1. This appeal raises an interesting question with regard to the market price of certain land in the town of Rajahmundry acquired by the Government in proceedings instituted under the Land Acquisition Act. When the notification was issued under Section 4 of the Act on 25th January 1937, the appellant and respondent 2 appeared as claimants to the land. The question of the respective interests of the appellant and respondent 2 has not yet been decided, but the appeal can proeeed on the footing that the appellant is entitled to the amount awarded in the proceedings, The Distuiet Judge of East Godavari has found that on the date of acquisition the market value of the land which measured 11541 square feet was Rs. 1676-13-0, to which was to be added the solatium of 15 per cent. A lease of the land for a term of 99 years was granted to Arbuthnot and Co., by the East India Co., on 4th July 1848 and therefore the term expires on 3rd July 1947. The appellant claims to be the successor in title of Arbuthnot and Co. The figure of Rs. 1676-13-0 represents the free hold value of the land but the District Judge held that the lessee was only entitled to one eighth of that value, relying on a statement in the Land Acquisition Manual published by the Government of Madras. The appellant does not claim to be entitled to compensation on the basis of full ownership, but he says that under an order of the Government issued on 28th October 1898, he would, if the land had not been acquired, be entitled at the expiry of the lease to hold the land on ryotwari tenure and the fact that there existed this right added to the market value of his interest in the property as the lessee on the date of notification. The order of the Government of Madras dated 28th October 1898, on which the appellant relies, cancelled the orders of the Government previously issued under which leases for 99 years could be converted into permanent holdings with a fixed assessment. The order directed that such leases would be dealt with in future in accordance with the following principles:
(i) Where the lease has actually expired and the land has legally reverted to the Government, ordinary ryotwari pattas will be issued, the lands being classed as dry or wet in accordance with ordinary settlement principles.
(ii) Where the lease is still running, the leaseholder will ordinarily be given the option of taking an ordinary ryotwari patta subject to periodical revision. If, however, the rent reserved under the lease is higher than the settlement rates, the lease should be allowed to run to its term, a ryotwari patta reserving for the unexpired term an assessment equal to the rent reserved under the lease.
(iii) Where the leased lands are in towns, the rates prescribed for the assessment of town sites should be applied instead of rates calculated in the ordinary settlement principles.
2. Mr. Govindarajachari contends that the appellant is much in the same position as a lessee whose lease gives to him the right to a renewal and in this connexion he has referred to the decision in Bogg v. Midland Railway Corporation (1867) 4 Eq. 310 Mr. Govindarajachari is putting his case too high when he says that the order of the Government of 28th October 1898 gives him a right to hold the land under the ryotwari tenure. The order does not go to this extent, but it indicates that Government will ordinarily convert such leaseholds into ryotwari tenure and regard the lessee as being entitled to a patta. Although this does not amount to an absolute right, the fact that this is the course which Government ordinarily takes would tend to increase the value of the lessee's interest. Section 23, Land Acquisition Act, provides that the market value to be taken is the market value on the date of the notification, which means the market price ruling immediately before the publication of the notification. Therefore the market price of the appellant's interest in the land acquired was his lessee's interest, plus the added value arising from the prospect of having the land converted into a ryotwari tenure at the end of the lease. Mr. D.A. Krishna Variar, who has appeared on behalf of Government, has suggested that the lessee's right to compensation could not be anything more than that based on the unexpired portion of the lease, because the Government having decided to acquire the land would not be prepared to follow the course laid down in its own order of 28th October 1898. But this argument overlooks the fact that all that the Court is concerned with is what the value of the lessee's interest was in the market when the notification appeared and the market value must be based on all the rights which the lessee had and on his potential rights.
3. In Vallabhadas Naranji v. The Collector A.I.R. 1929 P.C. 112 the Privy Council held that the value of the land which in itself was worthless, but had a potential use for salt works was the market value of the potentiality. Anticipating the argument that there was not an absolute right in the appellant to have the lease converted into ryotwari tenure, Mr. Govindarajachari referred to the case in Holt v. Gas Light and Coke Corporation (1872) 7 Q.B. 728. There a volunteer corps obtained land on lease for the purpose of using it as a rifle range. There were three blocks. The land at both ends was held by the corps under lease; but the intermediate land was held under a licence which could be terminated at any time. The respondent company acquired the land at one end and the question was what was the principle on which compensation should be awarded. It was suggested on behalf of the respondent company that as the intervening land was held merely under a licence which depended on the will of the owner, the acquisition of the adjoining portion meant no loss in respect of the land held under licence. In this connexion Coekburn C.J. said:
What matters it that between the two there intervenes a piece of land which does not belong to the parties claiming compensation, except this, that, inasmuch as their right to use that land as part of the range depended on the will or licence obtained from the owner of the land, it was precarious. But inasmuch as there was no reason to suppose he would alter his will in respect of it and change his mind and give them notice that the licence or permission given should be withdrawn, I see no reason why the jury should not, looking at the whole state of things, come to the conclusion that substantially this was not of so precarious a tenure but that they might infer that the existing state of things would not be altered; and that that which had been used before as an entire rifle range would have been so continued, and, consequently, that the land had a value which it would not have lost but for the the intervention and act of the company; and, therefore, there should be some compensation for this loss.
4. Before the land acquisition proceedings were instituted here, there was no reason to believe that Government would not grant to the lessee ryotwari tenure at the end of his period or during it if he applied and if the holding of the land under the ryotwari tenure had a value, that value increased the market price of the lessee's interest. The District Judge has not taken into consideration this factor and the case will be remanded to him to decide in the light of this judgment what the value of the lessee's interest in this land really is. The parties will be at liberty to adduce fresh evidence should they so desire. The appellant is entitled to costs, but we do not think that he should be given full costs because he has stamped his memorandum of appeal on the basis that he is entitled to the full Rs. 1676-13-0. An order for half the usual costs will meet the case. The court-fee will be refunded.