IN RE: SUKHANAND GURUMUKHRAI Vs. STATE

JUDGEMENT

(1.) This is a reference by the Special Acquisition Officer under Section 18 of the Land Acquisition Act relating to a piece of land measuring 3,009 square yards with a bungalow erected thereon situated on the Matunga Road which runs between Matunga station on the G.I.P. Railway Company s line and Mahim station on the B.B. and C.I. Railway Company s line. The property was notified by Government for the purpose of being handed over to the G.I.P. Railway Company which required additional land for traffic sidings and waggon sheds. A considerable area of the surrounding land has already been the subject-matter of previous references before me. The claimant purchased the land in reference about 1901 at the rate of Rs. 2 per square yard, and after filling it in all over to the extent of about 2 feet built a substantial upper storied bungalow with out-houses. The whole was surrounded with a low wall surmounted by a wooden fence. The compound has been laid out as a garden. This neighbourhood after the plague broke out in Bombay towards the end of 1896 was the first resorted to by persons who wished on that account to live outside the city. A considerable quantity of land changed hands and houses began to be built, but further development was checked when it was ascertained that the Bombay Improvement Trust had notified for acquisition all the land between the two Railways from Dadar to Matunga, so far back as 1898 or 1399. That notice was cancelled about the year 1905 and a fresh notice was issued by Government for acquisition for the Railway Company on the 22nd February 1906. The demand, however, for suburban residences continued unabated, though it could only be satisfied by erecting houses in Salsette.

(2.) Mr. Murphy, the Special Acquisition Officer, has valued the property on the basis of an hypothetical rent to the exclusion of all other methods. The claimant after the bungalow had been completed, had occupied the upper floor himself and had occasionally let out the ground floor and parts of the out-houses, so there was no possibility of arriving at the letting value of the whole except by guesswork. Mr. Chambers for Government estimated that a fair rent would be Rs. 100 per mensem. Mr. Murphy based his award on a rental of Rs. 120. In his decision he has complained of the attitude adopted by the claimant s legal advisers. The first valuation they brought in was one by Mr. Bryant based on his estimate of the present value of the land and buildings. The Company s solicitor stated that this valuation was on a wrong basis, the correct basis being the rental value. Mr. Murphy adopting the contention summarily rejected the claimant s valuation, and apparently expected him to immediately produce a valuation on a rental basis. At a later stage of the proceedings after the Railway Company had opened their case the claimant was allowed as a matter of grace to bring in a valuation also based on an hypothetical rent. Before me both parties have argued the case on the same basis.

(3.) Now the income of a property whether actual or imaginary is, no doubt, one of the, recognized starting points for a valuation. The mistake everyone has made in this case lies in thinking that that is the only element to be taken into consideration. In the case of residential property to endeavour to arrive at the market value solely on the basis of hypothetical rent may work grave injustice to the owner. There are commodities which may possess a value in the market not for the return they give on capital invested, but for the advantages and enjoyment which accrue from their possession. Residential property is such a commodity, and here by residential property I mean property which a purchaser wishes to acquire for his own residence. The first question to determine is whether there is a demand and if there is a demand the original cost is the most important element for consideration. I have frequently observed that a man who, buys land and builds, thereon does not necessarily produce a marketable commodity of the value of his outlay but it does not follow that he never does. For a man who wishes to acquire a residence for himself in a particular locality will consider not only the procurable rent of houses in the market but the cost to himself of building a new one.