1. This appeal is from the order on a Reference by the Land Acquisition Officer Under Section 18, Land Acquisition Act. The acquisition covered land of the total extent of 108.90 acres situated to the south of the Vizagapatam harbour and required for harbour purposes. The appellant is the acquiring authority. There is a memorandum of cross-objections by the first claimant, the proprietor of the Anakapalli Estate, otherwise known as the Zamindar of Chemudu. We are no longer concerned with the rival claimants to the land, whose claims were overruled by the Subordinate Judge. The Land Acquisition Officer awarded in all a sum of Rs. 17,745-1-3 as compensation, including Rs. 5,000 for damage to the unacquired property of the respondent by reason of the diversion of a spring situated in the acquired land which helps to irrigate the respondent's Lova Garden, the cultivated land of which has not been acquired. The respondent claimed compensation, amounting in all to Rs. 3,96,730, the important features of this claim being a sum of Rs. 1,30,680 claimed for value of the land acquired at Rs. 1,200 an acre and Rupees 2,50,000 claimed for 'damage sustained by severance'. The Subordinate Judge allowed in all Rs. 1,03,004-14-9, the bulk of which is made up of the estimated value of the spring in the acquired land, in addition to the amount already awarded by the Land Acquisition Officer.
2. The following questions arise for decision in this appeal and cross-objections: (1) Did the respondent in fact claim either in his original statement of claim or in his objection to the award by the Land Acquisition Officer, compensation for the value of the 'special adaptability' of the land acquired for supplying drinking water otherwise than to the unacquired lands of the respondent? (2) If no such claim was made before the Land Acquisition Officer, had the Subordinate Judge jurisdiction to award compensation for the 'special adaptability'? (3) If there was jurisdiction, has the 'special adaptability' of the land for supplying drinking water any value apart from the scheme for the purpose of which the acquisition was made? (4) Can the requirements of the harbour authorities for water be taken into consideration in estimating the value of the land acquired? (5) Was the Subordinate Judge wrong in holding that the water supply on the land acquired had no potential value as a possible supply of drinking water for a building scheme in connexion with the unacquired land of the respondent? (6) What is the correct way of calculating the compensation and what is the proper figure?
3. In order to understand the contentions of the parties, it is necessary to describe the chief topographical features of the neighbourhood of the area acquired. The Vizagapatam harbour, the construction of which was begun in 1920, was formed by excavations in swampy land adjoining the existing creeks and by dredging a deep water channel so as to give access to the artificial basin thus created. The town of Vizagapatam is situated to the north of this entrance channel and to the east of the land originally taken up for harbour purposes. There is no road across this channel, the only communication with the south side of the harbour land being by ferry. Running West to east, along the south of the harbour land is the Anakapalle Road which terminates inside the harbour land about half a mile from the entrance to the Lova Garden owned by the respondent. Except for an almost abandoned path there is no access to the respondent's garden from this road. The harbour land to the south of the entrance channel intervenes between the road and the Lova Garden. The area acquired consists of a large heart-shaped block of barren hilly land separated from the south shore of the harbour by a line of hills and containing the catchment area of the spring which has given rise to this litigation. In the north-east corner of this large block the harbour authorities have also acquired a narrow tongue of land running in a north-easterly direction to accommodate a small reservoir and channel and pipe line; and another narrow piece from the northern extremity of this tongue running towards the north-west, through which a tunnel has been out so as to carry both drainage water and pipe line through the hilly barrier separating the respondent's land from the reclaimed land of the harbour to the north. The spring in the acquired land naturally drains to the north-east into a valley known as the Lova Garden which is cultivated. Owing to its natural beauty, this valley was held in great affection by the Rani of Wadwan, who was the owner at the time when the notification was issued in 1928. She died in 1928 after the acquisition and her successor-in title is the Zamindar of Chemudu who is the respondent. At the time of acquisition, there had been practically no development of the harbour land to the south of the channel. This area is very malarious. It had no water supply, the harbour getting its water from the town of Vizagapatam so far as the main area is concerned. With a view to the development of the south side of this harbour, the land on both sides of the Anakapalle road had been acquired and villages situated therein which were very malarial had been shifted further to the west. The harbour authorities intended by undertaking antimalarial works and by creating a southern water supply to make this land on the south banks of the channel suitable for commercial purposes, such as oil installations and for the construction of a labour colony for the coolies employed on the harbour.
4. The malaria problem was very serious. Not only did it render the southern area unfit for development, but there was considerable danger to the workers in the Harbour Office situated on the northern bank of the channel and it was feared that the crews of the dredgers and other vessels in the harbour might be infected. In 1926 (vide Ex. 24) an anti-malaria survey was undertaken. This showed that the villages all along the south side of the channel were full of malaria and that the Lova Garden belonging to the respondent was one of the principal breeding places of the mosquitoes which endangered the health not only of the adjacent villagers but also of the harbour staff. The anti-malarial officer suggested that operations to get rid of the mosquitoes in the Lova Garden could most economically be carried out in conjunction with the utilization of the water from the valley to provide a pipe water supply to the south side of the harbour. This suggestion was welcomed by the harbour authorities, more especially as the existing agreement for the supply of water from the municipality, while it provided a sufficient supply during the early stages of the scheme, would not suffice for the ultimate needs of the harbour. Moreover, the spring at the head of the Lova Garden was 150 feet above the sea level so that a gravitation flow was practicable.
