Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 13
PETITIONER:
DURGI DEVI & ORS.
Vs.
RESPONDENT:
STATE OF U.P.
DATE OF JUDGMENT05/04/1978
BENCH:
SARKARIA, RANJIT SINGH
BENCH:
SARKARIA, RANJIT SINGH
UNTWALIA, N.L.
KAILASAM, P.S.
CITATION:
1978 AIR 1124 1978 SCR (3) 595
1978 SCC (3) 101
CITATOR INFO :
R 1981 SC1215 (5)
ACT:
U.P. Zamindari Abolition and Land Reforms Act, 1950 Sections
39(1) (e)(i) and Section 44 read with Rule 34 of U. P.
Zamindari Abolition & Land Reforms Rules 1952-Scope of-
Whether the compensation officer is required to appraise the
annual yield of the forests on the date of vesting and take
such yield also. into consideration while assessing the
average annual income from the forests under clause (e) of
Sec. 39(1)-Whether 15% deduction is permissible by way of
management expenses tinder Section 44(c)-Period to be taken
into consideration under sub clause (1) of section 39(1)(e)
of the Act, what is Computation of compensation.
HEADNOTE:
On the issuance of a Notification under Section 4 of the
U.P. Zamindari Abolition and Land Reforms Act, 1950, all
rights and interests of the intermediary (landlord)
including the forests in village Dhalani and Sorna, vested
in the State of U.P. with effect from the date of vesting
i.e. July 1, 1952. A draft compensation Roll under Section
40 of the Act, was prepared by the Compensation Officer in
respect of the intermediary’s interests in the said villages
and served upon the Latter, who whereupon filed objections
against the Roll. The intermediary claimed Rs. 64,971-9-7
more than the one shown as due to him in the draft roll.
Purporting to act under Section 39(1)(e)(i) of the Act, the
Compensation Officer held that the sale proceeds of the
forests in the area of village Sorna during 35 years
immediately preceding the date of vesting, aggregated to Rs.
6,13,334-8-3. He divided this figure by 35 and took the
resultant figure, i.e Rs. 17,524/- as the annual income from
the forests in village Sorna. But as Rs. 1775-14-6 had
already been included in the gross assets, he deducted this
amount and thus fixed the annual income from the forests in
the village, at Rs. 15,748-1-6. From this figure, he
further deducted 15% for management cost and held that the
intermediary was entitled to a further sum of Rs. 13,471-11-
6 over and above the one shown as due to him in the draft
Compensation Roll.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 13
The intermediary filed an appeal in the High Court against
the said findings which amounted to a decree under the Act,
and the State filed its cross objections. The High Court
held that the Compensation Officer in preparing the
Compensation Roll had committed two errors : Firstly, he
completely excluded from consideration the provisions of
sub-clause (ii) of clause (e) of Section 39(1) and did not
either appraise the annual yield of the forests or take the
same into consideration. Secondly, he did not give any
reason for taking the period of 35 years under Sub-Clause
(i) of Section 39(1)(e) as the measure for calculating the
annual average income from the forests. After appraising
the evidence on record, the High Court held that it was just
and proper that the number of years to be adopted in
calculating the average annual income under sub-clause (i)
of Section 39(1)(e) should be 20 years. On this basis, the
High Court divided the sum of Rs. 6,13,334-8-3 that bad been
worked out by the Compensation Officer in respect of the
income from sales of forests in Village Sorna, by 20, and
arrived at the figure Rs. 30,666-11-3. The High Court
further held on an interpretation of clause (e) of Section
39(1), that the Compensation Officer was bound to apperaise
the annual vield of the forests on the date of vesting,
under sub-clause (ii) of Section 39(1)(e) and take such
vield- also into consideration. Relying mainly on the
evidence of Shri D. D. Chopra (a retired Divisional Forest
Officer examined by the intermediary), the High Court found
that the yield of the forest, Apprased Linder clause (ii) of
Section 39(1) (e) of the Act, would be Rs. 47,128/- The High
Court further appears to have added the
596
figures worked out by it under sub-clauses (i) and (ii) of
Section 39(1)(e) and then divided the same by two. By this
process, considering all the circumstances of the case, the
High Court found that the fair amount to be fixed as the
average annual income from the forests in Village Sorna,
would be Rs. 40,000/-. It further held that no amount could
be legally deducted under Section 44 from this figure by way
of management expenses or for any other purpose. The
Compensation Officer was directed to prepare finally the
Compensation Roll on the basis of Rs. 40,000/- being the
annual income from the forests, after adding to it the
average income from Sayar. Thus, the intermediary’s appeal
was partly allowed. The cross-objections of the respondent-
State were dismissed.
