P L D 1976 Supreme Court 531 (PLP)

SALAHUDDIN ARMED, J.-These two appeals are by special leave of this Court, and arise out of a dispute over the compensation payable in respect of a brick-kiln in khasra No. 1318 in village Laram, near Peshawar. The appeals have been heard together and they ate now being disposed of under one order.

2. It appears that the Government had acquired 882 kanals 14 marlas of land in the said village belonging to different owners under the Land Acquisition Act, 1894 (hereinafter called the Act), for the purpose of providing the appellants with land to enable them to install a Textile Mill thereon. Included in the land was 60 kanals 7 marlas of banjar land over which the brick-kiln stood. Inter alia, the Collector had awarded a sum of Rs. 6,000 for the brick kiln, and as regards the land, he had fixed different rates for different categories of lands, namely, Nehri Awwal, Nehri Poem and the third category included in it Banjar Qadeem, Banjar Jadeed and Ghair Mumkin. The owners were also allowed 15 per cent. on account of compulsory acquisition.

3. Some of the owners of the land made a reference under section 18 of the Act, and the learned District Judge, considerably enhanced the compensation. For the brick-kiln the compensation was enhanced from Rs. 6,000 to Rupees two lacs, although the owner had claimed only Rs. one lac for it.

4. The Collector filed three appeals in the then High Court of West Pakistan, Peshawar Seat, from the order of the learned District Judge. During the hearing of the appeals, the parties including the owner of the brick-kiln, K. B. Haji Muhammad Quli Khan, arrived at a compromise dated the 4th/5th May, 1966 regarding the market value of the land including the land upon which the brick-kiln stood. According to the terms of compromise, which appears in paragraph 5 of the judgment of the High Court, the entire acquired land was divided into two categories, namely, 'cultivable' which included in it Nehri Awwal and Nehri Doem, and `uncultivable', which included Banjar Qadeem, Banjar Jadeed and Ghairmumkin. The compensation for the former was to be awarded at the rate of Rs. 1,700 per jareeb, and for the latter at the rate of Rs. 700 per jareeb. With regard to the land owned by K. B. Haji Muhammad Quli Khan (respondent No. 1 in Appeal No. 52 of 1970), however, increased rates of Rs. 1,900 per jareeb of cultivable land and Rs. 900 per jareeb of uncultivable land was allowed in view of the fact that certain steps had been taken by him to initiate a building scheme in respect of his land. The question of award of compensation for the brick-kiln was agreed to be dealt with separately. As there was no agreement on this question, the High Court heard arguments of the parties on the question, and finally allowed a sum of Rs. 54,000 on account of the loss of potential earnings for one year in respect of the brick-kiln under section 23 of the Act. It may be stated here that as respects the following two items relating to the brick-kiln there was no dispute between the parties, and they were accordingly not interfered with by the High Court; (1) 60 kanals 7 marlas of banjar land at the rate of Rs. 700 per jareeb as already agreed upon between the parties Rs. 10,560 ; (2) Price of work/superstructure already existing at the time of acquisition as assessed by the Collector Rs. 6,000.

5. In addition, the High Court also allowed interest under section 28 of the Act on the excess amount, that is, the difference between the amount fixed by the High Court and that allowed by the Collector at the rate of 6 % per annum from the date the Collector took possession of the land up to the date of payment. Furthermore 15 % on account of com pulsory acquisition, both in respect of the land and the brick-kiln was also allowed. The High Court accordingly modified the order of the learned District Judge.

6. The dispute between the parties is now confined to two points only, namely, (1) the compensation allowed by the High Court on account of loss of potential earnings or future profits under section 23 of the Act; (2) and the interest allowed under section 28 of the Act on the amount of compensation. Leave was granted to consider these two questions. Before us, too, contentions relating to these two questions have been advanced.

7. The first contention challenges the validity of the order allowing compensation on account of the loss of potential earnings or future profits as respects brick-kiln under section 23 of the Act. The relevant provisions of section 23 of the Act are as follows;

"Section

23. Matters to be considered in determining compensation.-(1) In determining the amount of compensation to be awarded for land acquired under this Act, the Court shall take into considerations first, the market-value of the land at the publication of the notification under section 4, subsection (I ); fourthly, the damage (if any) sustained by the person interested, at the time of the Collector's taking possession of the land, by reason of the acquisition injuriously affecting his other property, movable or immovable in any other manner; or his earnings; fifthly, if, in consequence of the acquisition of the land by the Collector, the person interested is compelled to change his residence or place of business, the reasonable expenses (if any) incidental to such change."