5. The alternative water supply then in contemplation was either the development of the wells in the evacuated villages on the south side or a much more ambitious scheme entailing the utilization of the water of the Meghadrigedda stream on the west of the harbour, a scheme which entailed difficulties because it required the co-operation of the Harbour, the Railway, the Municipality and the Government of Madras. It was estimated that the Lova Garden spring would give 50,000 gallons of excellent water daily. The original scheme was to take this water in pipes through the garden, and out by the mouth of the valley which emerges into the entrance channel. This was eventually abandoned in favour of the plan for tunnelling through the hilly area to the north of the spring and leading the water in an almost direct line to the point at which it was required, this tunnel being utilized not only to carry the pipe line, but also to carry away flood water so as to prevent the stagnation of water in the valley and thus eliminate one of the breeding places for mosquitoes. The scheme for utilisation of this water and the carrying out of anti-malarial operations in the valley was not really an independent scheme. It was linked up with a bigger scheme for getting rid of breeding places of mosquitoes all round the southern side of the harbour so as to make the whole of this area fit for development. The modification of the scheme by the proposal for a tunnel rendered it unnecessary to acquire the Lova Garden proper which the owner was most anxious to retain. All that had to be done in that garden was the construction of suitable drainage works. Full particulars of this scheme were communicated to the Rani who then owned the property.
6. In 1927 (vide Ex. D) the Diwan reported to the Rani on this scheme pointing out that it was not purely an anti-malarial measure but had a commercial bearing, that the constant supply of water was of great value and that compensation would have to be paid for it. This report was not apparently communicated to the harbour authorities at the time. Work on the tunnel so far as it was on harbour land was started in November 1927. On 13th February 1928, we have the Notification Under Section 4(1), Land Acquisition Act, for the acquisition of the land with which we are now concerned, and other adjacent lands for the execution of anti-malarial works. It is to be noted that this preliminary notification as well as the draft declaration issued later referred only to anti-malarial works; but there is no doubt that the greater portion of the area acquired from the respondent was acquired primarily not merely for anti-malarial works, but as the catchment area of the water supply required in connexion with the development of the south side of the harbour and that this larger objective was communicated to the respondent some time before the acquisition began. The respondent's objection to the acquisition (vide Ex. F) states that there was no objection to anti-malarial operations provided that the water source of the valley was not affected, but that if the water supply from the springs in the upper portions of the valley was to be cut off, the cultivation and amenities of the lower valley would be adversely affected and should be taken into consideration in fixing compensation. In April 1928 the Notification Ex. HH-1 was issued to enable the acquiring authority to take immediate possession of small portions of land required. Again (vide Ex. 19) the respondent objected to the diversion of the water so as to cut-off the water supply of the lower portions of the valley. There was no reference to any value which the water might possibly have except for the irrigation of the valley.
7. In the autumn of 1928 the respondent engaged Diwan Bahadur A.V. Ramalinga Ayyar, formerly Chief Engineer to the Government of Madras, as an expert to examine the property which was to be acquired and value it. His report is Ex. 3, dated 21st December 1928. He expressed the opinion that the water at the head of the valley could be utilized for the development of a building estate on the unacquired lands of the respondent situated round the valley and that such building sites would be in demand for persons connected with the harbour; and on this assumption, taking into consideration the value of the whole of the area, which in his opinion could be developed for building, and concluding that the diversion of the spring would put an end to this development, he suggested that a claim be made for Rupees 8,00,000 as compensation. This valuation was communicated to the harbour authority in Ex. KKKK dated 5th January 1929; and the Diwan states therein, quoting the agreement between the Harbour and the Municipality for the supply of water, that the respondent would be justified in claiming at least Rs. 4,00,000 by way of compensation and threatening to take the matter up to the Privy Council if necessary. On the same day (vide Ex. 20) the respondent filed before the Land Acquisition Officer a statement of claim which sets forth the importance of the water supply for the cultivation of the garden, the natural amenities of the valley and its attractions as a pleasure resort, the possibility of the development of the garden as a building estate and the consequent use to which the water of the spring could be put both for irrigation and for the supply of drinking water and the valuation put upon the property by Mr. Ramalinga Ayyar. The actual details of the claim were:
Land-value at Rs. 1,200 per acre ... 1,29,480
Value of the masonry structures and
roads. ... 15,000
Value of trees. ... 1,050
Damage sustained by severance. ... 2,50,000
Value of portions already taken
possession. ... 1,200
Total Rs.... 3,96,730
8. It is to be noted that though there is a big claim for 'damage sustained by severance' which presumably must be the damage to the unacquired land by reason of the acquisition, there is no express claim based on the value of the water to any one else other than the respondent. The award of the Land Acquisition Officer, which was not apparently based on any further representations made on behalf of the respondent or any materials to show that this water had a value other than its irrigation value, proceeds on the basis that the adverse effect on the irrigation facilities of the Lova Garden would not reduce the income from the valley by more than half and estimates the loss owing to the diversion of the major portion of the spring water at Rs. 5,000. The lands are valued on the basis of similar acquisitions in the neighbourhood and for the masonry structures, all of which are in a completely ruined condition as a result of a cyclone, the Land Acquisition Officer awards Rupees 3,950, the figure estimated by the Executive Engineer. On receipt of this award, the respondent objected and claimed a reference Under Section 18. The only words referring to the grounds of objection are the following:
The compensation awarded is very low and inadequate for the portion acquired and for the damages sustained by severance to the other portions of the valley garden.
