Posted On by &filed under High Court, Madras High Court.

Madras High Court
(Kanchumarti) Venkata … vs Secretary Of State on 7 March, 1927
Equivalent citations: AIR 1928 Mad 89
Author: K Sastri


Kumaraswami Sastri, J.

1. This appeal arises out of the proceedings instituted for determining the amount of compensation to be awarded in respect of the acquisition by the Government of 50 acres 75 cents of land situate in the town of Rajahmundry. The land was acquired for the construction of the Government Arts and Training Colleges at Rajahmundry. There were disputes as regards ownership of the land. Claimant 1 is the adopted son of K.V. Krishnayya who admittedly was the owner of the property and who was in possession. Claimant 2 is a reversioner who disputed the adoption. He succeeded in the Subordinate Judge’s Court but in appeal the High Court upheld the adoption and claimant 1 was declared to be entitled to the estate. This judgment of the High Court was affirmed by their Lordships of the Privy Council so that the person now entitled to the property is claimant 1.

2. The Government notified its intention to acquire the property on the 19th July 1921. On that day the claimant 2 had obtained a decree in his favour in the Sub-Court and the appeal in the High Court was pending. The decree of the Subordinate Judge in favour of the claimant 2 was on the 29th April 1921. It was reversed by the High Court on the 18th October 1922 and the judgment of the High Court was affirmed by their Lordships of the Privy Council on the 23rd June 1925. [K. Venkata Seetharama Chandra Row v. K. Venkata Krishna Row vide A.I.R. 1925 P.C. 201-Ed.] The order of the land acquisition officer fixing the compensation was on the 6th November 1921 and the application for reference was made on the 18th November 1921.

3. A preliminary objection is taken by the learned Government pleader that an appeal by the claimant 1 would not lie as he did not apply for a reference to the District Court under Section 13, Land Acquisition Act, the application having been made by claimant 2. I do not think this objection is tenable. At the date of the award by the Land Acquisition Officer, claimant 2 was the person who was declared by the Subordinate Judge to be entitled to the property and who prima facie was the person entitled to apply. He was the person interested within the meaning of Section 18(1) Land Acquisition Act 1, 1894. I am of opinion that where during the pendency of a suit or appeal a person who had a decree in his favour and who was prima facie entitled to the property institutes or defends proceedings in respect of property sought to be acquired, the proceedings can be continued by the person who ultimately succeeds in the litigation. Any order passed in respect of the property would enure for the benefit of the successful litigant and he is the person who on the reversal of the judgment of the lower Court would be entitled to continue the proceedings.

4. As regards Survey No. 119-B-2 the suit by claimant 2 was dismissed by the Subordinate Judge and claimant No. 1 who ultimatedly succeeded was the per-son who was entitled to that item and it is clear from the record that there is no valid reference as regards that item. As regards the remaining items, I think the 1st claimant is entitled to appeal against the award.

5. Turning to the merits, the only question is whether the District Judge was right in treating the land sought to be acquired as agricultural land and fixing the compensation on that basis. The land sought to be acquired is situate within the municipal limits of the town of Rajamundry and it appears from the evidence and the plan produced that it is abutted on one side by the Gokavaram Road and on the other by another road. The District Judge in para. 5 of his judgment deals with the various sale-deeds produced. He is of opinion that one rupee a square yard may be taken as the value of building sites on the side of the Gokavaram Road in 1921 at the time of the proposed, acquisition of the land in dispute. This finding is amply borne out by the evidence and the sale-deed produced by the witnesses. I do not think the District Judge was right in treating the land in question as agricultural land as the evidence in my opinion shows that the land should be treated as land fit and capable of being sold and used for building purposes. The land in dispute is within the municipal limits of Rajahmundry town. The town is a growing one and according to the evidence there is demand for building sites. (The judgment then discussed the evidence on behalf of the referring officer and proceeded.) This is all the evidence on the side of the referring officer, and there is nothing in that evidence to show that the land in question can only be used as agricultural land and that there is no probability of its being disposed of as building sites.

