Supreme Court of India
WALCHANDNAGAR INDUSTRIES LTD.versusTHE STATE OF MAHARASHTRA & ANR
- Citation
- 2022 INSC 146
- Decided
- 4 February 2022
- Disposal
- Case Partly allowed
- Bench
- HEMANT GUPTA
Holding
The Supreme Court restored the Reference Court's award of Rs.31,21,860 for the rails and sleepers, setting aside the High Court's reversal, while affirming the High Court's refusal to award compensation for rolling stock and increased transportation cost.
Summary
Walchandnagar Industries Ltd. owned a township served by a private trolley line. When the Ujjani Dam project submerged part of the line, the company claimed compensation for the loss of rails and sleepers, rolling stock and the increased cost of road transport, invoking the "severance" and "injurious affection" provisions of Section 23(1) of the Land Acquisition Act, 1894. The Reference Court awarded compensation for the rails and sleepers (Rs.31,21,860) and for the other heads, but the Bombay High Court reduced the award, denying compensation for the 28‑km stretch of rails and sleepers and for rolling stock and transportation cost. The Supreme Court held that the High Court erred in reversing the Reference Court's award for the rails and sleepers, as the loss of movable property falls under clause fourthly of Section 23(1) and is distinct from loss of earnings. It upheld the High Court's refusal to award compensation for rolling stock and increased transportation cost, and restored the Reference Court's award for the rails and sleepers. The appeals were therefore partly allowed.
Issues considered
- The applicability of clauses thirdly and fourthly of Section 23(1) of the Land Acquisition Act, 1894 to the claim for rails and sleepers, rolling stock and increased transportation cost.
- Whether the High Court was correct in reversing the Reference Court's award for compensation for the 28‑km stretch of rails and sleepers.
- Whether compensation for rolling stock and for increased transportation cost should be awarded as injurious affection to earnings.
- The relevance of Section 17 (urgency clause) and Section 49 in the context of a corporate landowner.
Legislation cited
- Land Acquisition Act, 1894s. 17, s. 18, s. 23, s. 24, s. 28, s. 34, s. 4, s. 49, s. 6
Subjects
Land acquisitionCompensationSeveranceInjurious affectionSection 23(1)Section 49Rails and sleepersRolling stockTransportation costUrgency clause
Judgment
826 [2022]REPORTS
SUPREME COURT 18 S.C.R. 826 [2022] 18 S.C.R.
A WALCHANDNAGAR INDUSTRIES LTD.
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 – Land
acquisition – Determination of compensation in light of clauses
“thirdly” and “fourthly” of s. 23 concerning ‘severance’ and
C
‘injurious affection’ respectively – On facts, the appellant-land
owner established a township situated at a distance of 36 kms. from
the Railway Station – For a direct and rapid connection between
the two points, the appellant provided its own trolley line in the
year 1946 wherein 35,000 tonnes of heavy material used to get
D transported – Part of the trolley line got submerged in the backwaters
of Ujjani Dam project and the remaining portion of the trolley line
situated in the unacquired part of the land had become useless –
Land acquisition officer awarded total compensation of
Rs.1,27,198.31/- and rejected the claim for the unacquired portion
– Reference Court enhanced the compensation for the acquired
E
part of the land and fixed compensation on account of severance
and injurious affection – However, the High Court interfered with
the award of the Reference Court – On appeal, held: As regards
claim relating to rails and sleepers, rolling stock and increase in
transportation cost, refusal of the High Court to award any
F compensation for the injurious affection to one set of movable
property, namely, rolling stock cannot be found fault with – Refusal
of the High Court to award any compensation for increase in
transportation cost, falling under the category of “injurious
affection to earnings” also cannot be faulted – However, the refusal
of the High Court to grant compensation for the injurious affection
G
sustained by the appellant to one set of movable property, namely,
rails and sleepers forming the trolley line for a distance of 28 kms.,
is unsustainable especially when the grant of compensation for the
injurious affection to rails and sleepers to a stretch of 7 kms.
submerged in the backwaters, has been sustained by the High Court
H
826
WALCHANDNAGAR INDUSTRIES LTD. v. THE STATE OF 827
MAHARASHTRA & ANR.
– In fact, the State has not come up on appeal against the same – A
Remaining portion of the trolley line to a distance of 28 kms has
been rendered useless after the acquisition – Furthermore, clause
fourthly of s.23(1), uses a significant phrase “injuriously affecting
his other property, movable or immovable, in any other manner, or
his earnings” - Thus, injurious affection to property, in any other
B
manner, may stand on a different footing from injurious affection
to earnings – While there is no evidence on record to connect the
drop in the level of profits from 1975-76 to 1976-77, with the increase
in transportation costs, there is acceptable evidence to show that
movable property became useless after the acquisition – Thus, the
conclusions by the High Court whereby the award of the Reference C
Court relating to compensation for injurious affection to rails and
sleepers, was reversed by the High Court, is set aside – Award of
the Reference Court granting a sum of Rs.31,21,860/- towards
compensation for rails and sleepers is restored – As regards, other
claims, the impugned judgment not interfered with.
D
Partly allowing the appeals, the Court
HELD: 1.1 Before the Reference Court, the Chief
Administrative Manager of the appellant, who was a qualified Civil
Engineer was examined as PW-1, and a retired Director of Town
Planning was examined as PW-15. Both these witnesses referred E
to the quotations given by Hindustan Steels Limited, towards
estimated cost of laying the trolley line. After allowing
depreciation and the value for which the material was sold and
after adjusting transportation cost, these witnesses estimated the
cost of rails and at Rs.50,08,288/-. Though the respondents
examined one Shri Mahajan, who also produced independent F
calculations, the Reference Court rejected his evidence on the
ground that it did not inspire confidence. Interestingly the
Reference Court did two things, namely, (i) it agreed that the
method or formula adopted by Shri Mahajan was proper and
recognized by the standard authors and yet rejected his evidence; G
and (ii) it agreed with the submissions of the Government Pleader
as to why the evidence of Shri Talim, retired Director of Town
Planning should not be relied upon, but eventually held that the
evidence of Shri Talim cannot be discarded totally. Thereafter,
the Reference Court proceeded to take the estimated cost of
H
828 SUPREME COURT REPORTS [2022] 18 S.C.R.
A rails and sleepers at Rs.2,41,053/-per km., and applied
depreciation 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, the Reference Court arrived at the
compensation rails and sleepers at Rs.31,21,816/-. [Paras 52 &
B
53][852-B-F]
1.2 The High Court held that the appellant was not entitled
to any compensation for rails and sleepers lying in the trolley
line for a distance of 28 kms., since the appellant was at fault for
not taking effective steps to lay alternative trolley line to a distance
C of 6 to 7 kms. which got submerged in backwaters. The High
Court held that in any case, the appellant did not suffer any loss,
as was evident from the balance sheets placed on record upto
the year 1978. After rejecting the claim with regard to the rails
and sleepers of the trolley line for a distance of 28 kms., on the
D basis of the reasons extracted above, the High Court proceeded
to award compensation for the rails and sleepers in trolley line to
a 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 line
E was not an easy task, especially when there were lot of land
owners. The urgency clause under Section 17 of the Land
Acquisition Act could not have been invoked, as the appellant is
a company. The fundamental flaw in the reasoning of the High
Court is that the High Court presumed that it was enough if the
land for relocating 7 kms. of trolley line was acquired. If trolley
F line to a distance of 7 kms., out of a total stretch of 35 kms.
admittedly got submerged in the backwaters, the trolley line
relating to the entire stretch would naturally become redundant.
Railway line is not like a roadway. Roads can take deviation easily,
but not railway lines. Therefore, if land had to be acquired for
G relocating the trolley line, it should have been for the entire stretch
of 35 kms. It is not possible to retain 28 kms. of trolley line and
relocate the remaining 7 kms. stretch alone. The High Court
committed a gross error in reversing the finding of the Reference
Court under this heading. [Paras 56 & 57][853-G-H; 854-A-C]
H
WALCHANDNAGAR INDUSTRIES LTD. v. THE STATE OF 829
MAHARASHTRA & ANR.