Dismissing the appeals by certificate, the Court
HELD:
1. (a) Clause (1)(i) of Section 39(1)(e) of the U.P.
Zamindari Abolition and Land Reforms Act, 1950 gives a
discretion to the Compensation Officer to take any figure
from 20 to 40 agricultural years for the purpose of
calculating the average annual income from the forests. The
words "considered reasonable" in sub-clause (i) enjoin a
duty on the Compensation officer to exercise this discretion
reasonably and not arbitrarily. Rule 34, gives guidelines
for determining the period for which average income shall be
taken under the aforesaid sub-clause (i). For determining
such period , the Compensation Officer has to take into
consideration several factors, namely, the class of the
forest, the periodical fellings made therein during the 40
years preceding the vesting, the income received year after
year during the 40 years preceding the vesting the species
of the trees in the forest and their age and class, the
condition of forest etc. [603 G-H, 604 A]
(b) In the instant case, for fixing the number of years at
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 13
35 under Sub-Clause (i) of Section 39(1)(e), the
Compensation Officer had not given any reason m;liatever
related to the criteria in Rule 34(1). On the other hand,
the High Court took due note of the factors, in clauses (i),
(ii), (iv) and (v) of Rule 34(1), in determining the period
of 20 years for calculating the average annual income. In
determining the period at 20 years, the High Court rightly
gave weight to the fact that its exploitation bad been
scientific and prudent, and it had started yielding income
from sale of trees only during 10 or 11 years preceding the
date of vesting and even on the date of vesting its
condition was good. Since the first fellings were within 20
years of the vesting, it was reasonable to determine the
period at 20, the same being the minimum fixed in the
statute. Thus, the determination of such period as 20 years
by the High Court. in the facts of the case, comports best with the guid
elines indicated in Rule 34(1). [604 F-H]
2. A plain reading of clause (e) of Section 39(1) shows that
its sub-clauses (i) and (ii) do not provide for two
alternative methods of calculating the average annual income
of the forest. The conjunction "and" at the end of sub-
clause (i) cannot be read as "or". It conjoins the two sub-
clauses, and in effect, read in the context of "shall" in
the opening part of clause (e), mandates the Compensation
Officer to take both the factors into consideration in
assessing the average annual income from the forest. The
reason why the Legislature has made compliance with the
requirement of this Sub-Clause (ii), also, obligatory,
appears to be to ensure that the compensation assessed has a
reasonable nexus and proportion to the actual and potential
value of the forest as on the date of vesting. If a forest
has been repeatedly, wholly and indiscriminately exploited
within forty years or less immediately before the vesting,
its actual and potential value as a forest on the date of
the vesting might be far less than the one calculated on the
basis of its average annual income of the preceding 20 to 40
years as the case may be. In such a case, average annual
income calculated merely on the basis of the income for a
period of 20 to 40 years preceding the vesting, may cause
fortuitous inflation in the assessment of compensation.
Conversely, if a forest has been very little exploited in
the preceding forty years and is well-preserved and well-
developed
597
on the date of vesting, then calculation of its average
annual income on the basis of sub-clause (i) alone, without
taking into account its potential yield oil the date of the
vesting, will make the compensation assessed wholly
illusory, having no relation whatever to the value of the
forest as at the date of vesting. Entry of the appraised
annual yield of the forest on the date of vesting, into
computation under clause (e), operates as a counterpoise
against fortuitous inflation or deflation in the assessment.
[605 A-E]
3. (a) There is no warrant for reading "and" in clause (c)
of Section 44 as "or". The Legislature appears to have
advisedly used the expression "cost of management" in
conjunction with the expression "Irrecoverable arrears of
rent". The former takes its color from the latter in
association with which it occurs. From the context, it
appears that the expression "cost of management" is confined
to the cost of management in the collection of rents. The
Scheme of Section 44 also supports this construction. Under
that scheme a particular deduction is authorised with
reference to income from a particular source. A comparative
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 13
study of Sections 39(1) and 44 would show that there is no
clause in the latter Section which specifically authorises
deduction of 15% from the income referable to clause (e) of
the former. [606 D-F]
(b) The High Court was, therefore, right in holding that 15%
towards the cost of management could not be deducted by the
Compensation Officer in respect of the income from forest
calculated under clause (c) of Sec. 39(1). [607 C-D]
JUDGMENT:
CIVIL, APPELLATE JURISDICTION : Civil Appeal Nos. 2478-
2479/68
From the Judgment and Decree/Order dated 9-12-1973 of the
Allahabad High Court in First Appeal No. 503 of 1955.