6. The witnesses for the claimants support the claimants’ case that the land should be valued on the footing not purely of agricultural land but of land which is fit and which could be disposed of for building purposes. (The judgment here narrated the evidence and proceeded.) The law as regards the compensation payable for lands acquired which have what is called special adaptability has been considered in several cases. In the matter of an arbitration between the Countess Mary Ossalinsky and the Mayor Alderman, and citizen of the city of Manchester, which is reported in extenso in the appendix to the law of compensation by Browne and Allan, page 659, Grove, J. puts the matter very clearly. The learned Judge observes:

If the land has what I may call an adventitious value, that is something beyond its mere agricultural or normal value, and that is a marketable value in this sense that persons wishing, for a purpose for which the land is peculiarly applicable, to purchase that land, would give a higher price for that land, then the arbitrator has a fair right to take that into consideration. It is a matter no doubt contingent, but still it is a matter which is not to be ignored or put out of consideration by an arbitrator. Land may be agricultural land, but it may be so near a town that it is tolerably certain that in a few years it will be converted into building land, quite certain in a larger number of years; as far as we can speak of anything in the future being certain, it will be converted into building ground. It is quite true that land might be rightly valued at more than its value as agricultural land if the land had any other capabilities for railway, canal, or irrigating purposes, or far water works, or for anything else, and they are reasonable and fair capabilities, not far-fetched hypothetical capabilities but reasonably fair contingencies. These are fair things to be considered by an aribitrator; not to give its full value as if the thing in prospect were actually accomplished but to give the enhanced value what it would sell to a willing purchaser, in consequence of its having these additional advantages.

7. In The Queen v. Brown [1886] 2 Q.B. 630 the land sought to be acquired was agricultural land which was fit for building purposes and Cockburn, C.J., observed that a jury where the dispute is as to the value of the land sought to be acquired must in assessing the amount,
have to consider the real value of the land and may take into account not only the present purpose to which the land applied but also any other more beneficial purpose to which in the course of events at no remote period it may be applied just as an owner might do if he were bargaining with a purchaser in the market.

8. In Bwlfa and Merthyr Lars Steam Collieries Ltd. v. Pontypridd Water Works Company, In re [1902] 2 K.B. 135 Vaughan Williams, L.J., observed:

It seems to me, therefore, that the true rule is that, in assessing the compensation the umpire may and ought to take into consideration every circumstance which is in existence as a fact at the moment when the notice to treat is given and not only those circumstances but also the probable user which might be made of the property. If for instance he has to assess the value of the land which is used as agricultural land, he is entitled to take into consideration its adaptability for building land, because, that is a fact which is in existence at the time the notice to treat is given.

9. The learned Judge, however, was of opinion that matters which are so remote or uncertain that they are incapable of being measured are not to be taken into consideration in assessing compensation. In Lucas and Chesterfield Gas Water Board, In re [1909] 1 K.B. 16, the question of compensation for special adaptability was considered by the Court of appeal and Vaughan Williams, L. J., referred with approval to the observations of Grove, J., In re Countess Ossalinsky and Manchester Corporation. Fletcher Moulton, L. J., in dealing with the question of special adaptability in cases where lands are required by public bodies for uses which are different from the uses to which the lands are put while in private hands and which therefore do not necessarily influence the price which such lands command in the market observed:

The decided cases seem to me to have hit upon the correct solution of this problem. To my mind they lay down the principle 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 the 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.

10. This case was approved and followed by the House of Lords in Cedars Rapids Manufacturing and Power Co. v. Lacosts [1914] A.C. 569. Lord Dunedin after referring to In re Lucas and Chesterfield Gas and Water Board [1909] 1 K.B. 16 observed:

For the present purpose it may be sufficient to state two brief propositions: (1). The value to be paid for is the value to the owner as it existed at the date of the taking, not the value to the taker. (2) The value to the owner consists in all advantages which the land possesses, present or future, but it is the present value alone of such advantages that falls to be determined.

