Skip to content


Baj Saraswati Jeshankar and anr. Vs. Agent, Bharatkhand Textile Manufacturing Co. Ltd. and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtGujarat High Court
Decided On
Case NumberFirst Appeal Nos. 530 and 531 of 1960
Judge
Reported inAIR1967Guj36; (1965)GLR512
ActsLand Acquisition Act, 1894 - Sections 30; Transfer of Property Act, 1882 - Sections 111
AppellantBaj Saraswati Jeshankar and anr.
RespondentAgent, Bharatkhand Textile Manufacturing Co. Ltd. and ors.
Appellant Advocate N.C. Shah, Adv. in F.A. No. 530/60,; K.S. Nanavati, Adv. in F.A. No.531/60 for;
Respondent Advocate K.S. Nanavati, Adv. for; B.A. Kayasth, Adv. in No. 1,; H
Excerpt:
property - apportionment - section 30 of land acquisition act, 1894 and section 111 of transfer of property act, 1882 - government acquired lands and compensation granted - dispute arose between landlords and tenant as to distribution of compensation - lower court concluded that landlords entitled to one-fourth compensation and tenant entitled to three-fourth amount - landlords preferred appeal - determining question of apportionment between landlord and tenant for value of interest lost by acquisition - amount of compensation to be determined with reference to market value of land as prevailing on date of notification - no materials to show as to what would be market value of tenant's interest - proportion fixed by lower court at 25% and 75% between landlord and tenant cannot be stated.....(1) these two appeals arise from the judgment and order, dated 15th september 1958, of the learned joint judge, ahmedabad, in compensation case no.137 of 1958 arising under section 30 of the land acquisition act, 1894(hereafter called 'the act'). the case raises the question of apportionment of the amount of compensation between a landlord and his tenant. the facts which need be stated in order to dispose of the two appeals are as follows. the government acquired 4363 square yards from out of survey no.2 which measured 10164 square yards and 10252 square yards from out of survey no.3 which measured 23716 square yards. the total amount of compensation which was determined by the land acquisition officer for the aforesaid two areas was rs.1,04,877-20 paise. two sets of parties laid claim to.....
Judgment:

(1) These two appeals arise from the judgment and order, dated 15th September 1958, of the learned Joint Judge, Ahmedabad, in Compensation case No.137 of 1958 arising under Section 30 of the Land Acquisition Act, 1894(hereafter called 'the Act'). The case raises the question of apportionment of the amount of compensation between a landlord and his tenant. The facts which need be stated in order to dispose of the two appeals are as follows. The Government acquired 4363 square yards from out of survey No.2 which measured 10164 square yards and 10252 square yards from out of survey No.3 which measured 23716 square yards. The total amount of compensation which was determined by the land Acquisition officer for the aforesaid two areas was Rs.1,04,877-20 paise. Two sets of parties laid claim to the aforesaid amount of compensation. One was the Bharatkhand Textile manufacturing Company Limited, Ahmedabad. Admittedly, that Company was the lessee of the two survey numbers. The lease deeds under which the company claimed title as a lessee are Exs.27 and 28, both dated 7th July 1930 and both drawn up in identical terms except in regard to the stipulation regarding the amount of rent. It is an admitted fact that, at the date of the notification under Section 4 of the Act. The interest of the landlord in survey No.2 is vested in Mulshanker Somnath, appellant of appeal No.530 of 1960. He is since dead and he is now represented by his heirs. It is also an admitted fact that at the relevant time, the landlord's interest in survey No.3 vested in Mulshanker and one Madhusudan Nathalal and that the former was entitled to a ten annas share in the landlord's interest and the latter six annas share in the same. Mulshanker was claimant No.1 and Madhusudan was claimant No.2. The land Acquisition officer decided that the landlords were entitled to a sum of Rs.14,319 form out of the total amount of compensation and that the lessee was entitled to the balance. Both the sides felt aggrieved by this decision of the land Acquisition Officer and claimed a reference under Section 30 of the Act. The reference was made to the District Court at Ahmedabad and it was numbered 137 of 1958. The learned Judge held that the landlords were entitled to 1/4th amount of compensation and that the lessee was entitled to 3/4 amount of compensation. Only Malshanker from out of the two landlords felt aggrieved by the aforesaid decision and he has preferred appeal No.530 of 1960. Therefore, the question which arises is that appeal for determination is as to what is the share which Mulshhanker is entitled to in the amount of compensation determined for survey Nos. 2 and 3. The lessee has preferred appeal No.531 of 1`960 and the question which arises in that appeal No.531 of 1960 and the question which arises in that appeal is what share the landlords are entitled to in the whole amount of compensation. The rival contentions are as follows. According to the landlord Mulshanker, the amount of compensation must be divided half to half between the landlord and the tenant. According to the lessee, the landlord is entitled to compensation on the basis of the rent payable to him, capitalized at 6% plus a further reasonable amount of compensation for some other rights which he is entitled to under the two leases. These are the two rival contentions, the correctness of which is required to be examined in the present two appeals.

