2004 (4) TMI 644 - SC - Indian Laws

Summary

Issues Involved:
1. Whether the use and occupation of the property by the appellant after 10.3.1987 was wrongful and illegal and in the nature of trespass.
2. Whether the arbitrator had failed to take into account relevant factors in assessing damages awarded in favor of the respondent.

Issue-wise Detailed Analysis:

1. Wrongful and Illegal Use and Occupation of Property:
The appellant contended that the possession of the property after 10.3.1987 was not illegal but permissive, as the Supreme Court had allowed them to remain in possession until 31.3.1993. The respondent argued that the possession was wrongful and in the nature of trespass since the acquisition proceedings were struck down by the High Court, and the appellant was liable to pay damages for wrongful use and occupation. The Court noted that the arbitrator had assessed damages on the assumption that the possession was illegal and in the nature of trespass, which was incorrect because the appellant was permitted by the Court to remain in possession until 31.3.1993. Therefore, the possession was not illegal, and damages should have been assessed on the basis of fair rent rather than mesne profits.

2. Assessment of Damages:
The appellant argued that the arbitrator had erred in assessing damages without considering relevant factors such as the dilapidated condition of the property, the rent accepted by the respondent until February 1988, and the expenses for maintaining the property. The respondent maintained that the arbitrator was correct in assessing damages based on the income/profit method, considering the commercial potential of the property. The Court found that the arbitrator had not taken into account several relevant factors, including the age and condition of the property, the fair rent previously accepted, and the municipal assessment. The arbitrator also failed to consider the expenses for maintaining the property and the lack of evidence supporting the assessed rates. Consequently, the Court held that the arbitrator had mis-conducted the proceedings by ignoring material documents and not applying correct principles of valuation.

Conclusion:
The Supreme Court allowed the appeal, quashed the High Court's judgment, and set aside the arbitrator's award. The matter was remitted to the arbitrator for reassessment of damages in accordance with the law. If the original arbitrator was unavailable, the High Court was directed to appoint another arbitrator to decide the matter within three months. There was no order as to costs.