WALCHANDNAGAR INDUSTRIES LTD. versus THE STATE OF MAHARASHTRA & ANR on 4 February 2022

SUPREME COURT REPORTS

[2022] 18 S.C.R.

WALCHANDNAGAR INDUSTRIES LTD.

A

v.

THE STATE OF MAHARASHTRA & ANR.

(Civil Appeal Nos. 2671-2672 of 2016)

B

FEBRUARY 04, 2022

[HEMANT GUPTA AND V. RAMASUBRAMANIAN, JJ.]

Land Acquisition Act, 1894 :ss. 4, 6, 17, 18, 23, 24 – Landacquisition – Determination of compensation in light of clauses“thirdly” and “fourthly” of s. 23 concerning ‘severance’ andC‘injurious affection’ respectively – On facts, the appellant-landowner established a township situated at a distance of 36 kms. fromthe Railway Station – For a direct and rapid connection betweenthe two points, the appellant provided its own trolley line in theyear 1946 wherein 35,000 tonnes of heavy material used to getDtransported – Part of the trolley line got submerged in the backwatersof Ujjani Dam project and the remaining portion of the trolley linesituated in the unacquired part of the land had become useless –Land acquisition officer awarded total compensation ofRs.1,27,198.31/- and rejected the claim for the unacquired portion– Reference Court enhanced the compensation for the acquiredEpart of the land and fixed compensation on account of severanceand injurious affection – However, the High Court interfered withthe award of the Reference Court – On appeal, held: As regardsclaim relating to rails and sleepers, rolling stock and increase intransportation cost, refusal of the High Court to award anyFcompensation for the injurious affection to one set of movableproperty, namely, rolling stock cannot be found fault with – Refusalof the High Court to award any compensation for increase intransportation cost, falling under the category of “injuriousaffection to earnings” also cannot be faulted – However, the refusalof the High Court to grant compensation for the injurious affectionGsustained by the appellant to one set of movable property, namely,rails and sleepers forming the trolley line for a distance of 28 kms.,is unsustainable especially when the grant of compensation for theinjurious affection to rails and sleepers to a stretch of 7 kms.submerged in the backwaters, has been sustained by the High Court H

– In fact, the State has not come up on appeal against the same –Remaining portion of the trolley line to a distance of 28 kms hasbeen rendered useless after the acquisition – Furthermore, clausefourthly of s.23(1), uses a significant phrase “injuriously affectinghis other property, movable or immovable, in any other manner, orhis earnings” - Thus, injurious affection to property, in any othermanner, may stand on a different footing from injurious affectionto earnings – While there is no evidence on record to connect thedrop in the level of profits from 1975-76 to 1976-77, with the increasein transportation costs, there is acceptable evidence to show thatmovable property became useless after the acquisition – Thus, theconclusions by the High Court whereby the award of the ReferenceCourt relating to compensation for injurious affection to rails andsleepers, was reversed by the High Court, is set aside – Award ofthe Reference Court granting a sum of Rs.31,21,860/- towardscompensation for rails and sleepers is restored – As regards, otherclaims, the impugned judgment not interfered with.

Partly allowing the appeals, the Court

Conclusion

Partly allowing the appeals, the Court

HELD: 1.1 Before the Reference Court, the ChiefAdministrative Manager of the appellant, who was a qualified CivilEngineer was examined as PW-1, and a retired Director of TownPlanning was examined as PW-15. Both these witnesses referredto the quotations given by Hindustan Steels Limited, towardsestimated cost of laying the trolley line. After allowingdepreciation and the value for which the material was sold andafter adjusting transportation cost, these witnesses estimated thecost of rails and at Rs.50,08,288/-. Though the respondentsexamined one Shri Mahajan, who also produced independentcalculations, the Reference Court rejected his evidence on theground that it did not inspire confidence. Interestingly theReference Court did two things, namely, (i) it agreed that themethod or formula adopted by Shri Mahajan was proper andrecognized by the standard authors and yet rejected his evidence;and (ii) it agreed with the submissions of the Government Pleaderas to why the evidence of Shri Talim, retired Director of TownPlanning should not be relied upon, but eventually held that theevidence of Shri Talim cannot be discarded totally. Thereafter,the Reference Court proceeded to take the estimated cost of A

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Arails and sleepers at Rs.2,41,053/-per km., and applieddepreciation of 35% and arrived at the depreciated value atRs.1,56,650/- per km. Applying this rate for the trolley line of adistance of 35 kms. and after deducting the actual scrap valuereceived by the appellant, the Reference Court arrived at thecompensation rails and sleepers at Rs.31,21,816/-. [Paras 52 &B53][852-B-F]

1.2 The High Court held that the appellant was not entitledto any compensation for rails and sleepers lying in the trolleyline for a distance of 28 kms., since the appellant was at fault fornot taking effective steps to lay alternative trolley line to a distanceCof 6 to 7 kms. which got submerged in backwaters. The HighCourt held that in any case, the appellant did not suffer any loss,as was evident from the balance sheets placed on record uptothe year 1978. After rejecting the claim with regard to the railsand sleepers of the trolley line for a distance of 28 kms., on theDbasis of the reasons extracted above, the High Court proceededto award compensation for the rails and sleepers in trolley line toa distance of 7 kms. which got submerged in the backwaters.[Paras 54 & 55][852-G-H; 853-E]

1.3 The acquisition of land for laying alternative trolley lineEwas not an easy task, especially when there were lot of landowners. The urgency clause under Section 17 of the LandAcquisition Act could not have been invoked, as the appellant isa company. The fundamental flaw in the reasoning of the HighCourt is that the High Court presumed that it was enough if theland for relocating 7 kms. of trolley line was acquired. If trolleyFline to a distance of 7 kms., out of a total stretch of 35 kms.admittedly got submerged in the backwaters, the trolley linerelating 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 forGrelocating the trolley line, it should have been for the entire stretchof 35 kms. It is not possible to retain 28 kms. of trolley line andrelocate the remaining 7 kms. stretch alone. The High Courtcommitted a gross error in reversing the finding of the ReferenceCourt under this heading. [Paras 56 & 57][853-G-H; 854-A-C]

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1.4 In the light of the oral and documentary evidence, theReference Court came to the conclusion that the life of thelocomotives can be taken as 20 years and the life of wagons canbe taken as 35 years. Applying depreciation on a straight lineformula, the Reference Court arrived at the depreciated value ofrolling stock as Rs.22,36,424.70/-. After deducting the scrap valueof Rs.4,56,540/-, the Reference Court fixed the compensationpayable for the rolling stock at Rs. 17,79,884.70/-. The HighCourt, on re-appreciation of evidence found that the appellantcompany did not bring before the Court, the book value of therolling stock. But the expert witness Shri Kamat examined asPW-13 admitted during cross-examination that as per the AssetRegister maintained by the appellant relating to the year 1986,the value of the rolling stock was almost zero. By selling therolling stock as scrap, the company had actually earned a sum ofRs.4,56,540/-. Moreover the High Court found from the evidenceon record that within the company premises, the trolley line to adistance of 14 kms. was in operation till the year 1983. This wasa clear indication that the rolling stock was used at least till theyear 1983. Therefore, the High Court reversed the grant ofcompensation made by the Reference Court in respect of therolling stock. [Paras 62 & 63][854-H; 855-A-D]

