1. ' SALEEM AKHTAR, J.---These two appeals will be disposed of by this judgment as they arise from a common judgments passed by the learned Judge in Chambers whereby the respondent's appeal against the award given by the learned District Judge was allowed and the compensation/rent for the requisitioned premises was fixed at Rs,3,000 per month and the appeal of the appellant was dismissed.
2. The respondent in both the above appeals owned the disputed property which was rented to a school at the rate of Rs,122.50 per month from the year 1962. It was a private school and was nationalized in the year 1972 after which the administration of the school vested in the Government.
2. The Provincial Government thus became the tenant and continued to pay the same rent to the respondent. The appellant exercising power under the West Pakistan Requisitioning of Immovable Property (Temporary Powers) Act, 1956, requisitioned the building w,e,f. 24-5-1977 and thus the appellant became bound under law to pay compensation as provided by the said Act. The appellant, however, continued to pay rent at the same old rate, but the respondent has alleged that efforts were made by filing. Application to determine the compensation, but the appellant failed to do so. Finally the respondent made an application before the learned District Judge/Arbitrator, Lahore on 4-3-1991 for determination of compensation for the property which had been requisitioned. The respondent alleged that her property was one-third part of a building.
3. The entire building consists of three parts and the disputed property of which the respondent is the owner comprises of an area of 14 Marlas on which there stands building in which the school is run.
4. It was alleged that the building was constructed in the year 1968 and its rent should be Rs,3,000 per month. The other portion of the same building was owned by her sister in which a school was run and after nationalization it had been requisitioned by the Government. The District Judge awarded compensation at the rate of Rs,2,200 per month in respect of that portion. It was alleged that the building of the respondent is larger in area and accommodation. It was also stated that in the year 1984 the Government had intention to purchase the building for which purpose it got the value of the land assessed through Revenue Department according to which it valued at Rs,18,000 per Marla and the price of the building was estimated at Rs,47,040, but the appellant refused to purchase. The respondent resisted the application pleading that it has been paying rent at Rs,122.50 which was a proper compensation and the same has been accepted by the respondent.
5. The valuation made by the Revenue Authorities as stated above in 1984 was admitted. The learned District Judge after recording evidence of the parties observed as follows:-- "Since both the parties have made exaggerations while giving estimation of the cost of the construction of the building and the land underneath it, I am left with no option but to fall back upon the independent testimony of the expert that is Sh. Nisai Ahmad, S.D.O. (Rtd.). He had inspected the building in presence of the parties. After measurement he found the area of the premises in question covering 2,948 sq. Ft., which is about a little over 13 Marlas. The present cost of construction is at Rs,250 per sq. Ft but the initial cost of construction of the building assessed by him was Rs,55 per -sq. Ft. The total thus comes up to Rs,46,200 with which addition of Rs,4,000 as price of the courtyard totals up to Rs,50,200 or Rs,50,000 in round figure. His further finding was that the two Chhapper or sheds had been got constructed by the school Authority and not by the petitioner: ' I, therefore, do not believe the version of the petitioner that she has spent Rs,25,000 for the purpose. Bald statement of P.W.1 is not sufficient and the claim not bolstered up by independent evidence cannot be believed. I, however, believe P.W.1 when he says that per Marla price of the premises in 1977 was between Rs,10,000 to Rs,20,000. It is common ground that the respondent had got the land assessed when they had a mind to purchase the building. The land was then assessed at Rs,18,000 per Marla by the Collector. Multiplying price of 13 Marlas of land by Rs,18,000 per Marla, the cost comes up to Rs,2,34,000. This price when added to Rs,50,000 (cost of construction of the building) total comes up to Rs,2,84,000."
6. ' After taking into consideration section 6 (1) (e) (iii) of the Act, the learned District Judge gave award to the effect that the appellant shall pay Rs,2,366 after deducting Rs,122.50 per month paid from 24-5-1977 to 1-12-1991. The arrears were required to be paid within three months failing which 6 % interest was to be added. In appeal the appellant pleaded bar of limitation, which was justifiably rejected. On merit following observation was made:- "Coming to the merits of the appeal filed by the owner it may be stated that her attorney categorically stated that the property was got constructed in 1968 at the cost of Rs,3 lacs and the land was purchased according to his evidence at the rate of Rs,2,060 per Marla. There is no cogent evidence led by the Provincial Government in rebuttal. The reliance on the report of Local Commissioner in my view was not proper and the other evidence produced by the Government does not inspire confidence. The monthly compensation claimed in the petition by the appellant i,e. At the rate of Rs,3,000 per month was, therefore, proved and should have been granted to her in particular keeping in view that there is no provision in the Act that the compensation once determined and fixed could be got enhanced with the passage of time by the owner though with the passage of time certainly the rates of rent and the value of the property is enhanced. The reliance on the report of Local Commissioner was not proper as direct evidence produced by the parties was available. The evidence of the attorney of the appellant in my view could not have been ignored as it was evidence of a witness who deposed about the price at which the land was purchased and the cost of construction incurred by the appellant."
