1. In this case we are concerned with the compensation which should be awarded for requisitioning property under Section 19 of the Defence of India Act read with Rule 75-A of Rules framed under that Act The question, in short, is whether in assessing compensation for requisitioned property 'fair rent' as fixed under the Rent Control Law should be taken into consideration and, if so, what is the extent to which the fair rent should be a determining factor in computing the compensation due.
The matter came up before Bishan Narain, J. sitting singly in the original instance and he noticed a conflict in two decisions of this Court, Raghbir Satan v. Punjab State. 1954-56 Pun LR 530 and Governor-General in Council v. Indar Mani Jatia. AIR 1950 EP 296. He accordingly suggested that the case be placed before a larger Bench. The matter then came before a Division Bench consisting of my brothers, Falshaw and Chopra, JJ. who took the view that the conflict could only be resolved by an authoritative decision by at least three Judges. The matter has now been argued before us at some length and all the relevant decisions bearing upon the question before us have been referred to by counsel at the bar.
2. The facts are that Roshan Lal Gupta owned plots Nos. 23 and 24 in Block No. 14-A, Western Extension Area; plot No. 23 and two floor's on plot No. 24 were requisitioned by Government under the Defence of India Rules in 1945. The question of compensation for the properties thus requisitioned arose and the matter was referred to an arbitrator. The owner claimed Rs. 80/- pet mensem per flat, i.e., a total of Rs. 240/- per month.
The Government contended that fair rent had teen fixed for the ground-floor on plot No. 23 at Rs. 43/8/- per mensem and for the two floors on plot No. 24 at Rs. 98/- per mensem; the owner was, therefore, not entitled to claim compensation at more than Rs. 43/8/- plus Rs. 96/- per mensem for the entire requisitioned property. The arbitrator took the view that the fair rent was not an adequate measure of compensation to be awarded under Section 19 of the Defence of India Act and fixed Rs. 100/- per mensem per flat, i.e., a total of Rs. 300/- per mensem for the entire property. The Union of India then filed the present appeal against the arbitrator's award,
3. The relevant portion of Section 19 of the Defence of India Act is in the following terms:
'19. (1) Where ....... by or under anyrule made under this Act any action is taken of the nature described in Sub-section (2), of Section 299 of the Government of India Act. 1935, there shall be paid compensation, the amount of which shall be determined in the manner, and in accordance with the principles, hereinafter set out, that is to say:
(a) Where the amount of compensation canbe fixed by agreement, it shall be paid inaccordance with such agreement.
(b) Where no such agreement can be reached, the Central Government shall appoint asarbitrator a person qualified under Subsection (3) of Section 220 of the above-mentioned Act tor appointment as a Judge-of a High Court.
(e) The arbitrator in making his award shall have regard to:
(i) the provisions of Sub-section (i) of Section 23 of the Land Acquisition Act, 1894, so far as the same can be made applicable; and
(ii) Whether the acquisition is ot a permanentor temporary character:
Section 23(1) of the Land Acquisition Act requiress the market-value of the land to be taken into consideration. Therefore, what we have to consider in assessing compensation in respect of requisitioned premises is what is the value of the income which the owner could have obtained in the market. The matter is complicated by the existence of Rent Control Laws which impose restrictions upon free dealings of property, and the question at once arises what is the market-value of the income which can be derived by letting out these premises by the landlord.
It has been argued before us on behalf of the Union of India that no landlord could have let out these premises at a higher figure than the fair rent fixed by the Rent Controller; therefore, that figure represents the market rent or marked value. On the other hand, it has been argued that the restrictive laws are not to be taken into consideration when assessing compensation under Section 23 of the Land Acquisition Act. Our attention has been drawn to a number of cases in which this matter was considered from various aspects.
I shall first consider the cases which would appear to support the contention of the learned counsel for the Union. The first of these is 1954-58 Pun LR 530, a Division Bench case in which It was held that compensation for requisitioned premises must be equal to the fair rent fixed bv the Rent Controller. This case was heard by Harnam Singh and Kapur, JJ. The view expressed by the learned Judges was' that in requisitioning property, Government acquired the possessory interest of the owner and in assessing the market-value of that possessory interest the fair rent fixed by the Rent Controller had to be borne in mind.
Kapur, J. observed that the provisions of theRequisitioning Act were not to be divorced fromreality and that the control on rents which thelaw in existence imposed had to be taken into account in determining compensation. It is somewhat surprising that an earlier decision of thisCourt by a Division Bench of which Harnam Singh,J. was a member was not cited or brought to thenotice of the learned Judges. In that earlier case,AIR 1950 EP 29ft Harnam Siagh, J. had exppressed a wholly contrary view.
He had said quite categorically, that the anthority requisitioning premises did not come within the meaning of word 'tenant' as defined in Clause 2(4) of the New Delhi House Rent Control Order, 1939, or Clause 2(d), Delhi Reat Control Ordinance, 1944.
Harnam Singh, J., after referring to a number of cases dealing with the matter, held that the fair rent as fixed by the Rent Controller was not adequate compensation for requisitioned premises. The facts in that case were that certain property was requisitioned by Government and after the order of requisition was made, the Rent Controller fixed Rs, 1,313/- per mensem as fair rent.
The landlord appealed against the order to the Chief Commissioner, and the appeal was allowed mainly on the ground that this was not a case which should have gone to the Rent Controller and compensation should have been fixed by the appropriate authority under Sec. 19 of the Defence of India Act. Compensation was awarded by the High Court at the rate of Rs. 3,600/- per mensem. Although an appeal had been allowed against the order of the Rent Controller, it nevertheless remains a fact that the Rent Controller had determined fair rent at Rs. 1,313/- per mensem and this figure had not been varied in appeal, and the only ground for allowing the appeal was that compensation should have been fixed not under the Rent Control Act but under Section. 19 of the Defence of India Act.