8. Of particular importance in the present case is clause fourthly of section 23 (1) and this has been the subject-matter of judicial consideration in several cases. In the case of Land Acquisition Officer v. Jamnabai (A I R 1946 Born. 142), the compensation in respect of a cigarette factory which was intended to be established by the claimant was in question. For this purpose, the claimant had obtained a license from the Collector of Bombay and had also got certain plans prepared and sanctioned by the authorities concerned. The work of building the factory had proceeded upto three feet above the plinth level, when the land was notified for acquisition. A Division Bench of the Bombay High Court observed that the expression "loss of earnings" used in section 23(1) (fourthly) of the Act meant "loss of earnings" from a business which at the time of acquisition was a going concern. With reference to an illustration similar to the one in the present case, the Court observed; "a claimant would get full compensation under clause (I) of section 23 because the compensation would be given not only for the land itself but also for the buildings thereon and the potentiality of using those buildings for the purpose of business would be a factor governing the market-value of the buildings; and we are not sure if a claim were made for the loss of earnings in a case of this type, that claim would be admitted in Court." It was further observed with reference to section 56 of Vol. 6, Halsbury's Laws of England, 2nd Edition that damages claimed must not be too remote.

9. The case of Madhab Gobinda v. Secretary of State (A I R 1929 Cal. 826), related to compensation in respect of use of three bighas of land for the purpose of making bricks. The evidence of the expert was that by excavating 15 feet deep in the ground, the claimants could manufacture 54 lacs of bricks. There was no boring done. There was evidence that on the contiguous land the claimant had made 6 lacs of bricks only and it was exhausted. There was no evidence that the claimant could not carry the trade of brick making on some other land nor was there any evidence that such land was not available in the vicinity to carry on the trade of brick making. In these circumstances it was observed : "To give the market value of the land and, in addition compensation for loss which, the claimant says, has happened to him for being prevented from taking the corpus of the land would really be giving the value of the land twice over". It was also held that loss of business would mean that a man pursuing some trade or business was compelled to give it up or to carry it on elsewhere, which would give him less profit than what he was making at the former place. It was also said that loss of business did not mean the profit made by using the corpus, the result of which would be that after some lapse of time, the property would be altogether valueless. I may add here that this is of course an extreme proposition, for all that can be said in the circumstances of the case is that the property might depreciate in value. In the case of Suresh Chandra (A I R 1927 Cal. 357), it has been observed that a person is entitled to claim damages for loss of earnings if he carries on some business in the acquired premises and by virtue of the acquisition he is deprived of his profits by reason of the fact that he cannot find any other place where he can carry on the business in which he was engaged on the acquired premises; for example, in this case if the claimant had carried on the trade of brick-making and had proved that after the acquisition he was unable to find a suitable field for carrying on his business of brick-making and by that reason would lose his customers or suffer damage in any other way, he might have made a claim for such damage. This case has been mentioned in the judgment of the High Court, but the aforesaid observations were not adverted to and considered. In the case of Government v. Century Spinning & Manufacturing Co. Ltd. (A I R 1942 Bom. 105), it was laid down that the burden was ordinarily on the claimant to show that the award was inadequate and should not be accepted. The Court observed that it had also been established by numerous authorities, the latest of which was 661 A 104, that the value of land was not to be ascertained merely by reference to the use to which it was to be determined, namely, the date of the notification, but also by reference to its potentiali ties, that is, by reference to the uses to which it was reasonably capable of being put in the future.

11. In A I R 1939 P C 98, it has been observed that the land is to be valued by reference to uses to which it is reasonably capable of being put in future. But it is possibilities of land and not its realized possibilities that must be considered. In the case of Collector, Quetta v. Habibullah (P L D 1970 Quetta 35), similar views have been expressed, and it has been said that the land has not to be valued merely in accordance with the use to which it is being put but also by reference to uses it was reasonably capable of being put in future. The case of Province of Punjab v. Muhammad Fazil (P L D 1968 Lah. 1360), is also to the same effect.

12. In the case of Secretary of State v. Rawat Mull Nopany (A I R 1938-Pat. 618), while interpreting section 23 (fourthly) it was observed thus: "But this clause has no application in case the loss of income complained of is the loss of the income of the property itself which is being acquired. That loss of income is a factor to be taken into consideration in fixing the market value of the land itself which the owner is to get under clause 1, firstly, of section, 23". Earlier it was observed that the loss of income con templated in clause fourthly, was the loss of personal income to the owner of the land.

