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Case Number

A.A.A.O No. 83 of 1949

Judges

Chandra Reddi, J.

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Structured Summary of the Opinion

Factual and Procedural Background

This second appeal arises from E.A. No. 188 of 1946 in O.S. No. 103 of 1940, originating in the Court of the District Munsif of Visakapatnam, and concerns an application for restitution.

A partition suit was instituted by the sons of Goteti Subba Rao. The trial Court directed the present first respondent to put the appellants in possession of 44.¾ cents of land, which the trial Court found to be in excess of the property to which the first respondent was entitled and to belong to the appellants. The first respondent appealed; the Subordinate Judge of Vizagapatam dismissed that appeal. This Court, in S.A. No. 2154 of 1944, reversed the lower Courts' decisions insofar as they related to portions not concerning the plaintiffs, and left the rights of the defendants inter se to be adjudicated, if necessary, in separate litigation.

Following that reversal, the first respondent applied for redelivery of the property and, among other things, claimed Rs. 2,000 as the value of 200,000 bricks and 200,000 tiles manufactured by the appellants from earth dug out of the 44.¾ cents of land.

The trial Court dealing with that claim directed only that the appellants should fill the pits dug in the land at their cost within 15 days. The first respondent appealed to the Subordinate Judge of Vizagapatam. The lower appellate Court confirmed other findings of the trial Court but, regarding the pits, directed the appellants to pay the money value or compensation for the earth dug and allowed the first respondent to fill the pits himself. In valuing the earth the lower appellate Court took into account the net profits realised by the appellants from the sale of the bricks and tiles manufactured from the earth.

The present appeal challenges the lower appellate Court's assessment of the value of the earth and the use of net profits in that valuation.

Legal Issues Presented

What is the proper measure of damages in restitution (under the facts of this case) when earth is dug from the plaintiff's land and used by defendants to manufacture bricks and tiles: (a) the value of the earth (or its price at the time it became chattels), (b) the depreciation in the value of the land caused by the digging, or (c) the net profits the defendants made from selling manufactured products?
Was the lower appellate Court correct in taking the defendants' net profits from sale of bricks and tiles as the basis for valuing the earth taken from the plaintiff's land?
What remedial directions are appropriate — a monetary compensation based on valuation, or an order to fill the pits (and if monetary, how should valuation be determined)?

Arguments of the Parties

Appellants' Arguments (Mr. Venkatesam)

The basis adopted by the lower appellate Court in assessing the value of the earth was erroneous.
The net profits realised by the appellants from sale of bricks and tiles are not relevant to the question of the value of the earth utilised in manufacturing those products.
The proper measure of damages is either the value of the earth dug out of the land or the value of the depreciation caused by digging pits in the land; in no event is the first respondent entitled to the net profits derived by the appellants.
Relies on Govinda Menon J.'s judgment in Periyayya Moopan v. Marudai Konar (S.A. No. 1341 of 1947 (Mad)), in which it was stated that "at the utmost the first defendant would be liable to pay the price of the mud and silt at the time he utilised them for manufacturing the bricks," and that net profits would not represent the value of the mud and silt.

Respondent's Arguments (Mr. Ramanarasu)