V. S. Desai, K. J. John and A. K. (Mrs.) Verma for the
Appellants in C.A. 2479/68 and Respondents in C.A. 2479/68.
G. N. Dikshit, M. V. Goswami and O. P. Rana for the
Respondent in C. A. 2478/68 for the Respondent in C. A.
2478/68. and appellant in C.A. No. 2479/68.
The Judgment of the Court was delivered by
SARKARIA, J.-These two cross-appeals on certificate arise
out of a judgment, dated December 9, 1963, of the High Court
of Judicature at Allahabad.
The appellants in Civil Appeal 2478 of 1968 are the heirs
and legal representatives of Shri R. B. Jodha Mal Kuthiala,
who was an intermediary (landlord) in the State of Uttar
Pradesh and possessed two villages, Dhalani and Sorna.
There are huge tracts of forests in the area of these
villages. On the issue of a notification under Section 4 of
the U.P. Zamindari Abolition and Land Reforms Act, 1950 (for
short the Act), all rights and interests of the
intermediary, including the forests in villages Dhalani and
Sorna, vested in the State of U.P. with effect from the date
of vesting, i.e. July 1, 1952.
A draft Compensation Roll purporting to be under Section 40
of the Act was prepared in respect of the intermediary’s
interests hi the said Villages, and served upon the
intermediary who thereupon, filed two objections against the
Roll. The intermediary claimed Rs. 64,971/79/7 more than
the one shown as due to him in the draft Roll.
598
Purporting to act under Section 39 (1) (e) (i) of the Act,
tile Compensation Officer held that the sale proceeds of the
forests in the area of village Sorna during 35 years’
immediately preceding the date of vesting, aggregated to Rs.
6,13,334/8/3 (after deducting Rs. 22,000/relating to the
income from the forests in village Dhalani). lie divided
this figure by 35 and took the resultant figure, i.e. Rs.
17,524/as the annual income from the forests in Village
Sorna. But .is Rs. 1,775/14/6 bad already been included in
the gross assets, ’lie deducted this amount and thus fixed
the annual income from the forests in this Village, at Rs.
15,748/1/6. From this figure, he further deducted 15% for
management cost and held that the intermediary was entitled
to a further sum of Rs. 13,471/11/6 over and above the one
shown as due to him in the draft Compensation Roll. With
these findings, the Compensation Officer disposed of the
objections of the intermediary by his order, dated October
28, 1955.
Against this order of the Compensation Officer, which under
the Act amounts to a Decree, to aggrieved intermediary
preferred an appeal to the High Court. The State also filed
cross-objections. The High Court held that the Compensation
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 13
Officer in preparing the Compensation Roll had committed two
errors : Firstly, he completely excluded from consideration
the provisions of sub-clause (ii) of clause (e) of Section
39 (1) and did not either appraise the annual yield of the
forests or take the same into consideration. Secondly, he
did not give any reason for taking the period of 35 years
under subclause (i) of Section 39(1) (e) as the measure for
calculating the annual average income from the forests.
After appraising the evidence on record, the High Court held
that it was just and proper that the member of years to be
adopted in calculating the average annual income under sub-
clause (i) of Section 39(1)(e) should be 20 years. On this
basis, the High Court divided the sum of Rs. 6,13,334/8/3
that had been worked out by the Compensation Officer in
respect of the income from sales of forests in Village
Sorna, by 20, and arrived at the figure Rs. 30,666/11/3.
The High Court further held on an interpretation of clause
(e) of Section 39(1), that the Compensation Officer was
bound to appraise the annual yield of the forests on the
date of vesting under sub-clause (ii) of Section 39(1)(c)
and take such yield also into consideration. Relying mainly
on the evidence of Shri D. D. Chopra (a retired Divisional
Forest Officer examined by the intermediary), the High Court
found that the yield of the forest, appraised under clause
(ii) of Section 39(1) (e) of the Act, would be Rs. 47,128/-.