11. Turning to the Indian Cases in the matter of the Land Acquisition Act, Premchand Burral v. Collector of Calcutta [1876] 2 Cal. 103, Sir Richard Garth, C.J., observed that where property is acquired under statutory powers, the compensation should be measured not by estimating the value of the property according to its present uses and its present rental, but by ascertaining what it would be worth if laid out in the most lucrative and advantageous way in which the owner could dispose of it e.g., for building purpose. In the matter of the Land Acquisition Act 10 of 1870 Munji Khetsey, In re [1891] 15 Bom. 279, it was held by Farran, J., that in the case of land in the vicinity of a town where building is going on, the value of the land should be determined not necessarily according to its present disposition but laid out in the most lucrative and advantageous way which the owner can dispose of it. In Daya Khushal v. Assistant Collector of Surat [1914] 38 Bom. 37, Batchelor, J., after reviewing the authorities on the subject was of opinion that the special adaptability of the land should be taken into consideration in fixing the value. In Fink v. Secretary of State [1907] 34 Cal. 599 the learned Judges observed:

The profit which might arise from the most advantageous disposition of the land is undoubtedly, one test for determining its market price.

12. This principle of valuation was recognized in the matter of the Land Acquisition Act, Premchand Burral v. The Collector of Calcutta [1876] 2 Cal. 103 and in a recent unreported case. The Hugli Mills Co. v. Secretary of State [1910] 12 C.L.J. 489. In the case of Secretary of State for Foreign Affairs v. Charlesworth Pilling & Co. [1902] 26 Bom. 1 the Privy Council laid down the rule that a claimant is entitled to the market value of his land, including such speculative advance therein as had already taken place in consequence of improvements in the locality, but excluding any future speculative advance for a like cause. The probable use of land in the most advantageous way, in accordance with, or, following, the use already made of neighbouring lands, leads to speculative advance in prices, and regard should be had to such advance. The utility of land is certainly an element for consideration in estimating its value, that is the utility which may be calculated by a prudent business man. This principle of valuation was accepted as sound in Rajendranath Banerjee v. Secretary of State [1905] 32 Cal. 343. I may in this connexion refer to Hugli Mills Co. v. Secretary of State [1910] 12 C.L.J. 489 Manmatha Nath Mullick v. Secretary of State A.I.R 1924 Cal. 574 and Bhiyabalappa v. Collector of Dharwar 1 B.L.R. 454. In Rajah of Pittapuram v. Revenue Divisional Officer, Cocanada [1919] 42 Mad. 644. Sir John Wallis, C.J., was of opinion that the proper way to value lands which at the time of the acquisition were used for agricultural purposes is to ascertain what would be their market value if put to the most lucrative use having regard to their condition, etc. In Rajah of Pittapur v. Revenue Divisional Officer Cocanada A.I.R. 1925 Mad. 818, Ramesam and Jackson, JJ., were of opinion that in ascertaining the market value of land the fact that it may be used for building purposes has to be remembered and that where the land is situate in great towns and cities, such an element makes a substantial difference. In Thareesamma v. The Deputy Collector, Cochin A.I.R. 1924 Mad. 252, Phillips and Venkatasubba Rao, JJ., deal with the question of compensation to be awarded in cases where agricultural land which is adaptable for building purposes is acquired. Venkatasubba Rao, J., refers to the authorities on the subject and is of opinion that in assessing compensation not only is the present purpose to which the land is applied to be taken into consideration but also any other more beneficial purpose to which in the course of events the land might within a reasonable period be applied and that the special adaptability of agricultural lands for building purposes is an element to be considered in fixing the compensation. In estimating, however, the value with reference to the special adaptability of the property and to its future user, the Court should, as pointed out in Rajendranath Banerjee v. Secretary of State for India [1905] 32 Cal. 343, estimate the future utility of the land by prudent business calculations and not by mere speculation and impractical imagination.

