Lindsay and Sulaiman, JJ.
1. We have decided that it is expedient that this case should be referred for decision to a Full Bench.
2. The case first came before us as first appeal No. 109 of 1923 and was argued and decided on the assumption that the law to be applied was that laid down in the Land Acquisition Act (Act 1 of 1894).
3. On an application for review of judgment being made on behalf of the respondent, the Secretary of State for India in Council-it became apparent that what was really under appeal was the award of a tribunal constituted under the U.P. Town Improvements Act, 1919 (U.P. Act No. 8 of 1919).
4. In Section 58, Clause (d) of that Act as originally enacted it was provided that the award of such a tribunal should be final. But under the U.P. Town Improvements (appeals) Act of 1920 (Act 3 of 1920) it is now declared by Section 3 that a right of appeal exists analogous to the right of second appeal conferred by Section 100, Civil P.C.
5. The U.P. Town Improvements Act has for the purposes of compulsory acquisition modified certain provisions of the Land Acquisition Act (Act 1 of 1894). Some of these modifications are set out in the Schedule to the Act and the particular modification with which we are concerned here is contained in para. 10, Clause (3) of the schedule which introduces an alteration into Clause 1, Section 23, Sub-section (1), Land Acquisition Act, under which in acquisition proceedings the Court must take into consideration:
The market value of the land at the date of the publication of the declaration relating thereto under Section 6.
6. In para. 10, Clause (3) of the Schedule above mentioned it is provided that the expression 'market value of the land' shall (for purposes of the U.P. Town Improvements Act) be the market value according to the use to which the land was put at the date with reference to which the market value is to be determined under that clause. This enactment, therefore, indicates a departure from the ordinary principles applied in the determination of market value under Act 1 of 1894. Those principles have been laid down in varying language. Thus it has been said in many cases that the fairest and most favourable principle of compensation to owners is to estimate the market value of the property
not according to its present disposition, but aid out in the most lucrative and advantageous way in which the owners could dispose of it.
7. Again it has been laid down that in assessing compensation the probable use to which the land may be put is necessarily an element to be taken into consideration so that, for example, land which may probably be used for building purposes cannot be valued on the same basis as merely agricultural land. Potential value, e.g., suitability for any particular purpose, should be taken into account in determining market value.
8. In deciding the appeal we followed the statement of the law as laid down by the House of Lords in Fraser v. City of Fraserville  A.C. 187, p. 194, thus:
The seller is entitled to the value to him 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 the purpose for which the property is compulsorily acquired.
9. This passage was cited with approval in the case of Narsingh Dass v. Secretary of State .
10. Now, it would seem that under the special legislation we have referred to, it in not permissible to take into account any potential value of the land and a Court is precluded from making a valuation based upon the most advantageous disposition of the land. Such was the view of a Bench of the Calcutta High Court in dealing with a cognate enactment, viz., the Calcutta Municipal Act (Bengal Act 3 of 1899), Section 557, Sub-sections (c) and (d) under which it is provided that the market value is to be deemed 'the market value according to the disposition of the land or building' at the material date.
11. In Manindra Chandra v. Secretary of State  41 Cal. 967, the Court held that the meaning of this provision is that when land is compulsorily acquired any use to which the land may be put in future should not be taken into consideration in determining its value. In the present case the law as amended by the special legislation has to be applied to the following facts. An area of land, 5 bighas, 11 biswas, and 1 biswansi belonging to Makhan Das has been compulsorily acquired by the Cawnpore Improvement Trust. For purposes of compensation this area has been divided into three portions: one leased to a mill, a second let out in small building sites to labourers who have erected huts to live in and a third portion, measuring 2 bighas, 10 biswas, 17 biswansis-vacant land on which there are a few scattered trees.
12. It is with reference to this third portion that the difficulty of applying the Act arises. At the material date it was being put to no use whatsoever. According to the owner this land has never been applied to agricultural purposes since he got possession of it some 30 years ago. The Land Acquisition Officer, however, treated this portion as agricultural land and has assessed compensation accordingly. This award has been sustained by the tribunal.
13. Prima facie the award is wrong for the land was not being used for agriculture at the time of notification: it was not being used at all. In these circumstances how is the law to be applied
The market-value of the land shall be the market-value according to the use to which the land was put
but the land was being put to no use.
14. We may mention that in our judgment in the appeal we came to the conclusion that the land in dispute lay in what might properly be described as the industrial area of Cawnpore. The land has a frontage on the main road running from Cawnpore to Kalpi, and the evidence shows that it is in a neighbourhood where the land has been used for the manufacture of bricks and pottery. In fact the sale-deed under which Makhan Das acquired the land in 1896 speaks of it as a grove known as pazawawali (i.e., brick-kiln grove), and the award of the Acquisition Officer shows that much of the land round about has been devoted to the making of brick and pottery. Speaking of the particular area in dispute, Abdul Majid, a surveyor in the employment of the trust, says in his evidence:
Some portion of the land was level and in some portions there were pits. They were ordinary pits. It did not appear that the earth was dug out for a kiln.