7. ' Consequently award made by the learned District Judge/Arbitrator was modified to the Extent that Rs,3,000 was fixed as monthly rent as compensation which was to be paid from 24-5-1977 and Rs,122.50 per month was to be deducted for the period from 24-5-1977 to 1-12-1991. Interest and costs were not awarded.
3. The learned counsel for the appellant contended that the application for making the award before the District Judge was hopelessly time-barred. This objection was not raised by the appellant before the District Judge. For the first time it was raised in appeal which was rejected. The question of limitation in these cases rests upon mixed questions of law and fact and unless the appellant had raised this plea at the trial stage where the respondents would have had the opportunity to meet it and produce such evidence as may be necessary, it would not be proper to allow the appellant in the facts and circumstances of the case to raise this plea at the appellate stage. In any event even on merits the plea cannot be sustained. Under the West Pakistan Requisitioning of Immovable Property (Temporary Powers) Rules, 1962, a procedure has been provided for determination of compensation. Under Rule 8 (1) the owner is required as soon as possible to negotiate with the Requisitioning Authority or its representative for fixing by agreement amount of compensation payable to him. Under Rule 8 (2) if within a fortnight of the service of order of requisition the owner does not apply to the Requisitioning Authority for fixation of compensation, the Authority shall proceed to determine compensation for payment as provided by section 7. The Requisitioning Authority (hereinafter referred to as the Authority) shall make offer of compensation and if not accepted within 30 days of making thereof, it shall be deemed to have been refused. This period can be extended by the Authority as it may deem fit where the owners or persons entitled to receive compensation are willing to negotiate. As a precautionary measure under Rule 8 (4) the Authority is required to obtain in writing refusal made by the owner. A mere noting regarding oral refusal will not be treated sufficient compliance of law. Under Rule 9 within seven days of the refusal of the offer of compensation the Authority shall deliver to the person or persons interested in the property a duly authenticated statement in writing setting forth the particulars of the property requisitioned with necessary details, the amount of compensation assessed by the Authority, the grounds on which it has been determined and also the date of expiry of period of limitation prescribed under Rule 10. Rule 9 (2) further provides that the Authority should obtain a written acknowledgement as token of delivery of such receipt. Rule 8 (2) incorporates all precautionary measures in determining the assessment and protecting the rights of the owners or persons interested in compensation. After this procedure has been completed and statement has been delivered, the persons interested in compensation are entitled to make an application to the Arbitrator for assessing the proper compensation. Such application should be made within 30 days from the receipt of the statement mentioned above. Thus, according to the Rules the period of limitation for filing an application before the Arbitrator for determining the compensation will start from the date of receipt of the statement and will expire after 30 days from such date. In the present case on the assessment of evidence it is clear that Rules 8 and 9 were not followed by the Authority. At no stage the parties negotiated or agreed to any compensation. There is no acknowledgement in writing either for acceptance or refusal of any agreed amount or amount sought to be assessed by the Authority. The respondent therefore could not be accused of delaying the matter. In fact till the filing of the application the appellant had not budged an inch and in a routine manner paid Rs,122.50 per month being the rent paid before the requisition. There is a lot of difference in payment of rent by tenant and payment of compensation by the Requisitioning Authority. The Authority did not at any stage apply its mind to the present controversy or the assessm ent of the compensation as required by Rules 8 and 9. Therefore, mere payment of rent which was paid prior to requisition cannot be treated as compensation after the requisition for the use and occupation of the property. The respondent had produced evidence to show that she had been approaching the Authority without any result. The attorney has also stated that Rs,122.50 was received under protest. Considering the provisions' of Rules referred above, even if the appellant without any agreement continued to make the same payment which it paid as rent prior to requisition, its acceptance will neither amount to an agreement nor a waiver on the part of the respondent. The application filed before the Arbitrator could not be treated as barred by time.
