ivil Appeal No 2228 of 1982
From the Judgment and Order dated the 2571980 of the Madras High Court in CRP No 1150 of 1979
Anant Palli and EC Agarwala for the Appellant
396 V Balachandran and K Vijay Kumar for the Respondent
The Judgment of the Court was delivered by K RAMASWAMY J
The appellanttenant is in occupation of a double storeyed building bearing No 100 Aiya Mudali Street Chintadripet Mount Road Madras on a monthly rent of Rs 170
The respondent landlady filed an application under Sec 4 of the Tamil Nadu Buildings Lease and Rent Control Act 18 of 1960 as amended by Act 23 of 1973 for short the Act 
The Rent Controller fixed the fair rent at Rs 1000 per month
On appeal the Court of Small Causes Madras and on further Revision under Sec 25 the Madras High Court confirmed the order
This appeal by special leave has been at the behest 01  the tenant
The admitted facts are that 13rd portion of the building is being used for residential and the rest for non residential purpose namely for running a school
It is of 50 years  old
Section 4 of the Act provides the procedure for fixation of the fair rent which reads thus Fixation of Fair Rent 1 The Controller shall on applica tion made by the tenant or the landlord of a building and after holding such enquiry as he thinks fit fix the fair rent for such building in accordance with the principles set out in the following sub sections
2 The fair rent for any residential building shall be nine per cent gross return per annum on the total cost of such building
3 The fair rent for any non residential building shall be twelve per cent gross return per annum on the total cost of such building
4 The total cost referred to in sub section 2 and sub section 3 shall consist of the market value of the site in which the building is constructed the cost of construction of the building and the cost of provision of any one or more of the amenities specified in Schedule I as on the date of application for fixation of fair rent Provided further that the cost of provision of amenities specified in Schedule I shall not exceed 397 i in the case of any residential building fifteen per cent and ii in the case of non residential building twentyfive per cent of the cost of site in which the building is con structed and the cost of construction of the building as determined under this Section 5a The cost of construction of the building including cost of internal water supply sanitary and electrical installations shall be determined with due regard to the rates adopted for the purpose of estimation by the Public Works Department of the Government for the area concerned
The Controller may in appropriate cases allow or disallow an amount not exceeding thirty per cent of construction having regard to the nature of the building
b The Controller shall deduct from the cost of construc tion determined in the manner specified in clause a depre ciation calculated at the rates specified in Schedule II
 A bird s eye view of Sec 4 indicates that the Control ler shall hold an enquiry before fixing the fair rent pre ceded by an application made in that behalf either by the tenant or the landlord in accordance with the principles set out in sub sections 2 to 5 of Sec 4
In case of a residential building the fair rent shall be 9 per cent and for nonresidential building 12 per cent gross return per annum on the total cost of the building in question
The total cost shall consist of a market value of the site on which the building is constructed b the cost of the construction of the building and c the cost of provision of any one or more of the amenities specified in Schedule I which shall not exceed 1 in the case of residential building 15 per cent and 2 in case of any non residential building 25 per cent of the cost of the site in which the building was constructed as determined under Sec 4 of the Act
The cost of the construction of the building would also include internal water supply sanitary and electrical installations
The estimation of its ratio thereof shall be as is done by the Public Works Department of the Government for the area concerned
In addition to the above having regard to the nature of the building the Controller may in appropriate cases allow or disallow an amount not exceeding 30 of construction
The Controller shall also deduct from the cost of construction determined in the manner specified in clause a of sub 398 section 5 of Sec
4 the depreciation calculated at the rates specified in Schedule II
The determination of the fair rent of the building shall be fixed as on the date of the application filed for fixation of the fair rent
Section 5 of the Act provides the right for refixation of the fair rent under the Act for the reasons adumbrated therein with which we are presently not concerned
An Engi neer was appointed as a Commissioner to evaluate the total cost of the building who adopted the rates of the Public Works Department and submitted his report which is Exhibit P 2
He was also examined as a witness
The rates of the construction for terraced building were a for the ground floor at Rs345 per sq
metre and b for first floor at Rs320 per sq
metre
As regards the tiled portion the cost of construction is Rs300 per sq
metre
The parties also adduced oral evidence
The Rent Controller after considera tion thereof fixed the rates as afore stated and he worked out the fair rent on that basis
The entire ground floor consists of 292725 sq
the area of two shops wherein consists of 23800 sq
The built up area of the first floor is 333075 sq
ft the tiled portion consists of 237 sq
The cost of construc tion was estimated at Rs 199300
The depreciation  1 per cent as is first class building was given
He added the market value of the open site at Rs20000 and also annuity on the vacant portion  1 per cent was added
Accordingly the Rent Controller worked out the cost at Rs 151820
The fair rent as non residential premises at 12 per cent gross return was fixed at Rs 15 18 per month
Since the respond ent landlady confined to the enhancement of the fair rent at Rs 1000 it was accordingly fixed
On appeal it was affirmed
In the revision the High Court while agreeing with the valuation adopted determined fair rent on the basis that 13rd as being used for residential purpose and 23rd for non residential purpose
On that basis the learned Judge worked out at the rate of 9 per cent and 12 as adum brated in Sec
42 and 3 and fixed the fair rent
