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Surendra Nath Sarkar and ors. Vs. Pyari Charan Law and ors. - Court Judgment

LegalCrystal Citation
Decided On
Reported inAIR1938Cal740
AppellantSurendra Nath Sarkar and ors.
RespondentPyari Charan Law and ors.
Cases ReferredDinendra Narain Roy v. Tituram Mukerji
- deemed to be the decision of the tribunal. the president has awarded rs. 1,92,000 out of the total compensation to the lessors, and the balance is in respect of the lessee's interest. the appeal is on behalf of the lessors, the sarkar claimants who question the basis of the apportionment adopted by the president. the president has valued the lessors' interest in the property as what he describes as a 10 per cent. security, mean-ing thereby that it is valued at ten years' purchase of the net annual rental reserved by the lease. the lease is ex. 8, and is printed at pages 9 to 13 of part ii of the paper book. it contains a clause in these terms:13. if the said land and bazar be acquired under the land acquisition act, then of the compensation, etc. therefor each shall get what would.....

Biswas, J.

1. This is an appeal against a decision of the Tribunal constituted under the Calcutta Improvement Act (Bengal Act 5 of 1911), in what is described as an apportionment case. That Act provides that for the purpose of acquiring land in connexion with the operations of the Calcutta Improvement Trust, the Tribunal shall perform the functions of the 'Court' under the Land Acquisition Act, and the provisions of this latter enactment are made subject to certain modifications set out therein. So far as appeals are concerned, Section 54, Land Acquisition Act, is excluded, and a separate Act has been enacted by the Indian Legislature being Act 18 of 1911 governing the right of appeal against the decisions of the Tribunal. The present appeal has been preferred under the provisions of this Act, and the only question is as to how a certain sum of money which has been awarded as the market value of the property acquired should be divided between the persons interested. The property under acquisition is a Municipal holding described as premises Nos. 1 and 1/1 Belliaghata Road, and comprising an area of 4 bighas 5 kottas 9 chittaks and 10 square. feet of land with a market known as Parsi bazar situated on the greater portion of it. At the material date, which was the date of the declaration under Section 6, Land Acquisition Act, the entire property was held under a mourashi mokarari lease which had been granted by the owners on 12th March 1924. The owners were the Sarkars, com. pendiously referred to in these proceedings as claimants No. 1. The lessee was one Nanda Lal Mallik, but he is not a party to this case, having been completely sold out, and the whole of his interest in the property is now represented by the other sets of claimants in the case, the Laws (Claimants No. 6) claiming by virtue of certain charges held by them under two decrees of this Court, and one Hrishi Kesh Shaw (Claimant No. 7) claiming to be purchaser in execution of a mortgage decree. As there is no question in this appeal as between these parties inter se, it will be sufficient to deal with their interests collectively as the interest of the lessee.

2. The Collector originally awarded Rs. 2,50,000 as the market value of the property, and subsequently reduced it by Rs. 3159-11-6 in respect of a small area which was found to belong to Government. The resultant award was for a sum of Rupees 2,46,840.4-6 (excluding statutory allowance), and the Collector made it jointly in favour of all the persons interested and deposited the amount in the Tribunal under Section 31 (2), Land Acquisition Act. He likewise made a reference under Section 30, and the parties also obtained reference under Section 18. No dispute was raised as to the market value and the only question was as to apportionment. The matter was dealt with by the President of the Tribunal sitting singly, as he was entitled to do under Clause (b) of Section 77 (1), Calcutta Improvement Act, and this decision must be deemed to be the decision of the Tribunal. The President has awarded Rs. 1,92,000 out of the total compensation to the lessors, and the balance is in respect of the lessee's interest. The appeal is on behalf of the lessors, the Sarkar claimants who question the basis of the apportionment adopted by the President. The President has valued the lessors' interest in the property as what he describes as a 10 per cent. security, mean-ing thereby that it is valued at ten years' purchase of the net annual rental reserved by the lease. The lease is Ex. 8, and is printed at pages 9 to 13 of Part II of the paper book. It contains a clause in these terms:

13. If the said land and bazar be acquired under the Land Acquisition Act, then of the compensation, etc. therefor each shall get what would be due to him according to law.