The High Court further appears to have added the figures
worked out by it under sub-clause’s (i) and (ii) of Section
39(1) (e)- and then divided the same by two. By this
process, considering all the circumstances of the case, the
High Court held that the fair amount to be fixed as the
average annual income from the forests in Village, Sorna,
would be Rs. 40.000/-. It further held that no amount could
be legally deducted under Section 44 from this figure of the
annual average income, by way of management expenses or for
any other purpose. The Compensation Officer was directed to
prepare finally the Compensation Roll on the basis of Rs.
40,000/being the annual income from the forests, after
adding to it the aver-
599
age income from Sayar. Thus, the intermediary’s appeal was
partly allowed. The cross-objections of the respondent
State were dismissed.
After obtaining a certificate under Article 133(1)(a) of the
Constitution (as it then stood), the heirs of the
intermediary (since deceased) aggrieved by the partial
dismissal of their claim by the High Court, have preferred
Civil Appeal 2478 of 1968; while the State in the cross-
appeal (C.A. 2479 of 1968) assail the judgment of the High
Court whereby the intermediary’s claim was partly accepted,
Both the appeals will be disposed of by a common judgment.
Three questions fall to be considered in these appeals :
First, whether the High Court was right in taking a period
of 20 years only under sub-clause (i) of Section 39(1)(e)
for the purpose of calculating the average annual income of
the fores’s from Village Sorna ? Second, whether the
Compensation Officer was required to appraise the annual
yield of the forests on the date of vesting and take such
yield, also, into consideration while assessing the average
annual. income from the forests under clause (e) of Section
39 (1) ? The whether under clause (c) of Section 44, 15% is
deductible from the average annual income from a forest
worked out in accordance with clause (e) of Section 39(1) ?
The first is a mixed question of law and fact; while the
last two turn on an interpretation of Sections 39 and 44 of
the Act and the Rules framed thereunder. It will, therefore
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 13
be appropriate to notice here the provisions material for
our purpose. These provisions are extracted hereunder
"39. Gross assets of a mahal.-(1) Gross
assets as respects a mahal shall be the
aggregate gross income of the land or estate
comprised in the mahal and such income shall
comprise
(a) rents including cesses and local rates
payable by or on behalf of the tenants, under-
proprietors, sub-proprietors permanent tenure-
holders, permanent lessees in Avadh, grantees
at a favourable rate of rent or grove-holders-
(i) in cash, and
(ii) where rent is payable in kind or partly
in cash or partly in kind the rent computed in
accordance with the provisions of the United
Provinces Tenancy Act, 1939, and (where the
said Act does not provide for such
computation, in the manner prescribed),
(iii) where rent is payable, but has not been
determined at ex-proprietary rates in the case
of under proprietors and ex-proprietary
tenants and at hereditary rates in all other
cases except grove-holders.
600
Explanation.-In this clause the word "tenants" includes
persons deemed to be hereditary tenants under Sections 12,
13, 14 and 16 but does not include any other tenant of sir,
(b) the amount computed at the rates
applicable to ex-proprietary tenants of
similar land for land in the personal
cultivation of or held as intermediary’s
grove, khudkasht or sir by all the
intermediaries in the estate in which
hereditary rights do not accrue, and, in the
case of the sir--
(i) in which hereditary rights accrue, at
hereditary rates, and
(ii) referred to in Section 17, the rent
payable by the tenant therefore,
(c) sayar, including income from hats,
bazars, melas vested in the State under clause
(a) of Section 6 and fisheries which shall be
an amount equal to one tenth of the total
income therefrom during the agricultural years
preceding the date of vesting;
"Explanation I.-’Total income’ from sayar under this sub-
clause shall be calculated on the basis of entries in
khatauni which shall be deemed to be correct unless’ proved
to the contrary by entries in any public document.
Explanation II.-For purposes of this section ’sayar’ as
respects an intermediary’s grove shall not include income
from the sale of wood, flowers or fruit.