13. The facts proved in the present case are that the land sought to be acquired is land situate within the Municipality of Rajamundry which is a large and growing town. There are several public offices and it is growing in commercial importance. These facts are not disputed by the learned Government pleader. As the town is on the Godaveri river expansion on that side is not possible. The report of the latest census in 1921 shows that the population has increased 172 per cent. from 1871 to 1921, there being an increase every decade and Rajamundry is said to be the principal trade centre for the Godaveri delta and also for part of the agency. The land according to the evidence is fit for being built upon and the surrounding lands have been acquired by the Municipality, plotted out and sold as building sites for houses and have also been purchased by private individuals who have also sold plots for building purposes. The land is bounded on two sides by road and there is the future advantage of a road being opened up owing to the owner having lands abutting the Gokavaram Road to which he can be given a right of way.

14. On the other hand, there is the fact that there are building sites on the 70 acres of land acquired by the Municipality in 1912 which were divided into 437 sites and which were disposed of to various persons. It appears from the evidence of the Secretary to the Municipality (R. W. 2) that only 50 houses have been built. He thinks that the distance from the public buildings is the cause for the remaining sites not being built upon. It is argued that the site in question is on a higher level and better adapted for building purposes and that as the Secretary says that the Municipality while promising to introduce a water supply scheme gave it up and dug only five wells may well account for more houses not having been built especially as the evidence of the witnesses called by the claimants shows that there is demand for building sites in Veerabhadrapuram which adjacent. This may be so; but the act that there are building sites available near the land is an element to be taken into consideration in fixing the value of the land sought to be acquired. There is also the fact that although one rupee a square yard was given for small plots of land, the same price could not be realised if the 50 acres were thrown open for sale at one time. It is suggested that it is open to the claimants to divide the land into convenient plots and offer the same for sale; but this would involve expenditure for the laying out of roads. It is also clear that it would take a few years before all the various plots could be sold.

15. On these facts the question is what is the compensation to be awarded. It is not possible in these cases to fix the price with any degree of accuracy especially where we are not dealing with the present use to which the land is put but, with the prospective use and valuing it on the basis of special adaptability. In the Secretary of State for Foreign Affairs v. Charlesworth Pilling & Co. [1902] 26 Bom. 1 their Lordships of the Privy Council observed:

It is quite true that in all valuations, judicial or other, there must be room for inference and inclinations of opinion which, being more or less conjectural, are difficult to reduce to exact reasoning or to explain to others…. In such an enquiry as the present, relating to subject abounding with uncertainties, and on which there is little experience, there is more than ordinary room for such guess-work; and it would be unfair to require an exact exposition of reasons for the conclusions arrived at.

16. I have gone through the evidence and followed it with reference to the plan produced in this case and having regard to the position of the land I think that so far as 15 acres are concerned, there is a fair and reasonable prospect of the land being taken up for building purposes within a period not so remote as to be negligible. So far as the land in the interior is concerned, I doubt very much whether having regard to the slow rate of progress of buildings on the site I would be justified in fixing the same compensation for the land in the interior as for the land abutting the road.

17. I think that as regards 15 acres of the land sought to be acquired compensation should be awarded at 6 (six) annas a square yard and that as regards the remaining land 600 rupees an acre would be a fair compensation. As I have not taken into consideration the existence of the buildings and trees in awarding six annas a square yard for 15 acres of the lands, I add 13,374-2-0 allowed by the District Judge. I see no reason to differ from him as to the value given on this head. In the result the award will be modified by allowing Rs. 69,624-10-0 instead of Rs. 38,030-10-0 allowed by the District Judge. Interest will be awarded at 6 per cent. from the date of possession on the excess decreed by us. I would therefore modify the award of the District Judge accordingly. The parties will pay and receive proportionate costs throughout.