1.4 In the light of the oral and documentary evidence, the A
Reference Court 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 Court arrived at the depreciated value of
rolling stock as Rs.22,36,424.70/-. After deducting the scrap value
B
of Rs.4,56,540/-, the Reference Court fixed the compensation
payable for the rolling stock at Rs. 17,79,884.70/-. The High
Court, on re-appreciation of evidence found that the appellant
company did not bring before the Court, the book value of the
rolling stock. But the expert witness Shri Kamat examined as
PW-13 admitted during cross-examination that as per the Asset C
Register maintained by the appellant relating to the year 1986,
the value of the rolling stock was almost zero. By selling the
rolling stock as scrap, the company had actually earned a sum of
Rs.4,56,540/-. Moreover the High Court found from the evidence
on record that within the company premises, the trolley line to a
D
distance of 14 kms. was in operation till the year 1983. This was
a clear indication that the rolling stock was used at least till the
year 1983. Therefore, the High Court reversed the grant of
compensation made by the Reference Court in respect of the
rolling stock. [Paras 62 & 63][854-H; 855-A-D]
1.5 Though it is contended on behalf of the appellant that E
the evidence of PW-13 (Shri Kamat) was misread by the High
Court and that due to good maintenance, the life of the rolling
stock had increased, we do not think that the view taken by the
High Court was completely out of sync with the evidence on
record. The High Court has actually extracted one portion of the F
evidence of Shri Kamat (PW-13). He has clearly admitted that
though he inspected the Assets Register in 1986 before preparing
the report he did not record in his report, the book value of the
asset. He clearly stated “it is possible that in book value, the
assets might become zero value in the instant case.” Therefore,
no exception can be taken to the finding recorded by the High G
Court insofar as rolling stock is concerned. [Paras 64 & 65][855-
E-G]
H
830 SUPREME COURT REPORTS [2022] 18 S.C.R.
A 1.6 The Reference Court accepted the evidence adduced
on the side of the appellant and came to a conclusion that the
appellant was transporting about 35,000 tonnes of goods per year
through the trolley line at the cost of Rs.0.20 per tonne per km
and that the cost of road transport for the same quantity of material
was Rs.0.80 per km. per tonne. The Reference Court thus arrived
B
at the increase in the cost of transportation per year at
Rs.8,00,718/-. However, the Reference Court rejected the claim
of the appellant in this regard for a total period of 10 years, on
the ground that there is no basis for allowing such a claim for a
total period of 10 years. Therefore as against the claim of the
C appellant for a sum of Rs.80,07,180/- (increase in cost for 10
years), the Reference Court awarded only Rs.8,00,718/- (increase
in cost for one year only). The High Court reversed the finding
of the Reference Court on the short ground that the appellant
had not demonstrated to have suffered any loss of profits on
account of the increase in the transportation cost and that even
D
the balance-sheets for the years 1972 to 1978 did not disclose
any loss of profit. Therefore, the High Court opined that the
increase in transportation cost, even if any, would have been
absorbed in the price charged to the customers and that there
was no case for allowing compensation under this head even for
E one year, when the appellant had not suffered any loss of profit.
In fact, the appellant had made a claim separately for a sum of
Rs.35,62,000/- towards loss of profits, but the same was turned
down by the Reference Court. Therefore, the High Court held
that the Reference Court could not have any compensation under
this heading ‘increase in transportation cost’. [Paras 68 &
F
69][856-C-G]
1.7 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 be highlighted that the appellant made a
G profit of Rs.96.07 lakhs during the year 1975-76 and that the
profit went down to Rs.40.83 lakhs during the year 1976-77. If
this claim of the appellant is taken to be true, it would mean that
the appellant suffered a reduction in profit to the tune of about
Rs.55,00,000/-in one year immediately after possession of the
H land was taken. The balance sheets and profit & loss accounts
WALCHANDNAGAR INDUSTRIES LTD. v. THE STATE OF 831
MAHARASHTRA & ANR.
produced by the appellant before us are as on 30.09.1976 and A
30.09.1977. Even according to the appellant, the reduction in
the profit to the extent of nearly Rs.55,00,000/- was not wholly
attributable to the increase in transportation cost. The appellant
claimed only a sum of Rs.8,00,718/- per year towards increase in
transportation cost. This constitutes only 15% of the total amount
B
of reduction in profits. It is seen from the profit & loss account
for the year ended 30.09.1977 that the sales turn over itself had
come down from Rs.22.09 crores to Rs.18.17 crores. Even the
raw material consumed had come down from 13.47 crores to
Rs.9.32 crores. There had also been a substantial down slide in
sub-contract and process charges. Therefore, the contention of C
the appellant that the profits went down, may be a point in an
answer to the adverse inference drawn by the High Court with
regard to profits. But it cannot be used in support of the appellant’s
case that the increase in the transportation cost accounted at
least in part to a reduced margin of profit. [Paras 72, 73][857-C-
D
G]
1.8 The impact of the increase in transportation cost, upon
the profit margin of a seller of goods, would depend upon the
terms and conditions of the contract. It may also vary from sea
transport to rail transport to road transport to air transport.
Though in shipping contracts there are standard covenants such E
as FOB (Free on Board), CIF (Cost, Insurance and Freight) etc.,
there are no such standard covenants in rail and road contracts.
In any case, the trolley line of the appellant covered only a
distance of 35 kms upto Bhigwan. Delivery of material had to be
effected by the appellant to its customers through some method F
of transport from Bhigwan. Nothing is on record to show that the
goods were always dispatched to all customers through goods
carriage railway line of the Indian Railways beyond Bhigwan. In
the absence of any evidence to show that the increase in the
transportation cost due to the submerging of a part of the trolley
line, had always to be absorbed only by the appellant, but could G
not have been passed on to its customers due to specific terms
and conditions of contract, the Reference Court could not have
accepted a claim in this regard. The decision of the High Court
with regard to the claim for compensation towards increase in
H
832 SUPREME COURT REPORTS [2022] 18 S.C.R.
A transportation cost appears to be reasonable and hence cannot
be interfered with. [Paras 74 & 76][857-H; 858-A-C, F-G]
1.9 The refusal of the High Court to award any
compensation for the injurious affection to one set of movable
property, namely, rolling stock cannot be found fault with. Similarly,
B the refusal of the High Court to award any compensation for
increase in transportation cost, falling under category of “injurious
affection to earnings” cannot also be faulted. However, the refusal
of the High Court to grant compensation for the injurious affection
sustained by the appellant to one set of movable property, namely,
rails and sleepers forming the trolley line for a distance of 28
C kms., is clearly unsustainable especially when the grant of
compensation for the injurious affection to rails and sleepers to a
stretch of 7 kms. submerged in the backwaters, has been
sustained by the High Court. [Paras 77][858-G-H; 859-A-B]
1.10 A question may arise as to whether the reasoning given
D by us for rejecting the claim for loss of earnings in the form of
increase in transportation costs, will not apply ipso facto to the
claim for compensation for the rails and sleepers also, since the
appellant ad switched over to road transport in the year 1972
itself. But our answer would be that clause fourthly of Section
E 23(1), uses a significant phrase viz., “injuriously affecting his other
property, movable or immovable, in any other manner, or his
earnings”. Therefore, injurious affection to property, in any other
manner, may stand on a different footing from injurious affection
to earnings. While there is no evidence on record to connect the
drop in the level of profits from 1975-76 to 1976-77, with the
F increase in transportation costs, there is acceptable evidence to
show that movable property became useless after the acquisition.
Therefore, both stand on different footings. Therefore, setting
aside that portion of the findings and conclusions reached by the
High Court in the impugned judgment, whereby the award of the
G Reference Court relating to compensation for injurious affection
to rails and sleepers, was reversed by the High Court. As a
consequence, the award of the Reference Court granting a sum
of Rs.31,21,860/- towards compensation for rails and sleepers
H
WALCHANDNAGAR INDUSTRIES LTD. v. THE STATE OF 833
MAHARASHTRA & ANR.
shall stand restored. In respect of all other claims, the impugned A
judgment 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 First
Land Acquisition Collector and Others (1975) 2 SCC
256 : [1975] Suppl. SCR 79; R.H. Wernickle and Ors. B
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.
