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Swarnamanjuri Dassi Vs. Secy. of State - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtKolkata
Decided On
Reported inAIR1928Cal522
AppellantSwarnamanjuri Dassi
RespondentSecy. of State
Cases Referred and Earl of Bldon v. N.E. Ry. Co.
Excerpt:
- .....in another portion of his judgment, he observes that in the case of a perpetual lease at -a fixed rent the lease should not be taken into account, because if that is done, it would lead to the absurd result that the value would be the same for all time to come unless something happened to alter the security.3. it is contended that the president has gone wholly wrong in his view. if the property acquired is subject to a perpetual lease bringing a fixed income and the security is not impaired, the value must be calculated upon the basis of the income derived and the fluctuation can only be with regard to the number of years' purchase that the property would fetch at the time of acquisition; that is, if money is plentiful the property may be sold at 20, 30 or even 40 years' purchase, if.....
Judgment:

B.B. Ghosh, J.

1. This is an appeal on behalf of claimant 1 under the Calcutta Improvement (appeal) Act, against the judgment of the Calcutta Improvement Tribunal modifying to some extent the award made by the Collector for the acquisition of certain premises in Lower Chitpora Road and Chhatawalla Galee in this town under the Calcutta Improvement Act. The appellant was the owner of the premises. She as administratrix of the estate granted a lease for 99 years to one Elias of these premises under an Indenture dated 1st March 1920. The lessee paid a selami of Rs. 5,000 for the lease on 22nd September 1919. The rent reserved was the net amount of Rs. 2000 per month. There was a stipulation in the lease that the lessee was to build structures on the demised premises at a cost of one lac of rupees within a certain period, and as security for the performance of that agreement he had to deposit Rs. 50,000 with some bank. Apparently this was done. Subsequently under the Calcutta Improvement Act, a scheme for acquisition of the lands was sanctioned on 20th January 1922 and a declaration for the acquisition was made on 10th January 1923. The Collector made an award in favour of the appellant to the extent of Rs. 3,14,000 odd plus the statutory-allowance. The claimant asked for a reference, and on the reference the Tribunal varied the award of the Collector by adding to the award Rs. 19,000 odd with the usual interest and statutory allowance. The Collector made a separate award of Rs. 18,500 in favour of the lessee, claimant 2 who had also asked for a reference to the Tribunal and whose claim for the excess amount was rejected in its entirety. Claimant 2 has also appealed against that judgment and his appeal which is No. 32 of 1926 will be dealt with separately.

2. It is argued on behalf of the appellant that in determining the market value under Section 23, Land Acquisition Act, the learned President of the Tribunal in his judgment has not taken into consideration the lease in favour of claimant 2 under which the appellant was entitled to the net income of Rs. 2,000 per month; and it is urged that the President has not acted according to the correct principle of valuation of the property acquired under the Land Acquisition Act. What the learned President has done is, according to this contention, to ignore the lease altogether; and it is submitted for the appellant that the President has entirely gone wrong in doing so. The President has staled in the greater portion of his judgment that this lease with reference to which claimant 1 pressed him to arrive at the valuation of the property should not be taken into consideration. In enunciating the mode in which the valuation should be made, the learned President has made certain observations to which no exception can possibly be taken and to which no exception was taken in the course of the argument. What was objected to was that the learned President had, in certain, other portions, misstated the principles, which should guide him in arriving at the valuation: Par example, when he states at p. 68 that in deciding what price a purchaser will pay for a property which is under a lease, the purchaser will not be guided by the terms of the lease, because the President assumes that when the purchaser desires to purchase, the lease should be surrendered to the lessor for no considerations whatsoever. Again in another portion of his judgment, he observes that in the case of a perpetual lease at -a fixed rent the lease should not be taken into account, because if that is done, it would lead to the absurd result that the value would be the same for all time to come unless something happened to alter the security.

3. It is contended that the President has gone wholly wrong in his view. If the property acquired is subject to a perpetual lease bringing a fixed income and the security is not impaired, the value must be calculated upon the basis of the income derived and the fluctuation can only be with regard to the number of years' purchase that the property would fetch at the time of acquisition; that is, if money is plentiful the property may be sold at 20, 30 or even 40 years' purchase, if money is scarce the property may be sold at 10 or 15 years' purchase; but at all times the basis of the calculation must be the income derived from the lease. It seems to me that the President; is wrong in his view that in calculating the price of a property which is subject to a lease, the rent derived by the landlord should not be taken into consideration in arriving at the value of the property. Take for instance a property which has been leased out at a very profitable rent permanently. The rent is well secured, may be as a charge upon some other property of the lessee, then the leasehold falls into decay and the income derived by the lessee amounts to nothing. If this property is sold, would it be right to say that this property should be sold for nothing and the lease should not be taken into consideration at all? If that were so, I think that would lead to an absurd result. Take another instance, if the Secretary of State happens to take a lease of a house as is often done in this city, for a particular purpose, and if the lease is taken at a time when rent rules high and the lease is taken for a period of 99 years and subsequent to that, rent falls and the value of landed properties falls consequently, can it be said that at that time if the Secretary of State seeks to acquire that property under the Land Acquisition Act, his liability to pay rent at the high rate contracted for in the lease should be ignored altogether and he can get the property at a low valuation which may be fixed at the time when it is acquired? I think that it also would be an absurd thing to say that the lease should not be taken into consideration at all.

