Nagendra Chandra Set vs Province of Bengal

Das, J.—This appeal is by the claimants and is directed against the decision of Mr. J. De, Arbitrator, appointed under the Defence of India Act in case No. 10 of 1944.

Premises No. 1, Rustamji Parshi Road, measuring 268 cottas together with structures thereon was requisitioned under the Defence of India Rules and possession thereof was taken by the military authorities on December 20, 1941. Some time thereafter the Collector made ''an offer to the claimants to pay compensation at the rate of Rs. 1,020 per month. The basis of this offer was as follows : for the hare land, compensation at the rate of Rs. 3 per cottas and for the structures 5 per cent, on the value, viz., Rs. 40,000 and certain additional amount as compensation for trees, etc. As the claimants did not accept the offer made by the Collector, the question of valuation was referred u/s 19 of the Defence of India Act. The Reference was later registered as Land Acquisition Case No. 10 of 1944, u/s 19 (valuation). The claimants filed a statement of the claim before the Arbitrator, wherein they claimed compensation at the rate of Rs. 2,130 per month. On June 25, 1946,'' the arbitrator decided that compensation was payable at the rate of Rs. 1,100 per month. It is the propriety of this decision which is challenged in this appeal.

Mr. Gupta, appearing for the claimants Appellants, has contended that compensation should be paid at the rate of Rs. 2,130 per month as claimed by the Appellants.

u/s 19 of the Defence of India Act, compensation has to be assessed according to the market value of the premises as defined in Section 23(1) of the Land Acquisition Act. Where only an interest in land, e.g. possession has been acquired by requisition under the Defence of India Rules, the owner is entitled to the market value of that interest. The test of fixing the market-value is not what the owner was doing with the land at the time of the requisition but what he could have done. The basis of the compensation in such cases is the fair rent payable for the land. This was decided in the case of Province of Bengal v. Board of Trustees for the Improvement of Calcutta ILR (1946) 1 Cal. 583. By the expression "fair rent" is meant such rent as a man of business may reasonably expect to get by letting out the property to the best advantage in consideration of the rates, manner of letting out similar properties in the neighbourhood and what may be expected to realise for a reasonably long time or in perpetuity.

In finding out the fair rent payable for the requisitioned lands, the most satisfactory way is to find out the same by a consideration of instances of letting out more or less similar lands. If it is not so capable of reasonable ascertainment, the court has to find out the same by an indirect method, viz., to value the lands and to fix the rent at a certain percentage thereof.

In the present case the value of the land and the structures was assessed respectively at Rs. 4,24,000 and Rs. 40,000 by Mr. Parks, a well-known valuer. When Mr. Parks was examined in the court below, the learned advocate appearing for the Province of Bengal did not contest the value of the land as found by Mr. Parks. Later on, an application was made on behalf of the Province of Bengal that the statement was made under a misconception. The Province of Bengal, however, did not lead any rebutting evidence to show that the valuation of the land as made by Mr. Parks was unfair. In these circumstances, the Arbitrator was inclined to accept the valuation of the land and the structures as made by Mr. Parks. Nothing has been said before us to show that the valuation made by Mr. Parks was unfair. We may, therefore, take it that the value of the land and the structures is Rs. 4,64,000.

In the court below it was contended on behalf of the claimants that the fair rent of the premises should be calculated on the aforesaid sum on the basis of 5 per cent, security. Reliance was placed on the decision already referred to. The learned Arbitrator did not accept this mode of calculation. He was of the opinion that there were materials on the record to calculate the probable letting value of the disputed premises by a direct method. The learned Arbitrator took into consideration the rent which the owner of premises No. 15/1, Ratan Babu Road, agreed to accept from the Government when the said premises was requisitioned. The agreement has been marked as Ex. B.A perusal of the agreement shows that in that case possession was taken by the Government on March 16, 1942 and thereafter the proprietor of the premises entered into the agreement with the Government agreeing to accept compensation at the rate of Rs. 750 per month as rent of the premises plus Rs. 216 as rent for the furniture. The owner agreed to pay the revenue, rent and municipal rates, etc., of the said premises. Before the Arbitrator Lalit Mohan Laha was examined on behalf of the Government to prove the value of the said premises, viz., 15/1, Ratan Babu Road. The witness valued the same at Rs. 1,42,000 for the bare land and Rs. 1,76,000 for the structures, i.e., in the aggregate a sum of Rs. 3,18,000. The learned Arbitrator accepted this valuation and proceeded to find out the proportionate rent of the disputed premises on the basis that the value of the same was Rs. 4,64,000. On a calculation he found that proportionate rent of the disputed premises would work out at Rs. 1,094 per month. He, therefore, awarded compensation at the rate of Rs. 1,100 per month.