Case Law Reference
[2019] 2 SCR 571 referred to Para 27 C
[1975] Suppl. SCR 79 referred to Para 39
[1969] SCR 90 referred to Para 48
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2671-
2672 of 2016. D
From the Judgment and Order dated 19.11.2008 of the High Court
of Judicature at Bombay in First Appeal Nos. 653 and 709 of 1991.
Gopal Sankaranarayanan, Sr. Adv., Jatin Zaveri, Neel Kamal
Mishra, D. S. Mishra, Advs. for the Appellant.
E
Deepak Nargolkar, Sr. Adv., Sachin Patil, Rahul Chitnis, Aaditya
A. Pande, Geo Joseph, Nishant Ramakantrao Katneshwarkar, Uday B.
Dube, Kaustubh Dube, Advs. for the Respondents.
The Judgment of the Court was delivered by
V. RAMASUBRAMANIAN, J. F
1. Challenging a common Judgment rendered by the High Court
of Judicature at Bombay in two appeals, modifying the award of the
Reference Court passed under Section 18 of the Land Acquisition
Act,1894, the claimant-landowner has come up with these civil appeals.
G
2. We have heard Mr. Gopal Sankaranarayanan, learned senior
advocate appearing for the appellant; Mr. Sachin Patil, learned advocate
appearing for the first respondent-State and Mr. Deepak Nargolkar,
H
834 SUPREME COURT REPORTS [2022] 18 S.C.R.
A learned senior advocate appearing for the second respondent-beneficiary.
3. The appellant is a company incorporated under the Companies
Act. It has established a township in a vast area measuring about 16000
acres of land, located 136 kms. away from Pune. The nearest railway
station to the township is at Bhigwan, located 36 kms. away from
B Walchandnagar Township.
4. For the purpose of transporting sugarcane and other goods, the
appellant had laid trolley lines covering a distance of 50 kms. inside its
estate. The appellant has also set up a 36 km. narrow gauge trolley line
from Walchandnagar to Bhigwan for transportation of heavy engineering
C goods.
5. In the year 1967, the Government of Maharashtra approved
the BHIMA (Ujjani) Irrigation Project. As part of the project, a 18 feet
height dam across the Bhima River was proposed to be constructed at
Ujjani about 1½ kms. upstream from Hingangaon bridge on Pune-
D Sholapur National Highway. Before undertaking the construction of the
dam, a general survey was carried out, which revealed that a section of
the trolley line may get submerged. Therefore, a spate of correspondence
and personal discussions ensued between the officials of the Government
and the representatives of the appellant for exploring the possibility of
E diverting the trolley line.
6. It is the case of the appellant that they wanted the Government
to invoke the urgency clause for the acquisition of some other land for
diverting the trolley line. But it is the case of the respondents that the
appellant had by then abandoned transportation through trolley line and
F switched over to road transport.
7. Be that as it may, a notification under Section 4 of the Land
Acquisition Act, 1894 was published on 26.10.1972. The proposal included
the land on which a section of the trolley line passed. The extent of land
covered by the trolley line that was expected to be submerged was
G measured to be 6 hectares 7 ares. Since the total land acquired for the
project, included the lands of the appellant, which were located in different
villages, a series of awards were passed.
H
WALCHANDNAGAR INDUSTRIES LTD. v. THE STATE OF 835
MAHARASHTRA & ANR. [V. RAMASUBRAMANIAN, J.]
8. For our present purpose, it may be noted that the Land A
Acquisition Officer passed an award on 9.12.1981. The claim of the
appellant in the Award Enquiry was not only for the market value of the
land, but also for: (i) compensation for the loss; and (ii) compensation
for the injurious affection due to the trolley line becoming obsolete. The
claim of the appellant also included a claim for the loss sustained by the
B
appellant on account of the unacquired portion being rendered useless.
9. By his Award dated 9.12.1981, the Land Acquisition Officer
awarded :
(i) Rs.15,329 for the acquired portion of land;
C
(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 D
(v) Rs.16,591.08 for solatium.
10. In effect, the Land Acquisition Officer awarded total
compensation of Rs.1,27,198.31/- and rejected the claim of
Rs.1,49,85,251/- for the unacquired portion.
E
11. Not satisfied with the award, the appellant sought a reference
under 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.6
of 1982.
12. Before the Reference Court, the appellant claimed F
enhancement of compensation for the land acquired. In addition, the
appellant also claimed compensation for severance and compensation
for injurious affection. The claim under different heads was summarized
by the Reference Court in paragraph 14 of its award and it is reproduced
for easy appreciation as follows:- G
H
836 SUPREME COURT REPORTS [2022] 18 S.C.R.
A SUMMARY OF CLAIM FOR COMPENSATION
I.Land in Acquisition in Kumbhargaon village
B
C
SEVERANCE AND INJURIOUS AFFECTION
II. SEVERANCE
D
E
III. INJURIOUS AFFECTION
F
G
H
WALCHANDNAGAR INDUSTRIES LTD. v. THE STATE OF 837
MAHARASHTRA & ANR. [V. RAMASUBRAMANIAN, J.]
Total for Severance and Injurious affection II + III A
(Rs.33,80,000 + 1,86,19,700 = 2,19,99,700)
IV. TOTAL COMPENSATION
B
C
D
13. Eventually by a Judgment dated 14.03.1990, the Reference E
Court, (i) enhanced the compensation for the acquired part of the land
to Rs.55,893.23; and (ii) fixed an amount of Rs.80,09,725 as
compensation on account of severance and injurious affection.
14. Aggrieved by such enhancement and fixation, the State of
Maharashtra filed an appeal in First Appeal No.653 of 1991. Not satisfied
F
with the quantum fixed, the appellant also filed an appeal in First Appeal
No.709 of 1991. Both the appeals were disposed of by a Division Bench
of the Bombay High Court by a Judgment dated 19.11.2008. By this
Judgment the High Court awarded:
(i) a compensation of Rs.20,62,006/- towards severance
G
(unacquired trolley line) payable with solatium at 30% working
out 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 to
Rs.2,21,784/-, thus, totaling to Rs.9,61,064/-; and
H
838 SUPREME COURT REPORTS [2022] 18 S.C.R.
A (iii) a compensation of Rs.1,23,231.25 towards acquired trolley
line together with solatium at 30% working out to
Rs.36,969.37, thus, totaling to Rs.1,60,200.62. The High Court
also held that the claimant company (appellant) will be entitled
to interest under Section 28 as well as 34, on the entire amount
of compensation as well as solatium from March-1976 till
B
the date of deposit.
15. It is against the aforesaid Judgment dated 19.11.2008 passed
in 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 have
filed any appeal.
C
16. As observed by the High Court, the award of the Reference
Court was in two parts. The first part dealt with the claim for compensation
on account of severance and injurious affection in respect of the trolley
line running across 28 kms. in the unacquired portion of the land measuring
abut 60.38 hectares. The second part of the award was in respect of the
D trolley line spread over about 7 kms. in the area submerged in water. For
a better understanding of the arithmetic, it will be useful to present in a
tabulation, the different heads of claim, the amount claimed by the
appellant, the amount awarded by the Reference Court and the amount
to which the compensation was reduced by the High Court:-
E
F
G
H
WALCHANDNAGAR INDUSTRIES LTD. v. THE STATE OF 839
MAHARASHTRA & ANR. [V. RAMASUBRAMANIAN, J.]
17. As could be seen from the above tabulation, the appellant A
suffered a huge set back before the High Court, mainly under three
heads of claims, which relate to severance and injurious affection in
respect of the trolley line running in the unacquired portion of land. These
three items are (i) rails and sleepers; (ii) rolling stocks; and (iii) increase
in transportation cost. At the cost of repetition, we will once again present
B
in a tabulation, the amount claimed by the appellant, the amount awarded
by the Reference Court and the amount to which the award was reduced
by the High Court under these three heads, so that we have a better
focus.
C
D
18. Insofar as rails and sleepers which became obsolete are
concerned, the claim of the appellant was that they could not be sold as
such, in view of the fact that the railways had switched over to broad E
gauge. Though the appellant had to spend huge money for the removal
of the rails and sleepers, they had to be sold only as scrap. According to
the appellant, the Government turned down the proposal for a new line
and hence they were entitled to be compensated to the extent of the
value of the rails and sleepers which became obsolete.
