/2022 INSC 0114/
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 2671­2672 of 2016
WALCHANDNAGAR INDUSTRIES LTD.          ... APPELLANT (S)
 
VERSUS
THE STATE OF MAHARASHTRA & ANR.         ... RESPONDENT(S)
 
J U D G M E N T
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   claimant­landowner   has   come   up   with
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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  respondent­State   and  Mr.  Deepak
Nargolkar,   learned   senior   advocate   appearing   for   the   second
respondent­beneficiary.
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
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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   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
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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.
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; 
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(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:­
SUMMARY OF CLAIM FOR COMPENSATION
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I. Land in Acquisition in Kumbhargaon village
1 Lands acquired 50,325­00
2 Embankment 63,850­00
3 C.D. Works 68,200­00
4 Trees 360­00
1,82,735­00
5 Solatium @ 15% 27,410­00
Total 2,10,145­00
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SEVERANCE AND INJURIOUS AFFECTION
II. SEVERANCE
A Land 6,03,800­00
B Diminution   in   value   of   lands   in
Walchandnagar Township 8,64,000­00
C Embankment,   C.D.   Works   and
buildings 18,85,200­00
D Trees 27,000­00
Total 33,80,000­00
III. INJURIOUS AFFECTION
E Rails Sleepers etc. 42,45,000­00
F Girders (remove) Nil
G Telephone line 16,000­00
H Rolling Stocks 22,17,600­00
I Increase in transportation costs 80,07,180­00
J Remodeling of Bhigwan Yard  4,72,100­00
K Loss of earnings (profits) 35,62,000­00
L Retrenchment compensation 1,00,000­00
Total for injurious affection 1,86,19,700­00
Total for Severance and Injurious affection II + III
(Rs.33,80,000 + 1,86,19,700 = 2,19,99,700)
IV. TOTAL COMPENSATION
I Land 2,10,145­00
II Severance 33,80,000­00
III Injurious Affection 1,86,19,700­00
Total Rs.2,22,09,845­00
IV Less   :   Compensation   as
awarded   by   S.L.A.O   No.1,   Pune
on 9 th
 December 1981 1,27,198­00
V Net amount of enhancement  2,20,82,647­00
VI Interest   on   total   compensation
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from   the   date   of   possession   to
date   of   payment   of
compensation @ 4% per annum
under   Section   34   of   L.A.   Act   is
to   be   paid   by   Government   to
the Claimant
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
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Rs.2,21,784/­, thus, totaling to Rs.9,61,064/­; and 
(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 March­1976 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
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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:-
Heads of claim Amount
claimed   by
appellant  Amount   awarded
by   Reference
Court Amount
granted   by
High Court
Severance
1 Land 6,03,800 1,50,950 1,50,950
2 Diminution   in
value 8,64,000 Nil Nil
3 Embankments,
C.D. Works etc. 18,85,200 20,16,019 19,11,056
4 Trees 27,000 Nil Nil
Injurious
Affection
1 Rails Sleepers etc. 48,45,000 31,21,816 6,08,942
2 Telephone Line 16,000 Nil Nil
3 Rolling stocks 22,17,600 17,79,884 Nil
4 Increase   in
transportation
costs 80,07,180 8,00,718 Nil
5 Remodelling   of
Bhigwan Yard 4,72,100 1,30,338 1,30,338
6 Loss   of   earnings
(profits) 35,62,000 Nil Nil
7 Retrenchment
compensation  1,00,000 10,000 Nil
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;
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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.
Heads Amount claimed  Awarded   by
Reference
Court Awarded   by
High Court
Rails   &
Sleepers 48,45,000 31,21,816 6,08,942
Rolling Stocks 22,17,600 17,79,884 Nil
Increase   in
transportation
cost 80,07,180 8,00,718 Nil
Total 1,50,69,780 5,702,418 6,08,942
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
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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.
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
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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
PW­13.   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 PW­13 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/­.  
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22. However,   the   High   Court   rejected   the   report   of   Mr.   Kamat
(PW­13),   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   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
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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 1972­78 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
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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;
(iv) that   the   High   Court   failed   to   note   that   the   profit   of   the
appellant went down from Rs.96.07 lakhs  in 1975­76 to
Rs.40.80 lakhs in 1976­77;
(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
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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   PW­13   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 Haryana 1
, it was contended by  Mr. Deepak Nargolkar that the
1     (2019) 13 SCC 101
17