(d)average annual income during the four
agricultural years immediately Preceding the
date of vesting from rents of building sites
vested in the State;
(e) average annual income from forests,
which shall be computed-
(i) on the basis of the income for a period
of twenty to forty agricultural years
immediately preceding the date of vesting; as
the Compensation Officer may consider
reasonable, and
(ii) on the appraisement of the annual yield
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 13
of the forest on the date of vesting;
(f) where royalties are payable on account
of mines and minerals the average income on
account of royalties calculated on the basis
of the annual returns filed by the
intermediary for the assessment of cess or
income-tax during the period of twelve
agricultural years preceding the agricultural
year in which the date of vesting falls or any
shorter period for which such returns have
been filed;
601
(g) where royalties are not payable and
mines are worked directly by an intermediary,
the average annual income from such mines
calculated on same basis as specified in
clause (f).
(2) Where the mahal is comprised of an area situate in
more than one village, the provisions of sub-section (1)
shall apply as if the portions situate in each village were
a separate mahal.
"44. Net assets of an intermediary. For purposes of
Section 40, the net assets of an intermediary in respect of
a mahal shall be computed by deducting from his gross assets
the following, namely
(a) any sum which was payable by him in the
previous agricultural year to the State
Government or superior landholder on account
of land revenue or rent and cesses or local
rates in respect of his share or interest in
the mahal;
(b) an amount on account of agricultural
income-tax, if any, paid or to be paid for the
previous agricultural year by the intermediary
in respect of his share or interest in the
mahal calculated in the manner prescribed;
(c) cost of management and irrecoverable
arrears of rent equal to fifteen per centum of
the gross assets;
(d) where the intermediary holds any land in
his personal cultivation or as khudkasht,
intermediary’s grove or Sir in (other than sir
in which hereditary rights accrue), an amount
computed at ex-proprietary rates, less the
deductions (i) to (iii) hereinafter mentioned,
for such portions only of the land in his
personal cultivation or held as khudkasht,
grove and or sir as is mentioned in Section
18;
(i) the agricultural income-tax, if any, payable th
erefore in the previous
agricultural year in respect of the land to be
ascertained in the prescribed manner;
(ii) the land revenue, cesses and local rates
payable therefore in the previous agricultural
year to be ascertained in the prescribed
manner, and
(iii) fifteen per centum of such amount on
account of matters referred to in clause (c);
(e) the average of the income-tax paid in
respect of the income from royalties mentioned
in clause (f) of Section, 39 computed over the
period mentioned in the said clause and the
cost of collection at such rates as may be
prescribed;
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 13
4-315SCI/78
602
(f) ninety-five per centum of the gross
income determined under clause (g) of Section
39, which shall be deemed to be the part of
the income reserved to him in respect of the
rights contained in Chapter VI.
Explanation.-For the purposes of this Section, land revenue
which has been assigned, released, compounded, or redeemed
by reason of any grant or confirmation made by or on behalf
of the State or any other competent authority in favour of
such intermediary shall not be deemed to be a sum payable as
land revenue to the State Government."
The material part of Rule 34 of the U.P. Zamindari Abolition
& Land Reforms Rules, 1952, framed under the Act, runs as
follows
"34. Section 39(e). (1) The Compensation
Officer shall. for the purpose of determining
the period for which average shall be taken
under sub-clause (i) of clause (e) of Section
39 of the Act, call upon the intermediary to
furnish within a period to be fixed a written
statement showing-
(i) the class of forest (e.g. high forest,
coppice with standards, scrub, etc.);
(ii) the periodical fellings made therein
during the 40 years immediately preceding the
date of vesting;
(iii) the income received year after year
during the 40 years immediately preceding the
date of vesting;
(iv) the principal species of trees in the
forest and their approximate age and class;
(v) the condition of the forest at the date
of vesting and any other particulars which may
be material for determining the period
aforesaid.
" (2)..................................
"(3) After considering the report of the
officer of the Forest Department and hearing
the intermediary and such other persons as he
may like to be heard, the Compensation Officer
shall make an order determining the period and
the average annual income from the forest and
shall record his reasons therefore."
The facts revelvant to the first question may now be noted.
According to the "written statement" of the intermediary,
the annual income received from the forests during the 40
years immediately preceding, the date of vesting from
Village Sorna, was as follows :
"1942-43.-For lumpsum sale for Rs. 25,000/-
ballies for supply (based on information
received from our predecessor in title Mr.
E.C. Thatcher).
603
1946-47.-Rehrapur Rs. 4209-8-3.
1948-49.-Lumpsum sale of coppice with standard
unregulated fellings Rs. 3,01,000-0-0.
1949-50.-Lumpsum sale, selection fellings Rs.
2,47,000-0-0.