3. The whole question therefore is what is payable to each party according to law. It seems to be only common sense that as between lessor and lessee the acquisition should not place either party in a better or a worse position than he was before the acquisition. The acquisition transforms the property into a certain sum of money, but the rights of the parties relatively to this sum ought to be the same as they were with reference to the property. Where a property is subject to a lease, theoretically speaking, the total compensation for the property should be the sum total of the compensation payable in respect of the interests of lessor and lessee. If the total compensation is not however arrived at by Separately calculating the interests of lessor and lessee, it seems to us that the amount should be divided between them in such proportions as would represent the value of their respective interests. It must follow on this basis that whatever is obtained by one party, the other takes the balance, and this ensures to each payment of the proportionate value of his interest. In an apportionment between lessor and lessee, it ought not surely to make a difference whether the lessor's or the lessee's interest is first valued and paid for. This is sometimes overlooked, and what is often done is that instead of dividing the total compensation between the lessor and the lessee in the proportion of their respective interests, either the lessor's or the lessee's interest is first assessed and then, after deducting the amount so assessed, the balance is handed over to the other : see for instance Nibas Chandra Manna v. Bipin Behari (1926) 13 AIR Cal 846. Such a method however may obviously lead to unfairness and injustice as between the parties, the party getting the first slice, so to say, out of the compensation being placed in a position of undue advantage as compared with the other. So far as we can see, there is and can be no valid reason for giving the first chance to either lessor or lessee in this behalf, and making the amount of compensation payable to the one or the other depend on such accidental preference. Such an anomalous result could not of course follow if one could be sure that the total compensation represented the sum total of the values of both lessor's and lessee's interest. But the market value of the land acquired is often determined on different considerations without separate assessment of each interest. In such a case, it would be manifestly inequitable at the time of apportionment to allow the one party the real value of his interest in the land, and leave to the other the balance only of the sum which had been calculated on a different basis altogether. This cannot ensure that the balance so determined will also represent the real value of the interest of the person to whom it is paid. As was pointed out by Mookerjee Ag. C. J. in Nayan Manjuri Dasi v. Hem Lal Dutt (1920) 7 AIR Cal 959, the market value of the land acquired may be determined on many hypothetical considerations, but the question of apportionment of the sum awarded as between the landlord and his tenant must be based, not on hypothetical grounds, but on an accurate determination of the value of their respective interest in the land. We are not unmindful that there are dicta to be found in certain decisions to the effect that it is not always possible in apportionment proceedings, with only a fixed sum to apportion, to ascertain the market value of each interest: see, for example, the case in In Re: Pestonji Jehangir (1913) 37 Bom 76. All the same, it will be observed that Maclebd J. said in this case that what the Collector and the Court have to do is to apportion the sum awarded amongst the persons interested as far as possible in proportion to the value of their interests. The true rule, in our opinion, applicable to a case like the one before us is that which was laid down as far back as 1872 by Jackson J. in Bhageeruth Moodee v. Rajah Jabur Jummah Khan (1872) 18 WR 91. There, what the Courts below had done was to ascertain the approximate value of the mokararidar's interest and pay him the amount so ascertained, and to give the remainder to the zamindar out of the total compensation previously fixed. It was held that this was not a correct method, but that the rule to be followed was 'that the parties should divide the money in the ratio of their respective interests in the estate.' The observations of Macleod C. J. in Dinendra Narain Roy v. Tituram Mukerji (1903) 30 Cal 801 at p. 810 are worth quoting in this connexion as indicating the right principle, though this particular aspect of the question was not pointedly raised in the case:

I think the Court ought to proceed on the principle of ascertaining what is the value of the interest of the zamindar on the one hand with which he has parted, and that of the tenant on the other, and to apportion the compensation money between them in accordance with those values.