15. It is difficult to see, therefore, how it is possible to treat the land as agricultural land. But if not treated as such for purposes of compensation, how is it to be treated when it is shown that at the time to be regarded it was not being: used for any purpose. We direct that the record be laid before the Hon'ble Chief Justice for the constitution of a Full Bench to determine the questions raised above, namely, the interpretation of Section 23, Sub-section (1) Clause 1, as amended by the special legislation referred to, and the application of the law to a case in which the land being acquired was being put to no use at the material date.
16. We think it proper to note that the tribunal, whose decision is now under appeal was presided over by Mr. Ashworth (now Mr. Justice Ashworth).
17. There are two questions referred to this Full Bench for decision, namely:
(1) What is the correct interpretation of Section 23, Sub-section (1), Clause 1, Land Acquisition Act (Act 1 of 1894), as amended by para. 10, Clause (3) of the Schedule to the U.P. Town Improvements Act, 1919 (U.P. Act 8 of 1919)? And (2) how the law as so interpreted is to be applied to a case where at the material date the land to be acquired was being put to no actual use
18. As regards the first question it is at once apparent that the amendment above referred to materially affects the scope of Clause 1, Section 23, Sub-section (1). as originally enacted for the market-value of the land which has now to be taken into consideration is the
market value according to the use to which the land was put at the date with reference to which the market value is to be determined under that clause.
19. In the cases to which Section 23, Sub-section (1), Clause 1, has been applied it has always been held that the potential value of the land should be taken into account. To quote from the judgment of the House of Lords in Fraser v. City of Fraserville  A.C. 187:
The seller is entitled to the value to him of the property in its actual condition at the time of its expropriations with all its existing advantages and with all its possibilities, excluding any advantage due to the carrying out of the scheme for the purpose for which the property is compulsorily acquired.
20. These principles cannot be applied to cases arising under the U.P. Town Improvements Act for, as pointed out, the expression 'market value' has under this Act a narrower meaning. Market value is to be assessed in accordance with the use to which the land is being put at the date when the notice issues under Section 36 of the Act. It is therefore not possible for the purposes of this Act to take into account any potential value of the land; no valuation can be made with reference to what has been called 'the most advantageous disposition of the land.' The consideration of potential value being excluded, the question is what factors can be considered when assessing the market value according to the use to which the land was put at the material date.
21. The basis of compensation should be the value to the owner of the date of the notification, and prima facie this would depend upon the profit which on that date the owner is deriving from the land, and that profit could be estimated from the use to which, at that point of time, the land was being actually put. No great difficulty could arise in dealing with a case where, at the material date, the land is actually being used. But what is to be said in a case where on this date, the land is not being used for any apparent purpose which can bring in profit to the owner? Is it to be taken that in the absence of immediate profit the land is of no value to the owner, that its market-value is nil and that, in consequence, the Improvement Trust can expropriate the owner without paying him compensation
22. That is a conclusion to be avoided, if possible, for it involves the inference that the legislature has conferred upon the trust authorities a power of confiscation. There is no express provision to the effect in the Act. It remains to be considered whether the existence of a power of confiscation must be inferred by necessary implication.
The market-value of the land shall be the market value according to the use to which the land was put at the date with reference to which the market-value is to be determined under that clause.
23. The language of the section is rigid. The governing words are 'according to the use to which the land was put, etc.' The determining factor is the actual use of the land at the date in question, and any use of the land prior to that date is to be disregarded.. In view of this phraseology it appears to be impossible, for the purpose of assessing the market value to resort to any other facts such, for example, as the history of the land, its physical features or its situation; for while data of this nature might otherwise be of weight as indicating the value of the land to the owner, they could only be of service in estimating a potential value based upon the use to which the land might most profitably be put. But the section expressly excludes all consideration of potential use by laying down that the determining factor in the assessment of the market value is the actual use to which the land is being put on the date of the notification: and from this the conclusion appears to be that either intentionally or through inadvertence the legislature has declared that in certain conditions the market value of the land on the material date may be nil.
24. It need hardly be pointed out that such an enactment is fraught with much possible hardship to owners of property which has become subject to the operation of the Act. Lands of great value may from a variety of causes fall temporarily out of use. Agricultural land may have to be left fallow for a season or two in order that it may recover productivity. On the owner of a valuable site acquired for a building scheme may have to suspend the execution of his project in order, for example, to contest in Court a claim to a right of way over the land. In either case the owner is liable to be expropriated without compensation if a notification issues under the Act while the land is not being put to actual use. It is difficult to imagine that cases of this kind were in contemplation when the Act was passed, but the language of the Act, as it stands, must, if followed, lead to these results. It must be left therefore to the legislature to declare whether it was intended to invest the Improvement Authorities with this power of confiscation or to amend the Act so as to avoid the results above mentioned.
25. In my opinion we must answer the two questions referred to the Full Bench as follows:
(1) The correct interpretation of Section 23, Sub-Section (1), Clause 1, Land Acquisition Act, as amended by para. 10, Clause (3), of the Schedule to the U.P. Town Improvements Act, 1919 (U.P. Act 8 of 1919) is that the market value of the land to be acquired is to be calculated exclusively in accordance with the use to which the land is being put on the date on which notice issues under Section 29 or Section 36, U.P. Town Improvements Act; and (2) whore on such date the land to be acquired is not being put to any use its market value may be nil.
26. I agree.
27. I agree.
Lindsay and Sulaiman, JJ.
28. Then decided the case in accordance with the principles laid down by the Full Bench.