9. Clearly this objection is not based on any value which the spring might have for sale to the public generally. After the reference to the Court the respondent filed in Court what is called a statement of claim Under Order 8, Rule 1, Civil P.C. This document besides dilating on the beauties and fertility of the valley and the adverse effect of acquisition upon these amenities, states also:
There is a growing demand for sites for building purposes and for bungalows in Vizagapatam and the Lova Gardens including the sites in question has by reason of its adaptability for building sites a potential value as such if drinking water is available. The sites in question are also fit for a water reservoir in order to store and supply water both for drinking and irrigation purposes and they can also be utilized for quarrying purposes. If the present sites be acquired with the spring water thereon, the zamindar will not only lose the above advantages but the plantations and gardens in the lower valley would be rendered useless and unattractive and sustain irreparable loss. The palatial buildings built in the lower valley for pleasure resort would be useless and lose their value if the garden adjoining them does not thrive by the deprivation of the only permanent water source.
10. In the schedule, the claimant repeats the details given in the statement of claim filed before the Land Acquisition Officer, the main item being again 'damage sustained by severance: Rs. 2,50,000.' By doing what appears to be violence to the wording of the passage extracted above, and by ignoring the particulars in the schedule attached thereto, the learned Subordinate Judge has arrived at the conclusion that this statement of claim embodies a claim for compensation for the market value of the water supply apart from its development in connexion with the building estate and apart from its value for irrigation purposes to the land remaining in the ownership of the respondent. There are no materials other than the correspondence which shows that the Dewan knew that the Harbour wanted this water for drinking purposes and had every intention of making the authorities pay for this drinking water, to justify the conclusion that there was a specific claim made before the Land Acquisition Officer or in the first statement filed before the Subordinate Judge to the market value of the special adaptability of the acquired land for supplying drinking water to any one other than the prospective occupants of the respondent's own land. It seems to us quite clear that this basis of valuation was not put forward by the respondent until the actual trial of the reference before the learned Subordinate Judge. It follows that, on the first question, our finding is that the respondent has not in fact claimed either in his original statement of claim or in his objections to the award of the Land Acquisition Officer compensation for the value of the 'special adaptability' of the land acquired for supplying drinking water otherwise than to his own unacquired lands.
11. The next question is whether the Subordinate Judge had jurisdiction to award compensation for that value in the absence of what may be called a pleading. There is very little in the Act itself to afford a basis for the appellant's argument that there is no jurisdiction. Section 18, which deals with reference to Court, contemplates four kinds of objections, namely (1) to the measurement of the land, (2) to the amount awarded as compansation, (3) to the person to whom the payment of compensation is to be made, and (4) to the apportionment of the compensation. Sub-section 2 requires the claimant to state the grounds of his objection. Whether the claim based on the acquisition of the spring is a claim for the value of the land acquired as specially adapted to supply drinking water to the outside public or whether it is merely a claim for damages for detriment to the unacquired land of the claimant by the loss of a potential drinking water source to the occupants of the unacquired land, the claim falls under the second head in Section 18(1), namely 'Compensation'. Under Section 20 the Court is directed to 'proceed to determine the objection'. The only sections which appear to restrict the jurisdiction of the Court in this matter are Sections 21 and 25, with which we are not now concerned. Section 53 of the Act makes the provisions of the Civil Procedure Code applicable to all proceedings before the Court under the Land Acquisition Act where the Code is not inconsistent with the Act. That being so, it may well be contended that Order 14, Rule 3 of the Code will apply and will enable the Court to consider in framing the issues not only the pleadings (that is the statement of claim, the award and the objections thereto) but also the allegations of the pleaders where they are not inconsistent with the pleadings. If so, it would follow that the Court would have jurisdiction to frame an issue which does not directly arise from the objections taken provided that it is not totally inconsistent with them.
12. Moreover, if Order 6, Rule 17, Civil P.C., applies to proceedings before the Court under the Land Acquisition Act, surely the Court could have given the respondent leave at the time of framing the issues to amend his statement of objections by including in it a claim for the value of the natural suitability for water supply of the land acquired subject of course to such terms as might be proper. In fact the learned Subordinate Judge did not receive any application to amend the statement of objections; but, if the power to amend exists, then the question is one of procedure rather than of jurisdiction. In the absence of a clear authority to the contrary, we should be constrained to hold that no question of jurisdiction arises.
