being an agreement between the Municipality and the vendors-defend ants, that contract is binding on the vendors in terms of the letter from the plaintiffs dated 12th September, 1947, accepted by the defendants and that the defendants were not entitled to claim in the proceedings under the Land Acquisition Act any sum for compensation other than that agreed by the contract and if the Collector awarded more than that sum the excess would belong to the plaintiffs and if he awarded less the plaintiffs were bound to pay the full agreed sum. The contention however does not by reason of this agreement challenge the jurisdiction of the Collector to take proceedings, under the Land Acquisition Act. This is also what their Lordships of the Privy Council observed. But in so far as the foundation of the appellants' case was concerned, their Lordships observed at pages 770-771 of the said decision (Bom. LR): (at p. 366 of AIR) than it rests on the assertion that when once proceedings for compulsory acquisition have been set on foot, the interested parties cannot come to any binding agreement regulating the amount of the purchase price. After noticing the contention they observed as follows :
'There is nothing whatever in the Land Acquisition Act itself to negative any such right. If the parties before the institution of the proceedings contemplated by that Act, chose to agree, they were perfectly competent to do so and there is nothing whatever in the words of the Act to suggest that this power is thereby taken away. The Act certainly does not directly effect such a remit, nor can their Lordships ascertain any reason why the fact that compulsory powers have been invoked in order to secure property from unwilling vendors, should be regarded as denuding all parties of rights they possessed before the proceedings began.'
6. It was also further observed at p. 771 of the same decision (Bom LR): (at p. 366 of AIR) as follows :
'Their Lordships think that the agreement made which is now established beyond dispute, is an agreement which bound the parties and that) the High Court exercising their appellate jurisdiction were right in the view they took.Their Lordships' opinion is not intended to interfere with the jurisdiction of the Collector.'
The facts in the above case were that certain negotiations were taking place between the plaintiffs and the defendants, but when they were unsuccessful, the plaintiffs moved the Court to acquire the same. Thereafter a notification was published and proceedings under the Land Acquisition Act commenced. When these proceedings were pending, the parties entered into an agreement and that proposal was accepted and approved on behalf of the Municipal Corporation of Bombay. This alteration in the position of the parties was brought before the Collector in due course, but at an adjourned hearing on the 27th January 1918, it was denied on behalf of the appellants that any agreement had been reached, and the Collector accordingly further adjourned the proceedings, in order that, the parties might take the necessary steps to settle whether or not a bargain had been made. These stops were taken with promptitude by the respondents, who instituted proceedings in the High Court of Judicature at Bombay on the 12th March 1918, asking for a declaration that there was a contract and for a very large number of points of ancillary relief. They succeeded before both Courts. It is against this decision that the appeal has been filed before their Lordships of the Privy Council. The Privy Council held that the parties who were competent before the proceedings to agree what they thought was the right price for the property, remain competent after the proceedings and an agreement so made is capable of being enforced in the courts in the ordinary way.
In Narayana Gajapathiraju v. Rev. Divl. Officer, AIR 1939 PC 98, the Privy Council again considered the question of the effect of the fixation of value in friendly negotiation adopting the observations of Lord Johnston in Inland Revenue Commr. v. Clay, (1914) 3 K B 466 observed as follows :
'In the present case the land must be valued not at the sum it would be worth after it had been acquired by the Harbour Authority and used for anti-malarial purposes, but at the sum that the authority 'in a friendly negotiation' (to use Lord Johnston's words) would be willing to pay on 13th February 1928, in order to acquire it for those purposes.'
