The potential value of the premises is a factor to be taken into account in determining compensation under the provisions of S. 19, Defence of India Act, and S. 23 (1), Land Acquisition Act 1894.

Judgement

J. L. KAPUR, J. : This is an appeal pursuant to special leave granted by this Court against the judgment and order of the High Court of Calcutta varying the order of the arbitrator in regard to compensation for compulsory requisitioning of the premises in dispute.

2. The appellant before us is the owner of the premises in dispute which at the relevant time consisted of four storeys, the ground floor and three upper floors and the respondent is the State of West Bengal which was the opposite party before the arbitrator. This building (No. 9 Chittaranjan Avenue) was constructed before 28th July 1940 and was taken on a registered lease for three years by the Bengal Central Public Works Division on a rental of Rs. 1,950 per mensem inclusive of taxes. On the termination of the lease the building was requisitioned by the West Bengal Government and taken possession of on 30th July 1948. The Land Acquisition Officer offered Rs. 2,200 per mensem inclusive of taxes in the form of rent as compensation. As the appellant did not agree to this compensation the matter was referred under S. 19 of the Defence of India Act to an arbitrator Mr. J. De. He held that Rs. 2,200 per mensem fixed by the Land Acquisition Collector was a fair compensation. Against this order the appellant took an appeal to the High Court who set aside the order of the arbitrator, remanded the case to the arbitrator and laid down the following principle for the ascertainment of compensation :

"therefore, in deciding upon a fair rent, for the purpose of S. 23 of the Land Acquisition Act it must be a notional fair rent of a hypothetical tenant and the assessment of such notional fair rent must be based upon a consideration which does not take into account restrictions temporarily imposed by any restrictive executive order or legislation like Rent Control Order etc. The assessment in practice should be as if it was of a house of like nature let out for the first time to a tenant who is not compelled to let it out. The practical method will be to assess rent as if it was a new house for the first time let out on that date"

On remand the appellant who had previously claimed Rs. 3,998 as compensation plus Rs. 125 for working and maintaining the lift, increased his demand to Rs. 7,700 per mensem exclusive of municipal taxes, and also Rs. 125 for the use of the lift. He stated in his application that the amount previously claimed by him "was unduly low and was made through mistake and miscalculation and misconception of things and principle and moreover it was due to the want of proper information at the time." After the remand he examined further evidence and the respondent also examined some witnesses. The new arbitrator Mr. J. C. Mazumdar held that the matter must be decided according to the rent prevailing in the locality in 1943 for similar buildings with similar accommodation and amenities and proceeding on this basis he awarded compensation of Rs. 2,581-8 per mensem inclusive of all taxes, cost of normal and essential repair, cost of the upkeep of the lift and potential value of the building in an important commercial locality having regard to the fact that the period of requisition was indefinite. This sum was to be paid as from 1st August 1943. This order did not satisfy the appellant and against it he took an appeal to the High Court who fixed the compensation at Rs. 16 per hundred sq. ft. for the ground floor and Rs.13 per hundred sq. ft. for the 1st floor and Rs. 12 per hundred sq. ft. for the second floor and Rs. 11 per hundred sq. ft. for the third floor and thus calculating for the total floor area i.e. 5333 sq. ft. per floor it held the monthly compensation to be Rs. 2773 per mensem. It rejected the additional award of 10% on account of potential value but allowed Rs. 77 per mensem on account of the lift and thus it awarded a total compensation of Rs. 2,850 per mensem. The High Court however observed :

"We must make it clear further that in making the above