Walchandnagar Industries Ltd. vs The State of Maharashtra & Anr.

Partly allowing the appeals, the Court

HELD: 1.1 Before the Reference Court, the Chief Administrative Manager of the appellant, who was a qualified Civil Engineer was examined as PW-1, and a retired Director of Town Planning was examined as PW-15. 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 at Rs.50,08,288/-. 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 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 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 rails and sleepers at Rs.31,21,816/-. [Paras 52 & 53][852-B-F]

1.2 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 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. 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 trolley line to a distance of 7 kms. which got submerged in the backwaters. [Paras 54 & 55][852-G-H; 853-E]

1.3 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. 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 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. The High Court committed a gross error in reversing the finding of the Reference Court under this heading. [Paras 56 & 57][853-G-H; 854-A-C]

1.4 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 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/-. The High Court, on re-appreciation 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 PW-13 admitted during cross-examination 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. [Paras 62 & 63][854-H; 855-A-D]

1.5 Though it is contended on behalf of the appellant that the evidence of PW-13 (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 (PW-13). 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.” Therefore, no exception can be taken to the finding recorded by the High Court insofar as rolling stock is concerned. [Paras 64 & 65][855E-G]

1.6 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/-. 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). 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 balance-sheets 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 held that the Reference Court could not have any compensation under this heading ‘increase in transportation cost’. [Paras 68 & 69][856-C-G]

1.7 The appellant has produced before us the copy of the balance-sheets and profit & loss account for the years 1975-76 and 1976-77. From these balance-sheets and profit & loss accounts, it is sought to be highlighted that the appellant made a profit of Rs.96.07 lakhs during the year 1975-76 and that the profit went down to Rs.40.83 lakhs during the year 1976-77. 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 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. [Paras 72, 73][857-CG]

1.8 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 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. 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. [Paras 74 & 76][857-H; 858-A-C, F-G]

1.9 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. Similarly, the refusal of the High Court to award any compensation for increase in transportation cost, falling under category of “injurious affection to earnings” cannot also be faulted. 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. [Paras 77][858-G-H; 859-A-B]

1.10 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 ad 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 1975-76 to 1976-77, 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. Therefore, setting aside that portion of the findings and conclusions reached by the High Court in the impugned judgment, 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 stand restored. In respect of all other claims, the impugned judgment is not interfered with. [Paras 78 & 79][859-C-G]

Wazir v. State of Haryana (2019) 13 SCC 101 : [2019]

2 SCR 571; Harsook Das Bal Kishan Das v. The First Land Acquisition Collector and Others (1975) 2 SCC

256 : [1975] Suppl. SCR 79; R.H. Wernickle and Ors. v. The Secretary of the State for India 2 Ind.Cas 562; Balammal v. State of Madras AIR 1968 SC 1425 : [1969] SCR 90 – referred to.