Curgenven, J.

18. This appeal is against the order of the District Judge of Godavari in O.P. No. 158 of 1921 which originated in a reference made by the Sub-Collector of Rajahmundry in a case under the Land Acquisition Act. The land acquired consists of Survey Nos. 119/B2, 123 and 124 of Rajahmundry totalling 50.75 acres, and the purpose for which the acquisition was made was to obtain a site for the Government Arts and Training Colleges.

19. Of the two claimants the appeal is preferred by the first and the learned Government pleader raises the preliminary objection that an appeal by this claimant is incompetent. There was litigation regarding the property, the 1st claimant claiming as an adopted son and the second as a reversioner disputing the adoption. In the first Court the reversioner succeeded except as regards Survey No. 119/B2, and while that judgment was in force, on 8th November 1921, the reversioner applied for a reference to the District Court under Section 18, Land Acquisition Act. Subsequently, the adopted son (1st claimant) won an appeal to the High Court and successfully resisted a further appeal to the Privy Council, so that the result was that he became entitled to all three survey numbers. Now under Section 18(1), Land Acquisition Act, an application for a reference to the Court may be made by ‘any person interested,’ and under Section 21 the scope of the inquiry before the Court is to be restricted to a consideration of the interests of the persons affected by the objection. The second claimant, who alone made the reference, was interested in Survey Nos. 123 and 124, because at that time he held a decree embracing them; but he was no longer interested in Survey No. 119/B2, because the decree had assigned it to the first claimant and thereafter he took no steps to challenge this decision. Thus the reference to the Court was good. as regards Survey Nos. 123 and 124, but bad as regards Survey No. 119/B2.: The first claimant, having under the appellate decrees since established his title to the two former numbers, may, I think, avail himself of the circumstance that a valid application for a reference was made by his predecessor in interest, the second claimant, so that his appeal regarding these two numbers is sustainable but it is unsustainable as regards Survey No. 119/B2 because there was no valid reference to the Court below.

20. Confining myself to Survey Nos. 123 and 124, therefore, I proceed to deal with the sole contention raised, that the compensation awarded is unduly low. The area involved is 49.24 acres, and a reference to the plan will show that the block acquired lies to the north-east, and upon the outskirts of Rajahmundry town, forming, with some numbers to the west, a wedge between two diverging roads, one leading to Gokavaram and the other to Rajanagaram. The whole block, including Survey No. 119 has a frontage upon the latter road. The first question which arose for the District Judge, and which arises for us now, is whether the land is to be valued as agricultural land or as affording sites for buildings or partly as one and partly as the other. The learned District Judge has decided, after reviewing the evidence placed before him, that the only or the highest value which the property possesses is as agricultural land and as such he has confirmed the award of Rs. 400 per acre, except for three acres of garden, for which a lump sum of Rs. 4,000 has been given. The basis of the award will be correct unless the appellant is able to show that there exists a demand for building sites in that quarter or that such a demand is likely to arise at some period not too remote to affect the present value of the property. That I think, is in substence the principle to be derived from the English and Indian decisions and applicable to the present circumstances. A summary of the more important of those decisions is to be found in the judgment of Venkatasubba Rao, J., in Thareesamma v. Deputy Collector, Cochin A.I.R. 1924 Mad. 252 as well as in the judgment which my learned brother has just delivered. The principle which underlies them is now well understood and the real difficulty lies in applying it.

