Raghubans Narain Singh Vs. The Uttar
Pradesh Government through Collector of Bijnor  INSC 183 (23 September
23/09/1966 SHELAT, J.M.
CITATION: 1967 AIR 465 1967 SCR (1) 489
CITATOR INFO :
RF 1977 SC1128 (9,14) RF 1979 SC 472 (23,24)
Land Acquisition Act, 1894, Ss. 11, 18, 23
and 28Compensation for land acquired-based on an earlier offer to purchase the
land-evidence relating to such offer not challenged as not genuine or bona
fide-whether proper basis for compensation-Valuation based on 'market value'-or
on income from land-when appropriate-Court exercising discretion to pay
interest under s. 28-whether can award interest at a rate less than 6 per cent.
For the purpose of building a school hostel.,
a piece of grove land belonging to the appellant and situated just outside the
town of Nehtaur, in U.P., was notified for acquisition under s. 4 of the Land
Acquisition Act, 1894, in December 1945 and possession was taken from the appellant
on July 4, 1947. The Collector in his award under s. II of the Act fixed the
total compensation-which included compensation for the trees on the land, for
the land itself and the 15 per cent solatium-at Rs. 2,218.
In a reference under s. 18 made at the
instance of the appellant to the District Judge, both the appellant and the
Government led oral evidence and also adduced evidence of certain specimen
sales to establish the proper value of the land. A Deputy Collector, who had
recently retired, gave evidence for the appellant to the effect that during
1945 he had offered to purchase the land in question for Rs. 18,000 with a view
to build a residential house for himself so that he could livethere after his
retirement; but that the offer was not accepted as the appellant wanted Rs.
Evidence was also led about the state of
development of the area in which the land was situated; and of the fact that
the income from the land at the time was approximately Rs. 700 per annum, with
the prospect of its increasing to Rs. 1,200 per annum when all the trees that
had been planted started bearing fruit.
The District Judge discarded the evidence of
specimen %ales produced by both sides as being of no assistance for determining
the compensation payable for the land. But he accepted the evidence (if the
offer made by the Deputy Collector as genuine and bona fide and on that basis
assessed the value of the land at Rs. 18,000. Adding to that the solatium of 15
per cent, he awarded Rs. 20,700 -,is compensation. He also held that the
appellant was entitled to interest under s. 28 but allowed interest only at 3
per cent on the ground that since the acquisition was for an educational
institution, interest at that rate was proper.
In an appeal against this decision the High
Court took the view that it was not possible to say whether the offer made by
the Deputy Collector was a genuine one or not. Having rejected also the
evidence of the specimen sales the High Court determined compensation for the
land at Rs. 13,000 by estimating the annual income from the land at Rs. 650 and
multiplying it by 20. After adding the solatium of 15 per cent, the total
compensation was fixed at Rs. 15,000. The High Court rejected the 490
appellant's contention that he was entitled to interest at the rate of 6 per
cent on two grounds, viz., (1) that the question as to the rate of interest was
not specifically raised in his cross objections; and (2) that s. 28 was
discretionary; therefore the District Judge could award interest at any rate up
to 6 per cent.
In the appeal to this Court it was also
contended on behalf of the appellant that the High Court judgment suffered from
an infirmity in that it failed to take into account the potential value of the
land as a-building site in view of the evidence as to the town's recent
HELD : The judgment and order of the District
Judge by which he fixed the compensation at Rs. 20,700 must be restored and
interest on the excess amount of Rs. 18,482 paid to the appellant at the rate
of 6 per cent per annum from July 4, 1947 up to the time of payment. [498 B]
The evidence on record did not constitute an ascertainable trend of development
of the town in the direction of the acquired land or of any active building
Compensation could not therefore be
determined on the basis of the potentialities of the land as a building site.
South Eastern Rail Co. v. L.C.C., (1915) 2 Ch. 252 and N. B. Jeejabhoy v. The
District Collector, Thana, C.A. Nos. 313 to 315 of 1963 decided on August 30, 1965
: referred to.[494 F] As the evidence of the Deputy Collector was not
challenged either on the ground that his offer was not bona fide or that he
offered to buy under compulsion or under any special circumstances, there was
no valid reason why the High Court should have refused to accept the
appreciation of his evidence by the District Judge and -resort to a method of
valuation not always adequate i.e. the annual crop value.
