Special Land Acquisition &
Rehabilitation Officer, Sagar Vs. M. S. Seshagiri Rao & ANR  INSC 18
(31 January 1968)
31/01/1968 SHAH, J.C.
CITATION: 1968 AIR 1045 1968 SCR (2) 892
CITATOR INFO :
R 1972 SC2224 (1)
Land Acquisition Act (1 of 1894).-Grant of
land on condition to surrender without compensation-Proceedings under Land
Acquisition Act-Compensation, how payable.
The, Government of Mysore, granted a plot of
land to the respondents with the added condition that "in the event of the
Government requiring the land for any reason whatsoever.
the grantee shall surrender the land to the
Government without claiming any compensation". The Government acquired the
land by adopting the procedure prescribed by the Land Acquisition Act but no
compensation was awarded to the grantees for the land. The High Court, in
appeal, held that since the Government had failed to exercise the right which
it had under the terms of the grant and had acted under the Land Acquisition
Act, the grantees were entitled to compensation as provided under the Act. In
appeal, this Court,
HELD : After obtaining possession of the land
in pursuance of statutory authority under s. 17 of the Land Acquisition Act,
the Government could not seek to exercise the option conferred by the terms of
the grant. The grantees were entitled to Compensation for the land of which the
ownership was vested in them. But in assessing compensation payable to the
grantees, existence of the condition which severely restricted their right
could not be ignored. [B-C] The Act is silent as to the acquisition of partial
interests in land but it cannot be inferred therefrom that interest in land
restricted because of the existence of rights of the State in the land cannot
be acquired. When land is notified for acquisition for a public purpose and the
State has no interest therein, market value of the land must be determined and
apportioned among the persons entitled to the land. Where the interest of the
owner is. clogged by the right of the State, the compensation payable is only
the market value of that interest, subject to the clog. [895 B, C] The
Collector of Bombay v. Nusserwanji Rattanji Mistri & Ors.  S.C.R.
Attorney-General v. De Kayser's Royal Hotel
Ltd.,  A.C. 508, referred to.
Government of Bombay v. Esufali Salebhai,
I.L.R. 34 Bom.
State of Madras v. A.Y.S. Parisutha Nadar,
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 335 of 1966.
Appeal by special leave from the judgment and
order dated November 6, 1963 of the Mysore High Court in Misc. Appeal No. 293
could not be ignored. [894 B-C] I 893 Niren
De, Solicitor-General, R. Gopalakrishnan and S. P.
Nayar, for the appellant.
Naunit Lal and T. S. Ramachandran, for the
The Judgment of the Court was delivered by
Shah, J. On April 15, 1952, the Government of Mysore granted an area of I I
acres and 38 gunthas of land situate in village Hebbyle to the respondents to this
appeal. The grant was made in Form Appendix 'E' to the Mysore Land Revenue
Rule.-, with the added condition that "in the event of the Government
requiring the land for any reason whatsoever, the grantee shall surrender the
land to the Government without claiming any compensation". On January 11,
1958, the Government of Mysore published a notification under s. 4 of the Land
Acquisition Act that the land granted was likely to be needed for a public
purpose. By a subsequent notification made under s. 17(4) of the Land
Acquisition Act, Government dispensed with the enquiry under s. 5-A of the Act
and obtained possession of the land. In assessing compensation, the Land
Acquisition Officer did not award any compensation for the land, and awarded
Rs. 1,495/- for improvement claimed to have been made to the land by the
grantees. In a reference under s. 18 of the Land Acquisition Act, the District
Court agreed with the Land Acquisition Officer. In appeal, the High Court of
Mysore set aside the award and remanded the case to the District Court with a
direction to determine the compensation payable to the grantees and to dispose
of the case according to law.
The High Court observed that since the
Government had failed to exercise the right which it had under the terms of the
grant and had adopted the procedure prescribed by the Land Acquisition Act,
compensation for acquisition under -the Land Acquisition Act and the process by
which the grantees were to be deprived of the land must be followed. Against
the order passed by the High Court, this appeal is preferred with special
Under s. 3(a) "land" is defined as
including benefits to arise out of land, and things attached to the earth or
permanently fastened to anything attached to the earth. By s. 4 the appropriate
Government is authorised to issue a notification that land in any locality is
needed or is likely to be needed for any public purpose, and thereafter to
exercise certain powers in respect of the land for determining its suitability
for the purpose notified. The Government may under s. 17 in cases of urgency
take possession of any waste or arable land needed for the public purpose and
the -land thereupon vests absolutely in the Government free from all
The Government of Mysore did not purport to
exercise the power reserved by the terms of the grant, and adopted the procedure
prescribed by the Land Acquisition Act. The High Court observed, relying upon
the decision of the House of Lords in Attorney-General v. De Kayser's Royal
Hotel Ltd.(1) that the Government could not, after adopting the procedure
prescribed by the Land Acquisition Act, seek to resort to the conditions of the
grant and claim that no compensation for acquisition of the land was payable.
