Uttar Pradesh Government vs H.S. Gupta

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Not extracted

Decision Date: 25 September 1956

Coram: Govinda Menon

In the matter titled Uttar Pradesh Government versus H. S. Gupta, decided on 25 September 1956, the Supreme Court of India delivered a judgment authored by Justice S. K. Das and delivered by Justice Govinda Menon. The case concerned two appeals that arose from the compulsory acquisition of the Dilkusha Estate, which was located outside the city limits of Lucknow. The State of Uttar Pradesh appeared as the appellant in Appeal No. 186 of 1955, while the claimant, H. S. Gupta, was the appellant in Appeal No. 187 of 1955. On 3 September 1947 the Land Acquisition Officer of Lucknow issued an award holding that the claimant was entitled to compensation of Rupees 2,88,000 together with a solatium of fifteen per cent for the compulsory nature of the acquisition under Section 3(2) of the Land Acquisition Act. In addition, the officer awarded damages of Rupees 350 per mensem for loss of profits from 17 June 1947—the date the acquisition declaration was published—pursuant to Section 6, continuing until the possession of the property was taken on 6 September 1947.

The claimant, dissatisfied with that award, sought a reference under Section 18 of the Land Acquisition Act to the District Judge of Lucknow. After an exhaustive examination of all issues raised, the learned District Judge concluded that the net saleable area of the estate measured 4,09,952 square feet. Valuing this area at Rupees 1‑2‑0 per square foot, the judge calculated that the compensation on that basis amounted to Rupees 4,61,196. The bungalow and other structures on the estate were separately assessed, bringing the total market value of the property to Rupees 5,28,413. The judge then added a solatium of fifteen per cent for the compulsory nature of the taking, and, applying Clause (1) of Section 23 of the Land Acquisition Act, arrived at a total compensation of Rupees 6,07,675. In addition, Clause (6) of Section 23 yielded a sum of Rupees 983. The judge also awarded interest at a rate of six per cent per annum on the excess amount of Rupees 2,76,583, which represented the difference between the District Judge’s assessment and the earlier award, calculated from 6 September 1947 to the date the excess was paid by the Court.

The Government of Uttar Pradesh challenged the decree and judgment of the District Judge by filing an appeal in the High Court of Judicature at Allahabad, Lucknow Branch. The appeal was heard by Judges Agarwala and Hari Shankar, who, by their judgment dated 22 September 1953, reduced the compensation awarded by the District Judge. The two appeals before the Supreme Court therefore arose out of the decision of the Allahabad High Court. For the purpose of efficiency, the Court noted that it would address the issues common to both appeals together. The principal grievance raised by the State of Uttar Pradesh was that the High Court’s basis for fixing a rate of zero‑14‑0 per square foot as compensation was unjustified. The State contended that the High Court had erred in rejecting

It was urged that the High Court had ignored the principle of belting when it fixed the compensation. The appellant further contended that the High Court had failed to consider that the land in question lay outside the municipal boundary and therefore did not benefit from water supply, electricity, conservancy or public transport, amenities that were available to land within the municipal area. The appellant also highlighted that the claimant had bought the property in September 1941 for Rs 72,000, and therefore only about five years had passed before a notice under Section 6 of the Land Acquisition Act was issued. Apart from asserting that the High Court’s decision was erroneous, the appellant did not specify what amount the claimant should receive or the basis on which a correct valuation should have been made. Counsel for the appellant, Mr S P Sinha, argued that the High Court ought to have set aside the District Judge’s award and restored the amount originally determined by the Land Acquisition Officer. In response, the claimant’s memorandum disputed the valuation principle adopted by the High Court and insisted that the market value of the land should not be less than Rs 2 per square foot. The claimant also raised minor objections, seeking Rs 6,179 for a well, Rs 11,191 for fuel, timber and fruit trees, and at least Rs 1,000 as compensation for an electric service line, all of which had been awarded by the District Judge. Furthermore, the claimant argued that the High Court should have granted Rs 12,681 for out‑houses as buildings rather than the Rs 2,000 allowed only for the cost of materials. The appellant also contested the denial of interest for the period from 8 July 1948 to 8 September 1949, during which the claimant’s payment was delayed. The High Court had refused interest at the rate of six per cent per annum, explaining that the delay resulted from a court order following the Government’s objection, and that the money had consequently been invested in Government securities.

Mr S P Sinha was unable to persuade the Court that the compensation fixed by the High Court, which differed from the District Judge’s view that valuation should be based on block rates, was unsound or unacceptable. The High Court had provided sound and persuasive reasons for adopting a plot‑rate valuation, even though it recognized that there were certain advantages to calculating value on a block basis when a large area of land was acquired. In the present case, as the learned District Judge had observed, the layout shown in Plan Exhibit 52 enabled

The Court observed that the claimant would receive a higher value for the land if it were divided into smaller plots rather than being disposed of without subdivision and dissection, and concluded that, given the facts of the case, valuation on a plot‑by‑plot basis was the appropriate method. The counsel for the appellant failed to substantiate any of the additional specific points raised in his grounds of appeal, and consequently Appeal No 186 of 1955 was dismissed with costs.