21. The general considerations which suggest that the land may have a value as building site are that it lies adjacent to the town of Rajahmundry, the population of which, it is said, has been increasing, that certain portions of land not less remote have been acquired for building, and that it has a good road frontage. The evidence contains particulars of two building enterprises, one Mr. Virabhadrayya having sought to create a peta or suburb adjoining the Gokavaram Road. and the Municipality having taken measures to extend the town upon an area known as Denavaigunta. The history of Mr. Virabhadrayya’s attempt is briefly this. In 1907 he bought 9 acres of land, comprising Survey Nos. 93, 94, 95A and 117A for a sum of Rs. 2,637 or rather under Rs. 300 per acre. After making pro” visions for internal communications, and reserving a portion for himself, divided the remaining area into 50 or 60 small house sites, which he proceeded to sell at the rate of annas four per square yard, which is equivalent to Rs. 1,210 per acre. In this way he disposed of about 7 acres, but since the process occupied him some five or six years, it is apparent that the demand for sites was not very urgent. Meanwhile, however, and owing no doubt in part to the creation of a nucleus, the value of the site sold, in some of them, rose, so that by sixth year some of his vendees were reselling at one rupee per squard yard. On 17th January 1915, he himself sold a site of 400 square yards which he had originally reserved for himself, at this rate. In the same year he sold another site at annas 12 per square yard.

22. A number of sale-deeds have been proved, particulars of which the District Judge has given in para. 5 of his order, and these show that sites in Virabhadrapuram have changed hands at prices the more recent of which approximate to one rupee per square yard. The other project consisted in the acquisition by the Municipality in 1910 of an area of 70 acres, with a view to town extension. This area (Survey Nos. 401,404 to 407) lies to the south of the land now under reference and is rather more centrally situated. The District Court awarded a rate of Rs. 175 per acre, and this was raised by the High Court to Rs. 200. The municipality laid out roads and constructed wells, and divided the block into 437 house sites, and succeeded in selling them all at rates from 2 to 5 annas per square yard between the years 1913 and 1915. About 50 houses were built, but the remaining 367 sites still lie vacant, and the Municipal Secretary (R. W. 2) does ‘ not think that any have been resold. It is clear, accordingly, that only a limited demand for sites on which to build houses existed in that locality, less than one-eighth of the provision made by the municipality having been appropriated to that purpose; and it may be doubted whether those who acquired the sites have not, in general lost money. The reason for this comparative failure is given by the Secretary as the distance from the Colleges, schools, market and other institutions. There can be little doubt that the availability of these sites must exercise a depressing influence upon the value of the other land suitable for building but not more central.

23. Outside the two areas of Virabhadrapuram and Danavaigunta there is evidence of only one offer. The claimant’s 10th witness, a P.W. D. Overseer, says that he offered the 1st claimant Rs. 2 par square yard for a site not in the acquired land but in other neighbouring land fronting on the Gokavaram Road, and that the offer was refused. But this site was across the road from Virabhadrapuram peta, and apart from that fact, a single offer for a small area does not furnish an index to the value of 50 acres.

24. Although owing to the presence of the Godavary river and of some other features the directions in which the town can expand are somewhat limited, the village plan shows that there are extensive areas of open land which, so far as can be seen, would afford sites for building. The experience furnished by the two projects discussed above shows that the occupation of this suburban area is likely to be slow. The sites in Virabhadrapuram which have changed hands for about one rupee per square yard cannot aggregate more than, say, three or four acres, whereas the area we are now dealing with extends to 50 acres, capable of accommodating something like 500 families. I think that if the owner had at the date of the notification (19th July 1921) followed the example of Mr. Virabhadrayya and laid out his property for sale in building lots, the most that can be inferred in his favour is that purchasers would have been found immediately or within a limited time for not more than a certain acreage. With regard to the remainder of the land I am in some doubt whether at the time of acquisition, its market value as agricultural land can be supposed upon the evidence available, to have been affected by the local demand for having accommodation. In view, however, of its proximity to the town, and of the other advantages as building site which it possesses, I do not feel justified in differing from my learned brother’s opinion that a moderate enhancement upon its value as agricultural land should be allowed in order to give effect to this consideration. I agree to the rates which he proposes, and that the award should be enhanced in conformity with them.

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