13. Mr. Page, appearing on behalf of the Acquiring Authority, has cited numerous cases on this part of his argument, but, as we agree generally with the learned Subordinate Judge on the jurisdiction question, we do not think it necessary to deal at length with the case-law which has been fully set forth in the lower Court's judgment. It is sufficient to state that there is good authority for the view that, though Section 18(2) requires that the application for a reference to Court shall state the grounds on which the objection is taken, there is a sufficient compliance with the provisions of this sub-section if the application states on which of the four heads of objection detailed in Sub-section (1) the applicant proposes to rely. It has been held by the Judicial Committee in Pramathanath Mullik v. Secretary of State that the jurisdiction of the Court with reference to Section 18(1) is confined to considering and pronouncing upon the objection which has been raised in the written application of reference, that is to say, the objection considered must fall under the same category in Section 18(1) as the objection pleaded. As their Lordships said, once it is ascertained that the only objection taken is to the amount of compensation, that alone is the 'matter' referred, and the Court has no power to determine or consider anything beyond it. This however does not amount to a decision that, when an objection to the amount of compensation has been taken, the Court has no jurisdiction to work out the amount of compensation in a manner different from that which has been adopted in the statement of objections. The case which goes nearest to the position for which Mr. Pago contends is the ruling of a single Judge of this Court in Secy. of State v. Subramania Iyer AIR 1930 Mad 576. In that case the learned Judge holds, quoting only a ruling of the Punjab Chief Court, that the raising of new grounds of compensation not taken in the statement of objections could only be allowed before the Court by virtue of some section of the Land Acquisition Act and that there is no section which gives power to the Court to entertain such fresh grounds. The learned Judge does not consider the effect of Section 53 of the Act which introduces the provisions of the Civil Procedure Code in the trial of references under the Act. He states:
In all ordinary circumstances, a claimant can and should present bis case fully before the Collector, and should be held bound throughout the proceedings by what may be termed his pleadings;
and with reference to Section 18(2) he observes:
The proceedings before the Court are of the nature of objections to the Collector's award, and not a judicial enquiry independently undertaken into such questions as the claimant may raise. On this view it would not be open to a claimant to make out a fresh case, whether by way of supplementary claima to compensation or otherwise.
14. If this be taken as a rule of procedure, subject to all just exceptions as are provided in the Civil Procedure Code, there is no reason to quarrel with this statement of the law; but if the decision of Curgenven, J. is to be taken to mean that the Court has no jurisdiction in a proper case to allow the claimant to vary the basis of his objection or to frame an issue relating to the same head of objection but not arising precisely out of the pleadings, then, in our opinion and with all respect, he goes too far. There is another ruling of this High Court, Lakshminarasamma v. Assistant Commissioner of Labour (1926) 95 IC 577, which deals with a case on which compensation was claimed for land on the basis of its use as a cocoanut tope, and in the reference to the District Judge a claim was made for compensation on the footing of its possible use as a building site. It was held that the claim on the basis of the building site value was inconsistent with the claim for its value as a cocoanut tope and that the claimant should not be allowed to base her case in Court on a valuation of the land which was inconsistent with the basis on which it was valued in proceedings before the Land Acquisition Officer. Here again the decision does not purport to go any further than to hold that as a matter of procedure a claimant should ordinarily be confined to the basis of value which has been put forward before the Land Acquisition Officer. There is no decision that the Court has no jurisdiction in a proper case to consider the effect of valuation on a different basis. Our conclusion on the second question, therefore, is that the Subordinate Judge had jurisdiction to award compensation on the basis of the value of this land for water supply apart from its value to the respondent's own lands, though no express objection was taken on this basis and no specific claim for compensation to this effect was urged before the Land Acquisition Officer.
15. The next question is primarily one of fact, namely, whether the natural adaptability of the land acquired as a source of drinking water for areas outside the land of the respondent had any value at the time of the notification apart from the scheme for which the land acquisition was made. In answering this question, we must leave out of consideration for the moment, both the possibility of the owners themselves using the water supply as part of some building scheme on their unacquired land and also the realized possibility of the water being required by the harbour for the scheme which led to the acquisition. The answer to the question depends very largely on the topography of the area north of the land acquired. The main harbour area is separated by the entrance channel from the reclaimed land lying to the north of the land acquired. There is no question of any supply being required by people living to the south or east or west of the land acquired. In the south there is a barrier of hills; to the east there is the land of the respondent, the Dolphin's Nose which has been acquired by the harbour authorities and the sea; to the west there is a barrier of hills; to the north there is a ridge of high ground through which the tunnel now runs and beyond it the undeveloped harbour land from which the inhabitants of a few malarious hamlets had been removed to a distance. The only populous area in the neighbourhood is that of the town of Vizagapatam which is situated on the other side of the harbour, and it is eatablished that the conveyance of the water from the respondent's land to the town of Vizagapatam is not practicable. There is no evidence that anyone prior to this scheme ever conceived of the possibility of running a pipe line down to the creek and selling the water to shipping, and any such scheme would not only require the concurrence of the harbour authorities, but in all probability would be so highly speculative that it could not be considered to be of any practical value.
