Land Acquisition Reference No. 5 of 1988,Case No. LAQ/345 of 1608

11th February, 2000

Petitioner Counsel: Ms. GEETHA SHASTRI with Ms.TRIVEDI
Respondent Counsel: Mr. S.R. RAJGURU,Mr. C.M.KORDE with Mr. MILIND N. JADHAV i/b MULLA & MULLA & C.B. & C.
Other Counsel: M.S.SANGHVI with Mr. M.B. RELE i/b NANDLAL KOTHARI & SABIR

Cases Cited:
Ratan Kumar Tandon. v/s. State of Uttar Pradesh, AIR 1996 SC 2710 [Para 5]
Abdul Kuddus Mandal v/s. State of Assam, (1999) 6 SCC 589 [Para 6]
Chimanlal Hargovinddas v/s. Special Land Acquisition Officer, Poona, AIR 1988 SC 1652 [Para 7]

JUDGMENT

JUDGMENT :- This Reference under Section 18 of the Land Acquisition Act, 1894 (for short " the Act" ) arises out of the Award given by the Special Land Acquisition Officer (for short "the SLAO") dated 27th October, 1987.

2. Notification under Section 4 (1) of the Act was issued on 21st October, 1982 acquiring the land bearing C.S.No. 1869 (plot No. 28 of Mint Road) admeasuring 681.16 sq.mtrs. Since 1940 there is a ground plus five floors building on the plot. The total plinth area is 40002 sq.ft. with an FSI of 5 to 6. The 6th floor with a total carpet area of 3460 sq.ft. was constructed without permission of the Claimants by Indian Navy, Ministry of Defence, Government of India, the acquiring body ( hereinafter referred to as "the acquired property"). The public purpose of the acquisition is "Housing offices of the Indian Navy for Ministry of Defence". The acquired property is leased to the Indian Naval Department since 1-12-1940. The Notification dated 21st October, 1982 was published in the Maharashtra Government Gazette on 18th November, 1982. The Claimant No.2 is the lessee of the property under a Deed of Assignment dated 23rd December, 1942 for the period of 999 years. The Claimant No.1 is the lessor of the property. On reference to this Court under Section 31 (2) of the Act, by consent, on 8th July, 1999 it has been decided that Claimant No.1 will get 30 per cent and claimant No.2 will get 70 per cent of the total compensation.

3. The SLAO has followed land plus building method of valuation. The rental method of valuation has been rejected. For the purpose of arriving at the compensation of the property the SLAO has separately valued the land and the building. The SLAO has valued the land at Rs. 17,02,900/- at the rate of Rs. 2500/- per sq.mt. The SLAO has for the purpose of estimating the land value relied upon two sale instances. In instance No.1 land value of the open plot of land is given at Rs. 1872.83 per sq.mt. in 1969 (Exh. A-1). In instance No.2 the land value is Rs. 1815.45 per sq.mt. in 1970 (Exh.A-2). The SLAO has also referred to Award Exhibit-A-4 in LAR No. 14 of 1986 but has ignored the same for the purposes of valuation. That Award had valued the land at Rs. 650/- per sq.mtr. In that case, Land Acquisition Reference No. 14 of 1986 was decided by this Court on 7-11-1996. The rate awarded in the aforesaid judgment of Upasani, J. is Rs. 1500/- per sq.mtr.

4. Claimant No.2 has examined Dr. Roshan H. Nahavati (P.W.1) as an expert and Satish Madav Bandre, Manager, Karnataka Bank Limited ( P.W.2), SLAO has examined Shri Prabhakar Vinayakrao Deshmukh, Deputy Director of Town Planning, Mumbai (D.W.1).

5. The learned Counsel submits that the valuation made by the SLAO is just and fair. There are no sale instances produced by the claimants. On the other hand SLAO has relied on two sale instances. He has used land plus building method. He had also gone into the rental method and rightly discarded the same. It is submitted that for arriving at the correct valuation the "Alice Building" instance is proper. This acquisition was the subject matter of LAR No.14 of 1986. The building has been valued on a tenanted basis, having similar location, dimensions and potential. In that case the relevant date was 29-5-1975. If Rs. 1500/- is taken as the base for 1975, the rise comes to 8.5 per annum on a simple basis. Thus, it cannot be said that the value of the land at Rs. 2500/- per sq.mtr. has been done arbitrarily or blindly. With regard to the building, SLAO has given a sum of Rs. 48,00,240/-. In support of this valuation, learned Counsel relies on para 9 of the judgment of the Supreme Court in the case of Ratan Kumar Tandon and Ors. V/S. State of Uttar Pradesh (AIR 1996 S.C. 2710). The learned Counsel has also relied on the commentary "Principles and practice of Valuations (Land and Houses), 4th Edn. by John A. Parks". Relevant extract of page 91 therein reads as follows:

"The depreciated value of a building is not always the correct figure to add to the value of the land, to arrive at the value of a property. The building may have to be valued as old materials..."