(2) In our judgment, it will be convenient, first of all, to examine the rights of each of the parties under the two transactions embodied in the two lease deeds. Ex. 27 and 28 before taking up the question of apportionment of the amount of compensation. We propose to examine the terms of only one the two leases because, as we have already mentioned and there is no dispute about this, the terms of the other lease are almost the same. Ex. 27, is the lease deed in respect of survey No.3. the lessor are (1) Somnath, the predecessor-in-title of appellant Mulshanker, (2) Sommath's brother Chhotala, and (3) Nathalala, the father of respondent No.2 in First Appeal No. 530 of 1960. The lease is the Bharatkhand Textile manufacturing Company Limited, appellant in First Appeal No. 531 of 1960. It is a registered lease deed, dated 7th July 1930. The heading of the lease is 'Document of Permanent Lease'. After describing survey No.3 the subject-matter of demise, the lease deed proceeds to state that that land 'has been taken by the second party (the lessee) from the first party (the lessor) on a permanent lease for the construction of a Mill and buildings connected there with and for construction of all kinds of buildings and for doing such use thereof in the manner of the second party (lessee) desired to make'. The lease deed states that the rent has been fixed at Rs. 861-10-6. It further says that the amount of rent is payable every year in advance and again repeats that the land has been taken 'from the first party(the lessor) on a permanent lease'. Thereafter, the lease deed proceeds to mention the various conditions on which the lease was taken. The first clause provides for the payment of rent and the right of the lessee to construct or get constructed the Mill as well as buildings in the said land' or to use it in any manner that the lessee as its 'heirs and executors and Vahivatdars may desire'. It also provides for payment of rent in advance 'as long provides for payment of rent in advance 'as long as the above mentioned land remained in the possession of the second party (the lessee)'. The second clause provides that, in case the lessee doe not pay the rent in stipulated time ,then, the lessor will serve the lessee with a notice of one month on the expiry of the stipulated period and if, even after the expiry of the period f notice, the lessee does not pay the rent, then the lessor will recover the rent from the lessee with interest thereon. In the third clause, it provided that the lessee will be entitled to the use of the well, but that it will hand back the well in the same condition as it was in case the land is handed back to the lessee. The liability to repair the well is cast on the lessee. The clause further provides that, in case a new well is constructed and the lease is surrendered, then, the lessor will be entitled to the possession of the new well also. The fourth clauses states that the lessor will not have right to get the land vacated or to obtain possession of the same 'so long as we of the second party (the lessee) pay the amount of rent every year in advance'. The fifth clause confers a right upon the lessee to relinquish the land ' on payment of two years rent in lump'. The sixth clause provides that the lessee will been titled to the earth, stones, bricks and brick-bats found in the land, but that the lessor will been titled to treasure trove or mineral. The seventh clause confers a right upon the lessee to assign the lease on the obligation to pay the amount of the rent and to abide by all the conditions of the lease. The eighth clause, provides that, in case of the demolition of the hedge, the lessee shall restore the same when surrendering possession of the land or to be planted thereafter, but that the lessor shall be entitled to the wood of the trees in case they fall down. The ninth clause provides that the liability for payment of the agricultural and the non-agricultural assessment and for payment of municipal taxes shall be on the lessee. The tenth clause confers an obligation upon the lessor to give all possible help to the lessee for construction of the buildings. The eleventh clause confers a right on the lessee of entering the land for necessary work. The twelfth clause provides that if the lessor obstructs the lessee in the use the land, then the lessor will be liable for the same. In the thirteenth clause, it is provided that 'as long as the rent of this field is being paid by us, the second pry (the lessee) continuously and for all time, we of the first party (lessor) have no right to have this field vacated or obtain possession of the same'. The fourteenth clause provides for the apportionment of rent between the two sets of landlords. The last paragraph then states ' with the conditions as stated above the second party (the lessee) has taken this land on a permanent lease and a document of lease concerning the same has been executed'.