16. It has been suggested that there might have been a sale of this water to the oil companies and others who in future might become tenants of the harbour on the land to the south of the channel. But at the time when this scheme was promulgated the whole of that area was undeveloped. It was full of malaria and it was incapable of any profitable use apart from the success of the anti-malarial campaign of which this acquisition is a part. It is not conceivable that the respondent himself would ever have been able to develop a water supply scheme, carrying out the necessary anti-malarial works and thereby encouraging business concerns to occupy the harbour land and buy water from him; nor is it likely that any such scheme would have worked at a profit. For the costs of ridding the area of malaria and making it fit for habitation would use up any profit that there might be from the sale of water. The evidence in the case quite clearly shows that the owner of the water source had no idea whatever that it had any commercial value as a source of supply of drinking water before the harbour authorities began investigations. The matter seems to be concluded by the evidence of the respondent's own expert Mr. Ramalinga Iyer, which is as follows:
I do not think that there is anything else to induce the claimant to sale the Lova Gardens beyond the water scheme and the building scheme. When I put forth the scheme, I thought that the harbour authorities would purchase the water. I did not think of any other buyers. The claimant did not suggest any other buyers. The Harbour is the only person who has any legal right of access to the reservoir because it owns all the surrounding properties. I thought that the harbour cannot but buy this water for the development of the harbour scheme. According to me, there is no competition; but one buyer is bound to come and buy. That buyer is a public authority and the claimant is in a position to make hay for his own goods. I agree that but for this harbour scheme there is no market for this water.
17. The conclusion therefore on the question of fact must be that the 'special adaptability' of this land for the supply of drinking water has no value apart from the scheme for which the acquisition is made and apart from the use to which it might conceivably be put for the development of the building scheme by the respondent himself.
18. The next question is whether the requirements of the harbour itself for water can be taken into consideration in estimating its value. This is purely a question of law and we are indebted to Mr. Page and the learned Advocate General for a very complete discussion of the English and Indian authorities on the subject. The general principles upon which Courts must estimate the value of the lands compulsorily acquired are set forth in Sections 23 and 24, Land Acquisition Act, and in a series of English decisions which have been followed by the Privy Council and the Courts in India. It is well settled that English decisions under the Land Clauses Act of 1845 lay down principles which are equally applicable to proceedings under the Indian Act. The cases which have been quoted before us are all considered by the learned Subordinate Judge who seems however to have been misled by a consideration of the effect on the English law of the Land Clauses Act of 1919. Apparently the express provision of that Act that the special adaptability of the land acquired for a particular purpose cannot be taken into account when there is no market apart from the special needs of the particular purchaser, seems to have led the learned Subordinate Judge to the inference that the law in England, as it stood prior to the Act of 1919, was entirely changed by that Act. This appears to be an error. It is unnecessary for the purpose of this case to go into the question of the effect on the English law of the Act of 1919. All the leading cases upon which we propose to base our decision are anterior to that Act, and the proper course seems to be to consider the effect of those decisions and to ignore the subsequent changes in the statute law in England, which have no application to India.
19. Under Section 23(1) of our Act, the Court, in determining the amount of compensation to be awarded for land, is required to take into consideration, first, the market value of the land as on the date of the notification Under Section 4(1), secondly, the damage sustained by the loss of standing crops or trees, thirdly, the damage by severance, and fourthly, the damage by reason of the acquisition injuriously affecting other pro. party of the owners. We are not now concerned with the other matters for consideration specified in the section. Section 24 provides that the Court shall not take into consideration the degree of urgency that led to the acquisition, the disinclination of the owner to sell, any damage which would not give a right of suit, any damage to the land acquired after the date of the declaration by the use to which it will be put, the increase in the value of the land acquired likely to accrue from the use to which it will be put when acquired, the increase to the value of the other land of the owner likely to accrue from the use to which the land acquired will be put and any expenditure on the land acquired after the date of the notification Under Section 4, Sub-section (1). We are concerned here mainly with the fifth of these considerations, namely, the increase to the value of the land acquired likely to accrue from the use to which it will be put when acquired. Applying this clause to the present case, it is argued that the Court cannot take into consideration the increase to the value of the land acquired by reason of the use of the water on the land for providing a drinking water source to the harbour.
20. It is settled law that in a case of compulsory acquisition the owner is entitled to receive compensation based on the value of the land to himself not based on its value to the acquiring authority. In assessing the value, regard must be had not only to the use which the owner has made of the land up to date of the notification Under Section 4, but also to all its potentialities and the restrictions on its user as on that date. Ordinarily the market value as on the date of the notification is the boat criterion of value. 'Market value' means the price which a willing owner as on that date would get by a process of bargaining with a willing seller. Apart from the market value, the owner is also entitled to compensation for any damage done to his unacquired lands by the loss of the lands acquired. It is settled that in considering the market value the market may be an imaginary market; there need not be evidence of the existence of specified purchasers. It is laid down in the Act that in assessing the value, the Court must exclude any increments of value which would accrue to the land by reason of the use to which it is to be put after acquisition and any value which will after the data of the notification Under Section 4 accrue to the land by reason of the further development of the scheme for the purpose of which it is to be acquired. What is called the 'special adaptability' of the land, that is to say the natural suitability of the land for some special use other than the use to which it is put by the owner, is an element to be taken into consideration in assessing the value; and the compensation to be awarded for such special adaptability is its value based on prudent business calculations having reference to the position on the date of the notification Under Section 4.