"Before the war in 1938-39 the old material value of a structure was approximately 10 per cent of the prime cost".

"....The value today (1969) varies between 15 and 20 per cent of the prime cost of the building according to the amount of steel used in the construction and the condition of the doors and windows."

The learned Counsel says that the building has to be valued only as old materials. In view of the above, Ms. Shastri submits that the Reference ought to be rejected.

6. Mr. Sanghvi, learned Counsel for Claimant No.2, submits that the acquired land is in a prominent business locality having frontage on two sides. It is adjacent to the Reserve Bank of India. It has a 50 meter frontage on the Shahid Bhagat Singh Road and has a second frontage of 20 metres on a side link. Sir Phiroshah Mehta Road is to the north of the acquired building. In fact, the building is located on the main artery of the area connecting a number of commercial areas from South Bombay to North Bombay. Even the Government has accepted that the acquired building is in a very good locality and that it is similarly situated as instances 1 and 2. Therefore, the rise factor has to be calculated with reference to these two instances. According to the learned Counsel, a ten per cent per annum rise on Rs. 1850/- per sq.mtr. from 1969 ( based on instances 1 and 2) to 1982 would give the undisputed value of Rs. 6830/- per sq.mtr. Giving justification for claiming 48,00,240/- for the building, the learned Counsel has submitted that PWD rates of construction cannot be applied to the building in question. But even if one accepts the valuation fixed on the building by the SLAO there is no justification for giving a compensation equal to 10 per cent of the value. In support of this submission the learned Counsel relies on the latest judgment of the Supreme Court in the case of Abdul Kuddus Mandal and Ors. v/s. State of Assam and Anr. (1999) 6 SCC 589).

7. I have considered the submissions made by the learned Counsel. The Supreme Court in the case of Chimanlal Hargovinddas v/s Special Land Acquisition Officer, Poona and Ors. (AIR 1988 S.C. 1652) has laid down the general principles and methodology to be followed for the purpose of valuation. It has been, inter alia, held that the Court has to make a fresh valuation on the basis of the material produced before the Court. The land acquisition reference is not an appeal against the Award of the SLAO. Only the material produced and proved before the Court can be relied upon. If the material produced before the SLAO is not produced and proved in the Reference Court it cannot be relied upon. The exercise of valuation has to be undertaken in a common sense manner as a prudent man of the world of business. Thus adopting the common sense approach of a willing purchaser and a willing vendor, the market value of the acquired property is to be calculated. In my view, the rental method of valuation is not appropriate in this case as instances of sale are available in the same locality having similar features. Instances No.1 and 2 (Exhibits A-1 and 2) are also to be ignored. They are instances of 1969 and 1970. The latest instance available to the Court is that of the " Alice Building". In that, the Court was dealing with a Tenanted building and calculated the land value on a tenanted basis. The building had been totally destroyed by fire. Thus the valuation of Rs. 1500 per sq.mtr. was only for the land. The value of Rs. 6380 per sq.mtr. claimed by Mr. Sanghvi accepts 10% rise per annum as reasonable. The only difference is that the 10% rise has to be calculated from 29-5-75, the relevant date in the Alice Building case. In that case the rise factor was calculated with reference to an earlier award in the same locality. The High Court accepted the fact that there was a gap of almost 5 years between the relevant date in the earlier Award i.e. 13th August, 1970 and the relevant date in the " Alice Building" instance which was 29th May, 1975. The rise of 10 per cent per annum on a compounded basis was accepted to be quite reasonable. Same is the situation in the present case. Thus calculated compensation would come to Rs. 3069/- This shall be rounded upto Rs. 3100/- p.s.m.