(3) Now the first contention of Mr. Shah appearing for the heirs of the original appellant Mulshanker is that the view of the learned Judge that the lease created a permanent tenancy was wrong Mr. Shah's contention is that, if the lease is read as a whole, then, the true construction thereof is that it is the lease for an indeterminate period, or, at the best, a lease which would ensure till the existence of the Mil only but that it is not a permanent lease. In support of this contention, Mr. Shah very strongly relies on the decision in Bayasaheb v West Patent Press Co. Ltd. : AIR1954Bom257 . In this case, their Lordships made the following general observations at page 63 (of Bom LR): (at p. 258, of AIR ) in connection with the construction of the lease in that case, which observations were approved by their Lordships of the Supreme Court in Sivayogeswara Cotton Press. Devange v m. Panchaksharapa : [1962]3SCR876 .

'The forms in which tenancy rights are created in India are not uniform and they do not conform to precedents known to conveyancing :sometimes the words used are not precise and it is not easy to understand from the said words the intention of the parties in executing the documents. Leases are often executed with our legal assistance; and the aid that the parties obtain from the professional scribes does not always contribute to make the terms clear or precise. The nature of tenancy created by any document must nevertheless be determined by construing the documents as a whole. If the tenancy is for a building purpose, prima-facie it may be arguable that it is intended for the life-time of the lessee or may in certain cases be even a permanent lease'.