21. So far there is no doubt as to the law. Apart from the above propositions, the appellant contends that where on the date of the notification there exists no person who can reasonably be presumed to be a probable buyer of the property for the special purpose to which it is naturally adapted, then the special adaptability cannot be taken into consideration at all in assessing the compensation, for to take it into consideration in such circumstances would be to make the acquiring authority pay for its own improvements, would nullify the effect of the statutory power of compulsory purchase, would involve the valuation of the land on the basis of its value of the acquirer and not on the basis of its value to the owner and would involve the consideration of the urgency which has led to the acquisition. On the other hand, the learned Advocate-General for the respondent contends that the intrinsic value of the special adaptability must be considered and not merely its market value; that this intrinsic value exists even when there is in prospect no possible purchaser other than the acquiring authority. It is argued that the value of the land to the owner includes necessarily the price which he might reasonably have expected to get on the date of the notification for the special adaptability of the property to the needs of the acquiring authority. The respondent contends that the owner, quite apart from the compulsory acquisition, would be likely to get a reasonable price for his facilities by a process of bargaining between himself as a willing seller and the acquiring authority as a willing buyer even in the absence of possible rival purchasers. It is argued that compulsory acquisition does not involve the expropriation of the owner without giving him the price which he might reasonably have expected to get in view of the development of the locality as it stood on the date of the notification, that is to say, the owner would naturally be aware of the development of the harbour and the likelihood of the use of the land to the south of the harbour for oil tanks and other commercial purposes and that the mere existence of this probability would give an intrinsic value to the supply of water which was likely to be required for those probable developments quite apart from the actual scheme of the acquisition. It is also contended that the only practicable way of assessing the price which a willing seller can expect to get in such circumstances is by taking as a basis of calculation the price which the buyer was actually paying for similar facilities elsewhere, and that is the basis which the learned Subordinate Judge has adopted.
22. It is unnecessary to dwell on the numerous cases cited which lay down propositions about which there is no dispute, but we must carefully consider those leading cases which help us to decide which of the two conflicting views outlined above is correct. In Vallabhdas Naranji v. The Collector AIR 1929 PC 112, the Privy Council had to deal with the valuation of certain land acquired under the Land Acquisition Act, which land was absolutely worthless except as a potential site for salt works. It was held that the owner on compulsory acquisition was entitled to the present market value of that potentiality and that where in fact it was found that the exploitation of this land as a salt factory was not likely to be profitable, the land should be valued as waste land. The case in South Eastern Railway v. London Connty Council (1915) 2 Ch 252 has been quoted for the respondent merely because of the observation that the market price is not a conclusive test of real value. There is nothing in the actual ruling which has any bearing on the facts before us. An important case on the acquisition of water rights is that of (1903) 1 KB 574 the appellate judgment being reported in In re Gough and Aspatria Silloth and District Joint Water Board (1903) 1 KB 574; on appeal (1904) 1 KB 417. That was a case in which land was acquired which had a special adaptability for use as a reservoir and it was wanted for that purpose by a public authority. There was no evidence that the land could not be used as a reservoir for other places but there was in fact no other buyer in view at the moment. It was held that it was right to take into consideration the fact that the land in question had peculiar natural advantages for supplying water to the District, apart from any value created or enhanced by the scheme for appropriating the water to the particular local authority, and it was not necessary to prove that the land could be similarly used by other specified local authorities. The effect of that decision is most clearly seen from the brief judgment of the Master of the Rolls. He says:
To exclude the element of adaptability it would be necessary, as it seems to me, to show that there is no reasonable possibility of the site coming into the market. The value of the possibility if it exists is a question entirely for the arbitrator.
23. That is to say, the burden of proof lies upon the acquiring authority to show that no one else has any use for the special adaptability other than the acquirer; it is not enough merely to show that at the moment no offer has been received from anybody else. The case of In re Countess Mary Osalinskey and the City of Manchester, which is reported at p. 659 of the Appendix to Browne and Allen's Law of Compensation, is often quoted on this subject. It arose out of the acquisition of land adjacent to Thirlmere in the Lake District for the construction of a reservior to supply the Manchester Corporation. At page 662 dealing with the argument that the arbitrator erred in taking into consideration the value of the land to the Manchester Corporation for use as a reservior, Grove, J. observes:
You must not look at the particular purpose which the defendants in the case before the arbitrator are going to put land to, when they take it under Parliamentary powers or undertakings for any special purpose, but you may possibly use it as an illustration to anticipate or to answer an argument that the schemes thrown out by the plaintiff in this case as going to enhance the value of the land, are not visionary, but are schemes with certain probability in them.
24. Later on at p. 665 the learned Judge observes:
There is not a single fact stated from the shorthand writer's notes to show me that the arbitrator did that which he ought not to have done, namely, based his valuation upon the particular circumstances and particular price which the Manchester Corporation might be interested to pay for this compulsory sale.
25. The judgment of Stephen, J. points out that the geographical position of Thirlmere with a large quantity of water at such a level as to make it available to nearly any large town in England makes it absurd to say that there is no special value attaching to its natural features. This ease may therefore be taken as an authority for the position that the special requirements of the acquiring authority cannot be taken into consideration in fixing the value of the special adaptability but may be used as an illustration of the way in which the special adaptability might be of value to others, and when it has been shown that the special adaptability has such a general value, compensation must be awarded for it.