4. It is further contended on behalf of the appellant that the learned President has fallen into another error in arriving at the valuation, as he has taken into account only the fact as to what a purchaser would pay for the property at the time of the acquisition and not what the loss to the seller would be at that point of time. Mr. Langford James who appears for the Secretary of State has conceded and very rightly that the President is wrong so far as he states that the lease should not be taken into consideration; but he contends that the lease is not the only factor which should be taken into consideration. There cannot be any dispute as regards that proposition. Mr. Langford James further contends that although the President has gone wrong in his view that the lease should not be taken into consideration at all and also that he has gone wrong in his reading of the result of the cases cited by the President in his judgment, he has as a matter of fact taken the lease into consideration while dealing with some of the arguments addressed to him on behalf of the appellant and, therefore, his judgment cannot be assailed as on a question of law. I shall consider that point presently. But before I do so, I would like to point out the principle of valuation of lands acquired, which has been laid down authoritatively in a number of cases. Mr.James refers to the case of Kailash Chandra Mitra v. Secy of State [1813] 17 C.L.J. 34 where Sir Lawrence Jenkins observes that the market value of the land acquired is the price that the owner willing, and not obliged to sell might reasonably expect from a willing purchaser with whom he was bargaining for the sale of the property. That proposition cannot be disputed. Again, it has been decided in the ease of Government of Bombay v. Merwanji Muncherji Cama [1903] 20 I.A. 80 that there is no difference between the term 'value to the owner' as used in the Land3 Clauses Act in England and the expression 'market value' as used in Section 23, Land Acquisition Act. Therefore in arriving at the market value of the property, it must be considered what the owner was actually receiving from the property and what would be the amount of loss to him by the acquisition. The same thing was laid down in the case of Seay. of State v. Shanmugaraya Mudaliar [1893] 20 I.A. 80, where their Lordships observed that the District Judge was right in estimating rent for the whole of the land instead of taking the rent actually received for a part by the owner in coming to his conclusion as to the valuation of the property acquired. It was, their Lordships stated, the best, if not the only, method he had for getting at the 'market value of the ownership' Lastly I should refer to the case of Narsingdas v. Seay. of State 29 C.W.N. 822. At p. 821 their Lordships of the Privy Council observe:

Now the principle upon which the valuation of the property compulsorily acquired should be measured has been repeatedly laid down by this Board and by the House of Lords.

5. To use the words to be found in Fraser v. City of Fraserville [1917] A.C. 187:

It is the value to the seller of the property in its actual condition at the time of its expropriation with all its existing advantages and with all its possibilities excluding any advantage due to the carrying out of the scheme for the purposes for which the property is compulsorily acquired.

6. The decision in Fraser's ease was that of the Judicial Committee and it was pronounced by Lord Buckmaster himself who also delivered the judgment in the case of Narsingdas. It has therefore been laid down by the highest authority which we are bound to follow that the value to the seller of the property in its actual condition at the time of the sale should be taken into consideration in arriving at the market value. It is not necessary for me to cite all the other cases which have been referred to at the Bar in order to substantiate the proposition submitted for our consideration that it is the value to the seller which should be taken into consideration. But I would refer to one other case only which is instructive as regards the manner in which the matter should be considered. It is the case In re Athlone Rifle Range [1902] 1 Ir. 433. There the question arose with regard to the acquisition of a certain land of which the Secretary of State for War was the lessee. It is unnecessary to state the facts in detail. But there the question arose whether the Secretary of State who was the lessee could be taken as having surrendered the lease at the time of the acquisition and thus reduce the amount of compensation that the owner of the land would otherwise get for the property acquired. The Master of the Bolls in dealing with this argument on behalf of the Secretary of State says;

If the clause of surrender and all the covenants in the lease are gone then the rent is gone also and the arbitrator is bound to deal with the land as free of rent which would amount to an estate in possession. That would be a good way of getting at the land for less than is paid for it as rent, apart from the circumstance that Percy is entitled to a beneficial lease. But is that a sound application of the law? It is not; because, though the service of notice to treat makes the Secretary of State the equitable owner of the land, the interest he takes is subject to the lease, and the assessment of compensation is not to be made as of a date subsequent to the service of notice to treat. Bat the circumstances are to be considered as they existed at the date of the notice, that is immediately before its service. That was the very case in Penny v. Penny [1868] 5 Eq. 227, referred to by Mr. Bowen; and Earl of Bldon v. N.E. Ry. Co. [1899] 80 L.T. (N.S.) 723 is an authority for the proposition that if the land which has been taken is likely to continue to produce rent which is being paid for it, the rent does offer the basis on which the value will be calculated.