8. The next question to be determined is as to whether or not the value of the building is to be added to the value of the land. In my view, the opinion expressed by John A. Parks in the commentary is not categoric to the effect that only 10 per cent of the prime cost is to be given. The commentary rather says that the depreciated value of a building is not always the correct figure to add to the value of the land. In Ratan Kumar Tandon's case (supra) the Supreme Court has held that when land and buildings are acquired by a notification, the claimant is not entitled to a separate valuation of the land and the building. But, the same is now overshadowed by the later judgment of the Supreme Court in the case of A.K.Mandal (supra). The aforesaid judgment is later in time and is also by a larger Bench. Ratankumar's judgment is given by two Judges whereas the judgment in A.K.Mandal's case is given by three Judges of the Supreme Court. In the aforesaid judgment it is categorically held as follows:

"It appears to us that the High Court fell in a basic error in not awarding compensation for the houses on the ground that since land had been acquired, it is only compensation for removal of houses standing thereon, which could have been granted because houses had not been acquired. That is not a correct approach. The compensation was required to be paid for the houses which were standing on that land. The land could not have been acquired without the houses standing thereon. The Reference Court had rightly awarded compensation for the houses. The order of the High Court on this account suffers from apparent error."

In view of the aforesaid ratio of the Supreme Court judgment, it would not be possible to accept the submission of Ms. Shastri that only 10 per cent of the prime cost of the building ought to be given. The SLAO has calculated the value of the building at Rs. 48,00,240/-. It has also come in evidence that the life of the building is 80 years. The acquired building was constructed in the year 1940. So by the time of acquisition it had already exhausted 50 per cent of its age. The building is also fully tenanted. These are relevant factors for determining the value of the building on the relevant date. I am unable to accept the submission of Mr. Sanghvi that the valuation of the acquired building has to be made on the basis of 5 to 6 FSI. It has categorically come in evidence that on the relevant date the FSI available was 1.33. Thus the value of the building based on the construction cost has to be done on the basis of 1.33 F.S.I. In such circumstances I am of the considered opinion that it would not be possible to value the building at the full cost of construction on the relevant date. The claimant would, therefore, be entitled to 50 per cent of the value as calculated in the Award. 50% of Rs.48,00,240/- comes to Rs. 24,00,120/-, which shall be rounded off to Rs.24 lacs. Counsel for the parties are directed to calculate the exact amount of compensation payable in relation to each other and to place the figures on record. S.O. till 11th February, 2000.

9. Learned Counsel have handed in the details of the compensation and the other benefits which are admissible to the Claimants. Mr. Korde has stated that the interest calculated by SLAO on Item No. (i) is less by Rs.148.32. This is accepted by the Claimants. The agreed calculation of the compensation as awarded by this Court is as under:-

"Claimant No.1 is therefore entitled to Rs. 25,61,811 ( 30% of Rs. 85,39,372) together with interest at 15% per annum on Rs. 6,98,601/- ( 30% of Rs. 23,28,672/-) from 12.2.2000 till payment. Claimant No. 2 is entitled to Rs. 59,77,561/- ( 70% of Rs. 85,39,372/-) together with interest on Rs. 16,30,071/- ( 70% of Rs. 23,28,672/-) from 12-2-2000 till payment."

There shall also be further directions as follows:-

"1. S.L.A.O. (3), Bombay & Bombay Suburban District is directed to pay to Claimant No.1 a sum of Rs. 25,61,811/- (Rupees Twenty five lakhs Sixty One Thousand Eight Hundred and Eleven only) together with interest on Rs. 6,98,601/- (Rupees Six Lakhs Ninety Eight Thousand Six Hundred and One only) at the rate of 15% per annum from 12.2.2000 till payment.

2. S.L.A.O. (3) Bombay & Bombay Suburban District is directed to pay to Claimant No.2 a sum of Rs. 59,77,561/- ( Rupees Fifty Nine Lakhs Seventy Seven Thousand Five hundred sixty One only) with interest on Rs. 16,30,071/- (Rupees Sixteen lakhs Thirty Thousand Seventy one only) at 15% per annum from 12.2.2000 till payment.

3. Liberty is given to parties to apply for interest under Section 28 in respect of additional solatium of Rs. 6,98,601.62 and additional component under Section 23 (1A) of Rs. 13,80,017.80 in the event of the larger Bench of the Supreme Court deciding that interest is payable on solatium and additional component under Section 23 (1A). Re. Kapurchand Jain (dead) and Ors. v/s, State Govt. Of H.P. 1999 (2) SCC 89."

Reference answered accordingly. No costs.

Certified Copy expedited.

Order accordingly.