26. The most instructive of all the English cases on this subject is that of In re Lucas and Chester field Gas and Water Board, the original judgment in which is in (1908) 1 KB 571 and the appellate judgment in (1908) 1KB 571; on appeal (1909) 1 KB 16. That was a case in which the Chesterfield Gas and Water Board owned two reservoirs, one above the other. Through the land between the two reservoirs, ran a pipe line belonging to the Board. Apart from the pipe line, the intervening land was the property of Mr. Lucas, and it was admittedly specially suitable for use as a reservoir. The argument on behalf of the Board was that this land had no value on account of its special adaptability as a reservoir because no other purchaser could use it for that purpose without acquiring statutory powers and without interfering with the Board's pipe line. It was held that the special value must be taken into consideration in awarding compensation, on the basis that the Court would assume that any possible purchaser would have been able to get statutory powers for the development of a scheme and that a public body would not use the existence of its pipe line merely as a lever to force the owner to part with the rest of his land for less than its worth. The judgment of Fietcher Moulton, L.J. has been repeatedly quoted with approval both by their Lordships of the Privy Council and by the Courts in India. The learned Judge at page 31 states as a proposition of law that:
Where 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 a scheme to enhance the value of the lands to be purchased under it. But when the special value exists also for other possible purchasers, so that there is, so to speak, a market, real though limited, in which that special value goes towards fixing the market price, the owner is entitled to have this element of value taken into consideration, just as he would be entitled to have the fertility or the aspect of a piece of land capable of being used for agricultural purposes.
27. He observes also at p. 32:
As I read the award of the umpire, he has specifically found as a fact that there exists such a special suitability in the lands in question, and that there also exists such a possible competition in the District in respect of the supply of water as would entitle him to estimate the compensation in the way I have described.
28. And then at p. 34:
But if the land still remains in the position that there is no competition for it by reason of its special position and adaptability, and that when the compensation has to be assessed, there is no one (apart from the one purchaser who has obtained compulsory powers of purchase) to whom the land has a higher value than its value for ordinary purposes, I can see nothing to exclude the operation of the principle that you are to look at the value to the seller and not at the value to the purchaser.
29. There can be little doubt that this exposition of law when applied to the facts of the present case as we have found them would justify the conclusion that no value can be awarded to the special adaptability of this land for supplying drinking water to the harbour alone, if it can be shown that the land cannot have any value as a source of drinking water to anyone else. The judgment of Fletcher Moulton, L.J. has been approved by the Privy Council in Cedar Rapids Manufacturing and Power Co. v. Locaste (1914) AC 569, which was a case of the acquisition of lands required for developing a hydro-electric project on a river in which the owner of the land had certain water rights. Their Lordships held that the proper basis for compensation was the amount for which the respondent's lands and rights could have been sold had the appellants with their acquired powers not been in existence, but with the possibility that that company or some other company or person might obtain those powers. The most that could be said for the respondent on the strength of this case is that the respondent would be entitled, to the value of the water supply on his land as it existed before the scheme for the development of the southern lands of the harbour was promulgated, but in view of the possibility that some such scheme might come into existence. Their Lordships say:
The value of the land is the price which it would fetch, enhanced above the bare value of the ground, which possible intended undertakers would give. That price must be tested by the imaginary market which would have ruled, had the land been exposed for sale before any undertakers had secured the powers, or acquired the other subjects which made the undertaking as a whole a realized possibility.
30. Applying this ruling to the facts of the present case, it seems most unlikely that the land acquired would in fact have received any increment of value by reason of its adaptability for supplying drinking water, which adaptability only existed for the malarial tract of land to the south of the harbour, had it been offered for sale before there was any proposal to clear those lands of malaria and render them fit for habitation and development. In The Secy. of State for Foreign Affairs v. Charlesworth Pilling and Co., (1902) 26 Bom 1, it was held that the plaintiffs were entitled to the market value including any actual speculative advance which was shown to have arisen at the date of the notice, but excluding any future speculative advance from the same cause. It was pointed out that the Court should not award more because the object of the scheme is likely to increase the value of the land, nor give less because the same object was likely to increase the value of the owner's unacquired land, but that the Court should exclude for both parties speculations on the effects which the scheme might produce on prices, except to the extent to which it is shown that such speculations had actually entered into the market price on the date of the notification. There is in the present case not only no evidence that speculations had affected the market value of this land as a source of drinking water supply on the date of the notification, but the evidence makes it clear that the respondent had no idea that this drinking water was of any value until investigations were made by Mr. Ramalinga Ayyar months after the notification was issued.
31. In Fraser v. City of Fraserville, (1917) AC 187 the Privy Council confirmed the decision of the Court which set aside the arbitratior's award on the ground that the arbitrators had estimated the potential value of the property due to the acquiring authority's reservoir and capitalised the estimated profit arising therefrom. It may be pointed out that the arbitrator's procedure was very similar to that which has been followed by the learned Subordinate Judge. Their Lordships summarise the leading cases referred to above and approve of the principle 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. In Sidney v. N.E. Railway Co., (1914) 3KB 629, Rowlatt, J. points out that, where there is no competition or where the price has been raised by biddings to a point at which competition ceases, there is no room for the application of the doctrine of special adaptability. At p. 637 the learned Judge states:
If and so long as there are several competitors including the actual taker who may be regarded as possibly in the market for purposes such as those of the scheme, the possibility of their offering for the land is an element of value in no respect differing from that afforded by the possibility of offers for it for other purposes. As such it is admissible as truly market value to the owner and not merely value to the taker. But when the price is reached at which all other competition must be taken to fail, to what can any further value be attributed? ... There can be only one answer--in respect of the value to him for his scheme.