Now, from the observations made by their Lordships at page 67 (of Bom LR): (at p.260 of AIR) it is quite clear that the main clauses which their Lordships were called upon to construe in that case were three in number. The first clause referred to the period of thirty years which had already been stipulated for. The second clause gave a right to the tenant to continue in possession of the premises so long as he paid the rent and the third clause gave him the option to determine the tenancy at his pleasure. The rival contentions which were raised and which their Lordships were called upon to examine in that case were that, in the submission of the landlord, the tenancy was one at will and tat, in the submission of the tenant, it was a tenancy which would ensure during the life-time of the company. Their lordships held in favour of the contention of the tenant. Now in our judgment, there is a material distinction between the facts obtaining in the above case and the facts obtaining in the above case and the facts obtaining in the present case. The most material difference between the two cases is that, in the above case, there was no stipulation for the period of the lease so that their lordships had to construe a lease deed in which the period had not been specifically provided for. Therefore, the period had to be ascertained from a perusal of the other clauses and specially from the fact that the lease was created for erecting buildings. In the present case, from the summary of the lease deed which we have already given, it is quite obvious that the parties have provided at as many as five places that the land was taken or given on a permanent lease. However, Mr. Shah tries to get over the effect of the use of the aforesaid words by references to clauses No.2,4,5 and 13. Mr. Shah's submission is that effect of the aforesaid four clauses is that , though the lease states at more than one place that it was a permanent lease, in law, it was a lease for an indeterminate period and was not a permanent lease. Now, in our judgment, none of the contentions on which he submissions of Mr. Shah are based is tenable Mr. Shah's contention is that the effect of clause No.2 and clause No.13 isthatthe lessor had a right of re-entry in case of non-payment of in such a provision, a permanent lease would be converted into a non-permanent lease. Apart from the fact that such a contention was negatived by their Lordships of the Supreme Court in the case of : [1962]3SCR876 , we are not convince that, under the terms of the aforesaid lease, the lessor had a right of re-entry as contended for by Mr. Shah. In effect, the contention of Mr. Shah is that there was a right to forfeit the tenancy on account of non-payment of rent Section 111, clause (g) of the Transfer of Property Act, 1882 provides for the determination of lease of immovable property by forfeiture and that clause states in express terms that a lease of immovable, property determines by forfeiture, that is so say, 'in case the lessee breaks an express condition which provides that on breach thereof the lessor may re-enter....'. Under this clause not only the condition the breach of which would determine the lease must be express, but that it must also provide that, on breach thereof, the lessor has a right of re-entry. Under the terms of lease, there is no doubt that there is an express condition to pay rent. But, from the summary which we have given, it is quite obvious that he provision relating to re-entry is absent. But Mr. Shah's contention is that that provision is implied in the terms of the lease. Apart from the fact that there is no such implication in the terms of the lease, it is quite obvious that, even if there was such an implication , there would be no right of re-entry. The question arises before the Bombay High Court in a series of cases and, in each of those cases, a similar contention was negatived. These Bombay cases are Bindings on this Court and therefore, we have no hesitation in rejecting the contention of Mr. Shah. The Bombay cases are Navalram v Javarilala, (1905) 7 Bom LR 4012, Narayan Dasappa vs Saiba, (1894) ILR 18 Bom 603, and Madrasaheb v Sannabawa Gujranshah, (1897) ILR 21 Bom 195. Secondly, Mr. Shah contended that the provision in clause 4 that lessor had no right to get the land vacated a long as the lessee paid the amount of rent every year in advance also implied a right to re-enter. In our judgment this is also a mere covenant and not a condition of the lease and does not detract from the permanent nature of the lease and confer a right of re-entry. Thirdly Mr. Shah contended that the right of the lessee to surrender the lease on payment of two years rent impliedly conferred a right on the lessor to terminate the lease on the doctrine of mutuality. Such a contention was negatived by their Lordships of the Supreme Court in the case of : [1962]3SCR876 , referred to. As pointed out by the Lordships in that case, such a clause did not confer any corresponding right on the lessor and that a right so conferred on the lessee cannot be converted into a disability or an obligation which should detract from the grant of a permanent tenancy. As regards the aforesaid two clauses, their lordships of the Bombay High Court pointed out in the case of : AIR1954Bom257 , already referred to, as follows at page 65 (of Bom LR); (at p.259 of AIR) : 'The emphasis is on the right of the tenant to remain in possession subject to payment of rent and the subsequent clause giving him the option to terminate the lease is merely incidental and subsidiary'. Therefore in our judgment there is nothing in the aforesaid clauses which detracts from the permanent nature of the lease which has been expressly provided for in the lease deed. On the contrary, the fact that the lease was being entered into for the purpose of erecting permanent structures and for establishing a Mill would clearly indicate that the intention of the parties was that it was to be a permanent lease.

(4) That leads us to the second question about the appointment of the amount of compensation between the lessor and the lessee. Now, on this subject, Mr. Shah cited a number of authorities. But in our judgment, it is not necessary to refer to all or any of them in view of the fact that the Bombay high Court in Dossibai Nanahboy Jeejeebhoy v P.M. Bharaucha : (1958)60BOMLR1208 a case binding on us has laid down the principles which should govern the apportionment of compensation between a landlord and his tenant. At page 1218 is to be found a passage which may be quoted in full. The passage is as follows:

'In apportioning the compensation, the Court has to give to each claimant the value of the interest which he has lost by compulsory acquisition. So, stated, the proposition may appear simple; but in its practical application numerous complicated problems arise in apportioning the compensation awarded. The difficulty experience is due to the nature of a variety of interest, rights and claims to land which have to be valued in terms of money. The compensation awarded for compulsory acquisition is the value of all the interests which are extinguished and that compensation has to be distributed equitably amongst persons having interest therein and the court must proceed to apportion the compensation so that the aggregate value of all interests is equal to the mount of compensation awarded. In disputes between landlords and tenants about apportionment, different methods of apportionment have been adopted. The methods which are generally adopted fall into three broad divisions. Under the first method value of lessors and the lessees interest may be separately ascertained in terms of money and then out of the total amount awarded the value of the interest of one may be taken out and the remainder awarded to the other. The second method is to value the interest of the lessor and the lessee separately, and if the aggregate of these two values does not reasonably correspond to the amount of compensation available for distribution. The amount may be distributed in the proportion of the two amounts. If reasonably precise valuation of the competing interests is not possible the Court may proceed to evaluate the interests of the claimants in terms of fractions of the total amount of compensation regarded as a single unit. This is the third method. Theoretically the aggregate value of the interests acquired must be equal to the amount of compensation to be distributed. But in the valuation of competing interests. Which from its very nature is dependent upon indefinite factors and uncertain data, considerable difficulty is encountered. Indisputably, in apportioning compensation, the Court cannot proceed upon hypothetical considerations but must proceed as far as possible to make an accurate determination of the value of the respective interests which are lost The Court in each case having regard to the circumstances and the possibility of a precise determination of the value having regard. To the materials available adopt that method of valuation which equitably distributes the compensation between the persons entitled thereto.

