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TMI Blog1939 (2) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... which runs down from high ground on the south-west to low ground; on the north-east adjoining the land of the Harbour Authority on the south of the above-mentioned creek. The upper portion of this valley consists of a shallow basin in the hills which forms the catchment area of a spring of water that emerges from the ground at the north-east end of the basin. This spring, which appears to yield even in the dry season an average flow of 50,000 gallons a day of excellent drinking water, is situated at a height of 150 feet above sea level. Until a part of it was diverted by the Harbour Authority, as narrated hereafter, the whole of the water from this spring ran down the valley to the lower end of Lova Gardens and from thence discharged itself into the creek. By the early part of the year 1926 the construction of the harbour had made considerable progress, and it was hoped that it would be ready for opening by the end of 1929. With that end in view a portion of the harbour site had been allocated by the Harbour Authority for the purpose of being used by oil companies and other industrial concerns. The entire south side of the harbour had indeed been allocated for industrial purposes. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the lower part of the valley to which reference has been made, and led from a short distance below the spring directly to the harbour area by means of a tunnel to be made through the hilly land to the north-west, of the valley. This scheme, which was in due course carried out and is now in operation, involved the acquisition from the appellant of the shallow basin forming the catchment area of the spring, the site of the spring itself, and a narrow strip of land below the spring. In due course the necessary steps were taken for the compulsory acquisition of this land under the provisions of the Land Acquisition Act, 1894, the notification, under Section 4(1) of the Act being given on February 13, 1928. The public purpose for which the land was needed was stated, in the notification to be the execution of anti-malarial works, the total area to be acquired from the appellant being 108-9 acres. Of this acreage the catchment area, including the site of the spring referred to as 2-1 D and 2-1 E, accounted for 105-92 acres, and the land below the spring referred to as 2-1 B (053 acres), 2-1C (0.48 acres) and 2-3B (1.97 acres) accounted for the rest. 3. After the giving of the not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. The compensation must be determined, therefore, by reference to the price which a willing vendor might reasonably expect to obtain from a willing purchaser. The disinclination of the vendor to part with his land and the urgent necessity of the purchaser to buy must alike be disregarded. Neither must be considered as acting under compulsion. This is implied in the common saying that the value of the land is not to be estimated at its value to the purchaser. But this does not mean that the fact that some particular purchaser might desire the land more than others is to be disregarded. The wish of a particular purchaser, though not his compulsion, may always be taken into consideration for what it is worth. But the question of what it may be worth, that is to say, to what extent it should affect the compensation to be awarded, is one that will be dealt with later in this judgment. It may also be observed in passing that it is often said that it is the value of the land to the vendor that has to be estimated. This, however, is not in strictness accurate. The land, for instance, may have for the vendor a sentimental value far in excess of its market value. But the compensation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy been built upon, a proposition that is embodied in Section 24 (5) of the Act and is sometimes expressed by saying that it is the possibilities of the land and not its realised possibilities that must be taken into consideration. 5. But how is the increase accruing to the value of the land by reason of its potentialities or possibilities to be measured? In the case instanced above of land possessing the possibility of being used for building purposes, the arbitrator (which expression in this judgment includes any person who has to determine the value) ,would probably have before him evidence of the prices paid, in the neighbourhood, for land immediately required for such purposes. He would then have to deduct from the value so ascertained such a sum as he would think proper by reason of the degree of possibility that the land might never be so required or might not be so required for a considerable time. In the case, however, of land possessing potentialities of such an unusual nature that the arbitrator has not similar cases to guide him, the value of the land must be ascertained in some other way. In such a case, moreover, there will, in all probability, be only a very limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to resell to a purchaser of the potentiality at a profit. It would seem, however, logically, that such purchasers should be disregarded. For the object of the imaginary auction is to discover what a purchaser of the potentiality will be willing to pay for it, and this cannot depend upon the presence at the auction of persons willing to pay less, unless it be that such ultimate purchaser is to be considered willing to pay whatever fantastic price he may be forced up to by competition. And no one suggests this. 9. Proceeding, therefore, with the imaginary auction at which are present two classes of buyers, viz. : the poramboke buyers and the potentiality buyers, the former will disappear from the bidding