1.5 Though it is contended on behalf of the appellant thatthe evidence of PW-13 (Shri Kamat) was misread by the HighCourt and that due to good maintenance, the life of the rollingstock had increased, we do not think that the view taken by theHigh Court was completely out of sync with the evidence onrecord. The High Court has actually extracted one portion of theevidence of Shri Kamat (PW-13). He has clearly admitted thatthough he inspected the Assets Register in 1986 before preparingthe report he did not record in his report, the book value of theasset. He clearly stated “it is possible that in book value, theassets might become zero value in the instant case.” Therefore,no exception can be taken to the finding recorded by the HighCourt insofar as rolling stock is concerned. [Paras 64 & 65][855-E-G]

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A1.6 The Reference Court accepted the evidence adducedon the side of the appellant and came to a conclusion that theappellant was transporting about 35,000 tonnes of goods per yearthrough the trolley line at the cost of Rs.0.20 per tonne per kmand that the cost of road transport for the same quantity of materialwas Rs.0.80 per km. per tonne. The Reference Court thus arrivedBat the increase in the cost of transportation per year atRs.8,00,718/-. However, the Reference Court rejected the claimof the appellant in this regard for a total period of 10 years, onthe ground that there is no basis for allowing such a claim for atotal period of 10 years. Therefore as against the claim of theCappellant for a sum of Rs.80,07,180/- (increase in cost for 10years), the Reference Court awarded only Rs.8,00,718/- (increasein cost for one year only). The High Court reversed the findingof the Reference Court on the short ground that the appellanthad not demonstrated to have suffered any loss of profits onaccount of the increase in the transportation cost and that evenDthe balance-sheets for the years 1972 to 1978 did not discloseany loss of profit. Therefore, the High Court opined that theincrease in transportation cost, even if any, would have beenabsorbed in the price charged to the customers and that therewas no case for allowing compensation under this head even forEone year, when the appellant had not suffered any loss of profit.In fact, the appellant had made a claim separately for a sum ofRs.35,62,000/- towards loss of profits, but the same was turneddown by the Reference Court. Therefore, the High Court heldthat the Reference Court could not have any compensation underthis heading ‘increase in transportation cost’. [Paras 68 &F69][856-C-G]

1.7 The appellant has produced before us the copy of thebalance-sheets and profit & loss account for the years 1975-76and 1976-77. From these balance-sheets and profit & lossaccounts, it is sought to be highlighted that the appellant made aGprofit of Rs.96.07 lakhs during the year 1975-76 and that theprofit went down to Rs.40.83 lakhs during the year 1976-77. Ifthis claim of the appellant is taken to be true, it would mean thatthe appellant suffered a reduction in profit to the tune of aboutRs.55,00,000/-in one year immediately after possession of theHland was taken. The balance sheets and profit & loss accounts produced by the appellant before us are as on 30.09.1976 and30.09.1977. Even according to the appellant, the reduction inthe profit to the extent of nearly Rs.55,00,000/- was not whollyattributable to the increase in transportation cost. The appellantclaimed only a sum of Rs.8,00,718/- per year towards increase intransportation cost. This constitutes only 15% of the total amountof reduction in profits. It is seen from the profit & loss accountfor the year ended 30.09.1977 that the sales turn over itself hadcome down from Rs.22.09 crores to Rs.18.17 crores. Even theraw material consumed had come down from 13.47 crores toRs.9.32 crores. There had also been a substantial down slide insub-contract and process charges. Therefore, the contention ofthe appellant that the profits went down, may be a point in ananswer to the adverse inference drawn by the High Court withregard to profits. But it cannot be used in support of the appellant’scase that the increase in the transportation cost accounted atleast in part to a reduced margin of profit. [Paras 72, 73][857-C-G]

1.8 The impact of the increase in transportation cost, uponthe profit margin of a seller of goods, would depend upon theterms and conditions of the contract. It may also vary from seatransport to rail transport to road transport to air transport.Though in shipping contracts there are standard covenants suchas 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 adistance of 35 kms upto Bhigwan. Delivery of material had to beeffected by the appellant to its customers through some methodof transport from Bhigwan. Nothing is on record to show that thegoods were always dispatched to all customers through goodscarriage railway line of the Indian Railways beyond Bhigwan. Inthe absence of any evidence to show that the increase in thetransportation cost due to the submerging of a part of the trolleyline, had always to be absorbed only by the appellant, but couldnot have been passed on to its customers due to specific termsand conditions of contract, the Reference Court could not haveaccepted a claim in this regard. The decision of the High Courtwith regard to the claim for compensation towards increase in A

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Atransportation cost appears to be reasonable and hence cannotbe interfered with. [Paras 74 & 76][857-H; 858-A-C, F-G]

1.9 The refusal of the High Court to award anycompensation for the injurious affection to one set of movableproperty, namely, rolling stock cannot be found fault with. Similarly,Bthe refusal of the High Court to award any compensation forincrease in transportation cost, falling under category of “injuriousaffection to earnings” cannot also be faulted. However, the refusalof the High Court to grant compensation for the injurious affectionsustained by the appellant to one set of movable property, namely,rails and sleepers forming the trolley line for a distance of 28Ckms., is clearly unsustainable especially when the grant ofcompensation for the injurious affection to rails and sleepers to astretch of 7 kms. submerged in the backwaters, has beensustained by the High Court. [Paras 77][858-G-H; 859-A-B]

1.10 A question may arise as to whether the reasoning givenDby us for rejecting the claim for loss of earnings in the form ofincrease in transportation costs, will not apply ipso facto to theclaim for compensation for the rails and sleepers also, since theappellant ad switched over to road transport in the year 1972itself. But our answer would be that clause fourthly of SectionE23(1), uses a significant phrase viz., “injuriously affecting his otherproperty, movable or immovable, in any other manner, or hisearnings”. Therefore, injurious affection to property, in any othermanner, may stand on a different footing from injurious affectionto earnings. While there is no evidence on record to connect thedrop in the level of profits from 1975-76 to 1976-77, with theFincrease in transportation costs, there is acceptable evidence toshow that movable property became useless after the acquisition.Therefore, both stand on different footings. Therefore, settingaside that portion of the findings and conclusions reached by theHigh Court in the impugned judgment, whereby the award of theGReference Court relating to compensation for injurious affectionto rails and sleepers, was reversed by the High Court. As aconsequence, the award of the Reference Court granting a sumof Rs.31,21,860/- towards compensation for rails and sleepers A

shall stand restored. In respect of all other claims, the impugnedjudgment is not interfered with. [Paras 78 & 79][859-C-G]

Wazir v. State of Haryana (2019) 13 SCC 101 : [2019]2 SCR 571; Harsook Das Bal Kishan Das v. The FirstLand Acquisition Collector and Others (1975) 2 SCC256 : [1975] Suppl. SCR 79; R.H. Wernickle and Ors.v. The Secretary of the State for India 2 Ind.Cas 562;Balammal v. State of Madras AIR 1968 SC 1425 :[1969] SCR 90 – referred to.

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Case Law Reference

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2671-2672 of 2016.

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From the Judgment and Order dated 19.11.2008 of the High Courtof Judicature at Bombay in First Appeal Nos. 653 and 709 of 1991.

Gopal Sankaranarayanan, Sr. Adv., Jatin Zaveri, Neel KamalMishra, D. S. Mishra, Advs. for the Appellant.

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Deepak Nargolkar, Sr. Adv., Sachin Patil, Rahul Chitnis, AadityaA. Pande, Geo Joseph, Nishant Ramakantrao Katneshwarkar, Uday B.Dube, Kaustubh Dube, Advs. for the Respondents.

The Judgment of the Court was delivered by F

V. RAMASUBRAMANIAN, J.

1. Challenging a common Judgment rendered by the High Courtof Judicature at Bombay in two appeals, modifying the award of theReference Court passed under Section 18 of the Land AcquisitionAct,1894, the claimant-landowner has come up with these civil appeals.