4. It seems to us that where the total sum awarded has already been determined and at is a question of apportioning the same between the lessor and the lessee, the essential point is to ascertain the proportion which the interest of one party bears to that of the other, and to divide the sum between them in accordance with such proportion. In other words, it follows that in order to assure to each party a proper allocation of the total compensation, which would accurately represent the proportionate value of his interest, it is impossible to avoid a separate assessment of each interest. If in the course of the valuation proceedings, that is to say at the time of ascertaining the market value of the property, the interests of the rival claimants have been separately assessed, such separate assessment may be and will be adopted as the basis of the apportionment, but where that is not the case, a separate assessment will have to be made for the purposes of the apportionment.

5. The present case illustrates the unfairness which may result from the adoption of any other course. The valuation paper of the Collector has been exhibited in this case; it is Ex. 26 printed at pp. 45 to 47 of Part II of the paper book. It shows how the Collector arrived at his valuation of Us. 2,50,000 for the property, and it does not appear that the valuation has any reference to the separate interests of the lessor and the lessee. The Collector took the actual rentals derived from the shop area of the property, made what he considered to be proper deductions from the gross receipts, and then applied varying rates of security or years' purchase to capitalize the same, and then he valued the bustee area which lay at the back, and in the result deduced a figure for the market value of the entire property. This figure came to Rs. 2,33,410 according to one standard, and to Rs. 2,39,360 according to another. As against this, he put down the owner's demand which was Rs. 2,60,000 and finally, with the consent of the acquiring authority, he accepted the party's offer of Rs. 2,50,000 as the figure for his award. This was afterwards reduced by a small sum of Rs. 3159-11-6, as already stated.

6. In the apportionment proceedings, as there was no dispute regarding market value, the Collector's figure was, as it had to be, accepted as the total sum available for division between lessor and lessee. But for the purpose of making the division, the only interest which the parties as well as the Court thought it necessary to value was that of the lessor. Naturally the attempt was on the one hand to increase and on the other to diminish, the value of such interest, the experts of both parties admitting that they had no materials before them for valuing, and had not valued, the lessee's interest. Such attempt on either side was expressed by the experts in terms of percentage of security; the lessor's interest was at one end put down as a 10 per cent. security, and at the other as a security of 6 to 7 per cent. This meant that according, as one opinion was accepted or the other, a purchaser of the lessor's interest would pay ten years' purchase, or anything between 16, 2/3rds and 14, 2/7ths years' purchase, the number of years' purchase multiplied by the annual rent reserved by the lease giving the total price. The learned President observed that considering the evidence of both experts and the other evidence, and after 'mature deliberation' he had come to the conclusion that the security for the lessor's interest should be taken at 10 per cent., as stated by Mr. C. K. Sarkar, the expert on behalf of the lessee. In the result, he calculated the lessor's interest in this way at Rs. 1,92,000 being ten times the annual rent of Rs. 19,200 payable under the lease, and this sum ha awarded to the lessor, and he gave the balance Rs. 54,000 (in round figures) to the claimants representing between them the interest of lessee. These claimants have not appealed but only the lessors. The lessors ask for more, and contend that the security should have been taken as a much: better security than 10 per cent. again assuming that what would be left over if anything, after paying the lessors, would be the proper amount to pay for the lessee's share. Mr. Bepin Chandra Mallik on behalf of the appellants points out that even if the lessor's interest is taken as a 8 per cent, security, i.e. at 12 1/2 years' purchase, it would give his clients Rs. 2,40,000 and that on the basis of 13 years' purchase, there would in fact be nothing left for the lessee out of the total compensation. The appellants have in fact valued their appeal at Rs. 54,000, being the whole of the sum which has been awarded to the lessee.