1951-52.-Lumpsum sale, coppice with standard
regulated fellings Rs. 81,125-0-0.
Note :-Dobri and Dhalani Estates were
purchased in Jan. 1948 and Rehrapur was
purchased in 1946. Hence the figures prior to
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 13
these dates are not available."
The Compensation Officer and the High Court have not
accepted the sale for Rs. 25,000/-, because neither Mr.
Thatcher, who was the then owner of the forest, had been
examined, nor had any agreement between him and the supposed
purchaser been filed. No accounts of the sales were
furnished.
The only contention of Mr. V. S. Desai, appearing for the
appellant (intermediary), is that this item of sale in 1942-
43 was wrongly excluded.
We find no merit in this contention. This is a concurrent
finding of fact and we see no reason to disturb it. There
is no dispute with regard to the remaining four items of
income from sales in 1946-47, 1948-49, 1949-50 and 1951-52.
The total of these four items comes to Rs. 6,35,334-8-3. It
is further common ground that out of these items, Rs.
22,000/- pertain to the sale of forests in Village Dhalani.
After deducting the same, the balance comes to Rs. 6,13,334-
8-3.
The issue before the Compensation Officer was : What should
be the number of years by which this figure of the total
income, was ’to be divided to ascertain the average annual
income of the forest in Village Sorna ? The contention of
the intermediary was that for this purpose it should be
divided by the number of sale-years only. This contention
was rejected-and we think rightly-by the Compensation
Officer But he wrongly fixed this number at 35.
Clause (1) (i) of Section 39(1) (e) gives a discretion to
the Compensation Officer to take any figure from 20 to 40
agricultural years for the purpose of calculating the
average annual income from the forests. The words
"considered reasonable" in sub-clause (i) enjoin a duty on
the Compensation Officer to exercise this discretion reason-
ably and not arbitrarily. ’Rule 34, extracted above, gives
guidelines for determining the period for which average
income shall be taken under the aforesaid sub-clause (i).
For determining such period, the Compensation Officer has to
take into consideration several factors, namely, the class
of the forest, the periodical fellings made therein during
the 40 years preceding the vesting, the income received year
604
after year during the 40 years preceding the vesting, the
species of the trees in the forest and their age and class,
the condition of forest, etc.
Mr. Dikshit contends that the factors enumerated in sub-
clauses (iv) and (v) of Rule 34(1) furnish more important
criteria than those indicated in the other sub-clauses for
determining the period for which the average is to be
taken. It is pointed out that the Uttar Pradesh Legislative
Assembly had passed a resolution on August 8, 1946 to
abolish Zamindari or big estates in the State; that since
this intermediary bad purchased the forest in question in
1948, he must be presumed to. be fixed with the knowledge
that the days of the Zamindari which he was purchasing were
numbered. With this background proceeds the argument the
intermediary must have mercilessly exploited the forest,
leaving nothing to be acquired under the Act, 1950,
excepting stumps or small saplings of tender age. We are
afraid this argument is not based on any evidence, whatever.
Mr. Dikshit referred to the evidence of Babu Singh (D.W.4.)
to show that the trees left in this forest at the date of
vesting were hardly 3" in diameter.
We have gone through the evidence of Babu Singh (D.W.4). Far
from supporting Mr. Dikshit’s contention, it knocks the
bottom out of it. Babu Singh was a forest contractor. Babu
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 13
Singh testified that be had purchased one coupe of the
forest in Village Sorna for Rs. 53,000/from the Forest
Department of the State for the year ending March 1953.
This means he purchased this coupe after the date of
vesting. He stated that the trees purchased by him were of
diameters varying from 4" to 12". The forest had a larger
number of Kokath trees and less of Sal. The very fact that
soon after the vesting, sale of one coupe of the forest
fetched Rs. 53,000/-, shows that it had not been mercilessly
exploited. This fact of sale of one coupe of this forest by
the State soon after the vesting, rather lends great
strength to the finding of the High Court that its average
annual income, estimated under clause (e) of Section 39(1)
would not be less than Rs. 40,000/-. By no stretch of
imagination, Babu Singh’s evidence could be read as showing
that the annual yield from the forest on the date of
vesting, was negligible.
