In a lease where the lessee has an option to remain indefinitely and the lessor cannot reclaim possession unless the lessee surrenders, the lessor's interest for compensation purposes is limited to the capitalized rental value, provided the land continues to be used for the leased purpose.

Lord Chancellor.:-

This is an appeal from a judgment of the High Court of Calcutta reversing the judgment of the District Judge of Dacca. The question in issue turns upon the construction to be placed upon a lease made in the year 1887 between the predecessor-in-title of the present appellants and one Kishori Lal Boy Chowdhuri, his lessee. By that lease the lessors granted to Kishori Lal Roy Chowdhury a lease of certain property in Dacca. The lease commences with the recital that Kishori Lal Roy Chowdhuri had taken a lease of a house described as No. 73, the boundaries of which are set out in the document, and it recites that it is necessary for Kishori Lal Lal Roy Chowdhury to secure a house for a long period, with the object of removing the insufficiency of accommodation and comfirming the stability of a school and College which had been established thereon. Then it recites that the lessors are agreeable, according to the lessee's proposals, to keep the house on lease to the lessee as long as he likes. It goes on to stipulate for a monthly rental of Rs. 140 and that the lessee shall not be entitled to give up the house before he prepares a house of his own for the school, and that the lessors shall not be entitled to take hold of the house unless the lessee gives up the same of his own accord. There are further provisions as to what is to happen with regard to buildings erected on the land in the event of the lessee giving up his lease, and the lease finishes with a statement that all the stipulations shall take force and effect against and in favour of the lessors, their heirs and representatives in succession and of the lessee, his heirs and representatives. After the execution of that lease the lessee carried on a school and College for some twenty years and in the year 1907, he executed an indenture of trust, by which he conveyed the lease and certain other properties to trustees, in order that they might carry on the College and school.

In the year 1908, the school was removed to another site. The College continued to be carried on for the time being on this site. At some date between 1908 and 1910 the land adjoining the property demised was acquired by the trustees, and upon the land so acquired a new building was erected for the use of the College. The land, the subject matter of the lease of 1887, appears thereafter to have been used partly as a hostel for students at the College, partly for superintendents' buildings, for a dining room, for lavatory accommodation and for a house for the lodge-keeper. This state of affairs continued from 1910 to 1920, the trustees continuing to pay the monthly rent to the lessors, and no objection being raised by anyone to what was being done. In the year 1920 it appears that the legislature desired to establish the College on a more permanent basis, and by Act 16 of 1920 *the Indian Legislative Council enacted that the property comprised in the lease should be transferred to and vested in and held by the Governor of Bengal in Council. Some time in the year 1920, after the passing of this Act but before it had actually come into force, the Government determined to acquire the freehold interest in the land, and it then became necessary to ascertain the amount of compensation to be paid to the appellants for their interests in the land. The Collector assessed the interest on the basis that they were entitled to a perpetual rental of 140 rupees per month but that they had no substantial or marketable interest in the land beyond that amount.

* The Jagannath College Act 16 of 1920 - Ed.

From that decision the appellants took the case to the Court and the District Judge reached the conclusion that the effect of the Act to which attention has just been called, No. 16 of 1920, was to bring the lease to an end, and therefore that the appellants were entitled to have their interest in the land valued as a fee simple in possession. From that decision an appeal was taken to the High Court of Calcut