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2. We have heard Mr. Gopal Sankaranarayanan, learned senioradvocate appearing for the appellant; Mr. Sachin Patil, learned advocateappearing for the first respondent-State and Mr. Deepak Nargolkar, Alearned senior advocate appearing for the second respondent-beneficiary.

3. The appellant is a company incorporated under the CompaniesAct. It has established a township in a vast area measuring about 16000acres of land, located 136 kms. away from Pune. The nearest railwaystation to the township is at Bhigwan, located 36 kms. away fromBWalchandnagar Township.

4. For the purpose of transporting sugarcane and other goods, theappellant had laid trolley lines covering a distance of 50 kms. inside itsestate. The appellant has also set up a 36 km. narrow gauge trolley linefrom Walchandnagar to Bhigwan for transportation of heavy engineeringCgoods.

5. In the year 1967, the Government of Maharashtra approvedthe BHIMA (Ujjani) Irrigation Project. As part of the project, a 18 feetheight dam across the Bhima River was proposed to be constructed atUjjani about 1½ kms. upstream from Hingangaon bridge on Pune-DSholapur National Highway. Before undertaking the construction of thedam, a general survey was carried out, which revealed that a section ofthe trolley line may get submerged. Therefore, a spate of correspondenceand personal discussions ensued between the officials of the Governmentand the representatives of the appellant for exploring the possibility ofEdiverting the trolley line.

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6. It is the case of the appellant that they wanted the Governmentto invoke the urgency clause for the acquisition of some other land fordiverting the trolley line. But it is the case of the respondents that theappellant had by then abandoned transportation through trolley line andFswitched over to road transport.

7. Be that as it may, a notification under Section 4 of the LandAcquisition Act, 1894 was published on 26.10.1972. The proposal includedthe land on which a section of the trolley line passed. The extent of landcovered by the trolley line that was expected to be submerged wasGmeasured to be 6 hectares 7 ares. Since the total land acquired for theproject, included the lands of the appellant, which were located in differentvillages, a series of awards were passed.

8. For our present purpose, it may be noted that the LandAcquisition Officer passed an award on 9.12.1981. The claim of theappellant in the Award Enquiry was not only for the market value of theland, but also for: (i) compensation for the loss; and (ii) compensationfor the injurious affection due to the trolley line becoming obsolete. Theclaim of the appellant also included a claim for the loss sustained by theappellant on account of the unacquired portion being rendered useless.

9. By his Award dated 9.12.1981, the Land Acquisition Officerawarded :

(i) Rs.15,329 for the acquired portion of land;

(ii) Rs.39032.94 for embankments, rails, bullies, sleepers;

(iii) Rs.43,491.12 for C.D. works;

(iv) Rs.12,754.17 towards labour charges for removing rails and steel sleepers; and

(v) Rs.16,591.08 for solatium.

10. In effect, the Land Acquisition Officer awarded totalcompensation of Rs.1,27,198.31/- and rejected the claim ofRs.1,49,85,251/- for the unacquired portion.

11. Not satisfied with the award, the appellant sought a referenceunder Section 18 on 12.01.1982. It was referred to the District Court,Pune, which took the same on file as Land Acquisition Reference No.6of 1982.

12. Before the Reference Court, the appellant claimedenhancement of compensation for the land acquired. In addition, theappellant also claimed compensation for severance and compensationfor injurious affection. The claim under different heads was summarizedby the Reference Court in paragraph 14 of its award and it is reproducedfor easy appreciation as follows:-

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836SUPREME COURT REPORTS

ASUMMARY OF CLAIM FOR COMPENSATION

I.Land in Acquisition in Kumbhargaon village B

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SEVERANCE AND INJURIOUS AFFECTION

II. SEVERANCE

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III. INJURIOUS AFFECTION

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Total for Severance and Injurious affection II + III

(Rs.33,80,000 + 1,86,19,700 = 2,19,99,700)

IV. TOTAL COMPENSATION

13. Eventually by a Judgment dated 14.03.1990, the ReferenceCourt, (i) enhanced the compensation for the acquired part of the landto Rs.55,893.23; and (ii) fixed an amount of Rs.80,09,725 ascompensation on account of severance and injurious affection.

14. Aggrieved by such enhancement and fixation, the State ofMaharashtra filed an appeal in First Appeal No.653 of 1991. Not satisfiedwith the quantum fixed, the appellant also filed an appeal in First AppealNo.709 of 1991. Both the appeals were disposed of by a Division Benchof the Bombay High Court by a Judgment dated 19.11.2008. By thisJudgment the High Court awarded:

(i) a compensation of Rs.20,62,006/- towards severance(unacquired trolley line) payable with solatium at 30% workingout to Rs.6,18,601.80, thus totaling to Rs.26,80,607.80;

(ii) a compensation of Rs.7,39,280/- for injurious affection,payable together with solatium at 30% working out toRs.2,21,784/-, thus, totaling to Rs.9,61,064/-; and B

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A(iii) a compensation of Rs.1,23,231.25 towards acquired trolleyline together with solatium at 30% working out toRs.36,969.37, thus, totaling to Rs.1,60,200.62. The High Courtalso held that the claimant company (appellant) will be entitledto interest under Section 28 as well as 34, on the entire amountof compensation as well as solatium from March-1976 tillBthe date of deposit.

15. It is against the aforesaid Judgment dated 19.11.2008 passedin First appeal Nos.653 and 709 of 1991 that the claimant (landowner)has come up with the above appeals. The State does not appear to havefiled any appeal.

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16. As observed by the High Court, the award of the ReferenceCourt was in two parts. The first part dealt with the claim for compensationon account of severance and injurious affection in respect of the trolleyline running across 28 kms. in the unacquired portion of the land measuringabut 60.38 hectares. The second part of the award was in respect of theDtrolley line spread over about 7 kms. in the area submerged in water. Fora better understanding of the arithmetic, it will be useful to present in atabulation, the different heads of claim, the amount claimed by theappellant, the amount awarded by the Reference Court and the amountto which the compensation was reduced by the High Court:- E

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17. As could be seen from the above tabulation, the appellantsuffered a huge set back before the High Court, mainly under threeheads of claims, which relate to severance and injurious affection inrespect of the trolley line running in the unacquired portion of land. Thesethree items are (i) rails and sleepers; (ii) rolling stocks; and (iii) increasein transportation cost. At the cost of repetition, we will once again presentin a tabulation, the amount claimed by the appellant, the amount awardedby the Reference Court and the amount to which the award was reducedby the High Court under these three heads, so that we have a betterfocus.

18. Insofar as rails and sleepers which became obsolete areconcerned, the claim of the appellant was that they could not be sold assuch, in view of the fact that the railways had switched over to broadgauge. Though the appellant had to spend huge money for the removalof the rails and sleepers, they had to be sold only as scrap. According tothe appellant, the Government turned down the proposal for a new lineand hence they were entitled to be compensated to the extent of thevalue of the rails and sleepers which became obsolete.

19. The Reference Court found as a matter of fact that the entiretrack had become completely useless and that the rails and sleepers hadto be sold only as scrap. Though the appellant examined a qualifiedvaluer by name Shri Talim, as a witness to show the loss sustained bythem, the Reference Court could not go entirely by his evidence, as headmitted to have no personal knowledge, but went by the informationsupplied by the appellant. The Reference Court found that the trolleyline was laid in the year 1946 and the valuation was made as of the year1976. The Reference Court, therefore, applied depreciation @ 35% andarrived at the figure of Rs.31,21,816.