For fixing the number of years at 35 under sub-clause (i) of
Section 39(1)(e), the Compensation Officer had not given any
reason whatever related to the criteria in Rule 34(1). On
the other hand. the High Court took due note of the factors
in clauses (i), (ii), (iv) and (v) of Rule 34(1), in
determining the period at 20 years for calculating the
average annual income. In determining this period at 20
years, the High Court rightly gave due weight to the fact
that its exploitation had been scientific and prudent, and
it had started yielding income from sale of trees only
during 10 or 11 years preceding the date of vesting and even
on the date of vesting its condition was good. Since the
first fellings were within 20 years of the vesting, it was
reasonable to determine the period at 20, the same being the
minimum fixed in the statute. Thus, the determination of
such period as 20 years by the High Court, in the facts of
the case, comports best with the guidelines indicated in
Rule 34(1).
605
The Compensation Officer, as mentioned earlier, did not
appraise the annual yield of the forest on the date of
vesting. A plain reading of clause (e) of Section 39(1)
shows that its sub-clauses (i) and (ii) do not provide for
two alternative methods of calculating the average annual
income of the forest. The conjunction "and" at the end of
sub-clause (i) cannot be read as "or". It conjoins the two
subclauses, and in effect, read in the context of "shall" in
the opening part of clause (e), mandates the Compensation
Officer to take both the factors into consideration in
assessing the average annual income from the forest. The
reason why the Legislature has made compliance with the
requirement of this sub-clause (ii), also, obligatory,
appears to be to ensure that the compensation assessed has a
reasonable nexus and proportion to the actual and potential
value of the forest as on the date of vesting. If a forest
has been repeatedly, wholly and indiscriminately exploited
within forty years or less immediately before the vesting,
its actual and potential value as a forest on the date of
the vesting might be far less than the one calculated on the
basis of its average annual income of the preceding 20 to 40
years as the case may be. In such a case, average annual
income calculated merely on the basis of the income for a
period of 20 to 40 years preceding the vesting, may cause
fortuitous inflation in the assessment of compensation,
conversely, if a forest has been very little exploited in
the preceding forty years and is well-preserved and well-
developed on the date of vesting, then calculation of its
average annual income on the basis of sub-clause (i) alone,
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 13
without taking into account its- potential yield on the date
of the vesting, will make the compensation assessed wholly
’illusory, having no relation whatever to the value of the
forest as at the date of vesting. Entry of the appraised
annual yield of the forest on the date of vesting, into
computation under clause (e), operates as a counterpoise
against fortuitous inflation or deflation in the assessment.
in the view we take we are fortified by a decision of this
Court in Ganga Devi v. State of Uttar Pradesh, where it was
pointed out that in computing the average annual income
under clause (e) of Section 39(1), the Compensation Officer
has to refer to both these sub-clauses (i) and (ii). He
cannot adopt either of these sub-clauses. It was also
pointed out that under sub-clause (ii) the annual yield on
the date of vesting is to be appraised by taking into
consideration, inter alia, the number and age of the trees,
the area under forest and the produce. The High Court in
the instant case, while determining the yield under sub-
clause (ii) has relied upon the evidence of Mr. Chopra, a
retired Forest Officer, who took all the relevant factors
into consideration. The High Court also accepted the
evidence of Chaudhri Babu Singh, Forest Contractor, which
was to the effect that for the year ending March 1953, the
sale of one coupe of this forest by the Forest Department of
the State, fetched Rs. 53,000/-. No fault therefore, can be
found with the High Court’s finding that on the date of
vesting, the annual yield of the forest, appraised under
subclause (ii) of clause (e) was not less than Rs. 47,128/.
The figure worked out by the High Court under sub-clause (i)
by dividing the total income of sales during the preceding
10 or 11
606
years, i.e. Rs. 6,13,334-8-3 by 20, was Rs. 30,666-11-3.
The total of these figures thus worked out under sub-clauses
(i) and (ii), comes to Rs. 77,794/-. If this figure is
divided by 2, the average annual income under clause (e)
would come to Rs. 38,897/-. The High Court rounded off and
raised this figure to Rs. 40,000/-. We do not want to
disturb that approximation because the sale of a coupe of
the forest for the year immediately following the vesting,
showed that the appraised yield of the forest on the date of
vesting could be around Rs. 50,000/-.
The last question that remains to be considered is, whether
the High Court was right in holding that the Compensation
Officer was not competent to deduct under clause (c) of
Section 44, 15% from the estimated income of the forest, for
management expenses.