32. Other cases have been quoted which do no more than give effect to the same principles. There is however one case which it is desirable to refer to as a warning that the report is based on a misquotation. The report of the case in Katheresan Chetti v. Special Collector, Twarte AIR 1936 Rang 226, misquotes a passage from the case in Fraser v. City of Fraserville, (1917) AC 187 probably owing to a copyist error, and makes it read that the value for purpose of compensation is the value to the seller with all its advantages due to the carrying out of the schemes for which it is acquired. The words 'excluding those advantages' which should be read after 'all its advantages' have been omitted thus making the decision quoted exactly the contrary of its true import. This error has been carried into the head-note.
33. Let us apply the law as laid down in these rulings to the facts of the present case. It has been shown that there was at the time of the notification no other purchaser besides a harbour who was reasonably possible as a purchaser for the drinking water supply on the respondent's land. That being so, this special adaptability has no value apart from the value created by the scheme for the purpose for which it is acquired. Even if we are to take into account the speculative rise of price which might have taken place by reason of the owner conceiving the possibility of the development of some such scheme as has been put forward, it is on the evidence apparent that no one foresaw this scheme until the actual investigation began and there is no evidence whatever of any speculative rise of price until after the scheme had resulted in the notification. Though the special adaptability existed, it had no prospect of becoming an element of value apart from the scheme; its value therefore was the result of the scheme and to award compensation for it is to do that which cannot be done with reference to Section 24(5) of the Act, i.e. to take into account the increase to the value of the land acquired likely to accrue from the use to which it will be put when acquired. It follows that the learned Subordinate Judge erred in awarding compensation for the special adaptability of this land to supply drinking water to persons outside the respondents' estate.
34. In view of this conclusion, it is unnecessary to go into the correctness of the Subordinate Judge's method of valuation. It must however be pointed out that his valuation rests on various assumptions for which there is no adequate basis if regard is had to the position before the issue of the notification. It assumes a realized possibility of the scheme maturing; it fails to consider the possibility of the scheme not being taken up or of the harbour deciding on one or other of the two alternative schemes of water supply which were under consideration; it assumes that the harbour would be willing to pay in perpetuity a rate for water which it had agreed to pay only for five years; it seema to overlook the fact that even this agreement with the Municipality reduced the price by one half for the succeeding five years. In fact the learned Subordinate Judge has really awarded compensation based on the value to the harbour of a completed scheme, and not on the possibility of some such scheme being completed.
35. The memorandum of cross-objections, so far as it deals with the details of the learned Subordinate Judge's method of calculation need not be considered. As to the rejection of the alternative basis of claim, namely, the possible development of a building estate on the respondent's land to utilize the water on the land which has been acquired, we would only say that we agree with the learned Subordinate Judge that such a building scheme was not a practical proposition and need not be taken into consideration in estimating compensation. It is unnecessary to repeat the grounds upon which the learned Subordinate Judges's decision is based. As to the actual value of the lands acquired, we consider that the learned Subordinate Judge is in error in treating as conclusive an estimate prepared for the harbour authorities at the early stages of the investigation and in deducing therefrom that the proper value of the land at the head of the valley was considerably more than the price which the respondent himself claimed.
36. In actual fact, none of the land acquired was yielding any income at all to the respondent at the time of the acquisition. The learned Subordinate Judge finds as a fact that the diversion of the water has not adversely affected the cultivation of the valley. The land acquisition officer has awarded a substantial sum for the loss of a part of the irrigation supply. We consider that the award of the Land Acquisition Officer is ample compensation for the value of the land with its potentialties and for any damages that may have been done by the diversion of the water from it away from the unacquired land. There is no reason to consider that the Land Acquisition Officer's estimate of the value of the buildings on the land acquired is too low. In the result therefore, we allow the appeal with costs here and in the Court below, and restore the award of the Land Acquisition Officer in toto. The memorandum of oross-objections is dismissed with costs.
37. I concur with my learned brother. The diversion of the water of the respondent's spring had two purposes: 1, To intercept the water and thus render the lower part of the Lova Gardens free from malaria. 2. To provide drinking water to the area south of the harbour. As a source of drinking water, the spring could only be utilized in that area, but, apart from the scheme, which was being undertaken at the time of this acquisition, that area was uninhabitable, or at least not habitable by people in such numbers as would require a moderately copious supply of drinking water. It is not contended that any other public authority or private undertaker except the harbour authorities would even have come forward to develop this area and make it habitable. Thus the value of the respondent's spring as a source of drinking water--ruling out respondent's scheme for developing a building estate in his valley--arose entirely from the antimalarial scheme carried out by the harbour authorities and depended on the success of that scheme. To my mind, Section 24, Sub-section 5 of Land Acquisition Act, is completely applicable to the facts of this case. If under that section the Court is debarred from taking into consideration 'any increase to the value of the land acquired likely to accrue from the use to which it will be put when acquired', what was the use to which at the date of this acquisition it was proposed to put this spring? Partly to drain the lower end of the valley. Partly by developing and improving the south side of harbour, to supply with drinking water the persons who might possibly be located there.
38. Certified for two counsel.