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A20. The High Court set aside the compensation awarded in respectof the rails and sleepers in the unacquired portion of the land, but confirmedthe compensation for the acquired portion of the land on the ground thatthe appellant did not take effective steps to lay an alternative trolley line.The High Court disbelieved the case set up by the appellant that theGovernment was not responsive to their demand for invocation of theBurgency clause to acquire the land needed for alternative trolley line.The High Court found, from the balance sheets that the appellant hadnot suffered any loss on account of being compelled to switch over toroad transportation.

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21. Insofar as rolling stock is concerned, the Reference CourtCaccepted the evidence of Mr. Kamat, a qualified valuer examined asPW-13. The Reference Court took the life of locomotives to be 20 yearsand the life of wagons to be 35 years, on the basis of the guidelinesissued by National Council of Applied Economic Research. Afteraccepting the evidence of PW-13 that the estimated cost of the rollingDstock would be Rs.48,49,618/-, the Reference Court applied anarithmetical formula with reference to the residual life and the total lifeof the locomotives and three wagons and arrived at the depreciatedvalue as Rs.22,36,424.70. From this amount the Reference Courtdeducted the scrap value and arrived at the compensation ofRs.17,79,884/-.E

22. However, the High Court rejected the report of Mr. Kamat(PW-13), on the ground that he started valuation only after the year1983 and that his valuation was based on 1986 prices. The High Courtalso found that the appellant continued to use the rolling stocks for thetrolley line to a length of 14 kms. till the year 1983 and that, therefore,Fthe appellant was not entitled to any compensation on this count.

23. As regards “increase in transportation cost”, the ReferenceCourt found:

(i) that the appellant was forced to discontinue the mostGconvenient and economical mode of transport;

(ii) that even if the appellant had resorted to an alternative routefor the trolley line, the same would have been longer by 12kms, warranting an expenditure of Rs.1.50 crores;

(iii) that the Government could not have invoked the urgencyHclause, for acquiring land for alternative trolley line, as the acquisition could not have been considered as one for publicpurpose but rather for the benefit of a company.

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(iv) that the appellant was able to prove through credibleevidence that the cost of transporting 35,000 tones of goodsp.a. increased from Rs.0.20 per km. to Rs.0.80 per km.

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(v) that, therefore, the appellant should be compensated forthe increase in transportation cost.

24. The Reference Court agreed with the appellant that the lossof earnings for the appellant, in this regard, was Rs.80,07,180/-, butawarded compensation only for one year as against the claim of theappellant for a period of 10 years. The Reference Court awarded a sumof Rs.8,00,718/-.

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25. The High Court set aside the amount awarded by theReference Court under this head on the ground that the appellant did notsuffer any loss of profit on account of the increase in the transportationcost, as the same would have been passed on to the customers. TheHigh Court observed that the balance sheets for the period 1972-78 didnot show any loss. The High Court went by the presumption thattransportation cost is always factored into the manufacturing cost of thegoods.

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26. In the light of the manner in which the High Court interferedwith the award of the Reference Court, it was contended by Mr. GopalSankaranarayanan, learned senior counsel for the appellant:

(i) that the appellant cannot be blamed for not finding analternative route to lay the trolley line and for not insistingon the Government to invoke the urgency clause for theacquisition of some other land for laying trolley line, as theprovisions of Section 17 could not have been invoked forthe benefit of a company; F

(ii) that in any case an alternative trolley line would haveadmittedly cost Rs.1.50 cores and the same would haveGbeen 12 kms. longer than the existing line, resulting in anincrease in the operational cost;

(iii) that the appellant was able to prove by cogent evidencethat the cost of transportation by road was higher; H

A(iv)that the High Court failed to note that the profit of theappellant went down from Rs.96.07 lakhs in 1975-76 toRs.40.80 lakhs in 1976-77;

(v) that there was neither any pleading nor evidence to showthat the transportation cost was passed on to the customers; B

(vi) that the High Court failed to note that the acquisition ofland on which a trolley line to a distance of 6 kms. passed,led to the investment on 28 kms. of trolley line in theunacquired portion being rendered useless;

(vii) that about 3 diesel locomotives and over 100 wagons wereCrendered useless due to the acquisition;(viii) that the High Court misread the evidence of PW-13 asthough he took the price as of the year 1986;

(ix) that despite best efforts, the appellant could sell only someof the locomotives, on account of there being no market forthem; and D

(x) that, therefore, the High Court was completely in error inrejecting the claim of the appellant and also reducing theamount awarded by the Reference Court.

E27. In response, it is contended by Mr. Deepak Nargolkar, thatthe appellant set up a bogey of a claim about the trolley line in theunacquired portion of land becoming redundant and that having admittedlyswitched over to road transportation way back in September 1972, theappellant was not entitled to claim any compensation for the purportedincrease in transportation cost. Placing reliance upon the decision of thisFCourt in Wazir vs. State of Haryana[1], it was contended by Mr. DeepakNargolkar that the additional component of compensation in terms ofclause “thirdly” under Section 23(1) of the Act is to be granted onlywhen the value of the left over land is effectively diminished in terms ofquality. Therefore, it is his contention that severance charges in cases ofGthis nature cannot be allowed.

28. We have carefully considered the rival contentions. As thedispute now stands confined only to three heads of claims, namely, (i)rails and sleepers; (ii) rolling stocks; and (iii) increase in transportationcost, we shall deal with them item-wise.

H1 (2019) 13 SCC 101

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Law on compensation for severance and injurious affection

29. Before we consider the aforesaid three heads of claim item-wise, it may be useful to take note of the legal principles on the basis ofwhich these claims are to be tested.

30. Sections 23 and 24 of The Land Acquisition Act, 1894 providetwo lists of matters respectively, namely (i) matters to be considered indetermining compensation; and (ii) matters to be neglected in determiningcompensation. Section 23(1), which alone is relevant for our presentpurposes, is extracted as follows:- B

“23. Matters to be considered in determiningcompensation- (1) In determining the amount of compensationto be awarded for land acquired under this Act, the Court shalltake into consideration- C

844SUPREME COURT REPORTS

place of business, the reasonable expenses(if any) incidental to such change; and A

sixthly,

the damage (if any) bona fide resultingfrom diminution of the profits of the landbetween the time of the publication of thedeclaration under section 6 and the timeof the Collector’s taking possession of theland.”

B

31. In simple terms, the six items covered by Section 23(1), whichare to be taken into consideration by the court in determiningCcompensation, can be summarised as follows:-

(i) The market value of the land on the date of publication ofnotification under Section 4(1);

(ii) The damage to standing crops or trees, which are on theland at the time of the Collector taking possession; D

(iii) The damage sustained by reason of severing such land fromthe unacquired land;

(iv) The damage sustained by reason of the acquisition injuriouslyaffecting the other property, movable or immovable, in anyother manner or the earnings, of the person interested;E

(v) The reasonable expenses incurred by the person interested,in changing his residence or place of business, when he iscompelled to do so in consequence of the acquisition;

(vi) The damage bona fide resulting from diminution of theFprofits of the land between the time of publication of thedeclaration under Section 6 and the time of the Collector’staking possession.

32. The points arising for determination in these appeals revolvearound clauses “thirdly” and “fourthly” of Section 23(1). These clausesGare referred to in common parlance as clauses concerning ‘severance’and ‘injurious affection’ respectively.

33. But clauses “thirdly” and “fourthly” of Section 23(1) cannotbe considered in isolation. They have to be read together with Section49 which reads as follows:- H

“49. Acquisition of part of house or building-.

