An agreement to enter into an agreement to lease does not create any right or interest in land, and a person who has merely such an agreement is not a person interested in land within the meaning of section 3(b) of the Land Acquisition Act, 1894, and is not entitled to claim apportionment of compensation.

Headnote:
LAND ACQUISITION - Apportionment of Compensation - Agreement to Enter into an Agreement to Lease - Whether Creates a Right or Interest in Land - Interpretation of Section 3(b) of the Land Acquisition Act, 1894.
Fact of the Case:

The Municipal Corporation of Greater Bombay (MCGB) had certain plots available for building purposes on building lease. Respondent No.1 wrote to the Municipal Commissioner offering to enter into an agreement to enter into a lease for a plot of 1600 square yards. The offer was accepted by the MCGB on 15th November 1956. However, no agreement of lease was executed, and respondent No.1 did not enter into possession of the plot. Subsequently, the plot was acquired by the Government under the Land Acquisition Act, 1894. Respondent No.1 claimed apportionment of compensation, relying on the decision in Dossibai Nanabhoy Jeejeebhoy v. P. M. Bharucha, where it was held that an intending lessee under an agreement to lease is a person interested in land and is entitled to claim apportionment of compensation. The Land Acquisition Officer referred the dispute to the Court under section 30 of the Land Acquisition Act.
Finding of the Court:

The Court held that respondent No.1 was not entitled to apportionment of compensation. It held that the agreement to enter into an agreement to lease did not create any right or interest in land in favor of respondent No.1. The Court distinguished the decision in Dossibai's case on the ground that the claimant in that case was in possession of the land in pursuance of an agreement of lease, whereas respondent No.1 in the instant case was not in possession.
Issues: 1. Whether an agreement to enter into an agreement to lease creates a right or interest in land? 2. Whether respondent No.1 was a person interested in land within the meaning of section 3(b) of the Land Acquisition Act, 1894?
Ratio Decidendi: 1. An agreement to enter into an agreement to lease does not create any right or interest in land. 2. A person who has merely an agreement to enter into an agreement to lease is not a person interested in land within the meaning of section 3(b) of the Land Acquisition Act, 1894, and is not entitled to claim apportionment of compensation.
Final Decision: The appeal was allowed, the order of the learned single Judge was set aside, and it was held that respondent No.1 was not entitled to make any claim in respect of the compensation awarded by the Land Acquisition Officer.

JUDGMENT - Chandurkar M.N. J.- This is an appeal by the Municipal Corporation of Greater Bombay challenging the decision of a learned single Judge of this Court holding that respondent No.1 was entitled to apportionment of amount of compensation payable to the Municipal Corporation under the Land Acquisition Act in the ratio of )0:6 in view of the decision of this Court in (DossibaiNanabhoy Jeejeebhoy v. P. M. Bharucha)1.

2. The facts in this case are not in dispute. The Municipal Corporation of Greater Bombay (hereinafter referred to as “the Corporation”) had certain plots available to be let out for building purposes on building lease. The ''practice of the Corporation was to invite offers firstly to enter into an agreement to enter into a lease and then to execute the lease in respect of such plots. So far as the plot in question is concerned, respondent No.1 wrote a letter to the Municipal Commissioner some time in 1956 offering “to enter into an agreement in the terms set out in the accompanying draft for a building lease …”. The p10t in question is 1600 square yards. Along with this letter, approved securities of the face value of Rs. 5000 duly endorsed to the Corporation to be held by the Corporation if the offer was accepted for due compliance with the obligations under the agreement were also sent. In addition, a sum of Rs. 300 was sent “to be held by the Corporation, if this offer is accepted, as an advance on account of stamp duty, registration charges and other costs payable in respect of the above mentioned agreement”. The letter further stated that if respondent No.1 failed to execute and complete the original' and duplicate of the agreement within one English calendar month after the date of delivery thereof or within such extended period (if any) as the Corporation may permit, the Corporation was to forfeit the security deposit and the advance of Rs. 300. There is no dispute that this offer was accepted by the Corporation on 15th November 1956.

3. Now, the agreement which respondent No. I had undertaken to enter into is different from the lease itself. This agreement has several clauses and under this agreement, possession was to be given to the intending lessee and the tenant was required to submit the necessary plans of the construction for approval and take the necessary steps. The agreement reserved the power of inspection to the Commissioner and the City Engineer or the Estate Agent and Land Manager in respect of the building and works erected and in the course of erection. The provision with regard to the lease is contained in paragraph 14 of the agreement and it appears that the lease is to be granted only after completion of the structure and the relevant stipulation with regard to the lease is as follows :-

“So soon as the City Engineer has accepted the completion certificate granted by the approved Architect and certified that the main building has been roofed in to the satisfaction of the City Engineer the Corporation shall if this Agreement has not previously been determined and if the Tenant has otherwise fulfilled all the terms and conditions of this Agreement grant to the Tenant or to any nominee of 'the Tenant who may be approved by the Corporation and the Tenant 07 such nominee shall accept a Lease of the Plot with the building thereon in perpetuity from the date of possession at the yearly rent mentioned in clause 13 hereof…. “

A separate form of the lease is also prescribed. Now, admittedly respondent No. 1 has not entered into the agreement of lease and clearly there was no question of any lease in his favour.

4. Now, the plot in question became the subject-matter of land acquisition proceedings consequent upon a notification under section 4 of the Land Acquisition Act being iSS1led on 12th May 1961 and notification under section 6 having been issued on 7th February 1962. Prior to this the Corporation had already sent an intimation to respondent No.1 on 20.h August 1960 that the land was under ac

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Judicial Analysis