In Surendra Nath v. State of Bihar, AIR 1962 Pat 406 after referring to the judgment of the Privy Council in ILR 46 Bom 767: (AIR 1922 PC 365) the Bench held that the prior private agreement in respect of the land proposed to be acquired between the parties should carry more weight in determining the market value of the land under Section 23 of the Act than a value calculated somewhat arbitrarily on the basis of the deeds of transfer in respect of pieces of land, which show highly varying sale rates. These decisions support the view we have taken namely that an agreement can be arrived at between the parties whether binding or in a friendly negotiation in respect of the price at which a certain property belonging to the claimant is proposed to be taken. Tbe Privy Council has even gone to the extent of authoritatively laying down that that the parties can do before the proceedings are started can also be done after the proceedings have commenced and if an agreement has been arrived at notwithstanding the jurisdiction of the Collector, to take proceedings under the Land Acquisition Act, which will be binding upon them, effect can be given to it. This is an important principle which gives a right to negotiate an agreement between the parties, in spite of the fact that proceedings have been taken under the Land Acquisition Act and that any agreement arrived at between them either prior to or subsequently can form the basis for valuation.
In this case, not only are there comparable sales, but in so far as the value of the land is concerned, there is only agreement as to the rate at which the land should be valued in 1951. Though that agreement may not be binding upon the parties for the reason that it was not reduced to the form required by the Constitution, nonetheless it indicates what the Revenue Divisional Officer, who is generally called upon to fix the compensation and make an offer was prepared to offer even before the proceedings. We have little doubt that this will also have to be taken into account along with the comparable sales. Even otherwise we would have considered the agreement and the offer by the Revenue Divisional Officer as a basis.
In so far as the learned Government Pleader's other contention is concerned, namely, that the capitalisation basis is the only basis where a land with houses is being acquired, we have not been referred to a single case in which it has been laid down that notwithstanding the evidence of comparable sales and other evidence from, which market value could be ascertained, that merely because a property was being let out, capitalisation should be the only basis for fixing the value of that property. On the other hand, the cases relied on by him are clearly distinguishable. Rathanamasari v. Secy. of State 44 Mad LJ 132: (AIR 1923 Mad 332) was cited, but a reference to p. 134 (of Mad L J): (at p. 333 of AIR) of the decision would show that their Lordships at the very outset pointed out that there is little evidence on record to enable them to come to a satisfactory conclusion as to the market value of the properties. Similarly, in Ismailji v. Dist. Dy. Collector, Nasik, AIR 1933 Bom 37 it was pointed out that the evidence relating to the value of the land was extremely meagre and in the circumstances capitalisation was adopted as the basis. In the same report, a reference has been made to another case, namely Asst. Development Officer v. Tayaballi, AIR 1393 Bom. 361. But this case also is not an authority for the proposition advanced by the learned Government Pleader. On the other hand, it was held therein as follows :
'In determining the market value of land to be acquired by Government post-notification transactions should not necessarily be ignored altogether. All transactions must be relevant which can fairly be said to afford a fair criterion of the value of the property as at the date of the notification.
If any considerable interval has elapsed the Court will naturally attach little or no value to subsequent sales, just as transactions long prior to the notification will usually be discarded.'
But Mr. Bapalarameswari Rao, on the other hand, has cited the decision of a Bench of this Court inDt. Wel Officer Guntur v. Ramakrishna Somaya-julu, : AIR1963AP328 in which after noticing the several cases including what is known as Chemudu case, (1939) 2 Mad LJ 451 66 Ind App 104: (AIR 1939 PC 98) Satyanarayana Rao J. (as he then was) observed as follows:
'The principle that in the case of land which, can reasonably be put to future use as a building site, it must be evaluated not on the basis of its existing value as a piece of agricultural land but with the future potentiality to it, is too well settled to be the subject-matter of any controversy at the present date.'