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 item­wise. 
Law on compensation for severance and injurious affection
29. Before   we   consider   the   aforesaid   three   heads   of   claim   item­
wise,   it   may   be   useful   to   take   note   of   the   legal   principles   on   the
basis 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:­
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“ 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 consideration­
first , the   market­value   of   the
land   at   the   date   of   the
publication   of   the
notification   under
section   4,   sub­section
(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
19

by   the   Collector,   the
person   interested   is
compelled to change his
residence   or   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;
20

(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:­
“ 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 no ­
tice   in   writing,   withdraw   or   modify   his   expressed   de ­
sire   that   the   whole   of   such   house,   manufactory   or
building shall be so acquired:
21

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 Collec ­
tor   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   unim ­
paired 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, or ­
der   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  Collec ­
tor   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   sustained   by   the   person   interested,   due   to   the
injurious affection,  (i)  of his other movable property;  (ii)  of his other
22

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. 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.
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.
37. In   so   far   as   the   1 st
  contingency   is   concerned   there   is   a   bar
under sub­section(1) of Section 49 for the acquisition of a part only
23

of   any   house,   manufactory   or   other   building,   if   the   owner   desires
that the whole of such house, manufactory or building shall be so
acquired.
38. In so far as the 2 nd
 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   un­reasonable   or
excessive.  
39. The   distinction   between   the   scope   of   sub­section   (1)   and   the
scope   of   sub­section   (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 Others 2
 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   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   third   clause   of   Section
23(1) of the Act makes it clear that the 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
2   (1975) 2 SCC 256
24

the   Act   saves   the   public   exchequer   money   which
otherwise   will   be   the   subject­matter   of   a   claim   for
severance.”
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).   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 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   un­reasonable   or   excessive.
Therefore,   it   is   enough   for   us   to   go   back   to   clauses   thirdly   and
25

fourthly   of  Section 23(1) without the constraints of sub­section (1)
or (2) of Section 49.
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   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   mix­up,
with   some   items   overlapping   with   others.   This   can   be   seen   from
paragraph 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   on   account   of
severance   and   injurious   affection.   Although   the
opponent   has   acquired   only   6   kilometers,   i.e.,   about
26

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   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,   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
ii) The   compensation   for   the   damages   suffered   by
the   Claimant   Company   in   respect   of   the   unac ­
quired   portion   of   the   trolley   line   on   account   of
severance   and   injurious   affection   under   the   fol ­
lowing head:
1) Unacquired   portion   of   the   land   admeasur ­
ing about 60.38 hectars.
2) The   entire   railway   track   of   36   kilometers
comprising  of rails, sleepers, girders, etc.
3) Rolling   stocks,   various   types   of   wagons,
tankers etc.
4) Diesel Engines three;
5) Telephone   line   and   telephone   poles,   trees,
wells,   etc.   Embankments,   C.D.   works,   Bridges,
Culverts   building,   non­operation   of   nearly   30
kilometers;   Diminution   in   the   value   of
Walchandnagar  Township,   due   to   discontinu ­
ance   of   the   trolley   line   facility   which   was   hith ­
erto 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   trans­shipment   of   loading
27

and unloading by road transport; total retrench ­
ment   compensation   for   about   52   persons,   spe ­
cially trained and employed for the  operation   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   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 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   claim   a   sum   of   Rs.80,07,180/­   towards   in ­
crease   in   transportation   costs   and   a   separate   amount   of
28

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 un ­
der clause  sixthly  of Section 23(1) and the claim under this head is
restricted to the time between the date of publication of the decla ­
ration 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 affec ­
tion 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.
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   trans ­
portation   costs’.   It   is   perhaps   after   realizing   such   overlapping   of
claim that the appellant has confined their claim in the present ap ­
peals   only   to   injurious   affection,   (i)   to   rails   and   sleepers;   (ii)   to
29

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 inju ­
rious affection, was a Division Bench decision of the Calcutta High
Court   in   R.H.   Wernickle   and   Ors.       vs.       The   Secretary   of   the
State   for   India 3
  .     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 Vil ­
lages of Lebong and Pandan at Darjeeling. A claim for injurious af ­
fection   was   made   by   the   owners   of   the   tea   estate   on   the   ground
that they were forced to stop work in the 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 ”. 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.
3   2 Ind.Cas 562
30