(1) The provisions of this Act shall not be put in force for thepurpose of acquiring a part only of any house, manufactory orother building, if the owner desire that the whole of such house,manufactory or building shall be so acquired:

Provided that the owner may, at any time before the Collectorhas made his award under section 11, by notice in writing, withdrawor modify his expressed desire that the whole of such house,manufactory or building shall be so acquired:

Provided also that, if any question shall arise as to whether anyland proposed to be taken under this Act does or does not formpart of a house, manufactory or building within the meaning ofthis section, the Collector shall refer the determination of suchquestion to the Court and shall not take possession of such landuntil after the question has been determined.

In deciding on such a reference the Court shall have regard to thequestion whether the land proposed to be taken is reasonablyrequired for the full and unimpaired use of the house, manufactoryor building.

(2) if, in the case of any claim under section 23, sub-section (1),thirdly, by a person interested, on account of the severing of theland to be acquired from his other land, the appropriate Governmentis of opinion that the claim is unreasonable or excessive, it may, atany time before the Collector has made his award, order theacquisition of the whole of the land of which the land first soughtto be acquired forms a part.

(3) In the case last hereinbefore provided for, no fresh declarationor other proceedings under sections 6 to 10, both inclusive, shallbe necessary; but the Collector shall without delay furnish a copyof the order of the appropriate Government to the personinterested, and shall thereafter proceed to make his award undersection 11.”

34. It may be noted that clause thirdly of Section 23(1) relatesonly to land, as it speaks only about the severance of the acquired landfrom the unacquired land and the damage sustained as a consequence.In contrast, clause fourthly of Section 23(1) deals with the damage A

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Asustained by the person interested, due to the injurious affection, (i) ofhis other movable property; (ii) of his other immovable property; and(iii) of his earnings. In other words what is injuriously affected at thetime of Collector’s taking possession of the land, may either be theunacquired portion of the immovable property or other movable propertyor even the earnings of the person interested.B

35. It may also be noted that the expression used in clause fourthlyis “earnings”, while the expression used in clause sixthly is “profits”.But clause sixthly is confined only to diminution of the profits of the landbetween the time of publication of the declaration under Section 6 andthe time of the Collector taking possession.C

36. Coming to Section 49, it deals with two contingencies. Theyare, (i) cases where what is sought to be acquired is only a part of anyhouse, manufactory or other building; and (ii) cases where a claim forcompensation under the head ‘severance’ under clause thirdly of Section23(1) arises.D

37. In so far as the 1[st] contingency is concerned there is a barunder sub-section(1) of Section 49 for the acquisition of a part only ofany house, manufactory or other building, if the owner desires that thewhole of such house, manufactory or building shall be so acquired.

E38. In so far as the 2[nd] contingency is concerned, there is a choicegiven to the appropriate Government to order the acquisition of the wholeof the land, if the appropriate Government is of the opinion that the claimfor severance compensation is un-reasonable or excessive.

39. The distinction between the scope of sub-section (1) and theFscope of sub-section (2) of Section 49 was brought out by this Court inM/s Harsook Das Bal Kishan Das vs. The First Land AcquisitionCollector and Others[2] as follows:- “12. The object of Section 49(1) of the Act is to give to the ownerthe option whether he would like part to be acquired. TheGovernment cannot take the other part under Section 49(1) of theGAct unless the owner says so. Section 49(2) of the Act has nothingto do with Section 49(1) of the Act. Section 49(2) of the Act givesthe option to the Government only where the claim under the thirdclause of Section 23(1) of the Act is excessive. Reference to the third clause of Section 23(1) of the Act makes it clear that theclaim under the third clause of Section 23(1) is for severance.The Government in such a case of acquisition of the remainingportion of the land under Section 49(2) of the Act saves the publicexchequer money which otherwise will be the subject-matter of aclaim for severance.”

40. In the case on hand, the provisions of Section 49(1) have noapplication. This is due to the fact that the appellant never desired thatthe whole of the manufactory shall be acquired by the Government. Infact, the total extent of land owned by the appellant was about 16000acres, on which a township had come up. Therefore, there was nooccasion for the appellant to exercise any option invoking Section 49(1).In any case, the appellant actually requested the Government to acquireland from other people, to divert the trolley line. Therefore, Section 49(1)has no application to the case on hand.

41. Section 49(2) also may not have any application for the reasonthat the appropriate Government did not think fit to seek acquisition ofthe whole of the land on which the remaining portion of the trolley lineexisted, on the ground that the claim for severance compensation wasun-reasonable or excessive. Therefore, it is enough for us to go back toclauses thirdly and fourthly of Section 23(1) without the constraints ofsub-section (1) or (2) of Section 49.

42. As we have indicated earlier, clause thirdly relates to thedamage sustained by the person interested, by reason of severance ofthe acquired land from the unacquired land, at the time of Collector’staking possession of the land. In contrast, clause fourthly of Section23(1) deals with the damage sustained by reason of the acquisitioninjuriously affecting, (i) the other movable property; (ii) the otherimmovable property; and/or (iii) the earnings of the person interested.

43. The claim of the appellant before the Reference Court underclauses thirdly and fourthly of Section 23(1), presented a mix-up, withsome items overlapping with others. This can be seen from paragraph22 of the award of the Reference Court, where the claim of the appellantis extracted by the Reference Court as follows:- “22. The main grievance of the Claimant Company is that theSpecial Land Acquisition Officer has not considered at all theClaimant’ claim for damages suffered by the Claimant Company A

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Aon account of severance and injurious affection. Although theopponent has acquired only 6 kilometers, i.e., about 20.74 Hectaresof land under the trolley line, this acquisition has rendered theremaining portion of about 30 Kilometers, i.e., 60.38 Hectares ofthe land under the trolley line totally useless. In other words, thecontention of the Claimant Company is that the acquisition of onlyB6 kilometers has not only deprived the Claimant Company of theuse of the trolley line facility, but it has also rendered the remainingportion of the trolley line of 30 kilometers, i.e. 60.38 hectares ofland, the rolling stock, three diesel engines, buildings, telephoneline and all other items connected with the trolley line, such as,Ccivil works, embankments, C.D. works, culverts, bridges, totallyredundant and obsolete. The claim can be divided into twocategories as follows:

A

i)Enhancement of compensation in respect of the acquiredportion of the land; and D

ii)The compensation for the damages suffered by the ClaimantCompany in respect of the unacquired portion of the trolleyline on account of severance and injurious affection underthe following head:

1) Unacquired portion of the land admeasuring about 60.38Ehectars.

2) The entire railway track of 36 kilometers comprising of rails,sleepers, girders, etc.

3) Rolling stocks, various types of wagons, tankers etc.

F

4) Diesel Engines three;

5) Telephone line and telephone poles, trees, wells, etc.Embankments, C.D. works, Bridges, Culverts building, non-operation of nearly 30 kilometers; Diminution in the valueof Walchandnagar Township, due to discontinuance of theGtrolley line facility which was hitherto available to the saidIndustrial Complex, the Additional cost of transport forswitching over from trolley line transport to road transport,the cost of remodeling the yard at Bhigwan Station in orderto suit the trans-shipment of loading and unloading by roadtransport; total retrenchment compensation for about 52

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persons, specially trained and employed for the operationof trolley line, who had come to be absorbed by theClaimant Company on humanitarian grounds and loss ofearnings.”

44. The second category of claim indicated in paragraph 22 of theaward of the Reference Court, extracted above, contains a mix of claimsthat may fall under clauses thirdly, fourthly and sixthly of section 23(1).But fortunately the rejection of some of those claims are not taken upnow by the appellant. In the appeals on hand, the claim is restricted onlyto three items namely, (i) the value of rails and sleepers; (ii) the value ofrolling stock; and (iii) increase in transportation costs. These items arecovered only by clause fourthly of Section 23(1) and they do not fallunder clause thirdly.