This passage clearly negatives the contention that in spite of the fact that there is available material from which the market value can be fixed, the capitalisation is the only basis on which compensation should be fixed. When the potential value: of the land as building site cannot be ignored) it follows that land which has already acquired the value of the building site, that value cannot be accepted, nor can the acceptance of the proposition adumbrated by the learned Government Pleader lead to anything but incongruous results. For instance take the case of three plots of land of 1,000 yds. each situate adjacent to one another and on one of which, there is a building which was leased out actually earning a rent of Rs. 10/- a month which the other two are vacant sites. Of the two vacant sites, one is sold by owner to Government at Rs. 5/- a yard. The other vacant land is soon after acquired by the Government for which ihe compensation had to be awarded at the rate of the adjoining land. Subsequently, a few months thereafter the other land and the building are also acquired by the Government. In these circumstances could it be contended that merely because that land has a small building, the compensation payable is only on the capitalised value of about Rs. 2,500/- or even Rs. 3,000/-. If this contention were countenanced, what it would amount to is, that valuable land will depreciate if a building is built thereon and is let out, Such cannot be the basis of determining the compensation under Section 23 of the Land Acquisition Act which essentially fixes the market value as the value of the property acquired. This market value has been stated to be the price at which a willing per-chaser will purchase and the price at which a willing seller will sell. It appears to us that when there are comparable sales or other evidence of determining the market value of the land the existence of a building or that is earning some rent should not be taken advantage of to reduce the market value (to which it would otherwise fetch). In Subhadrayyamma v. R.D.O. Rajahmundry, : AIR1963AP466 another Bench of this Court consisting of Umamaheswaram, J. and Chandrasekhara Sastry, J., noticed that the learned Judges of the Madras High Court had pointed out in 44 Mad LJ 132: (AIR 1923 Mad 312) that a plot consisting of a house and a garden is much more satisfactorily valued by capitalising the rental in the absence of other evidence which would give a more satisfactory value. They went on to observe as follows :
'But there might be cases in which the rental value docs not afford a true criterion of thevalue of the property when the house is situated in an extensive compound. In appeals Nos. 46 and 48 of 1950 and C.R.P. No. 754 and 755 of 1950 D/- 12-1-1955. 1955 Mad WN (short-notes) 36 the learned Judges held that where the subject-matter of acquisition was land of an extent of 6 acres and 37 cents situated in the heart of the residential area of the municipality together with a bungalow, garage and cut-house (which occupied about 27 cents), the proper method of valuing the property would be to treat the property as vacant land and then value separately the building materials on it. The valuation of the property i.e., the building and vacant site must depend upon the particular facts and circumstances of each case.'
We respectfully agree with the observations of the Madras High Court in the above appeals and C.R. Ps.. as also the observations in the above Bench decision which fully accord with our views. In our view, the capitalisation basis cannot be accepted, where there is other evidence of determining the market value of the property. In this case we have already indicated that there is sufficient material and consequently the basis upon which the learned Subordinate Judge awarded compensation cannot be sustained. We propose to value the land and the inuer compound at Rs. 3/- and the 1700 and odd sq. yds. of the outer compound at Rs. 2-5onP. per sq. yard. We also take into consideration that the buildings which are old and which were valued in 1950 or 1951 must have depreciated by the time the notification was published in 1955. Mr. Balaparameswari Rao is prepared to have the value of the building depreciated by 25% while the Government Pleader vehemently contends that it should be depreciated by 50%. The justice of the case will be met if the depreciation is adopted at 37 1/2% of the value in 1951. The value in 1951 is stated to be Rs. 38,387/-. In this view, at Rs. 3/- per sq. yd. for 29,782 sq. yds. the value would be Rs. 89,346/- and at Rs. 2-gonP. per so. yd. for 1775 sq. yds. of the outer compound the value will be Rs. 4,437-50 nP. The total value of the land is Rs. 93,783-50 np. To this may be added the cost of the value of the buildings as depreciated by 37 1/2% which amounts to Es. 23,991-87 nP. The arithmetic of these figures has been accepted by both parties as correct. The total value of the property, therefore, which the appellant is entitled to, will amount to Rs. 1,17,775-37 nP. To this will be added 15% disturbance charges or what is known as solatium. The appellant also be entitled to interest at 4% from the date of non-payment of of rent or award, whichever is earlier.
7. The appeal is accordingly allowed and the decree of the lower Court is modified. The appellant and the respondents will give and take proportionate costs in the appeal. The cross-objections are dismissed with costs.
8. The interest on enhanced compensation shall be payable from the date of the Award inasmuch as the possession as a tenant must be deemed to have changed into possession of the Government as owner from that date, till the date of deposit or realisation as the case may be.