F
19. The Reference Court found as a matter of fact that the entire
track had become completely useless and that the rails and sleepers had
to be sold only as scrap. Though the appellant examined a qualified
valuer by name Shri Talim, as a witness to show the loss sustained by
them, the Reference Court could not go entirely by his evidence, as he
admitted to have no personal knowledge, but went by the information G
supplied by the appellant. The Reference Court found that the trolley
line was laid in the year 1946 and the valuation was made as of the year
1976. The Reference Court, therefore, applied depreciation @ 35% and
arrived at the figure of Rs.31,21,816.
H
840 SUPREME COURT REPORTS [2022] 18 S.C.R.
A 20. The High Court set aside the compensation awarded in respect
of the rails and sleepers in the unacquired portion of the land, but confirmed
the compensation for the acquired portion of the land on the ground that
the appellant did not take effective steps to lay an alternative trolley line.
The High Court disbelieved the case set up by the appellant that the
Government was not responsive to their demand for invocation of the
B
urgency clause to acquire the land needed for alternative trolley line.
The High Court found, from the balance sheets that the appellant had
not suffered any loss on account of being compelled to switch over to
road transportation.
21. Insofar as rolling stock is concerned, the Reference Court
C accepted the evidence of Mr. Kamat, a qualified valuer examined as
PW-13. The Reference Court took the life of locomotives to be 20 years
and the life of wagons to be 35 years, on the basis of the guidelines
issued by National Council of Applied Economic Research. After
accepting the evidence of PW-13 that the estimated cost of the rolling
D stock would be Rs.48,49,618/-, the Reference Court applied an
arithmetical formula with reference to the residual life and the total life
of the locomotives and three wagons and arrived at the depreciated
value as Rs.22,36,424.70. From this amount the Reference Court
deducted the scrap value and arrived at the compensation of
Rs.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 year
1983 and that his valuation was based on 1986 prices. The High Court
also found that the appellant continued to use the rolling stocks for the
trolley line to a length of 14 kms. till the year 1983 and that, therefore,
F the appellant was not entitled to any compensation on this count.
23. As regards “ increase in transportation cost”, the Reference
Court found:
(i) that the appellant was forced to discontinue the most
G convenient and economical mode of transport;
(ii) that even if the appellant had resorted to an alternative route
for the trolley line, the same would have been longer by 12
kms, warranting an expenditure of Rs.1.50 crores;
(iii) that the Government could not have invoked the urgency
H clause, for acquiring land for alternative trolley line, as the
WALCHANDNAGAR INDUSTRIES LTD. v. THE STATE OF 841
MAHARASHTRA & ANR. [V. RAMASUBRAMANIAN, J.]
acquisition could not have been considered as one for public A
purpose but rather for the benefit of a company.
(iv) that the appellant was able to prove through credible
evidence that the cost of transporting 35,000 tones of goods
p.a. increased from Rs.0.20 per km. to Rs.0.80 per km.
(v) that, therefore, the appellant should be compensated for B
the increase in transportation cost.
24. The Reference Court agreed with the appellant that the loss
of earnings for the appellant, in this regard, was Rs.80,07,180/-, but
awarded compensation only for one year as against the claim of the
appellant for a period of 10 years. The Reference Court awarded a sum C
of Rs.8,00,718/-.
25. The High Court set aside the amount awarded by the
Reference Court under this head on the ground that the appellant did not
suffer any loss of profit on account of the increase in the transportation
cost, as the same would have been passed on to the customers. The D
High Court observed that the balance sheets for the period 1972-78 did
not show any loss. The High Court went by the presumption that
transportation cost is always factored into the manufacturing cost of the
goods.
26. In the light of the manner in which the High Court interfered E
with the award of the Reference Court, it was contended by Mr. Gopal
Sankaranarayanan, learned senior counsel for the appellant:
(i) that the appellant cannot be blamed for not finding an
alternative route to lay the trolley line and for not insisting
on the Government to invoke the urgency clause for the F
acquisition of some other land for laying trolley line, as the
provisions of Section 17 could not have been invoked for
the benefit of a company;
(ii) that in any case an alternative trolley line would have
admittedly cost Rs.1.50 cores and the same would have G
been 12 kms. longer than the existing line, resulting in an
increase in the operational cost;
(iii) that the appellant was able to prove by cogent evidence
that the cost of transportation by road was higher;
H
842 SUPREME COURT REPORTS [2022] 18 S.C.R.
A (iv) that the High Court failed to note that the profit of the
appellant went down from Rs.96.07 lakhs in 1975-76 to
Rs.40.80 lakhs in 1976-77;
(v) that there was neither any pleading nor evidence to show
that the transportation cost was passed on to the customers;
B (vi) that the High Court failed to note that the acquisition of
land on which a trolley line to a distance of 6 kms. passed,
led to the investment on 28 kms. of trolley line in the
unacquired portion being rendered useless;
(vii) that about 3 diesel locomotives and over 100 wagons were
C rendered useless due to the acquisition;
(viii) that the High Court misread the evidence of PW-13 as
though he took the price as of the year 1986;
(ix) that despite best efforts, the appellant could sell only some
D of the locomotives, on account of there being no market for
them; and
(x) that, therefore, the High Court was completely in error in
rejecting the claim of the appellant and also reducing the
amount awarded by the Reference Court.
E 27. In response, it is contended by Mr. Deepak Nargolkar, that
the appellant set up a bogey of a claim about the trolley line in the
unacquired portion of land becoming redundant and that having admittedly
switched over to road transportation way back in September 1972, the
appellant was not entitled to claim any compensation for the purported
increase in transportation cost. Placing reliance upon the decision of this
F
Court in Wazir vs. State of Haryana1, it was contended by Mr. Deepak
Nargolkar that the additional component of compensation in terms of
clause “thirdly” under Section 23(1) of the Act is to be granted only
when the value of the left over land is effectively diminished in terms of
quality. Therefore, it is his contention that severance charges in cases of
G this nature cannot be allowed.
28. We have carefully considered the rival contentions. As the
dispute now stands confined only to three heads of claims, namely, (i)
rails and sleepers; (ii) rolling stocks; and (iii) increase in transportation
cost, we shall deal with them item-wise.
H 1
(2019) 13 SCC 101
WALCHANDNAGAR INDUSTRIES LTD. v. THE STATE OF 843
MAHARASHTRA & ANR. [V. RAMASUBRAMANIAN, J.]
Law on compensation for severance and injurious affection A
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 of
which these claims are to be tested.
30. Sections 23 and 24 of The Land Acquisition Act, 1894 provide
two lists of matters respectively, namely (i) matters to be considered in B
determining compensation; and (ii) matters to be neglected in determining
compensation. Section 23(1), which alone is relevant for our present
purposes, is extracted as follows:-
“23. Matters to be considered in determining
compensation- (1) In determining the amount of compensation C
to be awarded for land acquired under this Act, the Court shall
take into consideration-
first, the market-value of the land at the date
of the publication of the notification under
section 4, sub-section (1); D
secondly, the damage sustained by the person
interested, by reason of the taking of any
standing crops trees which may be on the
land at the time of the Collector’s taking
possession thereof; E
thirdly, the damage (if any) sustained by the
person interested, at the time of the
Collector’s taking possession of the land,
by reason of severing such land from his
other land; F
fourthly, the damage (if any) sustained by the
person interested, at the time of the
Collector’s taking possession of the land,
by reason of the acquisition injuriously
affecting his other property, movable or G
immovable, in any other manner, or his
earnings;
fifthly, in consequence of the acquisition of the
land by the Collector, the person interested
is compelled to change his residence or H
844 SUPREME COURT REPORTS [2022] 18 S.C.R.
A place of business, the reasonable expenses
(if any) incidental to such change; and
sixthly, the damage (if any) bona fide resulting
from diminution of the profits of the land
between the time of the publication of the
B declaration under section 6 and the time
of the Collector’s taking possession of the
land.”
