# WALCHANDNAGAR INDUSTRIES LTD v. THE STATE OF MAHARASHTRA & ANR

- **Citation:** [2022] 18 S.C.R. 826
- **Court:** Supreme Court of India
- **Decided:** 2022-02-04
- **Case number:** Civil Appeal Nos. 2671-2672 of 2016
- **Bench:** Hemant Gupta, V. Ramasubramanian
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/walchandnagar-industries-ltd-v-the-state-of-maharashtra-anr-36157
- **Pages:** 35

## Headnote

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
'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
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
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
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
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
[2022] 18 S.C.R. 826
826
A
B
C
D
E
F
G
H
827
- In fact, the State has not come up on appeal against the same -
Remaining portion of the trolley line to a distance of 28 kms 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
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
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.
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
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
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
r

## Text

_Characters 0–39,713 of 75,942. This is a partial read: ask again with offset=39713 for what follows._

A
B
C
D
E
F
G
H
826
SUPREME COURT REPORTS
[2022] 18 S.C.R.
WALCHANDNAGAR INDUSTRIES LTD.
v.
THE STATE OF MAHARASHTRA & ANR.
(Civil Appeal Nos. 2671-2672 of 2016)
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
'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
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
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
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
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
[2022] 18 S.C.R. 826
826
A
B
C
D
E
F
G
H
827
- In fact, the State has not come up on appeal against the same -
Remaining portion of the trolley line to a distance of 28 kms 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
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
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.
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
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
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;
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
WALCHANDNAGAR INDUSTRIES LTD. v. THE STATE OF
MAHARASHTRA & ANR.
A
B
C
D
E
F
G
H
828
SUPREME COURT REPORTS
[2022] 18 S.C.R.
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 &
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
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
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
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
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
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]
A
B
C
D
E
F
G
H
829
1.4 In the light of the oral and documentary evidence, the
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
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
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
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
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
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
Court insofar as rolling stock is concerned. [Paras 64 & 65][855E-G]
WALCHANDNAGAR INDUSTRIES LTD. v. THE STATE OF
MAHARASHTRA & ANR.
A
B
C
D
E
F
G
H
830
SUPREME COURT REPORTS
[2022] 18 S.C.R.
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
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
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
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
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 &
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
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
land was taken. The balance sheets and profit & loss accounts
A
B
C
D
E
F
G
H
831
produced by the appellant before us are as on 30.09.1976 and
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
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
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-CG]
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
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
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
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
WALCHANDNAGAR INDUSTRIES LTD. v. THE STATE OF
MAHARASHTRA & ANR.
A
B
C
D
E
F
G
H
832
SUPREME COURT REPORTS
[2022] 18 S.C.R.
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,
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
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
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
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
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
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
A
B
C
D
E
F
G
H
833
shall stand restored. In respect of all other claims, the impugned
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.
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
[1975] Suppl. SCR 79
referred to
Para 39
[1969] SCR 90
referred to
Para 48
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 26712672 of 2016.
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.
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.
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.
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,
WALCHANDNAGAR INDUSTRIES LTD. v. THE STATE OF
MAHARASHTRA & ANR.
A
B
C
D
E
F
G
H
834
SUPREME COURT REPORTS
[2022] 18 S.C.R.
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
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
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 11⁄2 kms. upstream from Hingangaon bridge on PuneSholapur 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
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
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
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.
A
B
C
D
E
F
G
H
835
8. For our present purpose, it may be noted that the Land
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
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;
(ii)
Rs.39032.94 for embankments, rails, bullies, sleepers;
(iii)
Rs.43,491.12 for C.D. works;
(iv)
Rs.12,754.17 towards labour charges for removing rails and
steel sleepers; and
(v)
Rs.16,591.08 for solatium.
10. In effect, the Land Acquisition Officer awarded total
compensation of Rs.1,27,198.31/- and rejected the claim of
Rs.1,49,85,251/- for the unacquired portion.
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
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:-
WALCHANDNAGAR INDUSTRIES LTD. v. THE STATE OF
MAHARASHTRA & ANR. [V. RAMASUBRAMANIAN, J.]
A
B
C
D
E
F
G
H
836
SUPREME COURT REPORTS
[2022] 18 S.C.R.
SUMMARY OF CLAIM FOR COMPENSATION
I.Land in Acquisition in Kumbhargaon village
SEVERANCE AND INJURIOUS AFFECTION
II. SEVERANCE
III. INJURIOUS AFFECTION
A
B
C
D
E
F
G
H
837
Total for Severance and Injurious affection II + III
(Rs.33,80,000 + 1,86,19,700 = 2,19,99,700)
IV. TOTAL COMPENSATION
13. Eventually by a Judgment dated 14.03.1990, the Reference
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
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
(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
WALCHANDNAGAR INDUSTRIES LTD. v. THE STATE OF
MAHARASHTRA & ANR. [V. RAMASUBRAMANIAN, J.]
A
B
C
D
E
F
G
H
838
SUPREME COURT REPORTS
[2022] 18 S.C.R.
(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
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.
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
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:-
A
B
C
D
E
F
G
H
839
WALCHANDNAGAR INDUSTRIES LTD. v. THE STATE OF
MAHARASHTRA & ANR. [V. RAMASUBRAMANIAN, J.]
 17. As could be seen from the above tabulation, the appellant
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
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.
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
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.
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
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.
A
B
C
D
E
F
G
H
840
SUPREME COURT REPORTS
[2022] 18 S.C.R.
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
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
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
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/-.
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,
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
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
clause, for acquiring land for alternative trolley line, as the
A
B
C
D
E
F
G
H
841
acquisition could not have been considered as one for public
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
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
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
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
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
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
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;
WALCHANDNAGAR INDUSTRIES LTD. v. THE STATE OF
MAHARASHTRA & ANR. [V. RAMASUBRAMANIAN, J.]
A
B
C
D
E
F
G
H
842
SUPREME COURT REPORTS
[2022] 18 S.C.R.
(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;
(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
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
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.
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
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
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.
1 (2019) 13 SCC 101
A
B
C
D
E
F
G
H
843
Law on compensation for severance and injurious affection
29. Before we consider the aforesaid three heads of claim itemwise, 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
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
to be awarded for land acquired under this Act, the Court shall
take into considerationfirst,
the market-value of the land at the date
of the publication of the notification under
section 4, sub-section (1);
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;
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;
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
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
WALCHANDNAGAR INDUSTRIES LTD. v. THE STATE OF
MAHARASHTRA & ANR. [V. RAMASUBRAMANIAN, J.]
A
B
C
D
E
F
G
H
844
SUPREME COURT REPORTS
[2022] 18 S.C.R.
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
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
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;
(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;
(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
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
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:-
A
B
C
D
E
F
G
H
845
"49. Acquisition of part of house or building-.
(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
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
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
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
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.
(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
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
WALCHANDNAGAR INDUSTRIES LTD. v. THE STATE OF
MAHARASHTRA & ANR. [V. RAMASUBRAMANIAN, J.]
A
B
C
D
E
F
G
H
846
SUPREME COURT REPORTS
[2022] 18 S.C.R.
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.
35.