While upholding the depreciation at 1 per cent it fixed the fair rent Rs139167 per month but affirmed the fair rent at Rs1O00 per month as was confined to by the landlady
From this material matrix the question at issue is whether the fixation of the fair rent by the Rent Controller ultimately affirmed by the High Court is illegal
The contention of the learned counsel for the appellanttenant that the cost of the building and its market value are illegal is falla cious and untenable
Section 4 not only provides the proce dure but also the principles and method on the basis of which the fair rent is to be determined
The fixation of fair rent therefore is in consonance with Section 4
We 399 accordingly affirm its legality
Realising this stark reali ty the counsel laid emphasis that the valuation of the cost of construction should be as on the date of the construction of the building and placed strong reliance on KC Nambiar vs The IV Judge of the Court of Small Causes Madras  Ors
 Therein this Court held that the expres sion cost of construction  means the cost of construction of the building as originally erected with such additions as may be required to be made for subsequent improvements
Rule 12 which prescribes the rate at which the cost of construc tion is to be computed plainly goes beyond the terms of the section
Accordingly this Court allowed the appeal and determined the fair rent as on the basis of the cost of construction
On that premise the learned counsel for the appellant contended that calculation of the cost of con struction to the residential as well as non residential building should be with reference to the date of applica tion
We find no substance in the contention
It is already seen that sub section 4 of Sec 4 of the Act clearly indi cates that the total cost of construction referred to in sub section 2 and sub section 3 shall consist of the market value as on the date of application for fixation of the fair rent
It is obvious that at the time when this court ren dered the decision in Nambiar s case there was no provision in Sec 4 as to the date on which the cost of construction was to be determined and Rule 12 provided in the manner in which the fixation of the fair rent has to be made
But subsequently it was amended by Amending Act 23 of 1973 incorporating in sub section 4 of Sec 4 of the Act as the date of making an application
This is also apparent when we see Sec 5 of the Act
Sub section 3 of Sec 5 clearly mentions that Where the fair rent of any building has been fixed before the date of the commencement of the Tamil Nadu Building Lease and Rent Control Amendment Act 1973 the Landlord or the tenant may apply to the Controller to refix the fair rent in accordance with the provisions of Section 4 and on such application the Controller may refix the fair rent   Thus we are clearly of the view that the ratio in Nambi ar s case no longer would apply
The subsequent amendment brought on the statute in 1973 amplified the date of appli cation as the staring point to fix market value
On the basis of the valuation of the building estimated by the commissioner as per PWD rates prevailing in the area and evidence produced by the parties the Rent controller as modified by the High Court rightly determined the fair rent
400 It is next contended that the method adopted by the Controller and ultimately upheld by the High Court in fixing the fair rent is not correct
It is contended that the value of the building has been changing from time to time as is reflected from the evidence on record and the courts below committed the gravest error in not considering the evidence in proper perspective
It is already seen that Sec
4 pre scribed the principles on the basis of which the fair rent is to be fixed
In the light of those principles the evi dence adduced by the parties was considered by the Control ler the appellate court and the High Court found that the fixation of the fair rent is much in excess to the claim made by the landlady
Since the landlady confined the claim for Rs 1000 per month the courts below have fixed the fair rent at Rs 1000
Therefore on the findings of facts based on consideration of the evidence this Court cannot interfere and come to its conclusion
Thereby the finding is not vitiated nor illegal warranting interference
The appeal is accordingly dismissed with costs fixed at Rs 5000
GN Appeal dismissed


Summary:
Notification under section 4 of the Land Acquisition Act 1894 was issued in respect of the appellant s lands in 1959 and the lands were acquired
The Land Acquisition Collector awarded compensation at the rate of Rs2000 per bigha as also solatium and interest
The appellants approached the District Court which enhanced the compensation from Rs2000 per bigha to Rs40005000 per bigha
The appellants preferred appeals before the High Court
Taking into account a comparable sale in the area few months before the Notification the High Court enhanced the compensation to Rs7000 per bigha and also awarded solatium and interest
The plea for higher compensation on the ground that some developed plots were sold by a real estate company at a higher rate was negatived since according to the High Court that company was in a better position to develop the land and that the potentiali ty of the land in its hands was greater
These appeals by special leave are against the said orders of the High Court
Allowing the appeals HELD 1
In land acquisition proceedings compensation has to be fixed on the basis of a hypothetical sale at or about the time of the notification under section 4 of the Land Acquisition Act of similar land by a willing seller to a willing buyer there being no other factors like urgent need of money or urgent need of the land for a special purpose and so on which might depress or augment the price
In determining this compensation the ability of a particular party or his lack of ability to develop the land and to realise its potential cannot be regarded as a relevant circumstance
The High Court therefore was in error in 127 placing great reliance of the aforesaid circumstance in determining the value of the land for fixing the compensa tion
128F H 2
The appellants have failed to furnish any material on record of this Court on which this Court could fix the proper compensation nor have any arguments been advanced in that regard
In these circumstances the impugned judgments and orders are set aside and the appeals remanded to the High Court for determination of the proper compensation for the lands acquired in accordance with law
and in the light of our judgment
129A B