as soon as the poramboke value has been reached, and the bidding will thereafter be confined to the potentiality buyers. But at what figure will this bidding stop? As already pointed out, it cannot be imagined as going on until the ultimate purchaser has been driven by the competition up to a fantastic price. For he is ex hypothesi a willing purchaser and not one who is by circumstances forced to buy. Nor can the bidding be imagined to stop at the first advance on the po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompel him to do so is to treat him as a vendor parting with his land under compulsion and not as a willing vendor. The fact is that the only possible purchaser of a potentiality is usually quite willing to pay for it. An instance of this is to be found in the case of Inland Revenue Commissioners v. Clay [1914] 3 K.B. 466. That was a case under Section 25(1) of the Finance (1909-1910) Act, 1910, and is not perhaps strictly relevant to the present case. The facts of it, however, are worth recalling. There was a house of which the value to anyone except certain trustees was no more than 750. These trustees were the owners of a nurses' home which adjoined the house, and they were desirous of extending their premises. They accordingly purchased the house for 1,000, the owner thus receiving 250 for the potentiality his house possessed by reason of its position adjoining the nurses' home. It was held by the Court of Appeal that 1,000 was the value of the house to a willing seller. To say, said Lord Cozens Hardy M.R., that a small farm in the middle of a wealthy landowner's estate is to be valued without reference to the fact that he will probably be willing to pay a lar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was in question and that it ought to find a place in the estimate of the amount of compensation, he said (423): That view is supported by authority and by long practice; but underlying it is the question, which is one of fact for the arbitrator, whether there is a possible market for the site, and in determining that the statutory purchase is not to be considered. But the Master of the Rolls said that the purchase, not the purchaser, was to be left out of consideration. Any enhanced value attaching to the land by reason of the fact that it has been compulsorily acquired for the purpose of the acquiring authority must always be disregarded, and the Master of the Rolls meant no more than that. The case of Lucas and Chesterfield Gas and Water Board, In re [1909] 1 K.B. 16 must, however, be considered in greater detail, for it is on certain dicta of Fletcher Moulton L.J. in that case that the respondent chiefly relies. The land that had been compulsorily acquired in that case had potentialities for which the acquiring authority was not the only possible purchaser. The point now being considered did not, therefore, arise for decision. But in the Court below [1908] 1 K.B. 579Bray ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e become purchasers who are under a pressing need to acquire the land; and that is a circumstance that is never allowed to enhance the value. If, on the other hand, the Lord Justice meant by the scheme the intention formed by the acquiring authority of exploiting the potentiality of the land, his statement can only mean that the value of the land is not to be enhanced by the fact that they are possible purchasers. The result of this would be that, even in a case where there are two or more possible purchasers, their existence must not be allowed to enhance the value; for each purchaser must be deemed to have a scheme in the sense supposed, and the enhancement of value due to their competition which the Lord Justice envisages will in fact be due to the schemes. In these circumstances their Lordships are not prepared to follow the dictum of Fletcher Moulton L.J. in the Lucas case, and prefer the opinion there expressed by Vaughan Williams L.J. It is said, however, that the dictum of Fletcher Moulton L.J. has already received the approval of this Board: on more than one occasion. But in no case to which their Lordships' attention has been called was the question of the effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the potentiality of being used for the purposes of a railway. That potentiality was capable of being turned to account by a railway company who had obtained compulsory powers of acquiring it and by the proprietor of an adjoining colliery. In assessing the compensation to be paid by the railway company for the land, the arbitrator took into account the possibility that, but for its acquisition by the railway company, the colliery proprietor might have purchased it, but he did not take into consideration the possibility that the, company might in friendly negotiation have been willing to pay more for it than the colliery proprietor. In their Lordships' opinion he was wrong in this. The Divisional Court, however, on a case stated, upheld the decision of the arbitrator. In the course of his judgment Rowlatt J. said this (p. 637): Now, if and so long as there are several competitors including the actual taker who may be regarded as possibly in the market for purposes such as those of the scheme, the possibility of their offering for the land is an element of value in no respect differing from that afforded by the possibility of offers for it for other purposes. As such it is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue as a source from which water might be supplied to persons or corporations outside Lova Gardens. He did, however, allege that Lova Gardens had a. valuable potentiality as a building site and that such potentiality would be destroyed if he were deprived of the spring. He accordingly claimed ₹ 2,50,000 in this respect, calling it Damages sustained by severance, though in strictness it should have been called damages sustained by reason of the acquisition injuriously affecting his other property. He also claimed ₹ 1,200 per acre in respect of the land and ₹ 16,050 as the value of the masonry structures, roads, and trees on the land, the total claim amounting to ₹ 3,96,730. 