4. The next question arises about the quantum of compensation to be fixed by the Authority. The Rules provide no guidance in this filed. However, guidelines have been laid in a general manner by section 6 (1) (e) of the Act which reads as follows:-- "Section 6.--(1) .........................................
(e) The arbitrator in making his award shall take into consideration the following factors:--
(i) in the case of a building which was constructed after the 1st January, 1939, the rent of the same or of similar accommodation in similar circumstances prevailing in the locality during 12 months prior to the 1st January, 1939;
(ii) in the case of a building which was constructed after the 1st January, 1939, the rent at which such building was let out for the first time after its construction or the rent of similar accommodation in similar circumstances prevailing in the locality during 12 months prior to the construction of that building;
(iii) if the building was constructed after the 14th August, 1947, the initial cost of construction of that building.
(2) If the building was constructed after the 14th August, 1947, the compensation awarded shall in no case, after deducting the taxes and insurance premium for insurance against fire and earthquake, be less than eight per centum or exceed in amount ten per centum of the initial cost of the construction of that building."
8. These provisions merely direct the Arbitrator to take into consideration the facts enumerated in section 6 (1) (e) (i), (ii) & (iii). It is clause (iii) which is attracted here, according to which if the building was constructed after 14-8-1947, the initial cost of construction of the building shall be taken into consideration. Subsection (2) places limitation on the amount of compensation by providing that. In case of buildings constructed after 14-8-1947 after deducting taxes, insurance and premium for insurance against fire and earthquake, the compensation shall not be less than 8 per cent. Or exceed in amount 10 per cent of the initial cost of construction of that building. In subsection (1) (i) building has been defined as any building or part of the building and includes any land, godown or outhouses attached to it. However, the words 'initial cost of construction' have not been defined in the Act. The guiding principles in section 6 may be taken into consideration, but it cannot be the only basis for determining compensation. Therefore, other factors and judicially accepted principles, which are applied in such cases, are also to be taken into consideration.
5. Before considering these provisions of law, it is pertinent to note that on general principles compensation awarded should be just, fair and adequate taking into consideration the building, its use and condition. If any compensation is awarded which is ridiculous, fantastic or disproportionate having no nexus with the nature and use of the property, it cannot be treated as a just and proper determination of compensation. Section 6 itself provides for a fair amount of compensation _ as in sub-clause (1) (d) of section 6 it is provided that before the Arbitrator, the Government and the owner shall state what in their respective opinions is a fair amount of compensation. In case of different claims by the parties, the Arbitrator has to decide as to what is the "fair amount of compensation". The guiding principle provided by section 6 for determining a fair amount of compensation is not exhaustive. The only clause which attracts to the present case is section 6 (1) (e) (iii) which provides that in case the building was constructed after 14-8-1947 the initial cost of construction of the building shall be taken into consideration. The question arises what initial cost of construction means. Initial cost of construction of the building as defined does not mean merely the cost incurred by the owner for raising the building. The land underneath has also a value. Therefore, the value of the building has to be assessed by taking into consideration cost of construction and land as well. Open land adjacent to such building and forming part of it shall also be considered building as defined in the Act. Even otherwise the value of open land forming part of the building has to be taken into consideration while assessing the value of the building.
9. ' Assessm ent of land with building in urban area has been a complicated issue. In such cases one method of calculating market value is on rental basis. While ascertaining the rental due regard has to be given to the potential value of the land. In Raghunath Das Gopal Das v. Secretary of State (ILR 29 Bombay 514) it was held that where rental is the basis of calculating compensation for building with land; after ascertaining the net rental, the rate of return which investors in this class of property expect may be found out as such ascertainment serves to determine the number of years' purchase after giving weight to special circumstances which may affect the property advantageously or otherwise.
10. ' The method of assessing the value of building and the value of land separately and taking the total as value of both has not been accepted as a general principle for ascertaining the value of a building. Reference can be made to Dhanjibhoy Bomanji (10 Born. L.R. 710). Building with land and land without building are two different types of marketable commodities. In Rathnasamari v.
11. Secretary of State (AIR 1923 Mad. 332) repelling the contention that the land and building be valued separately and the two added together to get the market value of land and the building standing thereon, it was observed:-- "That is hardly the way in which property consisting of a house and a garden is valued in the market. A plot consisting of house and a garden is much more satisfactorily valued at twenty years' purchase by capitalising the rental, in the absence of other evidence which would give a more satisfactory value."