31. In simple terms, the six items covered by Section 23(1), which
are to be taken into consideration by the court in determining
C compensation, can be summarised as follows:-
(i) The market value of the land on the date of publication of
notification under Section 4(1);
(ii) The damage to standing crops or trees, which are on the
land at the time of the Collector taking possession;
D
(iii) The damage sustained by reason of severing such land from
the unacquired land;
(iv) The damage sustained by reason of the acquisition injuriously
affecting the other property, movable or immovable, in any
other 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 is
compelled to do so in consequence of the acquisition;
(vi) The damage bona fide resulting from diminution of the
F profits of the land between the time of publication of the
declaration under Section 6 and the time of the Collector’s
taking possession.
32. The points arising for determination in these appeals revolve
around clauses “thirdly” and “fourthly” of Section 23(1). These clauses
G are referred to in common parlance as clauses concerning ‘severance’
and ‘injurious affection’ respectively.
33. But clauses “thirdly” and “fourthly” of Section 23(1) cannot
be considered in isolation. They have to be read together with Section
49 which reads as follows:-
H
WALCHANDNAGAR INDUSTRIES LTD. v. THE STATE OF 845
MAHARASHTRA & ANR. [V. RAMASUBRAMANIAN, J.]
“49. Acquisition of part of house or building-. A
(1) The provisions of this Act shall not be put in force for the
purpose of acquiring a part only of any house, manufactory or
other 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 Collector B
has made his award under section 11, by notice in writing, withdraw
or 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 any
land proposed to be taken under this Act does or does not form C
part of a house, manufactory or building within the meaning of
this section, the Collector shall refer the determination of such
question to the Court and shall not take possession of such land
until after the question has been determined.
In deciding on such a reference the Court shall have regard to the D
question whether the land proposed to be taken is reasonably
required for the full and unimpaired use of the house, manufactory
or 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 the E
land to be acquired from his other land, the appropriate Government
is of opinion that the claim is unreasonable or excessive, it may, at
any time before the Collector has made his award, order the
acquisition of the whole of the land of which the land first sought
to be acquired forms a part. F
(3) In the case last hereinbefore provided for, no fresh declaration
or other proceedings under sections 6 to 10, both inclusive, shall
be necessary; but the Collector shall without delay furnish a copy
of the order of the appropriate Government to the person
interested, and shall thereafter proceed to make his award under
G
section 11.”
34. It may be noted that clause thirdly of Section 23(1) relates
only to land, as it speaks only about the severance of the acquired land
from the unacquired land and the damage sustained as a consequence.
In contrast, clause fourthly of Section 23(1) deals with the damage
H
846 SUPREME COURT REPORTS [2022] 18 S.C.R.
A sustained by the person interested, due to the injurious affection, (i) of
his other movable property; (ii) of his other immovable property; and
(iii) of his earnings. In other words what is injuriously affected at the
time of Collector’s taking possession of the land, may either be the
unacquired portion of the immovable property or other movable property
or even the earnings of the person interested.
B
35. It may also be noted that the expression used in clause fourthly
is “earnings”, while the expression used in clause sixthly is “profits”.
But clause sixthly is confined only to diminution of the profits of the land
between the time of publication of the declaration under Section 6 and
the time of the Collector taking possession.
C
36. Coming to Section 49, it deals with two contingencies. They
are, (i) cases where what is sought to be acquired is only a part of any
house, manufactory or other building; and (ii) cases where a claim for
compensation under the head ‘severance’ under clause thirdly of Section
23(1) arises.
D
37. In so far as the 1st contingency is concerned there is a bar
under sub-section(1) of Section 49 for the acquisition of a part only of
any house, manufactory or other building, if the owner desires that the
whole of such house, manufactory or building shall be so acquired.
E 38. In so far as the 2nd contingency is concerned, there is a choice
given to the appropriate Government to order the acquisition of the whole
of the land, if the appropriate Government is of the opinion that the claim
for severance compensation is un-reasonable or excessive.
39. The distinction between the scope of sub-section (1) and the
F scope of sub-section (2) of Section 49 was brought out by this Court in
M/s Harsook Das Bal Kishan Das vs. The First Land Acquisition
Collector and Others2 as follows:-
“12. The object of Section 49(1) of the Act is to give to the owner
the option whether he would like part to be acquired. The
Government cannot take the other part under Section 49(1) of the
G
Act unless the owner says so. Section 49(2) of the Act has nothing
to do with Section 49(1) of the Act. Section 49(2) of the Act gives
the option to the Government only where the claim under the third
clause of Section 23(1) of the Act is excessive. Reference to the
2
H (1975) 2 SCC 256
WALCHANDNAGAR INDUSTRIES LTD. v. THE STATE OF 847
MAHARASHTRA & ANR. [V. RAMASUBRAMANIAN, J.]
third clause of Section 23(1) of the Act makes it clear that the A
claim under the third clause of Section 23(1) is for severance.
The Government in such a case of acquisition of the remaining
portion of the land under Section 49(2) of the Act saves the public
exchequer money which otherwise will be the subject-matter of a
claim for severance.”
B
40. In the case on hand, the provisions of Section 49(1) have no
application. This is due to the fact that the appellant never desired that
the whole of the manufactory shall be acquired by the Government. In
fact, the total extent of land owned by the appellant was about 16000
acres, on which a township had come up. Therefore, there was no
occasion for the appellant to exercise any option invoking Section 49(1). C
In any case, the appellant actually requested the Government to acquire
land 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 reason
that the appropriate Government did not think fit to seek acquisition of D
the whole of the land on which the remaining portion of the trolley line
existed, on the ground that the claim for severance compensation was
un-reasonable or excessive. Therefore, it is enough for us to go back to
clauses thirdly and fourthly of Section 23(1) without the constraints of
sub-section (1) or (2) of Section 49. E
42. As we have indicated earlier, clause thirdly relates to the
damage sustained by the person interested, by reason of severance of
the acquired land from the unacquired land, at the time of Collector’s
taking possession of the land. In contrast, clause fourthly of Section
23(1) deals with the damage sustained by reason of the acquisition F
injuriously affecting, (i) the other movable property; (ii) the other
immovable property; and/or (iii) the earnings of the person interested.
43. The claim of the appellant before the Reference Court under
clauses thirdly and fourthly of Section 23(1), presented a mix-up, with
some items overlapping with others. This can be seen from paragraph G
22 of the award of the Reference Court, where the claim of the appellant
is extracted by the Reference Court as follows:-
“22. The main grievance of the Claimant Company is that the
Special Land Acquisition Officer has not considered at all the
Claimant’ claim for damages suffered by the Claimant Company
H
848 SUPREME COURT REPORTS [2022] 18 S.C.R.
A on account of severance and injurious affection. Although the
opponent has acquired only 6 kilometers, i.e., about 20.74 Hectares
of land under the trolley line, this acquisition has rendered the
remaining portion of about 30 Kilometers, i.e., 60.38 Hectares of
the land under the trolley line totally useless. In other words, the
contention of the Claimant Company is that the acquisition of only
B
6 kilometers has not only deprived the Claimant Company of the
use of the trolley line facility, but it has also rendered the remaining
portion of the trolley line of 30 kilometers, i.e. 60.38 hectares of
land, the rolling stock, three diesel engines, buildings, telephone
line and all other items connected with the trolley line, such as,
C civil works, embankments, C.D. works, culverts, bridges, totally
redundant and obsolete. The claim can be divided into two
categories as follows:
i) Enhancement of compensation in respect of the acquired
portion of the land; and
D ii) The compensation for the damages suffered by the Claimant
Company in respect of the unacquired portion of the trolley
line on account of severance and injurious affection under
the following head:
1) Unacquired portion of the land admeasuring about 60.38
E hectars.
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 value
of Walchandnagar Township, due to discontinuance of the
G trolley line facility which was hitherto available to the said
Industrial Complex, the Additional cost of transport for
switching over from trolley line transport to road transport,
the cost of remodeling the yard at Bhigwan Station in order
to suit the trans-shipment of loading and unloading by road
transport; total retrenchment compensation for about 52
H
WALCHANDNAGAR INDUSTRIES LTD. v. THE STATE OF 849
MAHARASHTRA & ANR. [V. RAMASUBRAMANIAN, J.]
persons, specially trained and employed for the operation A
of trolley line, who had come to be absorbed by the
Claimant Company on humanitarian grounds and loss of
earnings.”
