A) ABSTRACT / HEADNOTE

This case revolves around Haji Mohammad Ekramul Haq v. The State of West Bengal where the Supreme Court of India adjudicated upon the correct principles for assessing compensation for requisitioned property under the Defence of India Act, 1939 and the Land Acquisition Act, 1894. The building of the appellant was requisitioned for government use. The key issue was the method of determining fair compensation, specifically whether the “potential value” of the property should be factored in. The Arbitrator awarded compensation including a 10% addition for potential value. The High Court partly set aside the Arbitrator’s findings and calculated compensation without including potential value but awarded a nominal sum for the lift usage. The Supreme Court held that potential value must be considered as per the Land Acquisition Act’s principles. The Court enhanced the compensation accordingly. This case sets a precedent for valuation of requisitioned property by acknowledging potential value and special adaptability of property for particular purposes.

Keywords: Requisitioned Property, Potential Value, Land Acquisition, Defence of India Act, Fair Compensation, Arbitrator’s Award, Lift Maintenance, Supreme Court, Rent Control, Government Use.

B) CASE DETAILS

i) Judgement Cause Title:
Haji Mohammad Ekramul Haq v. The State of West Bengal

ii) Case Number:
Civil Appeal No. 191 of 1955

iii) Judgement Date:
December 16, 1958

iv) Court:
Supreme Court of India

v) Quorum:
J.L. Kapur, J. (Author of Judgment), with Jafar Imam and S.K. Das, JJ.

vi) Author:
Justice J.L. Kapur

vii) Citation:
[1959] Supp. SCR 922

viii) Legal Provisions Involved:

• Section 19 of Defence of India Act, 1939

• Section 23 of Land Acquisition Act, 1894

• Article 14, Constitution of India (by implication of fair procedure)

ix) Judgments Overruled by the Case (if any):
None

x) Case is Related to which Law Subjects:
Constitutional Law, Property Law, Administrative Law, Compensation Law, Land Acquisition Law

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The appellant’s property, a four-storey building at 9 Chittaranjan Avenue, Calcutta, was requisitioned by the State of West Bengal under the Defence of India Act, 1939 for the office of the Controller of Army Factory Accounts. Initially leased for three years at Rs. 1,950 per month inclusive of taxes, upon lease expiration in 1943, the government requisitioned the premises. The dispute arose when the parties failed to agree on fair compensation.

The Land Acquisition Officer offered Rs. 2,200 per month which the appellant rejected. The matter went to arbitration under Section 19 of the Defence of India Act, 1939. The Arbitrator fixed rent at Rs. 2,200 per month, but the High Court remanded the case directing compensation determination without considering artificial suppressions like rent control orders, emphasizing notional fair market rent.

On remand, after both parties produced fresh evidence, the Arbitrator awarded Rs. 2,581-8 per month including an additional 10% for potential value. The High Court partly reversed this and awarded Rs. 2,850 per month excluding the 10% potential value addition but adding Rs. 77 for lift maintenance. The appellant approached the Supreme Court seeking full consideration of potential value and higher lift maintenance compensation.

D) FACTS OF THE CASE

The building, constructed before July 28, 1940, was originally leased to the Bengal Central Public Works Division. Upon termination, it was requisitioned on July 30, 1943 under the Defence of India Act, 1939. The initial compensation was disputed, leading to arbitration. The building was uniquely suitable for government use as it was adjacent to another government-occupied building at 5 Chittaranjan Avenue.

The Arbitrator, upon remand, considered prevailing market rates in 1943 for similar accommodations and fixed rent accordingly. He additionally included 10% for potential value, acknowledging the building’s unique suitability for the government’s purpose and indefinite requisition period. The High Court rejected this 10% addition but adjusted rates based on square footage per floor, ultimately leading to an appeal before the Supreme Court.

E) LEGAL ISSUES RAISED

i) Whether potential value of requisitioned premises should be included in determining compensation.

ii) Whether the High Court erred in averaging rents of other properties rather than valuing based on evidence.

iii) Whether the compensation awarded for lift maintenance was adequate and justified.