Contends that his client is entitled to the net profits made by the appellants, relying on the decision of Raghava Rao J. in V. Anantharaman v. A. Subba Reddi (S.A. No. 2249 of 1947 (Mad)), where it was held that defendants who trespassed and used the earth to manufacture bricks were liable to pay the net profits made by them.
Also relied on Carrit Moran & Co. v. Manmatha Nath Mukherji (ILR (1941) 1-Cal 285) to support the contention that a trespasser may not deduct certain expenses in claims for damages; the Calcutta High Court there held that the trespasser was not entitled to deduct manufacturing and transport costs except for commission paid to brokers.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Periyayya Moopan v. Marudai Konar, S.A. No. 1341 of 1947 (Mad) (Govinda Menon J.)	At most the wrongdoer is liable to pay the price of the mud and silt at the time they were utilised for manufacturing bricks; net profits of manufactured bricks do not represent the value of the mud and silt.	The opinion cites and relies on this passage to support the proposition that valuation should be the value of the earth (or its value when it became chattels), not the net profits of finished products; the passage is quoted and treated approvingly.
V. Anantharaman v. A. Subba Reddi, S.A. No. 2249 of 1947 (Mad) (Raghava Rao J.)	Held that defendants who trespassed, dug out earth and manufactured bricks were liable to pay the net profits they realised from those activities.	The Court expressed doubt about the applicability of that principle to an application for restitution under Section 144 CPC and stated disagreement with the view that net profits should be the measure in restitution; the precedent was therefore not followed.
Carrit Moran & Co. v. Manmatha Nath Mukherji, ILR (1941) 1-Cal 285 (Calcutta High Court)	On facts where a trespasser plucked tea leaves, manufactured and transported them, the Court held the trespasser was not entitled to deduct expenses of plucking, preparing and transporting except commission to brokers.	The opinion finds this decision of limited assistance to the respondent here and states that the Calcutta decision does not advance the respondent's contention that net profits should be awarded; the Court regarded the underlying authority cited (Lord Sankey) as not supporting the respondent's argument.
Banco De Portugal v. Waterlow and Sons Ltd., (1932) A.C. 452 (Lord Sankey L.C.)	Authority on compensation aiming to put the injured party in the position they would have occupied but for the wrong; cited in colonial cases about allowable deductions from recoverable value.	The Court notes that the passage relied upon does not countenance the respondent's broader contention that deductions or allowances should lead to awarding net profits to the plaintiff in restitution here.
Livingstone v. Rawyards Coal Co., (1880) 5 A.C. 25	Statement of principle that damages should as nearly as possible put the injured party in the same position as if the wrong had not been sustained.	Quoted as an authoritative statement of the fundamental test for awarding damages and applied to explain that restitutionary damages should restore the party's pre-wrong position, not award speculative gains.
Halsbury's Laws of England, Vol. 10 (Hailsham Edition)	Measures of damages for injuries to land are generally the depreciation in selling value of the land/plaintiff's interest (not the cost of reinstatement); special rules for minerals: value at pit mouth allowing for cost of raising, with distinctions depending on fraud/negligence.	The Court relied on these passages as authoritative guidance for determining that the correct measure is diminution in value or pit-mouth valuation with appropriate allowances; used to reject the net-profits basis used by the lower appellate Court.
Krishnalal v. Radhika Mohan, AIR 1931 Cal 462	Applied the passages from Halsbury regarding measure of damages for injuries to land and minerals.	Referenced as an Indian decision that adopted the Halsbury position; used to support the reasoning that depreciation/diminution in value is the appropriate measure.
Salmond on the Law of Torts, 10th Edn.	When trespass causes physical damage to land, measure of damages is the resulting diminution in value of the property, not the cost of reinstatement.	Cited as doctrinal authority reinforcing that diminution in value, rather than the cost to restore, is the correct measure of damage for physical injury to land.
Currimbhoy & Co. Ltd. v. L.A. Creet, 57 Cal 170	Measure of damages for over-extraction by a co-owner: fair market value of minerals at the pit mouth, subject to allowances; describes two rules (harsher—only cost of bringing coal to bank; milder—allow expense of working and severing as well).	Used by the Court to illustrate the accepted approach to valuing extracted materials and to show that allowances depend on conduct; an example of applying pit-mouth valuation with discretion as to allowances.
This Court in S.A. No. 2154 of 1944	Held that those portions of the lower Court's decree which did not relate to the plaintiffs should be deleted and the rights of the defendants inter se be left to be adjudicated upon, if necessary, in different litigation.	Serves as the immediate procedural antecedent: that prior decision led to the first respondent's claim for redelivery and for compensation for bricks/tiles manufactured from earth taken from the disputed land.

Court's Reasoning and Analysis

The Court's analysis proceeds from the basic restitution principle: in an application for restitution (here brought under the procedural context described), the proper object of damages is to restore the person seeking restitution to the position he would have occupied but for the wrong decree or wrong act. The Court emphasized that restitution does not aim to award the plaintiff speculative gains he might have realised.

The Court reviewed the lower appellate Court's approach of taking the appellants' net profits from manufacturing and sale of bricks and tiles as the basis for valuing the earth taken from the first respondent's land. It concluded that that approach was incorrect.

The Court considered authorities to identify the correct measure of damage:

It accepted the principle, echoed in English and Indian authorities and scholarly texts (Halsbury, Salmond), that the usual measure of damages for physical injury to land is the diminution in the money value of the owner's interest (depreciation in selling value), rather than the cost of reinstatement.
Where minerals or materials are extracted, the relevant valuation principle is the value at the pit mouth (i.e., the value when they became chattels), subject to allowances for costs of extraction or raising them, with the extent of allowances depending on the conduct of the parties (harsher or milder rules depending on misconduct/fraud/negligence).
It relied on Govinda Menon J.'s statement in Periyayya Moopan v. Marudai Konar to the effect that, at most, the wrongdoer would be liable to pay the price of the mud and silt at the time they were utilised for manufacturing bricks, and that net profits of the manufactured goods do not represent the value of the raw material used.

The Court considered the contrary authority relied upon by the respondent (Raghava Rao J.'s decision) which awarded net profits, but expressed doubt about its applicability to restitution under Section 144 of the CPC and disagreed with that view insofar as it would award net profits in a restitution claim. The Court explained that it could not be said that but for the wrong decree the person seeking restitution would necessarily have realised the net profits that were in fact made by the defendants.

The Court also considered and set aside the respondent's reliance on Carrit Moran & Co., observing that the Calcutta decision did not advance the respondent's contention that net profits should be recoverable in this restitution context, and that the passages from Banco De Portugal relied upon did not countenance that contention.

On the basis of the foregoing statutory and case law principles, the Court concluded that the lower appellate Judge's method of arriving at the value of the earth by reference to the net profits of manufactured goods was erroneous. The correct approach is to determine the diminution in value (depreciation) caused by the digging, or, where appropriate, the value of the materials at the time they became chattels (pit-mouth value) subject to proper allowances depending on the parties' conduct.

Holding and Implications

Holding: The order of the lower appellate Court is set aside and the case is remanded to the trial Court for an enquiry as to the value of the depreciation caused by the pits dug in the land.

Immediate consequences and directions given by the Court:

The enquiry in the trial Court is to determine the value of the property immediately before the digging of the pits and the value immediately after the digging; it is confined to those valuations.
For this purpose, the parties are at liberty to adduce such evidence as may be necessary to prove their respective cases as to value.
The costs of this second appeal will abide and follow the result of the enquiry in the trial Court.
The memorandum of cross-objections is dismissed without costs; leave refused (as recorded in the opinion).
Case remanded to the trial Court for the specified enquiry.

Broader implications: The opinion applies established principles about measurement of damages for injury to land (diminution in value or pit-mouth valuation with allowances) and rejects awarding net profits as the standard measure in restitution claims of this character. The opinion does not purport to establish a novel rule of law beyond applying these established principles to the facts; its direct effect is to require a fresh enquiry on depreciation and to set aside the earlier monetary assessment based on net profits.

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Pentakota Ayodharamayya And Others v. Pentakota Venkata Krishnam Naidu .

1. This second appeal arises out of E.A No. 188 of 1946, in O.S No. 103 of 1940 in the Court of the District Munsif of Visakapatnam, for restitution. In a suit for partition instituted by the sons of one Goteti Subba Rao, the present first respondent was directed to put the appellants in possession of 44.¾ cents of land which was found to be in excess of the property to which he was entitled and which, according to the trial Court, belonged to the appellants. An appeal was filed by the present first respondent against this direction which was dismissed by the Subordinate Judge of Vizagapatam. But this Court in S.A No. 2154 of 1944, reversed the decisions of the Courts below holding that

“those portions of the lower Court's decree which do not relate to the plaintiffs shall be deleted and the rights of the defendants inter se be and hereby are left to be adjudicated upon, if necessary, in a different litigation.”

2. Consequently, the first respondent, in addition to applying for redelivery of that property, inter alia, claimed a sum of Rs. 2000 as the value of 2 lakhs of bricks and 2 lakhs of tiles prepared by the present appellants from out of the earth dug from the 44.¾ cents of land.

3. Dealing with this claim the trial Court held that the only relief which the present first respondent could get was a direction to the present appellants to fill up the pits dug in the land at their cost within 15 days from the date of the order.

4. The first respondent herein who was aggrieved by this order, filed an appeal to the Subordinate Judge of Vizagapatam. The lower appellate Court, which confirmed the findings of the trial Court on other issues, held that the proper direction in working out the rights of the parties, so far as the claim for damages in respect of the pits dug on the land of the first respondent, was concerned, was to direct the present appellants to pay the money value or the compensation for the earth dug and utilised by them and allow the present first respondent to fill up the pits in the manner he thought best as it thought that there were various difficulties in working out the direction of the trial Court as regards the filling up of the pits. But in valuing the earth dug and, utilised by the appellants the lower appellate Court took into consideration the net profits realised by the appellants by the sale of the bricks and the tiles which were manufactured out of the earth dug from the land in question.

5. In this appeal filed against the order of the learned Subordinate Judge, Mr. Venkatesam, the learned counsel for the appellants urges that the basis adopted by the lower Court in assessing the value of the earth was erroneous, that the profits realised by the appellants have no bearing or relevancy on the question of the value of the earth utilised by them in manufacturing the bricks. It is argued by Mr. Venkatesam that the proper measure of damages to be awarded in cases like this is either the value of the earth dugout of the land or the value of the depreciation that was caused by the act of his clients, viz., the digging of pits in the land, and that in any event the first respondent is not entitled to the net profits derived by his clients from the sale of the bricks.

6. In support o’ his contention he places reliance on a judgment of Govinda Menon J. in ‘Periyayya Moopan v. Marudai Konar’, S.A No. 1341 of 1947 (Mad). In dealing with the question as to how a person that is put to loss by the act of the parties against whom damages are sought should be compensated, the learned Judge observed;

“I am of opinion that at the utmost the first defendant would be liable to pay the price of the mud and silt at the time he utilised them for manufacturing the bricks.”

7. The learned Judge also stated that the net profits of the bricks manufactured out of the mud and silt would not represent the value of the mud and silt used for manufacturing the bricks.

8. Mr. Ramanarasu, learned counsel for the respondent relies upon a decision of Raghava Rao J. in ‘V. Anantharaman v. A. Subba Reddi’, S.A No. 2249 of 1947 (Mad), in support of his plea that his client is entitled to the net profits made by the appellants in this case. It was laid down by Raghava Rao J. in that case that the defendants who trespassed upon the land of the plaintiff, dug out earth from that land and utilised the same for manufacturing bricks, were liable to pay the net profits made by them to the plaintiff. It is very doubtful whether the principle enunciated by the learned Judge in that case is applicable to a claim arising under Section 144 of the CPC, for in an application for restitution only such damages as would restore the person seeking restitution to the position which he would have occupied but for the wrong decree should be directed to be paid. It could not be said that if the wrong decree was not passed by the trial Court in this case, the person seeking restitution would have made this amount. Even otherwise with respect I must express my disagreement with the view taken by the learned Judge in that case, as it does not seem to be in consonance with the principle applicable to such cases.

9. Mr. Ramanarasu next cited to me a decision of the Calcutta High Court in ‘Carrit Moran & Co. v. Manmatha Nath Mukherji*’, ILR (1941) 1-Cal 285. I do not think this decision carries him very far. There the point which the learned Judges were considering was whether a person who committed trespass, plucked tea leaves from the estate, manufactured them and transported the same, was entitled to deduct the cost of plucking, manufacturing and transporting the tea, in a claim for damages by the plaintiff against the trespasser. The learned Judges held that the defendant, who was guilty of fraud or negligence, would not be entitled to a deduction of the expenses incurred by him for the process of plucking, preparing and transporting them for sale but the only reasonable deduction to which he was entitled was the commission paid by the defendant trespasser to the brokers. In support of his conclusion Derbyshire C.J with whom Lort-Williams J. agreed relied upon the following passage in the judgment of Lord Sankey L.C in ‘Banco De Portugal v. Waterlow and Sons Ltd.’, (1932) A.C 452 at p. 475, which in my opinion does not countenance the contention put forward by Mr. Ramanarasu:

“It was similarly stated by Lord Blackburn in the House of Lords in ‘Livingstone v. Rawyards Coal Co.’, (1880) 5 A.C 25 at p. 39, in these words ‘Where any injury is to be compensated by damages, in settling the sum of money to be given for reparation of damages, you should as nearly as possible get at that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation. There is no doubt as to the law……”

10. The test to be adopted in awarding damages even in cases of trespass is laid down in several decisions of English Courts and also of Indian Courts. In Volume 10 of Halsbury's Laws of England, Hailsham Edition, at page 134 the following passage occurs:

“In respect of injuries done to the land by trespass the measure of damages is the depreciation in the selling value of the land, or in the selling value of the plaintiff's interest in it, and not the amount required to put the premises in repair……The amount recoverable, however, will not necessarily be the cost of reinstatement, the true measure of damage being the difference between the money value of the owner's interest before and after the injury.”

11. In support of this statement of law the learned author relies upon a number of English decisions which it is unnecessary for me to refer now. In the same volume at page 137 the learned author says:

“If the defendant was guilty of fraud or negligence, the plaintiff is entitled to recover the value of the minerals at the time they first became chattels—that is, their value at the pit's mouth — allowing for the cost of raising them to the surface. If the defendant acted honestly and without negligence, the plaintiff is only entitled to the value of the minerals at the pit's mouth after allowing for the cost of getting them as well as that of raising them to the surface.”

12. These passages were quoted with approval not only by Govinda Menon J. in ‘Periyayya Moopan v. Marudai Konar’, S.A No. 1341 of 1947, but also by a Bench of the Calcutta High Court in ‘Krishnalal v. Radhika Mohan’, AIR 18 (1931) Cal 462.

13. In Salmond on the Law of Torts, tenth Edn at page 210 the learned author says:

“When a trespass has caused physical damage to the land, the measure of damages is the loss thereby caused to the plaintiff, which in all ordinary cases is measured by the resulting diminution in the value of the property. The measure of damages is not the cost of reinstatement—the cost of restoring the land to the condition in which it formerly was—a cost which may greatly exceed the actual diminution in the value of the land.”

14. In ‘Currimbhoy & Co. Ltd. v. L.A Creet’, 57 Cal 170, the measure of damages to be awarded to a co-owner who dug out more than his share of the coal was considered. At page 201 the point is dealt with thus:

“The measure of damages ‘in a case like this is the fair market value of the coal (be it remembered that Creet was a part owner of the coal) at the pit mouth at the time when, it was served subject to just allowances. As to what allowances there shall be depends on the conduct of the parties and the other circumstances of the case. There are two rules—(1) the harsher, under which only the cost of bringing the coal to bank is allowed and (ii) the milder under which the expense of hewage and haulage, i.e, the cost o£ working and severing as well as of bringing to bank is allowed.”

15. In that case the milder rule was applied as the learned Judges thought that the co-owner was not guilty of misconduct of a substantial character.

16. On this discussion it follows that the basis adopted by the learned appellate Judge for arriving at the value of the earth was wrong.

17. Mr. Ramanarasu maintained that the value of the earth dug out from the land belonging to the first respondent would not represent the true measure of damages in a case like this and that his client would be restored to the position which he would have occupied but for the wrong decree only if he is paid the value of the depreciation sustained by him as a result of the action of the present appellants. Mr. Venkatesajn concedes that this is the fair basis of allowing restitution in a case like this.

18. Consequently the order of the lower appellate Court has to be set aside and the case remanded to the trial Court for an enquiry as to the value of the depreciation. For the purpose the parties are at liberty to adduce such evidence as may be necessary to prove their respective cases. The enquiry is to be confined to the value of the property before the digging of the pits and value thereof immediately after the digging. The costs of this second appeal will abide and follow the result of the enquiry in the trial Court. The memorandum of cross-objections is ??? pressed and is dismissed without costs. (Leave refused).

C.R.K/K.S

19. Case remanded.

Pentakota Ayodharamayya And Others v. Pentakota Venkata Krishnam Naidu .

Structured Summary of the Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellants' Arguments (Mr. Venkatesam)

Respondent's Arguments (Mr. Ramanarasu)

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Pentakota Ayodharamayya And Others v. Pentakota Venkata Krishnam Naidu .

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