The earlier view expressed by Harnam Singh, J., therefore, differs completely from the later view expressed by him in 1954-56 Pun LR 530. There is also a Calcutta case, Province of Bengal v. Board of Trustees for the Improvement of Calcutta, AIR 1946 Cal 416, in which the view expressed was that compensation must be fixed on the basis of what is fair rent, but the expression 'fair rent' was not used in reference to Rent Control law.
No fair rent had, in fact, been fixed by the Rent Controller for the property requisitioned in that case. The learned Judges assessed fair rent themselves after going into all the evidence in the case and examining a large number of leases in respect of similar lands in the vicinity. Our attention was drawn to an observation contained in paragraph 35 of the report which seems to support the contention' of the learned counsel for the appellant:
'We have already held that the effect of a requisition under the Defence of India Rules is to deprive the owner of his possession. He must, therefore, get the value of his possession. Looking from another aspect the requisitioning authority gets the possession from the owner and becomes, so to say, a statutory tenant. The basis of compensation must therefore be fair rent, .......'
But after making this observation, the learned Judges went on to examine the leases of lands in the vicinity and came to the conclusion that 5 per cent per annum was a fair return on the value of the property requisitioned. It was on this basis that the compensation was determined and the figure of 5 per cent per annum was accepted as fair rent. There is lastly a Single Bench decision of the Bombay High Court in Dawoodali Rahematulla Versey v. State of Bombay, 1953-56 Bom LR 238 : (AIR 1954 Bom 323).
In this case Shah, J. observed that any statutory restrictions upon the liberty of contract must be taken into consideration when assessing the value of property. There is not a single case, therefore, apart from 1954-56 Pun LR 530, in which, standard or fair rent was fixed by th Rent Controller and the figure so fixed was accepted as determining the compensation which must be paid upon requisitioning the property in question. There are several cases in which the contrary view was taken. I have already mentioned the Punjab case, AIR 1950 EP 296.
Another case is Mahammad Ekramul Haque v. Province of Bengal, AIR 1950 Cal 83. In this case the Central Government held some property under a lease, the rent reserved being Rs. 1,950/-per month. On the expiry of the lease the owner refused to renew it. A requisitioning order was then made and the owner was offered Rs. 2,200/-as the monthly rent. This figure included the-Corporation rates and, therefore, the rent offered remained at the original figure of Rs. 1,950/-. The offer was refused by the landlord who claimed Rs. 3,988/- as the monthly rent. The arbitrator fixed Rs. 1,950/- and the matter was taken, up in appeal to the High Court. The High Court took the view that the requisitioning authority cannot be deemed to be a tenant in law. The learned Judges observed :
'It is cleat that in case of a requisition like this, where possession is taken and there is not a complete acquisition of ownership of the land or building compensation has to be assessed under Section 23, Land Acquisition Act, on the basis of fair market value for such interest in land. The relationship created is not that of a landlord and tenant. The requisition is by the Government by virtue off its suzerian position by which it can forcibly take away any one's property. The market-value of the interest taken away from the owner has got to be assessed. In the present case, it is the possessory interest which has been taken by the State, and therefore, in assessing the fair market-value of the case, fair rent is taken to be a good criterion. It is as a criterion of market value of the interest that the question of fair rent arises, and the only bearing that the rent control legislation may have is in so far as it affects by way of fall in rent the income which will be obtainable from the property in a proper market by a landlord.'
The matter was remitted to the arbitrator by the High Court. At a later stage it came before the Supreme Court, and the decision of the Supreme Court is reported as Haji Mahammad Ekramul Haq v. State of West Bengal, AIR 1959 SC 488. The Supreme Court awarded Rs. 3,200/- per mensem as fair compensation although on the basis of the Rent Control legislation Rs. 1,950/- only could have been allowed.
Harnam Singh, J. considered this matter sitting singly in Union of India v. Ram Pershad, AIR 1952 Punj 116. In that case also be held the view that the rent fixed by the Rent Controller could noC be equated with the compensation due when property was requisitioned. He observed that
'it cannot be conceded that the principle on which compensation is to be assessed is the principle on which a Rent Controller win assess standard rent for that property'.
J may also make a reference to a Privy Council decision in a case which came from the Supreme Court of New South Wales. This was a case in which the Government compulsorily purchased certain lands and the question of compensation arose. The Privy Council held that where price control regulations compulsorily kept the price of land down, such price was not adequate compensation for compulsorily acquired land (see Minister for Public Works v. Christopher Bowes Thistlethwayte, 1954 AC 475).
4. Upon a careful consideration of the matter, it appears to me that there is a preponderance of authority for the view that where property is compulsorily requisitioned, the amount of compensation should not be determined solely on the basis of fair rent as fixed under the Rent Control Laws. The figure so fixed is merely a piece of evidence which may be taken into consideration as giving a indication of the market rents; other circumstances must be taken into consideration also.
The requisitioning authority Cannot Be deemed to be a tenant of the landlord and is, therefore, not governed by the rent laws. The fair rent as fixed by the Rent Controller is no more than a piece of relevant evidence. It certainly should not be taken as the sole criterion for determining compensation. The case may now be remitted to the learned Single Judge for disposal in the light of the decision arrived at above. 1954-56 Pun LR 530 will be considered as overruled.
5. I agree.
6. I agree.