F) PETITIONER/ APPELLANT’S ARGUMENTS

i) The counsels for Petitioner / Appellant submitted that:

The High Court ignored potential value of the premises, which was crucial given the building’s unique advantage for the government. They argued that the Arbitrator rightly included 10% for potential value due to the property’s special adaptability for the Controller of Army Factory Accounts.

The High Court erred by averaging rents of nearby buildings—No. 5 and No. 22 Chittaranjan Avenue—without properly appreciating the peculiar advantages of the appellant’s property. They contended that expert witness U.P. Malik’s valuation, suggesting Rs. 23 per hundred sq.ft. for the ground floor and Rs. 17.8 per hundred sq.ft. for upper floors, was more accurate.

The High Court wrongly dismissed Malik’s evidence without valid reasoning. Furthermore, the arbitrary sum of Rs. 77 awarded for lift maintenance was insufficient, considering the lift serviced both requisitioned buildings connected by an overhead bridge used by multiple government departments.

They also challenged the admissibility of Exhibit D (award for other properties) relied upon by the High Court, as it contained recitals not tested through cross-examination.

G) RESPONDENT’S ARGUMENTS

i) The counsels for Respondent submitted that:

The Arbitrator’s award was excessive, and the High Court correctly averaged rents of similarly situated properties. They emphasized that the High Court’s method of calculation was reasonable and within judicial discretion.

The government argued that potential value was speculative, unsupported by concrete evidence. The building’s location and market conditions justified the High Court’s approach without including speculative potentiality calculations.

The government defended the Rs. 77 award for lift maintenance, arguing that it sufficiently covered operational costs based on evidence before the court. They also contended that the appellant was attempting to claim inflated sums post remand which were far higher than his original claim.

H) RELATED LEGAL PROVISIONS

i) Section 19 of the Defence of India Act, 1939:
Empowers the government to requisition property and lays down arbitration for compensation disputes. Read here

ii) Section 23 of the Land Acquisition Act, 1894:
Outlines factors for determining compensation including market value and special advantages. Read here

iii) Article 14, Constitution of India:
Though not directly cited, principles of fairness and non-arbitrariness were relevant.

I) JUDGEMENT

a. RATIO DECIDENDI

i) The Supreme Court held that potential value must be considered while assessing compensation. It reaffirmed that principles under Section 19 of Defence of India Act parallel those in Section 23 of Land Acquisition Act. Property value assessment requires considering special adaptability for particular uses as was done by the Arbitrator.

The Court relied on Vyricherla Narayana Gajapatiraju v. Revenue Divisional Officer (1939) L.R. 66 I.A. 104 where Lord Romer stated that potentiality should be evaluated based on material evidence, not speculation. Read here

The Arbitrator correctly identified three factors:

• The special adaptability for Controller of Army Factory Accounts.

• The indefinite nature of the requisition.

• The additional burden on the lift.

Ignoring these amounted to legal error.

The Supreme Court also enhanced lift maintenance compensation to Rs. 125 per month, considering heavy usage and connection to multiple government offices via an overhead bridge.

Ultimately, the Court fixed compensation at Rs. 3,200 per month.

b. OBITER DICTA 

i) The Court observed that:

• Courts should avoid artificial suppressions like Rent Control when determining notional fair rent.

• The valuation must reflect circumstances as if letting occurred freely in the open market.

c. GUIDELINES 

i) The judgment provided key guidelines:

• Compensation for requisitioned property must include market rent, maintenance costs, and potential value.

• Courts must avoid rigid averaging of unrelated properties without considering peculiar adaptability.

• Potentiality assessment should rely on tangible evidence, not conjecture.

• Maintenance expenses must reflect actual usage.

J) REFERENCES

a. Important Cases Referred

i) Vyricherla Narayana Gajapatiraju v. Revenue Divisional Officer, (1939) L.R. 66 I.A. 104 Read here

b. Important Statutes Referred

i) Defence of India Act, 1939, Section 19

ii) Land Acquisition Act, 1894, Section 23

iii) Constitution of India, Article 14