44. The second category of claim indicated in paragraph 22 of the
award of the Reference Court, extracted above, contains a mix of claims B
that may fall under clauses thirdly, fourthly and sixthly of section 23(1).
But fortunately the rejection of some of those claims are not taken up
now by the appellant. In the appeals on hand, the claim is restricted only
to three items namely, (i) the value of rails and sleepers; (ii) the value of
rolling stock; and (iii) increase in transportation costs. These items are
covered only by clause fourthly of Section 23(1) and they do not fall C
under clause thirdly.
45. Even within clause fourthly, what we are concerned in these
appeals is the injurious affection of, (i) movable property such as rails
and sleepers and rolling stock; and (ii) the loss of earnings due to increase
in transportation costs. But unfortunately what the appellant did was to D
claim a sum of Rs.80,07,180/- towards increase in transportation costs
and a separate amount of Rs.35,62,000/- towards loss of earnings. Even
under the heading ‘loss of earnings’, what was claimed was actually
loss of profits. The appellant did not realize that the diminution of profits
fell under clause sixthly of Section 23(1) and the claim under this head E
is restricted to the time between the date of publication of the declaration
under Section 6 and the time of Collector taking possession. Injurious
affection to earnings is covered by clause fourthly and the statute has
made a distinction between, (i) injurious affection to earnings; and (ii)
diminution of the profits between the time of publication of the declaration
under Section 6 and the time of taking possession. F
46. The Reference Court rejected the claim for compensation of
Rs.35,62,000/- towards loss of earnings, on the ground that it overlapped
with the claim under the heading ‘increase in transportation costs’. It is
perhaps after realizing such overlapping of claim that the appellant has
confined their claim in the present appeals only to injurious affection, (i) G
to rails and sleepers; (ii) to rolling stock; and (iii) to earnings due to
increase in transportation costs, all of which fall under clause fourthly
of Section 23(1).
47. One of the earliest cases to be decided on the question of
injurious affection, was a Division Bench decision of the Calcutta High H
850 SUPREME COURT REPORTS [2022] 18 S.C.R.
A Court in R.H. Wernickle and Ors. vs. The Secretary of the State for
India3 . The said case arose out of the acquisition of land which included
a tea estate. The purpose of the acquisition was the extension of the
rifle range of the Cantonment in the Villages of Lebong and Pandan at
Darjeeling. A claim for injurious affection was made by the owners of
the tea estate on the ground that they were forced to stop work in the
B
unacquired portion of the tea estate, during the time when firing was
practiced in the rifle range. Dealing with the claim, Doss, J. opined,
“There can be no doubt that it is extremely unsafe to work on land
situate behind the butts when firing is going on, and the consequent
loss of time must inevitably increase the cost of cultivation”.
C Therefore, Doss, J., held that the owners of the tea estate were entitled
to compensation for the injurious affection of the 8 acres of tea land
behind the butts. Expressing concurrence with the view of Doss, J.,
Richardson, J. observed: “ It is said that the rifle range will interfere
with the working of 8 acres of land behind the butts and I think that
there can be no doubt as to this. It will not be safe to put coolies on
D
the land when the range is being used”. An argument was advanced
by the Government that the contemplated injury was contingent and that
it could arise only from the negligent use of the range and that the same
would fall under the category of actionable nuisance. Rejecting the said
argument, Richardson, J., opined: “But it is not clear that the injury
E which the claimants contemplate will amount to an actionable
nuisance. The Government will have the right to use the land as a
rifle range and no doubt it may be presumed that it will be so used
with the greatest care and circumspection. But even so, no prudent
owner would put his coolies on the land behind the butts while
firing was going on”.
F
48. In Balammal vs. State of Madras4, this Court was concerned
with a land acquisition under the provisions of the Madras City
Improvement Trust Act, Section 71 of which authorized the Board of
Trustees to acquire land under the provisions of The Land Acquisition
Act, 1894 with the previous sanction of the Government. When the dispute
G relating to determination of compensation ultimately landed up before
this Court, the argument of one of the land owners was that a part of the
compound of a cinema theatre was acquired compulsorily and that it
deprived the owner of the land, of the facility of providing additional
3
2 Ind.Cas 562
4
H AIR 1968 SC 1425
WALCHANDNAGAR INDUSTRIES LTD. v. THE STATE OF 851
MAHARASHTRA & ANR. [V. RAMASUBRAMANIAN, J.]
amenities to the patrons of the theatre and also of making constructions A
on the land expanding the business. The claim was pitched in the
alternative on clauses thirdly, fourthly and sixthly of Section 23(1).
While agreeing on principle about the entitlement of a person interested
to compensation under these clauses, this Court rejected the claim in
that case, on the ground that there was no evidence either to show any
B
loss by reason of severance or to show that the remaining land was
injuriously affected by reason of acquisition or to show that the earnings
of the owners were affected.
49. Therefore, keeping in mind the above legal principles, let us
now take up for consideration, the claim of the appellant in these appeals.
C
Rails and Sleepers
50. It was the claim of the appellant that Walchandnagar Township
is situate at a distance of 36 kms. from Bhigwan Railway Station on the
Central Railway line and that with a view to provide a direct and rapid
connection from Walchandnagar to Bhigwan, the appellant had provided D
its own trolley line with a private telephone line, goods yard with
transshipment siding and other facilities. The trolley line was laid in the
year 1946. According to the appellant, 35,000 tonnes of material used to
get transported through this trolley line which included heavy machinery.
Part of the trolley line got submerged in the backwaters of Ujjani Dam
and the remaining portion of the trolley line situate in the unacquired part E
of the land had become useless. According to the appellant, they had to
spend Rs.1,90,000/- for the removal and transport of the material relating
to trolley line. The proposal for acquisition of alternative land to lay a
new trolley line did not materialize due to various problems, not attributable
to the appellant. In any case, the cost of such acquisition was estimated F
at Rs.1.5 crores even at that time. The rails and sleepers forming part of
the trolley line to a length of 28 kms. had thus become useless. Therefore,
the appellant claimed a sum of Rs.50,08,328/- towards compensation
for rails and sleepers.
51. This claim was resisted by the respondents on the ground that G
the trolley line was laid in the year 1946 for the purpose of carrying
material from the sugar industry and that the appellant started
manufacturing heavy machinery only from 1956. The trolley line was
actually a narrow gauge line, having a width of 2 feet 6 inches. Therefore,
the respondents contended that no compensation was payable towards
H
852 SUPREME COURT REPORTS [2022] 18 S.C.R.
A rails and sleepers, especially when the appellant had also claimed
compensation towards increase in transportation costs for switching over
from rail transport to road transport.
52. Before the Reference Court, the Chief Administrative Manager
of the appellant, who was a qualified Civil Engineer was examined as
B PW-1, and a retired Director of Town Planning was examined as PW-
15. Both these witnesses referred to the quotations given by Hindustan
Steels Limited, towards estimated cost of laying the trolley line. After
allowing depreciation and the value for which the material was sold and
after adjusting transportation cost, these witnesses estimated the cost of
rails and sleepers at Rs.50,08,288/-.
C
53. Though the respondents examined one Shri Mahajan, who
also produced independent calculations, the Reference Court rejected
his evidence on the ground that it did not inspire confidence. Interestingly
the Reference Court did two things, namely, (i) it agreed that the method
or formula adopted by Shri Mahajan was proper and recognized by the
D standard authors and yet rejected his evidence; and (ii) it agreed with
the submissions of the Government Pleader as to why the evidence of
Shri Talim, retired Director of Town Planning should not be relied upon,
but eventually held that the evidence of Shri Talim cannot be discarded
totally. Thereafter, the Reference Court proceeded to take the estimated
E cost of rails and sleepers at Rs.2,41,053/- per km., and applied a
depreciation 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, the
Reference Court arrived at the compensation for rails and sleepers at
Rs.31,21,816/-.