7. We do not think that what the President did or what the appellants contend for is a fair way of dealing with the matter. The lessor's interest might be a 10 per cent. security or anything else, but whatever it was, he was not entitled to take away the whole of the sum at which such interest might be valued, leaving only the balance for the lessee without a valuation of his interest. The lessee might just as well claim that his interest should be first assessed and he be paid the sum at which it might be so assessed and the lessor left with the balance. It might be that the lessee's interest, if valued, might be found worth very little, but all the same it had to be valued, and then after it was ascertained what proportion it bore to the lessor's interest, the compensation was to be divided between the two according to such proportion. In that way alone could there be a true apportionment; that is indeed what apportionment means; it is not mere division, but division in the proportion of the interests of the parties concerned. As it is on the basis adopted by the President, the lessee is reduced to a precarious position and has to be satisfied with the leavings of the lessor, as it were, but there is no reason why it might not have been the other way about. For aught one knows, the share of the compensation which the lessee thus obtains may bear little or no relation to the profit-rental he may be making out of the leasehold, and yet he may fairly claim to be compensated on this basis; if the lessor is compensated on the basis of the full value of his interest, why should not the same basis be applied in determining the compensation payable to the lessee?

8. We have no hesitation in holding that the correct course was not followed, and we must accordingly allow the appeal and set aside the judgment of the learned President and remand the case to him to be dealt with de novo in the light of the principles we have indicated. In other words, he must ascertain the value of the interest of both lessor and lessee, and apportion the total sum available between them on that basis. In valuing these interests, the President will take all relevant factors into consideration, applying the correct standard to each as the facts may justify and the parties will be at liberty to adduce such further evidence as they may be advised. Strictly speaking, it was for the lessee to have adduced evidence at the last hearing to prove the value of his interest, but as it is just possible the parties were misled by the practice which appears to have been followed in such cases in the past, we think it would be right to set the matter at large and direct a re-trial on fresh evidence. Dr. Basak on behalf of claimants No. 6 endeavoured to show that there were materials already on the record, which if they did not go to the full extent of proving the value of the lessee's interest, were stilt sufficient to establish that in no circumstances could it be less than the sum actually awarded, viz. Rs. 54,000. All that we need say is, we were not satisfied. Mr. Mallik has desired us to make it clear that we have not said anything in this judgment to suggest that in valuing the respective interests of lessor and lessee, the President shall treat them as representing the same class of security. That is a matter on which we express no opinion and it will be for the President to decide what percentage rate or rates of security or number of years purchase should be applied, or whether this particular method of valuation should be followed at all.

9. In ordering a remand it is necessary to give one direction. As already stated, there is no appeal on behalf of the persons representing the lessee's interest; they accepted the sum of Rs. 54,000 which was awarded by the President. It is necessary therefore to direct that whatever the result may be of the further hearing, the lessee's share must be limited to the said figure of Rs. 54,000. It is also to be understood that so far as the claimants who represent between themselves the interest of the lessee, or claim through the original lessee, Nanda Lal Mallik, are concerned, the principle of apportionment inter se which has been agreed to and accepted by them must stand, and there is to be no variation in this respect. The Chief Executive Officer of the Corporation of Calcutta is a party to these proceedings, and his claim is in respect of rates and taxes due for the property acquired. It is agreed that the amount of such rates and taxes must be paid, and we direct accordingly that this should be paid out to the Chief Executive Officer, and he should be discharged from these proceedings. The question as to whether these rates and taxes ought to come out of the share of the lessor or the share of the lessee is left open, and will be dealt with by the President. The sum available for apportionment will be necessarily the amount left after payment of these charges. The costs of this appeal and of the hearing in the Tribunal will abide the result. Seeing that the only contesting respondent is claimant No. 6 and his claim is limited to approximately a sum of Rs. 20,000, we direct that the hearing fee of the appeal be assessed on the basis of Rs. 20,000 and not on the full valuation of the appeal.

Costello, J.

10. I agree.

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