45. Even within clause fourthly, what we are concerned in theseappeals is the injurious affection of, (i) movable property such as railsand sleepers and rolling stock; and (ii) the loss of earnings due to increasein transportation costs. But unfortunately what the appellant did was toclaim a sum of Rs.80,07,180/- towards increase in transportation costsand a separate amount of Rs.35,62,000/- towards loss of earnings. Evenunder the heading ‘loss of earnings’, what was claimed was actuallyloss of profits. The appellant did not realize that the diminution of profitsfell under clause sixthly of Section 23(1) and the claim under this headis restricted to the time between the date of publication of the declarationunder Section 6 and the time of Collector taking possession. Injuriousaffection to earnings is covered by clause fourthly and the statute hasmade a distinction between, (i) injurious affection to earnings; and (ii)diminution of the profits between the time of publication of the declarationunder Section 6 and the time of taking possession.

46. The Reference Court rejected the claim for compensation ofRs.35,62,000/- towards loss of earnings, on the ground that it overlappedwith the claim under the heading ‘increase in transportation costs’. It isperhaps after realizing such overlapping of claim that the appellant hasconfined their claim in the present appeals only to injurious affection, (i)to rails and sleepers; (ii) to rolling stock; and (iii) to earnings due toincrease in transportation costs, all of which fall under clause fourthlyof Section 23(1).

47. One of the earliest cases to be decided on the question ofinjurious affection, was a Division Bench decision of the Calcutta High A

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ACourt in R.H. Wernickle and Ors. vs. The Secretary of the State forIndia[3] . The said case arose out of the acquisition of land which includeda tea estate. The purpose of the acquisition was the extension of therifle range of the Cantonment in the Villages of Lebong and Pandan atDarjeeling. A claim for injurious affection was made by the owners ofthe tea estate on the ground that they were forced to stop work in theBunacquired portion of the tea estate, during the time when firing waspracticed in the rifle range. Dealing with the claim, Doss, J. opined,“There can be no doubt that it is extremely unsafe to work on landsituate behind the butts when firing is going on, and the consequentloss of time must inevitably increase the cost of cultivation”.CTherefore, Doss, J., held that the owners of the tea estate were entitledto compensation for the injurious affection of the 8 acres of tea landbehind the butts. Expressing concurrence with the view of Doss, J.,Richardson, J. observed: “ It is said that the rifle range will interferewith the working of 8 acres of land behind the butts and I think thatthere can be no doubt as to this. It will not be safe to put coolies onDthe land when the range is being used”. An argument was advancedby the Government that the contemplated injury was contingent and thatit could arise only from the negligent use of the range and that the samewould fall under the category of actionable nuisance. Rejecting the saidargument, Richardson, J., opined: “But it is not clear that the injuryEwhich the claimants contemplate will amount to an actionablenuisance. The Government will have the right to use the land as arifle range and no doubt it may be presumed that it will be so usedwith the greatest care and circumspection. But even so, no prudentowner would put his coolies on the land behind the butts whilefiring was going on”.F

48. In Balammal vs. State of Madras[4], this Court was concernedwith a land acquisition under the provisions of the Madras CityImprovement Trust Act, Section 71 of which authorized the Board ofTrustees to acquire land under the provisions of The Land AcquisitionAct, 1894 with the previous sanction of the Government. When the disputeGrelating to determination of compensation ultimately landed up beforethis Court, the argument of one of the land owners was that a part of thecompound of a cinema theatre was acquired compulsorily and that itdeprived the owner of the land, of the facility of providing additional3 2 Ind.Cas 562H4 AIR 1968 SC 1425

amenities to the patrons of the theatre and also of making constructionson the land expanding the business. The claim was pitched in thealternative on clauses thirdly, fourthly and sixthly of Section 23(1).While agreeing on principle about the entitlement of a person interestedto compensation under these clauses, this Court rejected the claim inthat case, on the ground that there was no evidence either to show anyloss by reason of severance or to show that the remaining land wasinjuriously affected by reason of acquisition or to show that the earningsof the owners were affected.

49. Therefore, keeping in mind the above legal principles, let usnow take up for consideration, the claim of the appellant in these appeals.

Rails and Sleepers

50. It was the claim of the appellant that Walchandnagar Townshipis situate at a distance of 36 kms. from Bhigwan Railway Station on theCentral Railway line and that with a view to provide a direct and rapidconnection from Walchandnagar to Bhigwan, the appellant had providedits own trolley line with a private telephone line, goods yard withtransshipment siding and other facilities. The trolley line was laid in theyear 1946. According to the appellant, 35,000 tonnes of material used toget transported through this trolley line which included heavy machinery.Part of the trolley line got submerged in the backwaters of Ujjani Damand the remaining portion of the trolley line situate in the unacquired partof the land had become useless. According to the appellant, they had tospend Rs.1,90,000/- for the removal and transport of the material relatingto trolley line. The proposal for acquisition of alternative land to lay anew trolley line did not materialize due to various problems, not attributableto the appellant. In any case, the cost of such acquisition was estimatedat Rs.1.5 crores even at that time. The rails and sleepers forming part ofthe trolley line to a length of 28 kms. had thus become useless. Therefore,the appellant claimed a sum of Rs.50,08,328/- towards compensationfor rails and sleepers.

51. This claim was resisted by the respondents on the ground thatthe trolley line was laid in the year 1946 for the purpose of carryingmaterial from the sugar industry and that the appellant startedmanufacturing heavy machinery only from 1956. The trolley line wasactually a narrow gauge line, having a width of 2 feet 6 inches. Therefore,the respondents contended that no compensation was payable towards AB

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Arails and sleepers, especially when the appellant had also claimedcompensation towards increase in transportation costs for switching overfrom rail transport to road transport.

52. Before the Reference Court, the Chief Administrative Managerof the appellant, who was a qualified Civil Engineer was examined asBPW-1, and a retired Director of Town Planning was examined as PW-15. Both these witnesses referred to the quotations given by HindustanSteels Limited, towards estimated cost of laying the trolley line. Afterallowing depreciation and the value for which the material was sold andafter adjusting transportation cost, these witnesses estimated the cost ofrails and sleepers at Rs.50,08,288/-.

C

53. Though the respondents examined one Shri Mahajan, whoalso produced independent calculations, the Reference Court rejectedhis evidence on the ground that it did not inspire confidence. Interestinglythe Reference Court did two things, namely, (i) it agreed that the methodor formula adopted by Shri Mahajan was proper and recognized by theDstandard authors and yet rejected his evidence; and (ii) it agreed withthe submissions of the Government Pleader as to why the evidence ofShri Talim, retired Director of Town Planning should not be relied upon,but eventually held that the evidence of Shri Talim cannot be discardedtotally. Thereafter, the Reference Court proceeded to take the estimatedEcost of rails and sleepers at Rs.2,41,053/- per km., and applied adepreciation of 35% and arrived at the depreciated value at Rs.1,56,650/- per km. Applying this rate for the trolley line of a distance of 35 kms.and after deducting the actual scrap value received by the appellant, theReference Court arrived at the compensation for rails and sleepers atRs.31,21,816/-.F

54. Both the appellant as well as the State Government wereaggrieved by the compensation so fixed by the Reference Court andboth of them were on appeal before the High Court. The High Courtheld that the appellant was not entitled to any compensation for rails andsleepers lying in the trolley line for a distance of 28 kms., since theGappellant was at fault for not taking effective steps to lay alternativetrolley line to a distance of 6 to 7 kms. which got submerged in thebackwaters. The High Court held that in any case, the appellant did notsuffer any loss, as was evident from the balance sheets placed on recordupto the year 1978. The finding recorded by the High Court in this regardHmay be usefully extracted as follows:- “In our opinion, the company cannot be granted compensation forrails and sleepers covering 28 kms. of the trolley line. In the earlierpart of this judgment we have held that the company was at faultin not taking due steps to lay the alternative trolley line for 6 to 7kms. area submerged in the backwater. It gave up this proposalby its own choice and the reasons put forward before theReference Court were false and fabricated. Even otherwise thecompany did not suffer any loss after the trolley line wasdiscontinued in 1976, as was evident from the balance–sheetsplaced on record upto the year 1978. The increase in transportcost i.e. road transportation by trucks was offset by increasingthe manufacturing cost which is so obvious from the fact that thecompany did not incur any losses after it resorted to roadtransportation. The company could not have prayed for injuriousaffection on account of discontinuation of the trolley line andclaimed compensation for rails and sleepers spread over 28 kms.of the trolley line. We do not find any justification that the companyshould be allowed to go with this compensation amount and havethe double benefit. It would be a premium for its inaction for layingthe alternative trolley line.”