In Appeal No 187, the counsel for the appellant limited his contentions to two matters. First, he argued that the learned Judges of the High Court erred in fixing the price of the land at Rs 0‑14‑0 per square foot and should have fixed it at a minimum of Rs 1‑2‑0 per square foot, after agreeing with the District Judge that compensation ought to be awarded on the plot system rather than on a block system. Second, he contended that interest should have been awarded at a rate of six per cent per annum from 6 September 1947 until the date the excess amount was made available to the claimant. The appellant urged that the High Court should have accepted the price of the land on the basis of comparable transactions involving building sites in and around Lucknow, particularly those relating to the Mahanager scheme, an area situated close to the Faizabad road and being developed by the Public Works Department. This locality lay about two and a half miles from the Council House, and the sale deeds identified as Exhibits 138 and 139 demonstrated that, in May and June 1947, the price per square foot in one case was Rs 1‑10‑6 and in the other was Rs 1‑13‑0. The plan annexed to Exhibit 138 showed the alignment of the property, indicating that plots numbered 18, 21, 22, 26 and 27 fetched Rs 1‑10‑0 per square foot, whereas the remaining plots fetched Rs 1‑13‑0 per square foot.

The counsel further argued that the evidence of the first production witness indicated that the land in dispute was worth between Rs 2‑3‑0 and Rs 2‑8‑0 per square foot. Various portions of the deposition of that witness were read out. The claimant, examined as the eighth production witness, asserted that in April 1947 the value of the land ranged from Rs 2‑8‑0 to Rs 3 per square foot, based on prevailing demand and supply. On cross‑examination he explained that smaller plots were sold at higher rates than larger plots, that the price obtained for larger plots could not be compared with that for smaller plots, and that if the entire Dilkusha Estate were sold as a whole, it would fetch one or two annas per square foot less than if it were sold as individual plots. The learned Judges of the High Court based their decision on

In this case, the Court examined the claimant’s attempt to lower the value of the plot to Rs 0‑14‑0 per square foot. After reviewing the deposition of PW 8, the Court concluded that a single, isolated remark such as the one in question should not have influenced the judges to reduce the price per square foot. The Court observed that the scheme shown in Exhibit 52 was a practical and workable plan that had been prepared many years before the compulsory acquisition was decided, and that the High Court, together with the District Judge, had correctly held that purchasers could be found for all the plots laid out in Exhibit 52. Consequently, the Court found no reason to justify any reduction in the value per square foot.

The Court noted that the conditions prevailing in the Dilkhusha estate were largely similar to those of the Mahanager scheme, and therefore it was appropriate to compare the two schemes. The District Judge had correctly adopted an average rate of Rs 1‑2‑0 per square foot for valuation when the plot‑wise method was used. The Court said that the High Court’s reliance on a block‑wise sale method was unwarranted, especially because the evidence showed that there were willing, even eager, buyers for every plot identified in Exhibit 52. The principle that a large, single block would fetch a lower price per square foot than the same area divided into smaller parcels could not be reasonably applied to the present facts. Instead, the High Court should have focused on the price obtained for smaller parcels of land that were similarly situated, with the same advantages and disadvantages, and then applied that standard to the case at hand. In that context, the Mahanager scheme served as the closest analogue. The Court agreed with the District Judge that Rs 1‑2‑0 per square foot was the appropriate price for the various plots shown in Exhibit 52.

Accordingly, the Court held that the reduction of Rs 53,366 from the amount awarded by the District Judge was not justified. On that basis, the Court modified the High Court’s order in this respect and restored the District Judge’s order. Regarding the second point raised by counsel, the Court considered the disallowance of interest. On 8 July 1948, the Land Acquisition Officer wrote Exhibit 64 to the District Judge of Lucknow, stating that, because an appeal against the District Judge’s order was pending, additional compensation should not be paid to the claimant until the matter was resolved, even though the amount was in deposit and could have been withdrawn. While the appeal was pending before the High Court, an application was filed on 18 August 1948 under Order 41, Rule 5 of the Civil Procedure Code, seeking a stay of delivery of the amount to the claimant, and an ad‑interim stay order was issued on 28 August 1948. Finally, on 4 April 1949, the High Court ordered that the application could not be granted unless the Uttar Pradesh Government agreed to pay the claimant interest at the rate of 4 percent per annum up to the date of payment, and the Government’s counsel undertook to obtain instructions and inform the Court within a week of the Government’s position.

The Land Acquisition Officer of Lucknow wrote to the District Judge, stating that because an appeal against the District Judge’s order was pending, the additional compensation should not be paid to the claimant until the appeal was finally resolved. Consequently, although the amount had been placed in deposit and could have been withdrawn by the claimant on that date, the claimant did not receive the money. While the appeal remained before the High Court, the claimant filed an application on 18 August 1948 under Order 41, Rule 5 of the Civil Procedure Code, seeking a stay of delivery of the amount. The High Court issued an ad‑interim stay order on 28 August 1948. On 4 April 1949 the High Court delivered its final order, holding that the stay could not be granted unless the Government of Uttar Pradesh agreed to pay interest to the claimant at a rate of four per cent per annum up to the date of actual payment. The Government’s counsel then promised to obtain the Government’s instructions and to inform the Court within a week of the Government’s position. On 12 May 1949 the High Court dismissed the application for a stay, finding that the application was not pressed. As a result of these proceedings, the claimant was deprived of the additional sum that had been awarded by the District Judge, a sum that this Court has now restored to him. In view of this deprivation, the appellant was held to be entitled to interest on the additional amount at the rate of six per cent per annum, as prescribed by the Land Acquisition Act, calculated from 8 July 1948 up to 12 May 1949. Accordingly, Appeal No 187 was allowed, and the appellant was awarded costs.