Mr. Dikshit contends that the word "and" in clause (e) of
Section 44 should be read dis-conjunctively so as to convey
the sense of "or". ’If it is so construed proceeds the
argument-15% for management cost has got to be deducted from
the "gross assets" calculated under Section 39(1) from each
of the sources indicated therein, including the income from
forests assessed under clause (e) of that Section.
We are unable to accept this argument.
There is no warrant for reading "and" in clause (c) of
Section 44 as "or". The Legislature appears to have
advisedly used the expression "cost of management" in
conjunction with the expression "irrecoverable arrears of
rent". The former takes its colour from the latter in
association with which it occurs. From the context, it
appears that the expression "cost of management" is confined
to the, cost of management in the collection of rents.
The scheme of Section 44 also supports this construction.
Under the scheme of Section 44, a particular deduction is
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 13
authorised with reference to income from a particular
source. A comparative study of Sections 39(1) and 44 would
show that there is no clause in the latter Section which
specifically authorises deduction of 15% from the income
referable to clause (e) of the former. To elaborate the
point, deduction under clause (d) of Section 44 is relatable
to income coming under clause (b) of Section 39. Sub-clause
(iii) of clause (d) of Section 44 specifically imports and
applies the deduction under the preceding clause (c), to the
income from the land in the personal cultivation of the
intermediary. Clause (e) of Section 44 specifically refers
to clause (f) of Section 39 and makes the cost of collection
of income from royalties deductible at such rates as may be
prescribed. Again, the deduction under clause (g) of
Section 44, has by specific reference, been made applicable
to the income from the source under clause (g) of Section
39(1). Had Mr. Dikshit’s argument, that clause (c) of
Section 44 contemplates an omnibus deduction which
encompasses all the sources of income assessed under clauses
(a) to (g) of Section 39(1) been correct, there was no
neces-
607
sity to specify the quantum and nature of deductions
separately in clauses (e) and (f) of Section 44 and then
relate them by specific reference to sources of income under
clauses (f) and (g) of Section 39(1). If clause (c) of
Section 44 were applicable proprio vigore to income from
Khudkasht land, there was no necessity to incorporate it by
specific reference in clause (d)(iii) of the same Section.
In other words, the deduction mentioned in clause (c) of
Section 44 could have no application to the income assessed
from the source under clause (b) of Section 39, but for the
special provision made in sub-clause (iii) of clause (d) of
Section 44. Construed consistently with the context and
scheme of Section 44, it appears that the deduction
mentioned in clause (c) of Section 44 was not intended to
apply to the income from forest assessed under clause (e) of
Section 39(1). The deduction under clause (e) of Section 44
appears to be confined to the rental income assessed under
clause (a) of Section 39(1), or the income from Khudkasht
lands assessed under clause (b) of Section 39(1) to which it
has been notionally applied by specific incorporation in
sub-clause (iii) of clause (d) of Section 44.
The High Court was, therefore, right in holding that 15%
towards the cost of management could not be deducted by the
Compensation Officer in respect of the income from forest
calculated under clause (e) of Section 39(1).
Nor could the words "gross assets" occurring at the close of
clause (c) in Section 44, be divorced from the context of
rents and construed in the spacious sense in which they have
been used in Section 39. Their meaning and scope in the
context is confined to the income from rents. If these
words are torn out of the context and interpreted in the
comprehensive sense in which they are used in Section 39,
this will lead to wholly unreasonable oppressive and absurd
results. This was demonstrated by the learned Judges of the
High Court, with reference to the income from mines worked
directly by an intermediary, calculated under clause (g) of
Section 39(1). Clause (f) of Section 44 provides’ that 95
per centum of the gross income determined under clause (g)
of Section 39 would be deductible for the purpose of
computing the net assets of the intermediary from this
source. If the contention of Mr. Dikshit, that 15% deduct
on under clause (c) of Section 44 is applicable to all
sources of income, including from the mines under clause (g)
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 13
of Section 39(1) is correct, then the income from mines
directly worked by the intermediary Will suffer a double
deduction 95% plus 15% under clauses (f) and (c) of Section
44. This means, instead-of paying any compensation to the
intermediary, an exaction of 10 per cent will be made from
him. Such could never be the intention of the Legislature.
We have therefore no hesitation in repelling this contention
of Mr. Dikshit. No other point has been argued before us.
In the result, both the appeals fail and are dismissed, with
no order as to costs.
S.R. Appeals dismissed.
608