55. After rejecting the claim with regard to the rails and sleepersof the trolley line for a distance of 28 kms., on the basis of the reasonsextracted above, the High Court proceeded to award compensation forthe rails and sleepers in the trolley line to a distance of 7 kms. which gotsubmerged in the backwaters. This compensation, payable for the railsand sleepers in the trolley line to a distance of 7 kms. which gotsubmerged in the backwaters, was worked out, by accepting thedepreciated cost fixed by the Reference Court at Rs.1,56,650/- per km.For a distance of 7 kms., it worked out to Rs.10,96,550/-. From thisamount the High Court deducted the scrap value of Rs.4,87,608/- andarrived at the compensation payable under this heading at Rs.6,08,942/-

56. But as rightly contended by Shri Gopal Sankaranarayanan,learned senior counsel for the appellant, the acquisition of land for layingalternative trolley line was not an easy task, especially when there werelot of land owners. The urgency clause under Section 17 of the LandAcquisition Act could not have been invoked, as the appellant is acompany.

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A57. The fundamental flaw in the reasoning of the High Court isthat the High Court presumed that it was enough if the land for relocating7 kms. of trolley line was acquired. If trolley line to a distance of 7 kms.,out of a total stretch of 35 kms. admittedly got submerged in thebackwaters, the trolley line relating to the entire stretch would naturallybecome redundant. Railway line is not like a roadway. Roads can takeBdeviation easily, but not railway lines. Therefore, if land had to be acquiredfor relocating the trolley line, it should have been for the entire stretch of35 kms. It is not possible to retain 28 kms. of trolley line and relocate theremaining 7 kms. stretch alone. Therefore, we are of the consideredview that the High Court committed a gross error in reversing the findingCof the Reference Court under this heading.

A

Rolling Stocks

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Rolling Stocks

58. The claim of the appellant was that due to the entire trolleyline becoming useless, three diesel locomotives, about 100 four wheelerwagons, few 8 wheeler wagons and a one way bridge became redundantDand that they are entitled to compensation towards the loss of value/utility of these rolling stocks. The appellant quantified the claim underthis head at Rs.22,16,044/-.

59. This claim was resisted by the Government on the ground thatthe appellant was put on notice of the proposed acquisition way back inE1967 and that after showing inclination to lay an alternative trolley line atthe initial stages, the appellant abandoned the proposal in the year 1974and that, therefore, the claim for compensation under this head wasliable to be rejected.

60. The appellant examined an Industrial Consultant and aFregistered valuer by name Shri Kamat, in support of this claim. His reportcontaining the valuation of the rolling stock was filed as Exhibit-93. Thiswitness testified that before preparing the estimate, he obtained quotationsfrom one Shahajhan Engineers and Suyog Electricals.

61. Though the respondents relied upon the evidence of theGExecutive Engineer, Mechanical Division, examined as DW-5, theReference Court rejected his evidence on the ground that it was of noassistance. This witness had admitted that he never had any occasion tovalue any railway wagons or locomotives.

62. In the light of the oral and documentary evidence, the ReferenceHCourt came to the conclusion that the life of the locomotives can be taken as 20 years and the life of wagons can be taken as 35 years.Applying depreciation on a straight line formula, the Reference Courtarrived at the depreciated value of rolling stock as Rs.22,36,424.70/-.After deducting the scrap value of Rs.4,56,540/-, the Reference Courtfixed the compensation payable for the rolling stock atRs. 17,79,884.70/-.

63. The High Court, on re-appreciation of evidence found that theappellant company did not bring before the Court, the book value of therolling stock. But the expert witness Shri Kamat examined as PW-13admitted during cross-examination that as per the Asset Registermaintained by the appellant relating to the year 1986, the value of therolling stock was almost zero. By selling the rolling stock as scrap, thecompany had actually earned a sum of Rs.4,56,540/-. Moreover theHigh Court found from the evidence on record that within the companypremises, the trolley line to a distance of 14 kms. was in operation till theyear 1983. This was a clear indication that the rolling stock was used atleast till the year 1983. Therefore, the High Court reversed the grant ofcompensation made by the Reference Court in respect of the rollingstock.

64. Though it is contended on behalf of the appellant that theevidence of PW-13 (Shri Kamat) was misread by the High Court andthat 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 completelyout of sync with the evidence on record. The High Court has actuallyextracted one portion of the evidence of Shri Kamat (PW-13). He hasclearly admitted that though he inspected the Assets Register in 1986before preparing the report he did not record in his report, the bookvalue 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 recordedby the High Court insofar as rolling stock is concerned.

Increase in transportation cost

66. In simple terms, the claim of the appellant was that the cost oftransportation through trolley line was Rs.0.20 per km. per tonne andthat the cost of transportation by road was Rs.0.80 per km. per tonne.Since a portion of the trolley line got submerged in the backwaters andas a consequence, the entire stretch of trolley line became unusable, the A

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Acompany had to switch over to road transport, resulting in an increasedcost of Rs.8,00,718/- per year. Applying a multiplier of 10, the appellantmade a claim for Rs.80,07,180/- under this head.

67. The appellant examined the Chief Administrative Manager asPW-1, the Planning Manager as PW-3 and a person working as a clerkBin the transport Section of the company as PW-6. The Chief Accountantof the company was examined as PW-7 and a person who was carryingon road transport business under the name and style of Purohit RoadLines was examined as PW-12.

68. The Reference Court accepted the evidence adduced on theCside of the appellant and came to a conclusion that the appellant wastransporting about 35,000 tonnes of goods per year through the trolleyline at the cost of Rs.0.20 per tonne per km and that the cost of roadtransport for the same quantity of material was Rs.0.80 per km. pertonne. The Reference Court thus arrived at the increase in the cost oftransportation per year at Rs.8,00,718/-. However, the Reference CourtDrejected the claim of the appellant in this regard for a total period of 10years, on the ground that there is no basis for allowing such a claim fora total period of 10 years. Therefore as against the claim of the appellantfor a sum of Rs.80,07,180/- (increase in cost for 10 years), the ReferenceCourt awarded only Rs.8,00,718/- (increase in cost for one year only).

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69. The High Court reversed the finding of the Reference Courton the short ground that the appellant had not demonstrated to havesuffered any loss of profits on account of the increase in the transportationcost and that even the balance-sheets for the years 1972 to 1978 did notdisclose any loss of profit. Therefore, the High Court opined that theFincrease in transportation cost, even if any, would have been absorbed inthe price charged to the customers and that there was no case for allowingcompensation under this head even for one year, when the appellant hadnot suffered any loss of profit. In fact, the appellant had made a claimseparately for a sum of Rs.35,62,000/- towards loss of profits, but thesame was turned down by the Reference Court. Therefore, the HighGCourt held that the Reference Court could not have granted anycompensation under this heading ‘increase in transportation cost’.