7. It seems to me, therefore, that the learned President is not right in the way in which he proceeded to make the valuation by ignoring the lease altogether.

8. Mr. James, however, contends that the lease cannot be treated as the only basis for making the valuation. For example, what the appellant wanted in the lower Court was to have the valuation made on the basis of 20 years purchase of the rents reserved in the lease and that appears to have been the contention of Sir Benode here at the opening. Mr. Langford James has argued that the lease is certainly a factor to be taken into consideration, but that other matters should also be considered as to whether the lessee was likely to continue to get the rent reserved having regard to the circumstances disclosed, that is to say, whether the personal liability which the lessor undertook by his covenant in the lease is to continue to be of any value for the entire period of the lease, or whether there was any chance of the lessor losing the income stipulated in the lease after the expiry of Mr. Elias's life. Further it should also be taken into consideration as to whether the solvency of Mr. Elias himself would continue for any appreciable period of time. I quite agree with this contention. No doubt these factors should be1 considered along with the income derived from the lease itself in order to arrive at-the proper valuation of the property. But it is contended by Sir Benode on behalf of the appellant that although these other matters put forward by Mr. James should be considered, the President has ignored the lease altogether and there he has gone wrong. He has not considered the lease; he has not considered the other circumstances also. It seems to me that the appellant is correct in the contention he makes.

9. I must now deal with the argument of Mr. James that the learned President has actually taken the lease into consideration although he said it should not be done. He has apparently done so, but it seems to me he has done it in a very round about way. In dealing with the argument of the advocate for the claimant that the lease amounted to an absolute sale to the lessee and the rent was a mere annuity, the learned President has observed that in finding the present value of the annuity the rata of interest to be take a cannot be less than that of a mortgage on the property which in Calcutta is ordinarily in the neighbourhood of 8 per cent. Mr. James has argued upon this that the President has taken the lease into consideration and holds that having done so he would give the valuation at the rate of 8 per cent. It may be possible to support the judgment in that way. But as it seems to me to be quite clear that the President has approached the question from a wrong point of view, it would not be proper for us to hold that he did consider the lease in arriving at the true valuation of the property. Similarly in dealing with another argument of the advocate for the claimant the learned President observes:

Whoa the rent has been fixed at an amount which is in excess of the present capacity of the land, the consideration of the security of rent would be entirely absurd and the personal security of the lessee would be the primary guarantee for such a rent.

and for the capitalization of the income the rent should be on very much the same footing as an unsecured annuity which must rank much lower than interest on Government securities and so forth. It may be that the learned President was dealing with the lease in the same rouudabout way as he did when considering the other argument on behalf of the claimant. But as in the major portion of his judgment he ha-i elaborately discussed the question as to whether the lease should be taken into consideration in arriving at the valuation of the property and has rejected it I do not think it would be right for us to hold that his judgment takes the correct view of the principle of valuation and should be supported. One of the assessors agreed in the view of the President and the other assessor understood the judgment of the President to have laid down that the lease should not be taken into consideration at all.

10. Under these circumstances I think that the judgment of the tribunal should be set aside and the case sent back to that tribunal for dealing with the question of valuation in the light of the observations made above. The lease in question should be taken into consideration and also the other circumstances which would afford the basis for coming to the proper valuation of the land as I have indicated above.

11. The costs of all Courts will abide the final result.

Cammiade, J.

12. I am also of the opinion that this case must go back for a reconsideration of the question of valuation on the footing of the lease executed by the tenant, Elias, in favour of the first claimant. It is true that in the judgment delivered by the learned President of the tribunal a reference has been made to this lease and the learned President has made certain observations from which it may be taken that his opinion was that even if the lease was taken into consideration, the valuation based on it would not amount to more than the valuation arrived at by him. It appears, however, from the wording of his judgment that the lease has not been considered in all its aspects and in all its bearings in regard to the question at issue. There is the undoubted fact that the property at the time of acquisition yielded a monthly rent of Rs. 2,000 clear to the first claimant and this rant was reserved to the claimant for a period close upon a century. This matter could not be left out of consideration by any person seeking to purchase the land as an investment, because there would be a ready return for his money for a number of years. This of course assumes that the tenant is a solvent person, a question which has also to be gone into in deciding how far the lease should be taken into consideration in calculating the present market value of the land.

13. There is also the fact that according to the terms of the lease the tenant is bound to erect buildings at a cost not below one lac of rupees. This is also a factor which the intending purchaser would take into consideration; and it is one which the learned President has entirely overlooked. At how many years' purchase an intending purchaser would purchase the property which was subject to a lease for a long terra of years is a question which can only be answered by taking evidence as to the general custom of business with the purchasers in Calcutta; and this is a matter which the learned President will have to look into and if it is necessary he would have to take evidence on the subject.

14. For all these reasons the case should go back for a reconsideration of the question of valuation.


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