18. On January 18, 1929, the Land Acquisition Officer made his award. He allowed in all a sum of ₹ 17,745-1-3 including the fifteen per cent. addition prescribed by Section 23(2) of the Act. It appears from the grounds of award bearing the same date that he thought nothing of the potentiality of Lova Gardens as a building site, and the existence of any such potentiality has now disappeared from the case and need not be referred to again. He valued the land at ₹ 50 an acre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng authority had actually put the property could be taken as a strong piece of evidence to show that the property acquired could be put to such use by the owner at the date of acquisition. Applying these principles, he found that the value of the land acquired, including the spring, was ₹ 1,05,000, which, with the addition of the fifteen per cent. under Section 23(2) of the Act, amounted to ₹ 1,20,750. The ₹ 17,745-1-3 awarded by the Land Acquisition Officer had been paid to the appellant and received by him under protest, and deducting this sum from the ₹ 1,20,750, there remained ₹ 1,03,004-14-9 due to the appellant. This sum he decreed in favour of the appellant with certain interest. The valuation of ₹ 1,05,000 was arrived at in this way. Evidence had been given before the learned Judge by two witnesses on behalf of the appellant as to what would be a proper charge for water supplied to the harbour area from the spring, and they estimated the charge at ₹ 1-8-0 per 1,000 gallons. The learned Judge, however, said that taking into consideration the conclusions arrived at by him, which were presumably the conclusions of law and findings of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasonably possible purchaser for the drinking water supply on the appellant's land, and this being so, the Subordinate Judge had erred in awarding compensation for the special adaptability of the land to supply drinking water to persons outside the appellant's land. After referring to the authorities and, in particular, the dictum of Fletcher Moulton L.J. in the Lucas case (supra), he said: There can be little doubt that this exposition of the law when applied to the facts of the present case as we have found them would justify the conclusion that no value can be awarded to the special adaptability of this land for supplying drinking water to the harbour alone, if it can be shown that the land cannot have any value as a source of drinking water to anyone else. 21. By the harbour the learned Judge meant, of course, the Harbour Authority. Stodart J., who, as already stated, concurred in the judgment of Wadsworth J, added that: It is not contended that any other public authority or private undertaker except the Harbour Authority would ever have come forward to develop this area and make it habitable. Thus the value of the…spring as a source of drinking water ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s true that there was a practical certainty of the Harbour Authority's taking steps to render the site as free as possible from malaria; for, if they did not, the harbour would not be used to any great extent even as a port of call. But, in order to carry out the necessary anti-malarial works, it was essential for the Harbour Authority to obtain a supply of drinking water from some source other than the wells in the area which were largely responsible for the malarious condition of the area and were going to be closed. The appellant on February 13, 1928, would therefore have been in this dilemma. If the only other source of water were the appellant's spring, the Harbour Authority would be the only possible purchaser. If, on the other hand, the Authority could obtain water from other sources sufficient both for the anti-malarial work and the supply of the traders in the harbour area, the appellant would almost certainly be refused permission to carry his competing supply over the Authority's land. In point of fact there was at one time an alternative scheme on foot for obtaining water known as the Meghadrigedda Scheme. The scheme was to be for the benefit of the Municipa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was prepared to pay for its acquisition. In the present case the land must be valued not at the sum it would be worth after it had been acquired by the Harbour Authority and used for anti-malarial purposes, but at the sum that the Authority in a friendly negotiation (to use Lord Johnston's words) would be willing to pay on February 13, 1928, in order to acquire it for those purposes. 25. Returning to the award made in the present case by the learned Subordinate Judge, it is to be observed that in valuing the land with its special adaptability as being worth ₹ 1,05,000 to the appellant, he did so on the footing that the appellant would himself have been in a position to supply the water to the harbour but for its compulsory acquisition by the Harbour Authority. He would also seem to have so valued it upon the footing that the spring could have been made an income-earning concern on February 13, 1928. He would otherwise have made a substantial discount from the ₹ 1,05,000. It is plain, therefore, that, in view of the fact that the water could not be exploited by the appellant himself and that it would necessarily be some years before the water would become a pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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