70. The objections of the appellant to the finding of the High Courtin this regard are two-fold namely, (i) that the profits actually went downfrom Rs.96.07 lakhs in 1975-76 to Rs.40.80 lakhs in 1976-77; and (ii)

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that without any evidence on record the High Court presumed that theincrease in transportation cost was off-set and recovered from the buyersof the goods manufactured by the company.

71. Insofar as the first objection is concerned, we must point outat the outset that the Notification for acquisition under Section 4 waspublished in the Government Gazette on 26.10.1972. The declarationunder Section 6 was published in the Government Gazette on 01.08.1974.Notices under Sections 9(1) and 9(2) were published in September-1974and Feburary-1975. Though the exact date on which possession wastaken is not mentioned by either of the parties, the appellant has stated intheir synopsis that the Government took possession of the land in 1976.

72. The appellant has produced before us the copy of the balance-sheets and profit & loss account for the years 1975-76 and 1976-77.From these balance-sheets and profit & loss accounts, it is sought to behighlighted that the appellant made a profit of Rs.96.07 lakhs during theyear 1975-76 and that the profit went down to Rs.40.83 lakhs during theyear 1976-77.

73. If this claim of the appellant is taken to be true, it would meanthat the appellant suffered a reduction in profit to the tune of aboutRs.55,00,000/-in one year immediately after possession of the land wastaken. The balance sheets and profit & loss accounts produced by theappellant before us are as on 30.09.1976 and 30.09.1977. Even accordingto the appellant, the reduction in the profit to the extent of nearlyRs.55,00,000/- was not wholly attributable to the increase in transportationcost. The appellant claimed only a sum of Rs.8,00,718/- per year towardsincrease in transportation cost. This constitutes only 15% of the totalamount of reduction in profits. It is seen from the profit & loss accountfor the year ended 30.09.1977 that the sales turn over itself had comedown from Rs.22.09 crores to Rs.18.17 crores. Even the raw materialconsumed had come down from 13.47 crores to Rs.9.32 crores. Therehad also been a substantial down slide in sub-contract and process charges.Therefore, the contention of the appellant that the profits went down,may be a point in an answer to the adverse inference drawn by the HighCourt with regard to profits. But it cannot be used in support of theappellant’s case that the increase in the transportation cost accounted atleast in part to a reduced margin of profit.

74. The impact of the increase in transportation cost, upon theprofit margin of a seller of goods, would depend upon the terms and A

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Aconditions of the contract. It may also vary from sea transport to railtransport to road transport to air transport. Though in shipping contractsthere are standard covenants such as FOB (Free on Board), CIF (Cost,Insurance and Freight) etc., there are no such standard covenants in railand road contracts. In any case, the trolley line of the appellant coveredonly a distance of 35 kms upto Bhigwan. Delivery of material had to beBeffected by the appellant to its customers through some method oftransport from Bhigwan. Nothing is on record to show that the goodswere always dispatched to all customers through goods carriage railwayline of the Indian Railways beyond Bhigwan. In the absence of anyevidence to show that the increase in the transportation cost due to theCsubmerging of a part of the trolley line, had always to be absorbed onlyby the appellant, but could not have been passed on to its customers dueto specific terms and conditions of contract, the Reference Court couldnot have accepted a claim in this regard.

75. Moreover there was a finding of fact in the Award passed onD09.12.1981 which was taken note of by the High Court. The relevantportion of the Award reads as follows:

“Further as per local enquiry it is told that the Trolley line wasconstructed years back mainly for bringing heavy machinery atWalchandnagar. After this purpose was served, they were usingEit for movement of goods for some time. The process of movingthe goods on the Trolley line became uneconomical. So theyresorted to road and truck traffic which was quick and possiblyeconomical. Thus the whole Trolley line was in disuse beinguneconomical on the relevant date i.e. 27-9-72. In thesecircumstances the claim for severance and injurious affection hasFbeen rejected.”

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

CONCLUSIONG

77. The upshot of the above discussion is that the refusal of theHigh Court to award any compensation for the injurious affection to oneset of movable property, namely, rolling stock cannot be found fault with,for the reasons stated above. Similarly, the refusal of the High Court toaward any compensation for increase in transportation cost, falling underH

the category of “injurious affection to earnings” cannot also be faulted,for the reasons indicated separately. However, the refusal of the HighCourt to grant compensation for the injurious affection sustained by theappellant to one set of movable property, namely, rails and sleepers formingthe trolley line for a distance of 28 kms., is clearly unsustainable especiallywhen the grant of compensation for the injurious affection to rails andsleepers to a stretch of 7 kms. submerged in the backwaters, has beensustained by the High Court. In fact, the State has not come up onappeal against the grant of compensation for the injurious affection tothe trolley line to a distance of 7 kms which got submerged in backwaters. That the remaining portion of the trolley line to a distance of 28kms has been rendered useless after the acquisition, is not in dispute.

78. A question may arise as to whether the reasoning given by usfor rejecting the claim for loss of earnings in the form of increase intransportation costs, will not apply ipso facto to the claim forcompensation for the rails and sleepers also, since the appellant hadswitched over to road transport in the year 1972 itself. But our answerwould be that clause fourthly of Section 23(1), uses a significant phraseviz., “injuriously affecting his other property, movable or immovable,in any other manner, or his earnings”. Therefore, injurious affectionto property, in any other manner, may stand on a different footing frominjurious affection to earnings. While there is no evidence on record toconnect the drop in the level of profits from 1975-76 to 1976-77, with theincrease in transportation costs, there is acceptable evidence to showthat movable property became useless after the acquisition. Therefore,both stand on different footings.

79. Therefore, the appeals are partly allowed, setting aside thatportion of the findings and conclusions reached by the High Court in theimpugned judgment (para 22), whereby the award of the ReferenceCourt relating to compensation for injurious affection to rails and sleepers,was reversed by the High Court. As a consequence, the award of theReference Court granting a sum of Rs.31,21,860/- towards compensationfor rails and sleepers shall stand restored. In respect of all other claims,the impugned judgment is not interfered with.

80. Before parting we are obliged to bring one important fact onrecord. It appears that at the time of filing of the First Appeal before theHigh Court of Judicature at Bombay, the respondents deposited on17.07.1992, the award amount of Rs.2,72,25,680/-. By virtue of an order AB

C

D

E

FG

H

Apassed subsequently, the appellant withdrew the said amount apparentlyafter furnishing bank guarantee. But by the impugned judgment dated19.11.2008, the High Court of Bombay allowed the appeal of therespondents and reduced the award amount. When the Special LeavePetitions out of which the present appeals arise, came up for admission,this Court passed an order dated 16.03.2009 which reads as follows:-B

“Issue notice.

If the petitioner has furnished any bank guarantee in regard to theamount already drawn, there shall be interim stay of enforcementof the guarantee by the respondent subject to the petitionerCextending validity of the bank guarantee till disposal of this matter.”

We hope that the bank guarantee is kept alive as per the aboveorder of this Court dated 16.03.2009. Now that the judgment of theBombay High Court is modified by us, the appellant will be entitled toretain so much of the amount as they would be entitled to, by virtue ofDthis judgment and the appellant shall pay the respondents the excessamount, within four weeks. In case the bank guarantee furnished by theappellant is alive, the Land Acquisition Officer may prepare freshcalculations and enforce the bank guarantee only to the extent ofdisallowed portion. There will be no order to costs.

E

Nidhi Jain and Amarendra Kumar(Assisted by : Adnan Khan, LCRA)

Appeals partly allowed.

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G

H