Land Acquisition Act 1894 - Injurious Affection To Property May Stand On A Different Footing From Injurious Affection To Earnings : Supreme Court

While dealing with section 23(1)(iv) of Land Acquisition Act, 1894 ("Act") the Supreme Court has observed that injurious affection to property, in any other manner, may stand on a different footing from injurious affection to earnings.

The bench of Justices Hemant Gupta and V Ramasubramanian was considering a civil appeal assailing Bombay High Court's order of modifying the award of the Reference Court passed under Section 18 of the Land Acquisition Act,1894.

While partly allowing the appeal by reinforcing the award of the Reference Court in relation to the compensation of injurious affection to rails and sleepers, the bench in Walchandnagar Industries Ltd. v. The State Of Maharashtra & Anr. said,

"A question may arise as to whether the reasoning given by us for rejecting the claim for loss of earnings in the form of increase in transportation costs, will not apply ipso facto to the claim for compensation for the rails and sleepers also, since the appellant had switched over to road transport in the year 1972 itself. But our answer would be that clause fourthly of Section 23(1), uses a significant phrase viz., "injuriously affecting his other property, movable or immovable, in any other manner, or his earnings". Therefore, injurious affection to property, in any other manner, may stand on a different footing from injurious affection to earnings. While there is no evidence on record to connect the drop in the level of profits from 1975-76 to 1976-77, with the increase in transportation costs, there is acceptable evidence to show that movable property became useless after the acquisition. Therefore, both stand on different footings."

Factual Background

In the year 1967, the Government of Maharashtra approved the BHIMA (Ujjani) Irrigation Project as a part of which a 18 feet height dam across the Bhima River was proposed to be constructed at Ujjani about 11⁄2 kms. upstream from Hingangaon bridge on Pune-Solapur National Highway. Before undertaking the construction of the dam, a general survey was carried out, which revealed that a section of the trolley line was set up by Walchandnagar Industries Ltd. ("Appellant") may get submerged.

Therefore a spate of correspondence and personal discussions ensued between the officials of the Government and the representatives of the appellant for exploring the possibility of diverting the trolley line. On October 26, 1971 a notification under Section 4 of the Land Acquisition Act, 1894 was published which included the land on which a section of the trolley line passed.

On December 9, 1981, the Land Acquisition Officer passed an award by awarding total compensation of Rs.1,27,198.31/- and rejected the claim of Rs.1,49,85,251/- for the unacquired portion. The appellant's claim in the Award Enquiry was not only for the market value of the land, but also for: (i) compensation for the loss; and(ii) compensation for the injurious affection due to the trolley line becoming obsolete. Appellant's claim also included a claim for the loss sustained by the appellant on account of the unacquired portion being rendered useless.

Not satisfied with the award, the appellant sought a reference under Section 18 on January 12, 1982 and the reference court (i) enhanced the compensation for the acquired part of the land to Rs.55,893.23; and (ii) fixed an amount of Rs.80,09,725 as compensation on account of severance and injurious affection.

Aggrieved by such enhancement and fixation, the State of Maharashtra filed an appeal in First Appeal before the High Court. The Division Bench of Bombay High Court on November 19, 2008 reversed

Both the appeals were disposed of by a Division Bench of the Bombay High Court by a Judgment dated 19.11.2008 modified the award of the Reference Court passed under Section 18.

Submission Of Counsels

Appearing for the appellant, Senior Advocate Gopal Sankaranarayanan contended that the appellant could not be blamed for not finding an alternative route to lay the trolley line and for not insisting on the Government to invoke the urgency clause for the acquisition of some other land for laying trolley line, as the provisions of Section 17 could not have been invoked for the benefit of a company. It was also his contention that the appellant was able to prove by cogent evidence that the cost of transportation by road was higher.

Representing the second respondents- beneficiary, Senior Advocate Deepak Nargolkar argued that the appellant had set up a bogey of a claim about the trolley line in the unacquired portion of land becoming redundant and that having admittedly switched over to road transportation way back in September 1972, the appellant was not entitled to claim any compensation for the purported increase in transportation cost.

Advocate Sachin Patil appeared for the State of Maharashtra.

Supreme Court's Analysis

The bench in the judgment authored by Justice V Ramasubramanian to adjudicate on the issue discussed the Law on compensation for severance and injurious affection and referred to section 23, 24 and 49 of the Act.

To decide on the question of injurious affection, the bench relied on the judgements in R.H. Wernickle and Ors. vs. The Secretary of the State for India 2 Ind.Cas 562 and Balammal vs. State of Madras AIR 1968 SC 1425.

With regards to claim related to rails and sleepers, the bench while upholding with the submissions that the urgency clause u/s 17 of Land Acquisition Act could not have been invoked, as the appellant is a company said,

"But as rightly contended by Shri Gopal Sankaranarayanan, learned senior counsel for the appellant, the acquisition of land for laying alternative trolley lines was not an easy task, especially when there were a lot of land owners. The urgency clause under Section 17 of the Land Acquisition Act could not have been invoked, as the appellant is a company.

57. The fundamental flaw in the reasoning of the High Court is that the High Court presumed that it was enough if the land for relocating 7 kms. of trolley line was acquired. If trolleys line to a distance of 7 kms., out of a total stretch of 35 kms. admittedly got submerged in the backwaters, the trolley line relating to the entire stretch would naturally become redundant. Railway line is not like a roadway. Roads can take deviation easily, but not railway lines. Therefore, if land had to be acquired for relocating the trolley line, it should have been for the entire stretch of 35 kms. It is not possible to retain 28 kms. of trolley line and relocate the remaining 7 kms. stretch alone. Therefore, we are of the considered view that the High Court committed a gross error in reversing the finding of the Reference Court under this heading."

With regards to the appellants submission that they were entitled to compensation towards the loss of value/utility of these rolling stocks, the bench said,

"Though it is contended on behalf of the appellant that the evidence of PW-13 (Shri Kamat) was misread by the High Court and that due to good maintenance, the life of the rolling stock had increased, we do not think that the view taken by the High Court was completely out of sync with the evidence on record. The High Court has actually extracted one portion of the evidence of Shri Kamat (PW-13). He has clearly admitted that though he inspected the Assets Register in 1986 before preparing the report he did not record in his report, the book value of the asset. He clearly stated "it is possible that in book value, the assets might become zero value in the instant case."

65. Therefore, no exception can be taken to the finding recorded by the High Court insofar as rolling stock is concerned."

On the aspects of increase in transportation cost, the bench said,

"74. The impact of the increase in transportation cost, upon the profit margin of a seller of goods, would depend upon the terms and conditions of the contract. It may also vary from sea transport to rail transport to road transport to air transport. Though in shipping contracts there are standard covenants such as FOB (Free on Board), CIF (Cost, Insurance and Freight) etc., there are no such standard covenants in rail and road contracts. In any case, the trolley line of the appellant covered only a distance of 35 kms upto Bhigwan. Delivery of material had to be effected by the appellant to its customers through some method of transport from Bhigwan. Nothing is on record to show that the goods were always dispatched to all customers through goods carriage railway line of the Indian Railways beyond Bhigwan. In the absence of any evidence to show that the increase in the transportation cost due to the submerging of a part of the trolley line, had always to be absorbed only by the appellant, but could not have been passed on to its customers due to specific terms and conditions of contract, the Reference Court could not have accepted a claim in this regard.

76. Therefore, the decision of the High Court with regard to the claim for compensation towards increase in transportation cost appears to be reasonable and hence cannot be interfered with."

While partly allowing the appeal, the bench said, "The upshot of the above discussion is that the refusal of the High Court to award any compensation for the injurious affection to one set of movable property, namely, rolling stock cannot be found fault with, for the reasons stated above. Similarly, the refusal of the High Court to award any compensation for increase in transportation cost, falling under the category of "injurious affection to earnings" cannot also be faulted, for the reasons indicated separately. However, the refusal of the High Court to grant compensation for the injurious affection sustained by the appellant to one set of movable property, namely, rails and sleepers forming the trolley line for a distance of 28 kms., is clearly unsustainable especially when the grant of compensation for the injurious affection to rails and sleepers to a stretch of 7 kms. submerged in the backwaters, has been sustained by the High Court. In fact, the State has not come up on appeal against the grant of compensation for the injurious affection to the trolley line to a distance of 7 kms which got submerged in back waters. That the remaining portion of the trolley line to a distance of 28 kms has been rendered useless after the acquisition, is not in dispute."

Case Title: Walchandnagar Industries Ltd. V. The State Of Maharashtra & Anr.| Civil Appeal Nos. 2671­2672 of 2016

Coram: Justices Hemant Gupta and V Ramasubramanian

Citation : 2022 LiveLaw (SC) 159

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