(5) As against, the aforesaid principles, Mr. Shah contended that the correct principles to apply in such cases was the one enunciated by their Lordships of the Madras High Court in F.G. Natesa Ayyar v Kaja Mauf Sahib, ILR 50 Mad 706: (AIR 1927 Mad 489). The observation on which Mr. Shah relies are at page 709 (of ILR Mad): (at p.490 of AIR) and they are as follows:-

'When the land was leased out under Exhibit A, it was apparently a waste land fit only for pasturage of cattle and consequently valued at a very low figure. Now that the Railway Company has come forward and acquired the land, the compensation has been given for it apparently on the footing of a building site. This enhanced value is not due to the exertion either of the landlord or the tenant. It is a sort of windfall which has come to both the parties. There is no reason why one alone should have the whole of it and not the other. If we give the landlord only Rs.80/- we will be ignoring altogether the general right as melwaramdar which is in him'.

With the greatest respect we are unable to agree with the principles so enunciated. In our judgment, the true principles as has been pointed out in the aforesaid Bombay case and which principle is binding on this Court, viz., that determining the question of apportionment between a landlord and a tenant, the task which has got to be performed by the Court is to compensate the landlord and the tenant for the value of the interest that is lost by the acquisition. There is no question of any windfall in determination of the amount of compensation at all. The amount of compensation is to be determined with reference to the market value of the land as prevailing on the date of the notification and the question is what is the portion of that market value which is attributable to one or the other party and which that party has lost. Therefore, deciding the present case on the principles laid down in the aforesaid, Bombay case, the first question which arises is whether the interest of the landlord and the tenant can be valued in terms of money with reasonable precision or exactness. It is quite obvious that, if the Court can so value the two rival interests, exactly coincides with the total of the two interests exactly coincides with the total amount of compensation determined by the land Acquisition Officer. In the latter event, it is quite obvious that no injustice would be done either to the landlord or to the tenant. But, some times even in such cases, complications may arise on account of the fact that the amount of compensation which is determined by the Land Acquisition Officer as payable by the acquiring authority is not determined on the basis of the separate valuation of the various interest involved. The amount of compensation, as a great rule, is determined by determining the market value of the totality of interests. If in a given, a case the totality of the amount of compensation does not coincide with the totality of the two interests separately valued, them, the question would further arise for determination as to how the excess or the shortfall is to be apportioned between the two interests. Some Judges have resolved this problem by dividing the excess or the shortfall in the proportion of the values separately determined in respect of each interest. But, it is quite obvious that whichever of the aforesaid two methods is employed, the condition precedent for the employment of such a method is that the Court must be in a position to value, in more or less a precise and exact manner, each interest. Now on the facts of this case , it is not possible either to evaluate the interest of the landlord or that of the tenant with reasonable precision in terms of money. Mr. Nanavati contends that this can be easily done so far as the interest of the lessor is concerned. Mr. Nanavati is partially right. He is right in saying that, in so far as the lessor has a right to recover the amount of rent , that particular amount can be capitalized according to the known principles of valuation. We may mention that the figures which were given to us as regards the rent which has been lost as a result of the aforesaid acquisition were as follows. As regards survey No.3 the amount of interest which the landlord would lose was stated to be Rs.374-39 paise and the corresponding figure in respect of survey No.2 was stated to be Rs.155.55 paise. We find that the figure so given, when added up with the figures of the rents which are, at present, being aid by the lessee to the lessor in respect of the aforesaid two survey numbers do not tally. But as we are only concerned at present, with the question of principle, we do not pursue the matter further. There was a controversy in our Court as to at what years purchase the aforesaid amounts of rent lost should be