It is true that after obtaining possession of the land in pursuance of
statutory authority under S. 17, the Government of Mysore could not seek to
exercise the option conferred by the terms of the grant. But on that account in
assessing compensation payable to the grantees, existence of the condition
which severely restricted their right could not be ignored. The grantees were
entitled to compensation for the, land of which the ownership was vested in
them. The measure of that compensation is the market value of the land at the
date of the notification, and the measure of that market value is what a
willing purchaser may at the date of the notification under S. 4 pay for the
right to the land subject to the option vested in the Government.
The High Court also placed reliance upon the
judgment of the Madras High Court in The State of Madras v. A. Y. S.
Parisutha Nadar(2). In that case the main
question decided was whether it was open to a claimant to compensation for land
under acquisition to assert title to the land notified for acquisition as
against the State Government when the land had become vested in the Government
by the operation of the Madras Estates (Abolition and Conversion into Ryotwari)
Act 26 of 1948. On behalf of the State it was contended that once an estate is
taken over by the State in exercise of its powers under the Estates Abolition
Act, the entire land in the estate so taken over vested in the State 'in
absolute ownership, and that no other claim of ownership in respect of any
parcel of the land in the estate could be put forward by any other person as
against the State Government without obtaining a ryotwari patta under the
machinery of the Act. The High Court rejected that contention observing that
the Government availing itself of the machinery under the Land Acquisition Act
for compulsory acquisition and treating the subject-matter of the acquisition
as not belonging to itself but to others, is under an obligation to pay
compensation as provided in the Act, and that the Government was incompetent in
the proceeding under the Land Acquisition. Act to put forward its own title to
the property sought to be acquired so as to defeat the rights of persons
entitled to the compensation. The propositions so broadly stated are, in our
judgment, not accurate. The Act contemplates acquisition of land for a public
purpose. By acquisition of land is intended the purchase of such interest
outstanding in others as clog the right of the Government to use the land for
the public purpose. Where (1)  A.C. 508.
(2)  2 M.L.J. 285.
895 the land is owned by a single person, the
entire market value payable for deprivation of the ownership is payable to that
person : if the interest is divided, for instance, where it belongs to several
persons, or where there is a mortgage or a lease outstanding on the land, or
the land belongs to one and a house thereon to another, or limited interests in
the land are vested in different persons, apportionment of the compensation is
contemplated. The Act is, it is true, silent as to the acquisition of partial
interests in the land, but it cannot be inferred therefrom that interest in
land restricted because of the existence of rights of the State in the land
cannot be acquired. When land is notified for acquisition for a public purpose
and the State has no interest therein, market value of the land must be
determined and apportioned among the persons entitled to the land. Where the
interest of the owner is clogged by the right of the State, the compensation
payable is only the market value of that interest, subject to the clog.
We are unable to agree with the High Court of
Madras that when land is notified for acquisition, and in the land the State
has an interest, or the ownership of the land is subject to a restrictive
covenant in favour of the State, the State is estopped from setting up its
interest or right in the proceedings for acquisition. The State in a proceeding
for acquisition does not acquire its own interest in the land, and the
Collector offers and the Civil Court assesses compensation for acquisition of
the interest of the private persons which gets extinguished by compulsory
acquisition and pays compensation equivalent to the market value of that
interest. There is nothing in the Act which prevents the State from claiming in
the proceeding for acquisition of land notified for acquisition that the
interest proposed to be acquired is a restrictive interest.
We agree with the observations made by
Batchelor, J., Government of Bombay v. Esufali Salebhai(1) at p. 636 :
" The procedure laid down in the Act is
so laid down as being appropriate to the special case which is considered in
the Act, i.e., the case where the complete interests are owned privately. But
that special case is, as I understand it, singled out by the legislature as the
norm or type with the intent that in other cases which only partially conform
to the type the procedure should be followed in so far as it is appropriate,
nor that such cases should be excluded from the Act because they do not wholly
conform to the type. In other words, Government . . . are not debarred from
acquiring and paying for the only outstanding interests merely because the Act,
which primarily contemplates all interests as I.L.R. 34 Bom. 618.
896 held outside Government, directs that
the, entire compensation based upon the market value of the whole land, must be
distributed among the claimants. In such circumstances, as it appears to me,
there is no insuperable objection to adapting the procedure to the case on the
footing that the outstanding interests, which are the only things to be
acquired, are the only things to be paid for." The principle of Esufali
Salebhai's case(1) was it may be observed, approved by this Court in The
Collector of Bombay v. Nusserwanji Rattanji Mistri & Others(1).
But the view expressed by the District Court
that the grantees are not entitled to any compensation for the land cannot be
sustained. The District Court was bound to determine the market value, at the
date of the notification under s. 4 of the Land Acquisition Act, of the
interest of the grantees in the land.
The order passed by he High Court is
maintained subject to the modification that the market value of the interest of
the grantees in the land (of the nature hereinbefore mentioned) at the date of
the notification under s. 4 of the Land Acquisition Act shall be determined and
paid to the grantees in addition to the compensation paid for the improvement
in the land. There will be no order as to costs in this appeal.
Y.P. Order of the High Court modified.
(1) I.L.R. 34 Bom. 618.
(2)  S. C. R . 111 I.