Such a method of valuation is not adequate at
least for two reasons : (1) that the owner may not so far have put his property
to its best use or in the most lucrative manner;
and (2) in a case like the present the grove
had not yet started giving maximum yield. Valuation of the land by ascertaining
the annual value of the produce can and should be resorted to only when no
other alternative method is available. Government of Bombay v. Merwanji
Muncherji 10 Bom. L.R. 907 and Governor-General in Council v. Ghissuddin, 30
P.L.R. 212, 'referred to. [496 A-C] There was nothing wrong in permitting the
appellant to raise the point as to the rate of interest as the question
depended only upon the construction of s. 28. Connecticut Fire Insurance Co. v.
Kayanagh , A.C. 473, referred to. [496 H] By s. 28 as it applies in U.P.,
where the Court exercises its discretion and grants interest, the interest has
to be at the 'rate of 6 per cent. By the plain language of the Section the
discretion that is conferred on the Court is whether in the given circumstances
of a particular case the Court should award interest or not. The words
"may direct" me-an that it is discretionary on the part of the court
to grant or to refuse to grant interest. But the words following those words
i.e. "the Collector shall pay interest on such excess at the rate of 6 per
centum per annum" would mean that once the discretion to grant interest is
exercised, there is no further discretion and the interest if awarded has to be
at the rate of' 6 per centum per annum.
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
82 of 1964.
491 Appeal from the judgment and decree dated
March 13, 1959 of the Allahabad High Court in First Appeal No. 74 of 1949.
B. C. Misra, and M. V. Goswami for the
N. D. Karkhanis and O. P. Rana, for the
The Judgment of the Court was delivered by
Shelat, J. This appeal by certificate from the High Court at Allahabad involves
the question as to the valuation of a piece of land belonging to the appellant
and situate outside the town Nehtaur, in District Bijnor, U.P. The land
admeasures 6 pucca bighas and is grove land having in all 123 trees of which a
number are mango and naspati trees.
The notification under s. 4 of the Land
Acquisition Act, 1, of 1894 was issued on December 22, 1945 in which it was
stated that the land was being acquired for a public purpose, viz., the
construction of a hostel etc., of S.N.S.M. High School at Nehtaur. Possession
of the land was taken from the appellant on July 4, 1947. The Collector of
Bijnor made his award under s. II of the Act fixing Rs.
1167-4-0 as compensation for the trees, Rs.
1050-12-0 as compensation for the land and adding 15% solatium awarded the
total sum of Rs. 2218/-. A reference was thereafter made under s. 18 at the
instance of the appellant to the District Judge, Bijnor. Both the appellant and
the Government led oral evidence and also adduced evidence of certain specimen
of exemplar sales. Besides the oral evidence, the appellant relied on two sale
deeds, one dated March 20, 1926 and another dated January 5, 1934. He also led
the evidence of one Syed Nisar Haider Zaidi, a Deputy Collector who had just
retired and who prior to his retirement had written two letters to the
appellant dated October 14, 1945 and November 20, 1945 expressing his desire to
purchase the land in question with a view to build a residential house for
himself so that he could live therein after his retirement. In these letters he
had offered Rs.
18,000/but that offer was not accepted by the
appellant as he wanted Rs. 24,000/as the price of the land. On behalf of the
Government also reliance was placed on three specimen sales being Exhibits Al,
A2' and A3. The evidence disclosed that the land acquired was at a distance of
about 2 furlongs from the town Nehtaur which at that time had a population of about
18,000 souls. The land abuts on the main road from Moradabad to Bijnor and is
next to the said school. Nearby is a fairly large size pond. The evidence of
Murari Singh, one of the witnesses examined by the Government, was that besides
the appellant's grove there were some other groves nearby on the other side of
the road, that the town was a growing town in the sense that electricity was
available, there was a branch of the Bharat Bank and there were 5 or 6 mills
and 492 a crusher working in the town since the last few years. The mills
referred to by the witness obviously must be some small scale industries. The
witness however stated that only 2 or 4 new houses had been constructed in the
town during the last about 10 years, though one more school had been opened in
the town about 3 years ago. As against his evidence there was some evidence,
that some houses were constructed in the grove lands nearby. But there was no
evidence to show that there was any building activity nearby of any substantial
nature or that there was any definite trend of development in the direction of
the acquired land.
As regards the income from the land there was
the evidence of Pushkar Nath that the fruit trees grown in the land yielded
approximately an annual income of Rs. 500/-,about 49 mango and naspati trees
being fruit bearing at that time.
It appears that the grove had been laid only
about two or three years ago. But the evidence of the Village Patwari clearly
disclosed that the grove would yield about Rs. 1,000/a year when all the trees
started bearing fruits.
Besides the income from the trees the land
also yielded an income of about Rs. 200/a year by way of sale of Bind pullas.
The District Judge discarded the evidence of
specimen sales produced by both the sides as being of no assistance for the
reasons stated by him. It is not necessary to examine those reasons as there is
no dispute that he was right in rejecting them and the High Court also agreed
with him that that evidence was of no help in arriving at the correct
valuation. The District Judge, however, was impressed with the evidence of
witness Zaidi and accepting the offer conveyed by him as genuine and bona fide
held on the basis of that offer that the value of the land could be safely
assessed at Rs. 18,000/-; and adding to that sum the solatium at 15%. he
awarded Rs. 22,700/as compensation. He also held that the appellant was
entitled to interest under s. 28 but allowed interest at 3 % per annum
observing that since the acquisition was for an educational institution,
interest at that rate was proper.
Against the said judgment and order the
Government filed an appeal before the High Court at Allahabad and the appellant
also filed his cross-objections. As already stated the High Court agreed with
the District Judge that the evidence of specimen sales was of no assistance.
But regarding the evidence of witness Zaidi it commented as follows :"It
is not possible for us to say as to whether the approach made by Syed Nisar
Haider Zaidi was a genuine one or not; but even if we take it to have been a
genuine approach there can be no doubt that the price that he was going to
offer was a price which he fixed 493 because of the peculiar circumstances in
which he was placed the circumstances having been that he was, upon retirement,
desirous of going back to his native place and to take up residence there and
to build a house outside the populated area. The price which such an
exceptional purchaser is going to offer will not afford a true test about the
value of the property." Having thus rejected the evidence of the specimen
sales and also the offer evidence of witness Zaidi the High Court fell back on
the net annual income from the land which it estimated at Rs. 650/and
multiplying it by 20 fixed the value of land at Rs. 13,000/-. Adding to that
figure the solatium at 15 %, the High Court awarded in all Rs.
15,0001/-. As regards interest the High Court
rejected the appellant's contention that he was entitled to interest at the
rate of 6 Y. per annum on two grounds : (1) that the question as to the rate of
interest was not specifically raised in his cross-objections and (2) that s. 28
was discretionary, and therefore the District Judge could fix the rate of
interest up to 6 % per annum and that it was not incumbent upon the court to
award interest at 6 % per annum as contended by the appellant. The appellant
has challenged in this appeal the correctness of the judgment and the order of
the High Court both on the question of valuation and the rate of interest.
The first contention raised on behalf of the
appellant is that the High Court's Judgment suffered from an infirmity in that
it failed to take into account the potential value of the land as a building
site in view of the evidence as to the town's recent development. This
contention, in our view, has no substance. Market value on the basis of which
compensation is payable under s. 23 of the Act means the price that a willing
purchaser would pay to a wilting seller for a property having due regard to its
existing condition, with all its existing advantages, and its potential possibilities
when laid out in its most advantageous manner, excluding any advantage due to
the carrying out of the scheme for the purposes for which the property is
compulsorily acquired. As observed in South Eastern Rail Co. v. L.C.C(1).
"The value to be ascertained is the
price to be paid for the land with all its potentialities, and with all the use
made of it by the vendor." Dealing with the doctrine of potential value
this Court in N. B. Jeejabhoy v. The District Collector, Thana(2) observed as
follows :"A vendor willing to sell his land at the market value will take
into consideration a particular poten(1)  2 Ch. 252.
(2) C.A. Nos. 313 to 315 of 1965, decided,
Aug. 30, 1965.
494 tiality or special adaptability of the
land in fixing the price. It is not the fancy or the obsession of the vendor
that enters the market value, but the objective factor namely , whether the
said potentiality can be turned to account within a reasonably near
future...... The question therefore turns upon the facts of each case. In the
context of building potentiality many questions will have to be asked and
answered : whether there is pressure on the land for building activity, whether
the acquired land is suitable for building purposes, whether the extension of
the said activity is towards the land acquired, what is the pace of the
progress and how far the said activity has extended and within what time,
whether buildings have been put up on lands purchased for building purposes,
what is the distance between the built-in-land and the land acquired and
similar other questions will have to be answered. It is the overall picture
drawn on the said relevant circumstances that affords the solution." It is
clear that there is no evidence on record of any building activity of a
substantial nature being carried on 'in the neighbourhood of the acquired land
at about the time when the notification was issued in 1945. There is equally no
evidence of any trend of development of the town in the direction of the
acquired land. The only evidence was as to the existence of the school nearby,
of the land abutting on the road and of some houses having been built on the
opposite side of the road in some of the grove lands. Such evidence however
would not constitute an ascertainable trend of development of the town in the
direction of the acquired land or of any active building activity nearby.
Clearly, therefore, no question of the valuation having to be made on the basis
of the potentiality of the land as building site can possibly arise. The
contention of Mr. Mishra in this regard therefore must be rejected.
But the next contention urged by him is a
substantial one and requires consideration. He argued that the High Court fell
into error in rejecting the evidence of witness Zaidi accepted as reliable by
the District Judge and in substituting that finding by its own estimate of the
annual income derived from the land. The evidence of witness Zaidi being the
evidence of an offer made by him cannot of course be equated in importance with
the evidence of proper specimen sales of properties in the neighbourhood.
Obviously an offer does not come within the
category of sales and purchases but nonetheless if a person who had made an
offer himself gives evidence such evidence is relevant in that it is evidence,
that in his opinion the land was of a certain value.
495 But the evidence that the owner refused
an offer so made amounts to this only that in his opinion his land was worth
more than the figure of value named or that the offer was for some other reason
such that he was not willing to accept. (cf. Government of Bombay v. Merwanji
It has also been held that an agreement to
sell is a relevant matter and can be used in relation to fixing the value of
the acquired land. (cf. Governor-General in Council v. Ghiasuddin)(2). There
can however be no doubt that apart from Zaidi's offer being relevant it was not
an offer similar to an offer made by an irresponsible broker as commented in
Government of Bombay v. Merwanji Muncherji(1).
There is nothing also to show, that he or the
appellant knew that a notification for acquisition was about to be issued or
that he colluded with the appellant to fabricate evidence of an offer to enable
the appellant to get better compensation. There is not even a faint suggestion
in the cross examination on behalf of the Government that his offer was not
genuine or that it was irresponsible. What is more significant is that no
suggestion was made in his crossexamination that the offer was excessive or
that it was not bonafide or that he had made it without properly considering it
or without regard to the situation and the suitability of the land. There was
therefore no justification in the remark made by the High Court that it could
not be said whether his offer was genuine or not. The District Judge accepted
it as genuine and if the High Court did not agree with his assessment of his
evidence it ought to have given reasons for such disagreement. It is impossible
thus to treat the evidence of Zaidi either as unacceptable or irrelevant. The
second criticism by the High Court of Zaidi's evidence that his offer was made
in exceptional circumstances and therefore cannot be regarded as one of a willing
prospective purchaser is also not correct. At the time when Zaidi made his
offer he was about to retire. He wanted to retire in his native place and
desired to have a house which would be situate outside the town. His offer was
for a grove-land with plenty of trees some of which were already bearing fruits
and the rest were likely to yield fruit in the near future. The land abutted on
the road, was next to the school and some houses had already been built on the
other side of the road. In these circumstances it is difficult to appreciate
why the High Court thought that the offer was not of a willing prospective
buyer. There were other groves nearby and Zaidi had therefore an opportunity to
select, if he wanted to, there being nothing to show that the owners of the
other such lands were not willing to sell.
Probably he selected this land because it was
situated next to the school and abutted on the road. In view of these facts it
is difficult to see how the High Court came to the conclusion that he made the
said offer in special circumstances, agreeing to purchase the land under (1) 10
Bom. L. R. 907.
(2) 3. P. L. R. 212.
496 compulsion or stress of circumstances.
Since his evidence was not challenged either on the ground that his offer was
not bona fide or that he offered to buy under compulsion or under any special
circumstances there was no valid reason why the High Court should have refused
to accept the appreciation of his evidence by the District Judge and resort to
a method of valuation not always adequate, viz., the annual crop value. Such a
method of valuation is not adequate at least for two reasons : (1) that the
owner may not have so far put his property to its best use or in the most
lucrative manner and (2) in a case like the present the grove had not yet
started giving the maximum yield. Such a method of valuation by ascertaining
the annual value of the produce can and should be resorted to only when no
other alternative method is available. We are of the view that the District
Judge was right in accepting the evidence of Zaidi and in treating his offer as
one of a willing prospective purchaser. The valuation made by the District
Judge rested on a better footing in the circumstances of the case and ought to
have been accepted by the High Court.
On the question of interest, Mr. Mishra
contended that under section 28 neither the District Judge nor the High Court
had any discretion in allowing interest at a rate less than 6%.
He argued that this question being purely one
of construction and not depending on any finding of fact even though the
question was not specifically raised in the appellant's cross-objections before
the High Court the High Court ought to have allowed interest at 6%. Mr.
Karkhanis, on the other hand, argued that what section 28 does is to provide
for a ceiling of the rate of interest. And even if that is not so, since the
section confers discretion on the court to grant or not to grant interest that
discretion impliedly means that even where the court grants interest it can do
so at any rate up to 6%. The contention so put forward resolves itself into two
questions : (1) whether in the absence of a specific objection as to interest
in the appellant's cross-objections the High Court ought to have gone into that
question and (2) whether on a proper interpretation of section 28 the Court has
a discretion to grant interest at a rate less than 6 %. The first point would
not create any difficulty in the way of the appellant because the High Court
did in fact go into the question of interest even though it was not
specifically taken in the cross-objections and decided the question also on
interpretation of section 28. Besides, the question is purely one of law and as
Lord Watson said in Connecticut Fire Insurance Co., v. Kavanagh(1).
"When a question of law is raised for
the first time in a court of last resort upon the construction of a do(1)
 A. C. 473.
497 .lm15 cument or upon facts either
admitted or proved beyond controversy, it is not only competent but expedient
in the interests of justice to entertain, the plea.,, Section 28 reads as
follows :"If the sum which, in the opinion of the Court, the Collector
ought to have awarded as compensation is in excess of the sum which the
Collector did award as compensation, the award of the Court may direct that the
Collector shall pay interest on such excess at the rate of six per centum per
In its plain language the discretion that is
conferred on the Court is whether in the given circumstances of a particular\
case the court should award interest or not.
The words "may direct" mean that it
is discretionary on the part of the court to grant or refuse to grant interest.
But the words following those words, viz., "the Collector shall pay
interest on such excess at the rate of six per centum per annum" would
mean that once the discretion to grant interest is exercised there is no
further discretion and the interest if awarded has to be at the rate of six per
centum per annum. This also appears to be the construction of s. 28 so far
understood. It is because the section leaves no discretion as regards the rate
of interest that the Central Provinces Act XVII of 1939 by section 2 provides
that the rate of interest shall be at a rate which shall be not less than 3 Y.
per annum and not more than 6 % per annum in place of the words "at the
rate of six per centum per annum" in section 28. Some of the other State
legislatures such as Madras, Gujarat, Maharashtra and Punjab have instead of
using the above mentioned phraseology substituted 6 % in s.
28 by "4 % per annum". The result
of these amendments is that whereas in the case of the Central Provinces (now
Madhya Pradesh) the Court has a discretion to grant interest at anything
between three,to six per cent, in the case of the other States the court has to
award interest at the rate of 4 %. We are told that no such amendment has been
carried out in U.P. The consequence is that section 28 as it stands must apply
and therefore where the court exercises its discretion and grants interest the
interest has to be at the rate of 6 %. The construction which we are inclined
to place on section 28 is to a certain extent supported by the same expression
used in section 34 which also deals with interest and which provides that when
the amount of compensation is neither paid nor deposited before taking
possession of the acquired land "the Collector shall pay the amount
awarded with interest thereon at the rate of six per centum per annum"
etc. It is a well-settled rule of construction that where the legislature uses
the same expression in the same statute at two places or more the same
interpretation should be given to that expression unless the context requires
otherwise. That being so, there is nothing wrong in permitting the appellant to
raise the point 498 as to the rate of interest as that question depends only
upon the construction of section 28. In the view that we have taken as to the
interpretation of section 28 Mr. Mishra must also succeed on this question.
In the result, the appeal must be allowed and
the judgment and order passed by the High Court set aside. The judgment and
order of the District Judge by which he fixed the compensation at Rs. 20,700/including
solatium at the rate of 15 % is restored. But we direct that the interest on
the excess amount of Rs. 18,482/should be paid to the appellant at the rate of
six per cent per annum from July, 4, 1947 up to the time of payment. The
'respondent, will pay to the appellant his costs throughout.
R.K.P.S. Appeal allowed.