capitalized. Mr. Shah submitted that it should be capitalized at 25 years purchase, whereas Mr. Nanavati submitted that it should be capitalized at 16 2/3 years' purchase. If we had to decide the case on the basis of the rent valuation of the lessor's interest, we would have agreed with Mr. Shah's contention in preference to the contention of Mr. Nanavati. In our judgment having regard to the fact that the ground-rent was well secured, a purchaser in the market would regard the rent as secured as a return from filt-edged security, But Mr. Nanavati did concede that a mere capitalization of the amount of rent would not compensate the landlord fully. The landlord possessed some other rights under the lease deed. Amongst those rights, the most important is the right of reversion. It is true that, having regard to the fact that the lease has been construed to be a permanent lease, the reversionary interest may not be said to be of great significance. But, at the same time, we must bear in mind the provision relating to surrender. Now one does not know what exactly would have been the fate of the lease in course of the balance of the life of the land. It is not improbable that, in times of slumps, the lessee might surrender the lease and , then in course of time, there may be considerable increase in the value of the land on the arrival of better times . Then the landlord had the right to receive the treasure trove and the minerals. Mr. Nanavati said that these two rights were also insignificant. In our judgment, though there is no evidence to show that there was any treasure rove or any minerals, it is also equally clear that no attempt was made to ascertain, by either side as to the existence of one or the other. It is true that in case of the right to receive the fuel, the landlord has been compensated separately in as much as the compensation relating to trees which were existing on the lands has been entirely given to the landlord. Then there is also a right to receive the well or wells in case the landlords surrendered in future. The aforesaid rights are incapable of being converted into money, precisely and exactly,. The second difficulty in the case appears to arise from the fact that no materials have been laid before the Court for the purpose of evaluating the lessee's interest. In our judgment unless an attempt is made in that direction, injustice is likely to be caused by merely evaluating the interests of the lessor and paying the balance to the lessee. This was pointed out by Mr. Justice Macklin in Somashekhar Swami v Bapusaheb Narayanrao, 49 Bom LR 784, at p.788 (AIR 1948 Bom 176 at p.179).

'I have considerable doubt as to the fairness of the procedure adopted. It seems to me that the adoption of such a procedure, namely estimating the present value of the rights of one side and giving the balance to the other side, is bound to lead to unfairness to one side or the other unless it can be definitely stated that the valuation of the combined rights of all the parties as arrived at in the award is a strictly valuation. If for example, the award errs on the side of generosity and the value of the landlord's rights is deducted from the amount awarded, then all the advantage goes to the tenant. If on the other hand, the award errs on the side of stinginess and the tenant is given only the balance after the landlord's rights have been deducted, then it is the tenant who bears the full disadvantage of the award'.

Moreover there are no materials to show as to what would be the market value of lessee's interest. Under the circumstances in our judgment, the present case is one in which the first two methods referred to in the case of (1958) 60 Bom LR 1208, cannot be adopted. Therefore, the third method must be adopted and that is exactly the method which the learned Judge has adopted in the present case. It is true, in some cases, the proportion has been fixed to be six annas and ten annas between the landlord and the tenant. That was the proportion which was fixed in Dossibai's Case. But, that was a case obviously not of permanent tenancy. The lease in that case was initially for a period of 99 years with a provision of the right of renewal at the option of the lessee for a further period of 99 years at double the rate. In the case, we have got to deal with a permanent tenancy. Under the circumstances, the proportion fixed by the learned Judge at 25 and 75 per cent between the landlord and the tenant cannot be stated to be unreasonable and therefore, both the appeals must be dismissed.

(6) Appeal No.530 of 1960 is dismissed. Appellants therein to pay the costs of respondent No.1. Appellants and the rest of the respondents to bear their own costs. Appeal No.531 of 1960 is dismissed with costs.

(7) Appeal dismissed.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //