(Delivered by Govinda Menon. J)

Under S. 19 of the Defence of India Act, where there is a compulsory acquisition of property, the question of compensation has, in the first instance, to be fixed by agreement between the officers of Government and the owner of the property. Where no agreement is reached, the Central Government shall appoint an arbitrator who is qualified for appointment as a High Court Judge for deciding the compensation. Such an arbitrator, in making the award, shall have regard to the provisions of Sub-S. 1 of S. 23 of the Land Acquisition Act, 1894, so far as the same can be applicable and Cl. (f) of S. 19 of the Defence of India Act lays down that an appeal shall lie to the High Court against the award of an arbitrator except in cases where the amount thereof does not exceed an amount prescribed on that behalf by rules made by the Central Government.

An area of 71 cents of land situated on the main cantonment road by the side of the Andhra Scientific Co. in Masulipatam town, belonging to the respondents was acquired by the Government for constructing a fire station The District Collector of Krishna, fixed the compensation at Rs. 12,101-13 4 being the value of the land, Rs. 129-6 0 being the value of the barbed wire fencing, and Rs. 28-0 being the value of the trees, aggregating in all to Rs. 12,233-1 1-4. He also offered a 15 per cent solatium in the sum of Rs. 1,835-0 11. The grand total therefore offered by the District Collector was Rs. 14,068-12-3. The owner of the land was not willing to accept this amount and therefore the District Judge of West Godavari was appointed as arbitrator. The learned Judge, alter considering the oral and documentary evidence let in before him, came to the conclusion that the value of the site should be fixed at Rs. 6 per sq. yard whereas the offer was at the rate of Rs. 3-8-0 per sq. yard. Computing the amount on this basis, the land value will be Rs. 20,746. He also increased the price of the barbed wire fencing and reinforced concrete poles from Rs. 129.6-0 to Rs. 600. The solatium was proportionately increased to Rs. 3202 4-5 and the grand total came to Rs. 24,550 125. The learned judge also allowed interest at 6 per cent per annum on the excess amount allowed by him. The State has preferred an appeal against the excess amount and the interest allowed and the claimant has preferred a memorandum of cross-objections.

The first question for consideration is whether the learned Judge was justified in increasing the site value from Rs 3 80 to Rs. 6 per sq. yard. In this connection we have also to decide whether the respondent in the memorandum of cross objections is entitled to claim the rate of Rs. 15 per sq. yard. Ex. D.14 is a plan, not drawn to scale, of the proposed site as well as the surrounding areas. We may at once say that it is a very unsatisfactory delineation of the land sought to be acquired and its neighbourhood. Therefore the lower Court made a local inspection of the site, the result of which is stated in paragraph 6 of the judgment. After giving a description of the locality and the various buildings around the site, the learned Judge comes to the conclusion that the locality was both residential and commercial in character. Then the documents filed on behalf of the Government showing the value of the sites in the neighbourhood were considered. Under Ex. D.2 it was found that the price works out at Rs. 2-1.6 per sq. yard The land is situated not far away from the site in question. Under Ex. D.3 the rate comes to Rs. 1-8 0 per sq. yard. Ex. D.1, which relates to a site a little far away, shows that the rate is Rs. 0 13-6 per sq. yard. Under Ex. D.8 the rate works out at Ra. 0 5-10 per sq. yard. Like this the learned Judge has discussed various other documents and pointed out what the price per square yard in that locality is. From these documents it is clear that sites in the locality had been sold at much lower rates. But most of these transactions were prior to the acquisition in question. In the present case the notification for acquiring the property was made on 21st September 1943 and the acquisition itself was on 9th October 1944. We have therefore to find out what the value would be at or about the time of the notification.

Exs. D.2 and D.3 are of September 1937, Ex. D.5 is of December 1938; D.6 of January 1943; and so on. The transaction which is nearest in point of time to the one in question and also relating to a plot which is part of the same survey number is Ex. D.4 dated 24th June 1943. Under that the rate comes to Rs. 2-120 per sq. yard. This was in June 1943. After considering all these documents the learned Judge was of opinion that during the year 1943 there was a progressive rise in the site values and the site had acquired a potential value as a building site. Therefore the learned Judge fixed Rs. 6 per sq. yard as the proper value. The learned Government Pleader contends that the lower Court was not justified in fixing such a high figure when the documentary evidence showed that lands adjacent and nearby to the site in question were sold at prices below Rs. 3 per sq. yard. In such circumstances the value of Rs. 3-8-0 per sq. yard fixed by the Collector, according to the learned Counsel, is the proper value. Considering the circumstance that the learned Judge had the benefit of a personal inspection of the locality and was satisfied that the lands were increasing in value during those years, and the fact that the potential value of the site should also be taken into consideration, leaving aside the question of what adjacent lands fetched at sales sometime anterior to the notification, we are of opinion that it cannot be said that the learned Judge has exercised his discretion in a wrong manner. One thing is clear and that is that during the years 1943-1944 the price of lands in urban areas shot up like a rocket and the increase was phenomenally high. The factor which weighed with the learned Judge was that the price would have been much more than Rs. 3-80 per sq. yard in 1944. We do not therefore feel justified in reducing the value of Rs. 5 per sq. yard fixed by the learned Judge. The respondents' claim of Rs. 15 per sq. yard is, to say the least, highly exaggerated and fanciful. Since the learned Judge had fixed the site value taking into consideration not only the value on the date of the notification but also the potential value of the site during the year 1944, we cannot say that the respondents are entitled to anything more than Rs. 6 per sq. yard. As we are definitely of opinion that no increase in the site value can be allowed, we confirm the value of Rs. 6 per sq. yard and dismiss the memo randum of cross-objections with costs.

Two legal questions have been raised by the Government Pleader. Firstly he contended that since S. 19(e)(f) of the Defence of India Act lays down that the arbitrator, in making his award, shall have regard to the provisions of Sub-S. (1) of S. 23 of the Land Acquisition Act, the application of Sub-S. (21 of S. 23 of the Land Acquisition Act, whereby 15 per cent solatium is allowed, cannot be justified. Under Sub-S. 12) of S. 23 of the Act. In addition to the market value of the land as fixed under Sub-S. (1) of S. 23, the Court shall in every case, award a sum of 15 per cent of such market value as solatium in consideration of the compulsory nature of the acquisition. We are of opinion that this argument is well founded. When S. 19(e) of the Defence of India Act lays down specifically that in making the award, the Arbitrator shall have regard to the provisions of Sub-S. (1) of S. 23 of the Land Acquisition Act, it is impossible to contend that the provisions of Sub-S. (2) of S. 23 have been attracted. The specific mention of Sub-S. (1) impliedly excludes the application of Sub S. (2). If authority for this position is needed we may cite Dinbai v. Dominion of India(1) where a Bench of the Bombay High Court holds that the very purpose of the Defence of India Rules was that property which was required for the war should be acquired for a smaller amount than property which is ordinarily acquired under the Land Acquisition Act. But it is contended by Mr. Somasundaram for the respondent that the Collector himself has offered a solatium of 15 per cent on the site value and therefore we should not interfere with the order of the Arbitrator allowing the solatium. It might be that the Collector was not fully alive to the implications of his action or that he did not comprehend the scope of the compensation offered. But whatever that might be since the Collector had thought fit to award a solatium of 15 per cent we do not think that we need interfere with his offer. Under Cl. (a) of S. 19 of the Defence of India Act, the amount of the compensation can be fixed by agreement and if the parties did not agree the Arbitrator has to decide only on the disputed points. Here, so far as the solatium is concerned, it is an amount which the Collector was prepared to pay. There is no disagreement on the per centage of solatium. It might therefore be said that the amount of solatium was not the subject matter of disagreement between the parties, so far as the Collector's offer was concerned. But the same cannot be said with regard to the solatium allowed by the Arbitrator on the increased value of the compensation As the law does not allow him to go beyond the provisions of Sub-S. (1) of S. 23 of the Land Acquisition Act, it is not open to the Arbitrator to award any solatium on the value of the site fixed according to the principles laid down in Sub-S. 1 of S. 23 of the Land Acquisition Act. We therefore disallow the 15 per cent solatium allowed by the Arbitrator on the excess amount awarded by him as the value of the site While retaining the solatium of Rs. 1,835-0-11 offered by the Collector, we disallow the excess solatium granted by the Arbitrator, viz., Rs. 1,367-3-6.

The other question is whether the claimant is entitled to interest on the increased amount. The learned Judge has allowed interest at 6 per cent on the sum of Rs. 10,4820 2. The argument of the Government Pleader is that S. 34 of the Land Acquisition Act is the statutory provision which allows interest and since that section is not made applicable to the acquisition under the Defence of India Act no interest can be allowed. For this purpose he relies upon the observations in Associated Oil Mills Ltd. v. Provincial Government Of Madras, Madras. That was a case where land was requisitioned under the Defence of India Act and it was not a case of a permanent acquisition, For the damages consequent upon such requisition, the learned Judges have held that interest is not payable. At page 570 the learned Judges observe as follows;

“As to the first point, we do not see how interest can be awarded on an amount which is in the nature of damages.”.

The distinction between that case and the present one is that here we are concerned with a permanent acquisition of property and the conversion of land into money. It is not a case of damages arising out of temporary requisition. If it had been one in which a party is entitled to damages for requisitioning his property it may be that no interest is allowable. The moment the property is taken away from the party, he is entitled to get its value as quid pro quo. The full value has not been offered by the Collector and therefore on the difference between what was offered by the Collector and what is now fixed by the Arbitrator, the owner of the land is entitled to be paid the interest. If authority for this position is needed there is a recent decision of the Calcutta High Court in Province of Bengal v. Pawan Kissen Law & Co(2), where the learned Judges say that when land is acquired under the Defence of India Act the Arbitrator can award interest to the person whose land has been acquired on the price of the land and the interest will run from the date when the land is taken possession of till the date on which the land acquisition Collector draws up the award and makes an offer to the person. The learned Judges discuss the Privy Council case reported in Inglewood Pulp and Paper Co. Ltd. v. New Brunswick Electric Power Commission(3), and they quote the observations of their Lordships in that case which are to the following effect:

“It is now well established that on a contract for sale and purchase of land it is the practice to require the purchaser to pay interest on his purchase money from the date when he took possession……………It is true that the expropriation under the Act in question is not effected for private gain, but for the good of the public at large, but for all that, the owner is deprived of his property in his case as much as in the other and the rule has long been accepted in the interpretation of statutes that they are not to be held to deprive individuals of property without compensation unless the intention to do so is made quite clear. The status in the present case contains nothing which indicates such an intention. The right to receive interest takes the place of the right to retain possession and is within the rule.”

The learned Judges differed from the observations at page 570 in Associated Oil Mills Ltd. v. Provincial Government Of Madras Madras. We do not think that it is necessary to hold that the Madras case is incorrectly decided on this point. Where it is damages no interest can be awarded. But where it is the equivalent of the property, then interest can be awarded. We are therefore of opinion that interest can be awards on the excess amount of the site value. The decree of the lower Court is modified accordingly. The parties will pay and receive proportionate costs in the appeal.

V.C.S