F
54. Both the appellant as well as the State Government were
aggrieved by the compensation so fixed by the Reference Court and
both of them were on appeal before the High Court. The High Court
held that the appellant was not entitled to any compensation for rails and
sleepers lying in the trolley line for a distance of 28 kms., since the
G appellant was at fault for not taking effective steps to lay alternative
trolley line to a distance of 6 to 7 kms. which got submerged in the
backwaters. The High Court held that in any case, the appellant did not
suffer any loss, as was evident from the balance sheets placed on record
upto the year 1978. The finding recorded by the High Court in this regard
H may be usefully extracted as follows:-
WALCHANDNAGAR INDUSTRIES LTD. v. THE STATE OF 853
MAHARASHTRA & ANR. [V. RAMASUBRAMANIAN, J.]
“In our opinion, the company cannot be granted compensation for A
rails and sleepers covering 28 kms. of the trolley line. In the earlier
part of this judgment we have held that the company was at fault
in not taking due steps to lay the alternative trolley line for 6 to 7
kms. area submerged in the backwater. It gave up this proposal
by its own choice and the reasons put forward before the
B
Reference Court were false and fabricated. Even otherwise the
company did not suffer any loss after the trolley line was
discontinued in 1976, as was evident from the balance–sheets
placed on record upto the year 1978. The increase in transport
cost i.e. road transportation by trucks was offset by increasing
the manufacturing cost which is so obvious from the fact that the C
company did not incur any losses after it resorted to road
transportation. The company could not have prayed for injurious
affection on account of discontinuation of the trolley line and
claimed compensation for rails and sleepers spread over 28 kms.
of the trolley line. We do not find any justification that the company
D
should be allowed to go with this compensation amount and have
the double benefit. It would be a premium for its inaction for laying
the alternative trolley line.”
55. After rejecting the claim with regard to the rails and sleepers
of the trolley line for a distance of 28 kms., on the basis of the reasons
extracted above, the High Court proceeded to award compensation for E
the rails and sleepers in the trolley line to a distance of 7 kms. which got
submerged in the backwaters. This compensation, payable for the rails
and sleepers in the trolley line to a distance of 7 kms. which got
submerged in the backwaters, was worked out, by accepting the
depreciated cost fixed by the Reference Court at Rs.1,56,650/- per km. F
For a distance of 7 kms., it worked out to Rs.10,96,550/-. From this
amount the High Court deducted the scrap value of Rs.4,87,608/- and
arrived 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 laying G
alternative trolley line was not an easy task, especially when there were
lot of land owners. The urgency clause under Section 17 of the Land
Acquisition Act could not have been invoked, as the appellant is a
company.
H
854 SUPREME COURT REPORTS [2022] 18 S.C.R.
A 57. The fundamental flaw in the reasoning of the High Court is
that the High Court presumed that it was enough if the land for relocating
7 kms. of trolley line was acquired. If trolley line to a distance of 7 kms.,
out of a total stretch of 35 kms. admittedly got submerged in the
backwaters, the trolley line relating to the entire stretch would naturally
become redundant. Railway line is not like a roadway. Roads can take
B
deviation easily, but not railway lines. Therefore, if land had to be acquired
for relocating the trolley line, it should have been for the entire stretch of
35 kms. It is not possible to retain 28 kms. of trolley line and relocate the
remaining 7 kms. stretch alone. Therefore, we are of the considered
view that the High Court committed a gross error in reversing the finding
C of the Reference Court under this heading.
Rolling Stocks
58. The claim of the appellant was that due to the entire trolley
line becoming useless, three diesel locomotives, about 100 four wheeler
wagons, few 8 wheeler wagons and a one way bridge became redundant
D and that they are entitled to compensation towards the loss of value/
utility of these rolling stocks. The appellant quantified the claim under
this head at Rs.22,16,044/-.
59. This claim was resisted by the Government on the ground that
the appellant was put on notice of the proposed acquisition way back in
E 1967 and that after showing inclination to lay an alternative trolley line at
the initial stages, the appellant abandoned the proposal in the year 1974
and that, therefore, the claim for compensation under this head was
liable to be rejected.
60. The appellant examined an Industrial Consultant and a
F registered valuer by name Shri Kamat, in support of this claim. His report
containing the valuation of the rolling stock was filed as Exhibit-93. This
witness testified that before preparing the estimate, he obtained quotations
from one Shahajhan Engineers and Suyog Electricals.
61. Though the respondents relied upon the evidence of the
G Executive Engineer, Mechanical Division, examined as DW-5, the
Reference Court rejected his evidence on the ground that it was of no
assistance. This witness had admitted that he never had any occasion to
value any railway wagons or locomotives.
62. In the light of the oral and documentary evidence, the Reference
H Court came to the conclusion that the life of the locomotives can be
WALCHANDNAGAR INDUSTRIES LTD. v. THE STATE OF 855
MAHARASHTRA & ANR. [V. RAMASUBRAMANIAN, J.]
taken as 20 years and the life of wagons can be taken as 35 years. A
Applying depreciation on a straight line formula, the Reference Court
arrived 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 Court
fixed the compensation payable for the rolling stock at
Rs. 17,79,884.70/-.
B
63. The High Court, on re-appreciation of evidence found that the
appellant company did not bring before the Court, the book value of the
rolling stock. But the expert witness Shri Kamat examined as PW-13
admitted during cross-examination that as per the Asset Register
maintained by the appellant relating to the year 1986, the value of the
rolling stock was almost zero. By selling the rolling stock as scrap, the C
company had actually earned a sum of Rs.4,56,540/-. Moreover the
High Court found from the evidence on record that within the company
premises, the trolley line to a distance of 14 kms. was in operation till the
year 1983. This was a clear indication that the rolling stock was used at
least till the year 1983. Therefore, the High Court reversed the grant of D
compensation made by the Reference Court in respect of the rolling
stock.
64. Though it is contended on behalf of the appellant that the
evidence of PW-13 (Shri Kamat) was misread by the High Court and
that due to good maintenance, the life of the rolling stock had increased, E
we do not think that the view taken by the High Court was completely
out of sync with the evidence on record. The High Court has actually
extracted one portion of the evidence of Shri Kamat (PW-13). He has
clearly admitted that though he inspected the Assets Register in 1986
before preparing the report he did not record in his report, the book
value of the asset. He clearly stated “it is possible that in book value, F
the assets might become zero value in the instant case.”
65. Therefore, no exception can be taken to the finding recorded
by the High Court insofar as rolling stock is concerned.
Increase in transportation cost G
66. In simple terms, the claim of the appellant was that the cost of
transportation through trolley line was Rs.0.20 per km. per tonne and
that 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 and
as a consequence, the entire stretch of trolley line became unusable, the
H
856 SUPREME COURT REPORTS [2022] 18 S.C.R.
A company had to switch over to road transport, resulting in an increased
cost of Rs.8,00,718/- per year. Applying a multiplier of 10, the appellant
made a claim for Rs.80,07,180/- under this head.
67. The appellant examined the Chief Administrative Manager as
PW-1, the Planning Manager as PW-3 and a person working as a clerk
B in the transport Section of the company as PW-6. The Chief Accountant
of the company was examined as PW-7 and a person who was carrying
on road transport business under the name and style of Purohit Road
Lines was examined as PW-12.
68. The Reference Court accepted the evidence adduced on the
C side of the appellant and came to a conclusion that the appellant was
transporting about 35,000 tonnes of goods per year through the trolley
line at the cost of Rs.0.20 per tonne per km and that the cost of road
transport for the same quantity of material was Rs.0.80 per km. per
tonne. The Reference Court thus arrived at the increase in the cost of
transportation per year at Rs.8,00,718/-. However, the Reference Court
D rejected the claim of the appellant in this regard for a total period of 10
years, on the ground that there is no basis for allowing such a claim for
a total period of 10 years. Therefore as against the claim of the appellant
for a sum of Rs.80,07,180/- (increase in cost for 10 years), the Reference
Court awarded only Rs.8,00,718/- (increase in cost for one year only).
