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PETITIONER: SPECIAL LAND ACQUISITION & REHABILITATION  OFFICER, SAGAR

       Vs.

RESPONDENT: M.   S. SESHAGIRI RAO & ANR.

DATE OF JUDGMENT: 31/01/1968

BENCH: SHAH, J.C. BENCH: SHAH, J.C. RAMASWAMI, V.

CITATION:  1968 AIR 1045            1968 SCR  (2) 892  CITATOR INFO :  R          1972 SC2224  (1)

ACT: Land Acquisition Act (1 of 1894).-Grant of land on condition to  surrender  without compensation-Proceedings  under  Land Acquisition Act-Compensation, how payable.

HEADNOTE: 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. [1955] S.C.R. 1311, followed.

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Attorney-General  v.  De Kayser’s Royal Hotel  Ltd.,  [1920] A.C. 508, referred to. Government  of  Bombay v. Esufali Salebhai, I.L.R.  34  Bom. 618, approved. State  of  Madras v. A.Y.S. Parisutha Nadar,  [1961]  M.L.J. 285, disapproved.

JUDGMENT: 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 of 1961. 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 respondents. 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 leave. 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 Goverrnment 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 encumbrances. The  Government  of Mysore did not purport to  exercise  the power  reserved by the terms of the grant, and  adopted  the

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proce- 894 dure 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) [1920] A.C. 508. (2) [1961] 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

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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

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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)  [1955] S. C. R . 111 I. 897