13. Keeping in view the aforesaid interpretation of section 23 of the Act, and the language of clause (fourthly), it seems to me clear that the damages injuriously affecting the claimant's earnings contemplated under the clause are referable to the time of the Collector's taking possession of the land. In the present case, the brick-kiln was not a "going concern", it was not in operation, and the claimant was not earning anything from the kiln on the day, the Collector took possession of the land. It was one of the usual brick-kilns, which was intended to be operated by hands and no machinery was required for its operation. Such a kiln merely required a chimney and some oven, to be set up, and for these structures a compensa tion of Rs. 6000 was allowed, and the quantum of this compensation has not been disputed. It is legitimate to presume that in determining the compensation for the land upon which the brick-kiln stood, the value of the land including its potentialities was taken into consideration. There is also no dispute about the value put on the land upon which the brick-kiln stood. It appears from the High Court judgment that it was an old abandoned brick-kiln which had been repaired by the late K. B. Haji Muhammad Quli Khan, and it was about to start working when the acquisition took place. It further appears that the object of setting up of the brick-kiln was to supply bricks to the township proposed to be set up by the Khan Bahadur, but that such township never came into existence. Before the kiln could start functioning several factors bad to be considered grid arranged for. There were the questions of supply of labour and supply of materials. The claimant never put up an alternative kiln. He led no evidence to show that the land for such a kiln was not available in the vicinity. There is another aspect of the case. The working of the brick-kiln inevitably involves the using of the corpus of the land which in turn leads to the depreciation of the land. Therefore, but for the fact that the kiln had not started operation, the value of the land was likely to have gone down. The case reported in A I R 1929 Cal. 826 referred to this aspect of the matter.

14. The learned Judges of the High Court with due respect to them, seem to have fallen in error in importing the notion of clause firstly to clause fourthly of section 23 of the Act. In the first clause potentiality of the land is taken care of. Clause fourthly, upon its plain language, is clearly applicable to a business actually carried on and producing actual earnings on the date the Collector took possession of the land. Except for the solitary case of A I R 1927 Cal. 357, the High Court has not referred to any case in which clause fourthly has been considered. In these circumstances I am in agreement with the line of reasoning given in A I R 1946 Bom. 142 and A I R 1929 Cal. 826, and C hold that the High Court was wrong in determining the compensation of Rupees one lac for the brick-kiln under section 23 of the Act.

15. As regards the second contention ordering payment of interest under section 28 of the Act, it seems to me plain and unambiguous that it gives a discretion to the Court to direct payment of interest on the excess. Section 28 reads as follows;

"

28. 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 annum from the date on which he took possession of the land to the date of payment of such excess into Court." It has been observed in some cases that interest awarded under section 28 is in the nature of compensation of damages assessed in terms of interest for loss of possession of property upto the date of receipt of its considera tion. In the case of Nursing Das (A I R 1928 Lah. 263), where the District Judge had enhanced the amount of compensation as awarded by the Collector the claimant was held entitled to interest on the amount whereby the District Judge enhanced the Collector's award from the date of that award until the date of his own judgment. It was further observed that if the amount was further enhanced by the High Court, the claimant was entitled to further interest on the same allowed from that date until the date of judgment of the High Court. I should like however, to point out that under section 28 of the Act, the Court may direct that the Collector shall pay interest on such excess at the rate of six per centum per annum from the date on which he took possession of the land to the date of payment of such excess into Court. The section makes no mention of the date of the award or of the date of the judgment of the Court. Having regards to the facts and circumstances of the case and the considerable difference between the compensation awarded by the Collector and that awarded by the High Court and now by this Court, the learned Judges of the High Court rightly exercised the discretion in favour of the claimants. On behalf of the claimant it has been contended that the rate of six per centum per annum under section 28 of the Act has been enhanced to compound interest at the rate of 8 per centum per annum by Act III of 1969. It appears that on the 15th March 1969 Land Acquisition (West Pakistan Amendment) Act, 1969 (Act III of 1969) was promulgated, whereby section 28 of the Act was amended. The amendment substituted for the words "interest such excess at the rate of six per centum", the words "compound interest on such excess at the rate of eight per centum". The following proviso was also added at the end; "Provided in all cases where the Court has directed that Collector shall pay interest on such excess at the rate of six per centum from the date on which possession was taken and the payment of compensation or a part thereof has not been made up to the commencement of the Land Acquisition (West Pakistan Amendment) Act, 1969, the rate of compound interest on such excess or balance shall be eight per centum."

16. It is an admitted fact that the claimants have not been paid the excess over the amount of compensation as determined by the Collector. The aforesaid proviso, therefore, applies to the present case, and respondent K. B. Haji Muhammad Quli Khan or for the matter of that his heirs and legal representatives substituted for him and who are respondents before us are entitled to payment of interest under section 28 of the Act at the rate of compound interest of eight per centum on the amount representing the difference between the amount of compensation awarded by the Collector and now enhanced by this Court from the date the Collector took possession of the property up to the date the compensation as now finally determined is paid. I would order accordingly.

17. The appeals are accordingly allowed in part. Each party will bear its own cost. The result is that the compensation of Rupees five lac for the brick-kiln is set aside. The said respondents are allowed payment of interest at the rate of compound interests of eight per centum on the excess from the date the Collector took possession to the date the compensation is paid. The other two items of the compensation as respects the brick-kiln, namely, (1) Rs. 10,560 for 60 kanals 7 marlas of banjar land at the rate of Its. 700 per jareeb as already agreed upon between the parties ; and (2) Rs. 6000 as price of work/superstructure already existing at the time of acquisition as assessed by the Collector, are maintained. S. A. H. Appeal partly allowed.