E 69. The High Court reversed the finding of the Reference Court
on the short ground that the appellant had not demonstrated to have
suffered any loss of profits on account of the increase in the transportation
cost and that even the balance-sheets for the years 1972 to 1978 did not
disclose any loss of profit. Therefore, the High Court opined that the
F increase in transportation cost, even if any, would have been absorbed in
the price charged to the customers and that there was no case for allowing
compensation under this head even for one year, when the appellant had
not suffered any loss of profit. In fact, the appellant had made a claim
separately for a sum of Rs.35,62,000/- towards loss of profits, but the
same was turned down by the Reference Court. Therefore, the High
G Court held that the Reference Court could not have granted any
compensation under this heading ‘increase in transportation cost’.
70. The objections of the appellant to the finding of the High Court
in this regard are two-fold namely, (i) that the profits actually went down
from Rs.96.07 lakhs in 1975-76 to Rs.40.80 lakhs in 1976-77; and (ii)
H
WALCHANDNAGAR INDUSTRIES LTD. v. THE STATE OF 857
MAHARASHTRA & ANR. [V. RAMASUBRAMANIAN, J.]
that without any evidence on record the High Court presumed that the A
increase in transportation cost was off-set and recovered from the buyers
of the goods manufactured by the company.
71. Insofar as the first objection is concerned, we must point out
at the outset that the Notification for acquisition under Section 4 was
published in the Government Gazette on 26.10.1972. The declaration B
under Section 6 was published in the Government Gazette on 01.08.1974.
Notices under Sections 9(1) and 9(2) were published in September-1974
and Feburary-1975. Though the exact date on which possession was
taken is not mentioned by either of the parties, the appellant has stated in
their synopsis that the Government took possession of the land in 1976.
C
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 be
highlighted that the appellant made a profit of Rs.96.07 lakhs during the
year 1975-76 and that the profit went down to Rs.40.83 lakhs during the
year 1976-77. D
73. If this claim of the appellant is taken to be true, it would mean
that the appellant suffered a reduction in profit to the tune of about
Rs.55,00,000/-in one year immediately after possession of the land was
taken. The balance sheets and profit & loss accounts produced by the
appellant before us are as on 30.09.1976 and 30.09.1977. Even according E
to the appellant, the reduction in the profit to the extent of nearly
Rs.55,00,000/- was not wholly attributable to the increase in transportation
cost. The appellant claimed only a sum of Rs.8,00,718/- per year towards
increase in transportation cost. This constitutes only 15% of the total
amount of reduction in profits. It is seen from the profit & loss account F
for the year ended 30.09.1977 that the sales turn over itself had come
down from Rs.22.09 crores to Rs.18.17 crores. Even the raw material
consumed had come down from 13.47 crores to Rs.9.32 crores. There
had 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 High G
Court with regard to profits. But it cannot be used in support of the
appellant’s case that the increase in the transportation cost accounted at
least in part to a reduced margin of profit.
74. The impact of the increase in transportation cost, upon the
profit margin of a seller of goods, would depend upon the terms and H
858 SUPREME COURT REPORTS [2022] 18 S.C.R.
A conditions of the contract. It may also vary from sea transport to rail
transport to road transport to air transport. Though in shipping contracts
there are standard covenants such as FOB (Free on Board), CIF (Cost,
Insurance and Freight) etc., there are no such standard covenants in rail
and road contracts. In any case, the trolley line of the appellant covered
only a distance of 35 kms upto Bhigwan. Delivery of material had to be
B
effected by the appellant to its customers through some method of
transport from Bhigwan. Nothing is on record to show that the goods
were always dispatched to all customers through goods carriage railway
line of the Indian Railways beyond Bhigwan. In the absence of any
evidence to show that the increase in the transportation cost due to the
C submerging of a part of the trolley line, had always to be absorbed only
by the appellant, but could not have been passed on to its customers due
to specific terms and conditions of contract, the Reference Court could
not have accepted a claim in this regard.
75. Moreover there was a finding of fact in the Award passed on
D 09.12.1981 which was taken note of by the High Court. The relevant
portion of the Award reads as follows:
“Further as per local enquiry it is told that the Trolley line was
constructed years back mainly for bringing heavy machinery at
Walchandnagar. After this purpose was served, they were using
E it for movement of goods for some time. The process of moving
the goods on the Trolley line became uneconomical. So they
resorted to road and truck traffic which was quick and possibly
economical. Thus the whole Trolley line was in disuse being
uneconomical on the relevant date i.e. 27-9-72. In these
circumstances the claim for severance and injurious affection has
F been rejected.”
76. Therefore, the decision of the High Court with regard to the
claim for compensation towards increase in transportation cost appears
to be reasonable and hence cannot be interfered with.
G CONCLUSION
77. The upshot of the above discussion is that the refusal of the
High Court to award any compensation for the injurious affection to one
set of movable property, namely, rolling stock cannot be found fault with,
for the reasons stated above. Similarly, the refusal of the High Court to
award any compensation for increase in transportation cost, falling under
H
WALCHANDNAGAR INDUSTRIES LTD. v. THE STATE OF 859
MAHARASHTRA & ANR. [V. RAMASUBRAMANIAN, J.]
the category of “injurious affection to earnings” cannot also be faulted, A
for the reasons indicated separately. However, the refusal of the High
Court to grant compensation for the injurious affection sustained by the
appellant to one set of movable property, namely, rails and sleepers forming
the trolley line for a distance of 28 kms., is clearly unsustainable especially
when the grant of compensation for the injurious affection to rails and
B
sleepers to a stretch of 7 kms. submerged in the backwaters, has been
sustained by the High Court. In fact, the State has not come up on
appeal against the grant of compensation for the injurious affection to
the trolley line to a distance of 7 kms which got submerged in back
waters. That the remaining portion of the trolley line to a distance of 28
kms has been rendered useless after the acquisition, is not in dispute. C
78. A question may arise as to whether the reasoning given by us
for rejecting the claim for loss of earnings in the form of increase in
transportation costs, will not apply ipso facto to the claim for
compensation for the rails and sleepers also, since the appellant had
switched over to road transport in the year 1972 itself. But our answer D
would be that clause fourthly of Section 23(1), uses a significant phrase
viz., “injuriously affecting his other property, movable or immovable,
in any other manner, or his earnings”. Therefore, injurious affection
to property, in any other manner, may stand on a different footing from
injurious affection to earnings. While there is no evidence on record to
connect the drop in the level of profits from 1975-76 to 1976-77, with the E
increase in transportation costs, there is acceptable evidence to show
that movable property became useless after the acquisition. Therefore,
both stand on different footings.
79. Therefore, the appeals are partly allowed, setting aside that
portion of the findings and conclusions reached by the High Court in the F
impugned judgment (para 22), whereby the award of the Reference
Court relating to compensation for injurious affection to rails and sleepers,
was reversed by the High Court. As a consequence, the award of the
Reference Court granting a sum of Rs.31,21,860/- towards compensation
for rails and sleepers shall stand restored. In respect of all other claims, G
the impugned judgment is not interfered with.
80. Before parting we are obliged to bring one important fact on
record. It appears that at the time of filing of the First Appeal before the
High Court of Judicature at Bombay, the respondents deposited on
17.07.1992, the award amount of Rs.2,72,25,680/-. By virtue of an order H
860 SUPREME COURT REPORTS [2022] 18 S.C.R.
A passed subsequently, the appellant withdrew the said amount apparently
after furnishing bank guarantee. But by the impugned judgment dated
19.11.2008, the High Court of Bombay allowed the appeal of the
respondents and reduced the award amount. When the Special Leave
Petitions 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 the
amount already drawn, there shall be interim stay of enforcement
of the guarantee by the respondent subject to the petitioner
C extending validity of the bank guarantee till disposal of this matter.”
We hope that the bank guarantee is kept alive as per the above
order of this Court dated 16.03.2009. Now that the judgment of the
Bombay High Court is modified by us, the appellant will be entitled to
retain so much of the amount as they would be entitled to, by virtue of
D this judgment and the appellant shall pay the respondents the excess
amount, within four weeks. In case the bank guarantee furnished by the
appellant is alive, the Land Acquisition Officer may prepare fresh
calculations and enforce the bank guarantee only to the extent of
disallowed portion. There will be no order to costs.
E
Nidhi Jain and Amarendra Kumar Appeals partly allowed.
(Assisted by : Adnan Khan, LCRA)
F
G
H
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