Expressing   concurrence   with   the   view   of   Doss,   J.,   Richardson,   J.
observed:  “   It is said that the rifle range will interfere with the work ­
ing 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   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. Reject ­
ing   the  said   argument,  Richardson,   J.,   opined:   “ But   it   is   not   clear
that   the   injury   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”. 
48. In   Balammal     vs.     State   of   Madras 4
,   this   Court   was
concerned   with   a   land   acquisition   under   the   provisions   of   the
4   AIR 1968 SC 1425
31

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   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   amenities   to   the   patrons   of   the   theatre   and   also   of
making   constructions   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   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.
32

49. Therefore,  keeping  in  mind the  above legal principles,   let us
now take up for  consideration, the claim  of the appellant in  these
appeals.
Rails and Sleepers
50. It   was   the   claim   of   the   appellant   that   Walchandnagar
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 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 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
33

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   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   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   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
34

of the appellant, who was a qualified Civil Engineer was examined
as PW­1, and a retired Director of Town Planning was examined as
PW­15.   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/­.
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 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
35

be   discarded  totally.   Thereafter,   the   Reference   Court   proceeded   to
take   the   estimated   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/­. 
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 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
36

recorded   by   the   High   Court   in   this   regard   may   be   usefully
extracted as follows:­
“ In   our   opinion,   the   company   cannot   be   granted
compensation   for   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   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   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   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   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
37

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. 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 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.
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
38

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. Therefore, we are of the considered view that
the High Court committed a gross error in reversing the finding 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   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   1967   and   that   after   showing   inclination   to   lay   an
alternative   trolley   line   at   the   initial   stages,   the   appellant
39

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
registered valuer by name Shri Kamat, in support of this claim. His
report   containing   the   valuation   of   the   rolling   stock   was   filed   as
Exhibit­93.     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
Executive   Engineer,   Mechanical   Division,   examined   as   DW­5,   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   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
40

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/­.
63. The High Court, on re­appreciation 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 PW­13 admitted during cross­examination 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.
64. Though   it   is   contended   on   behalf   of   the   appellant   that   the
41

evidence   of   PW­13   (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   (PW­13).   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.”
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
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
42

line   became   unusable,   the   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
PW­1,   the   Planning   Manager   as   PW­3   and   a   person   working   as   a
clerk  in  the  transport  Section   of  the  company   as PW­6.  The  Chief
Accountant   of   the   company   was   examined   as   PW­7   and   a   person
who was carrying on road transport business under the name and
style of Purohit Road Lines was examined as PW­12.  
68. 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/­.
43

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).
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 balance­sheets 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
44

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   two­fold   namely,   (i)   that   the   profits
actually   went   down   from   Rs.96.07   lakhs   in   1975­76   to   Rs.40.80
lakhs in 1976­77; and   (ii)   that without any evidence on record the
High Court presumed that the increase in transportation cost was
off­set   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   under   Section   6   was   published   in   the   Government
Gazette  on  01.08.1974.  Notices  under  Sections  9(1)  and  9(2)  were
published   in   September­1974   and   Feburary­1975.   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.
45

72. The appellant has produced before us the copy of the balance­
sheets and profit & loss account for the years 1975­76 and 1976­
77.     From   these   balance­sheets   and   profit   &   loss   accounts,   it   is
sought   to   be   highlighted   that   the   appellant   made   a   profit   of
Rs.96.07   lakhs   during   the   year   1975­76   and   that   the   profit   went
down to Rs.40.83 lakhs during the year 1976­77. 
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  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
46

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.   
74. 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
47

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.
48

75. Moreover  there   was   a   finding   of   fact   in   the  Award   passed  on
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   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.   27­9­72.   In   these   circumstances   the   claim   for
severance and injurious affection has 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.
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
49

in   transportation   cost,   falling   under   the   category   of   “ injurious
affection   to   earnings ”   cannot   also   be   faulted,   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   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. 
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 
50

had 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   1975­76   to   1976­77,   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.
79. Therefore,   the   appeals   are   partly   allowed,   setting   aside   that
portion of the findings and conclusions reached by the High Court
in   the   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
51

stand   restored.   In   respect   of   all   other   claims,   the   impugned
judgment is not interfered with. 
80. Before   parting   we   are   obliged   to   bring   one   important   fact   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 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:­
“ 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  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
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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   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.
… ..…………....................J.
       (Hemant Gupta)
.…..………......................J.
     (V. Ramasubramanian)
New Delhi
February  4, 2022
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