12. ' While dealing with a similar issue the following observation was made in Vattissali v. The Revenue Divisional Officer, Calicut (AIR 1923 Mad. 31):-- "In the present case there is no evidence worthy of the name of the value of the land or of similar land in the vicinity, and it would be impossible for this Court to assess such value. Apart from this, when a building and its appurtenant land cannot be valued separately and no attempt has been made to do so in these proceedings, the market value must be determined on the net rental value and when that is done the building cannot be separated from the land, for it is impossible to say what proportion of the rent is fixed on the building and what on the land."
13. ' The aforestated observations are basically applicable to cases where valuation is ascertained on rental basis in the absence of evidence of market value or value of similar property in the vicinity.
14. The value of land and value of building can be added for taking the total as value of both in cases where the land is not fully developed by building constructed on it. It is called "Land Building Method" in which "to the market value of the land at the material time" is added "the value of the building at the material time". In applying this formula prime cost of the building which may be initial cost of the building at the material time must be ascertained. Thus, the initial cost of construction will mean the value a similar structure would have cost to erect at the material time.
15. When initial cost of construction at the material time is to be taken into consideration for assessing the value of the house or its rental value, the value of the land underneath and attached to it, if any, has also to be kept in view. If principle of Land Building Method is applied, then value of the land will be added to the initial cost of construction.
16. ' There are various methods for assessment of value of a property which include assessment value by an expert, the market value at the material time, by assessment of value of similar buildings in the same locality taking into consideration the transactions of such properties during the relevant time, the rental value fixed by the Municipal Authorities which, though do not form determining factor, can be of some help. In cases of market value of the property, it should be reflected by transaction between two free parties willing F to sell and purchase the property.
17. ' In the present case the land underneath as well as the open space measures about 14 Marlas. The respondent claimed that in 1968 the cost of construction was Rs,3,00,000 and she had purchased the land at the rate of Rs,20,000 per Marla. However, no written document has been produced in support of this claim. Another portion of the house which is occupied by the respondent's sister and has also been requisitioned as a school was run in it, the Court has awarded compensation at Rs,2,000 per month. The assessm ent made by the office of the Collector at the instance of the Government shows that the land was assessed at Rs, 18,000 per Marla while the value of the building was estimated at Rs,48,000. The initial cost of construction of the building was assessed by Sh. Nisar Ahmed, retired S.D.O., at Rs,55 per sq. Ft., which comes to a total of Rs,46,200. The value of the land has been assessed at Rs,18,000 per Marla by the Collector, which has been calculated at Rs,2,34,000 and thus according to the, learned District Judge/Arbitrator the total cost comes to Rs,2,80,000. The rent at the rate of 10 per cent. Has been calculated at Rs,2,366 per month. However, the learned Judge of the High Court has fixed it at Rs,3,000 taking into consideration the evidence of the respondent.
18. While assessing the value of a building one must take into consideration the market value of the building at the material time, rental value of similar building in the neighbourhood, the locality and location and the advantages, if any, it commands due to its location. From the evidence it seems that it is very near to the main G.T. Road, commercial area is springing up. On the back side of the building there exists a commercial area. The building is in a residential-cum-commercial area. It is also better situated and has more area than the adjacent property of the respondent's sister whose rent has been fixed at Rs,2,000 per month. Besides these factors, the "Land Building Method" can be applied for assessing the value of the building because considering its nature/condition, the property has been fully developed. The value as assessed by independent and expert witnesses as discussed above should be accepted.
19. ' Another consideration which should weigh while fixing the rent/compensation is that it is not being determined for limited/fixed period. The rent will be for an unlimited period and considering the fact that the rent laws provide for appreciation of rent after regular intervals, the rent is bound to increase from time to time. A person cannot be expected to receive rent at a fixed rate for an unlimited period. In view of the attending evidence and circumstances, the rent fixed at Rs,3,000 per month is just, fair and reasonable.
20. A very important factor which has persuaded us to assess the rental value on general principles for valuation in addition to provisions of section 6 (1) (e) (iii) and (2) of the Act is that in Province of Punjab v. Amin Jan (PLD 1994 SC 141) the whole of section 6 (1) (e) (i), (ii) (iii) & (2) of the Act have been held to be repugnant to the Injunctions of Islam because "it does not provide the compensation based on the current market rate" and "it does not provide a periodical increase in the monthly rent or compensation". This judgment was to take effect on 30-6-1993 when these provisions were to cease to have effect to the extent of repugnancy and no amendment has been brought to our notice.
21. We, therefore, dismiss the appeals with no order as to costs. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.