The question is whether this is a proper method of finding out the fair rent of the disputed premises in the facts of the present case. The valuation made by Mr. Laha of premises No. 15/1, Ratan Babu Road, was never put to Mr. Parks. The learned Arbitrator inspected the said premises as also the disputed premises and recorded an inspection note. In his opinion, the said premises was not comparable to the disputed premises. It is also not known under what circumstances the owner of the aforesaid premises agreed to accept the compensation as per agreement, Ex. B. The question never went to court and there is no decision by a competent tribunal as regards the actual letting value of the aforesaid premises, viz., 15/1, Ratan Babu Road. In these circumstances, it is not safe to assess the letting value of the disputed premises by a sole reference to what the owner of premises No. 15/1, Ratan Babu Road, agreed to accept as rent of the latter premises. Moreover, the letting value of the disputed premises cannot be said to be capable of reasonable ascertainment by a reference to the letting value of only one premises in the neighbourhood. In my opinion, the learned Arbitrator was not right in fixing the compensation for the disputed premises by a sole reference to the rent agreed to be accepted by the owner in respect of the premises No. 15/1, Ratan Babu Road.

We have, therefore, to ascertain the fair rent of the disputed premises by an indirect method of calculation, viz., by fixing a percentage of the value of the said premises. In the court below, Mr. Parks who was examined on behalf of the Appellant, referred to three cases, viz., (i) 5, South End Park, (ii) 29, Balmukund Road, (iii) 51, Beliaghata Main Road and stated that in these cases the assessment was made on the basis of 5 per cent, security. It is also to be noticed that in the offer made by the Collector rent on the basis of 5 per cent, security was assessed so far as the structures are concerned. The fixation of fair rent on the basis of 5 per cent, security, though generally accepted, cannot, however, be regarded as an inflexible rule; each case must depend upon its own circumstances, on the evidence given at the trial and the nature of the property in question. An investor who makes an investment always takes into account a variety of facts, viz., the safety and stability of the security, the return likely to be yielded, etc. No hard and fast rule can, therefore, be laid down for fixing the percentage at which rent has to be calculated on the value of the premises. It is unfair to rely too much on what has been done in other cases and to apply a fixed percentage in every case. Government securities are backed by the assets of the country and are the best form of security. Secured ground rents are secured by the building erected on the land and the reversionary value of the land. Ordinarily, a difference of one per cent, between the said two forms of investment is allowed and appears to be reasonable. In case of unsecured ground rent which differs from the above two cases, the security is merely the reversionary value and is somewhat uncertain. In this form of investment the yield is generally taken to be one per cent, more than in case of secured "round rent.

Mr. Gupta referred us to Ex. 8 which shows the price at which Government securities were sold at the time. On calculation the security in such cases would be 3-7 per cent. Mr. Parks in his work on the Principles and Practice of Valuation at pp. 28-29 observes that secured ground rent should be valued between 4� per cent and 5 per cent and unsecured ground rent between 5 and 6 per cent. He observes, that from his own personal experience a well-secured ground rent in Calcutta usually yields about 4� per cent. Mr. Parks has wide experience in these matters. His opinion is entitled to great weight. The specific instances referred to by Mr. Parks have not been shown to be comparable to the present case. In the present case, the disputed premises is an old and dilapidated structure. The land has no doubt a wide river frontage, but is tapering towards the other end. The locality where the premises is situated is more or less a factory site and demand for taking such leases would be comparatively lower than in case of residential sites.

If we calculate on 4� per cent, security basis, compensation would be payable at Rs. 1,740 per month. In view of the facts and circumstances of this case we think that the fair letting value inclusive of taxes should be assessed at Rs. 1,650 per month and compensation assessed at this sum.

The appeal is, therefore, allowed in part, the decision of the learned Arbitrator is set aside and in lieu thereof we direct that compensation for the period of requisition be paid at the rate of Rs. 1,650 per month inclusive of taxes. As the appeal has partially succeeded the Appellants will be entitled to half the costs of the paper book and other costs, the hearing-fee in this appeal payable to the Appellants is assessed at forty gold mohurs. The Appellants are also entitled to the costs of the court below which we assess at five gold mohurs.

We have been informed by the learned advocates on both sides that the aforesaid premises has been derequisitioned.

The Respondent is directed to pay the Appellants the total amount of compensation calculated as above within three months of the drawing up of the decree in this Court.

Guha J.

I agree.