' This judgment shall dispose of appeals bearing Nos. F.A.O. 169/89 and FA.O. 182/89 because they involve the same questions of law and facts. These appeals have been filed under subsection (6) of section 6 of the West Pakistan Requisitioning of Immovable Property (Temporary Powers) Act of 1956, hereinafter called the Act, against the award given by the District Judge regarding the compensation to be paid to the owner for the use and occupation of the requisitioned property.
FA.O. No,169/89 has been filed by the owner of the building while FA.O. No,182/89 has been filed by the Punjab Government.
2. The Government of the Punjab through notification dated 30-7-1977 requisitioned the building under section 3 of the Act for educational institution, which is owned by the appellant in FA.O.
No,169/89 and has been in occupation of Zafar Islam Primary School, Panj Pir, Mughalpura, Lahore.
The tentative compensation to be paid to the owner was fixed at Rs,225 per month. Appellant Sher Zaman being the owner of the building filed an application under section 6 of the Act for settlement of the compensation, claiming that it should be enhanced to Rs,2,700 per month, in view of the actual initial cost of construction and the value of the land underneath the building. The learned District Judge acting as an arbitrator under the Act, fixed the compensation at Rs,940 per month and directed that arrears calculated at that rate should also be paid with effect from 30-7- 1977. This was done vide order dated 14-6-1979. Sher Zaman in his appeal has claimed that the compensation should be fixed at Rs,2,700 per month while the Punjab Government in FA.O.
No,182/89 has claimed that compensation should be reduced to Rs,225 per month.
3. Evidence was led by the parties on the question of fair compensation of the property in dispute.
P.W.1 Saif-ur-Rehman and Sher Zaman P.W.2 appeared for the owner while R.W.1 Nasreen Nazar (a teachress in the school), R.W.2 Mst. Munazza Akhtar (Headmistress of the school) and R.W.3 Abdul Majid, Cashier were produced as witnesses by the Punjab Government. The learned District Judge appointed Sh. Nisar Ahmad S.D.O. Of the Building Department as the Local Commissioner for determining the cost of construction of the Building and he was examined as C.W 1. The learned District Judge heavily relied on the statement and report of the Local Commissioner as an independent expert witness. According to this witness the covered area of the school building is 1285 sq. Ft. And the cost of the building in 1971 when the school was built was Rs,1,02,800, at the rate of Rs,80 per sq. Ft.
4. The compensation is to be worked out on the basis of the initial cost of construction of the building, as per provisions of section 6 of the Act. The building in question was constructed in 1971, therefore, the cost was calculated on the basis of the construction rates of 1971. The Hon'ble Supreme Court in the case Government of the Punjab through Secretary Education, Lahore v.
Shahida Begum 1994 SCM R 1488 has held that initial cost of construction will also include the value of the land underneath the building and attached thereto. The effect of this pronouncement shall be discussed in detail in the later part of this judgment.
5. Regarding the cost of the land, the owner appellant claimed that its value was Rs,20,000 per Marla in 1971 while the respondent-Government claimed that the price of the land was just Rs,500 per Marla. The learned District Judge found that the value of the land in 1971 was Rs,2,000 per Marla.
Therefore, adding the price of the land to the cost of construction the total initial cost of construction under section 6(1) (e) (iii) of the Act was held to be Rs,1,12,800. Assessing the compensation at the rate of 10% of the said initial cost of construction the learned District Judge/Arbitrator fixed the compensation at the rate of Rs,940 per month.
6. Learned counsel for the owner has challenged the award and has contended that the land has been evaluated arbitrarily, without reference to the evidence on record. He urged that P.W.1 Saif-ur- Rehman has specifically stated that the land in 1971 was of the value of Rs,15,000 per Marla. P.W.2 who is the owner of the building also stated the same price of the land. Learned counsel further contended that location of the land was also not taken into consideration while fixing the land. The school building is situated on the main Shalimar Road, Lahore and in view of this commercial potential its value could not be less than Rs,15,000 per Marla in 1971. Learned counsel for the Punjab Government, on the other hand, submitted that value of the land in 1971 could not more than Rs,500 per Marla.
7. After considering the submissions made by the learned counsel and the evidence led by the parties, I find that the value of the land has been fixed by the learned District Judge without any basis. It has not been considered that the property is situated on the main road in Lahore and the area was fully developed. In 1971, the price of the land could not be just Rs,2,000 per Marla by any standard.
Keeping in view the commercial potential of the land I hold that the value of the land on which the school is built was Rs,10,000 per Marla in 1971.
8. The school is built on 5 Marlas of land. Total value of land in 1971 comes to Rs,50,000. The cost of construction of the building as per the statement of the Local Commissioner, in 1971 was Rs,1,02,800.
Adding up the cost of land to this amount, the initial cost of construction comes to Rs,1,52,800. The compensation at the rate of 10% of the initial cost of construction, under subsection (2) of section 6 of the Act, comes to Rs,15,280 per annum or Rs,1,274 per month. Accordingly, it is held that the appellant is entitled to receive the compensation at the rate of Rs,15,280 per annum. This compensation shall be paid with effect from the date of the notification i,e, 30-7-1977. The arrears, after making deduction of the actual amounts already paid to Sher Zaman appellant, shall be paid to him within three months from today.
9. The submission of the learned counsel for the respondent-Government, that value of the land cannot be included in the initial cost of construction, is untenable in view of the law laid down by the Hon'ble Supreme Court in the case of Shahida Begum, ibid, which is to the following effect:- "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.
When initial cost of construction at the material time is to be taken into consideration for assessing the value of the land underneath and attached to it, if any, has also to be kept in vielk. If principle of Land Building Method is applied, then value of the land will be added to the initial cost of construction."
' Keeping in view the dictum laid down by the Hon'ble Supreme Court, the initial cost of construction as mentioned in section 6 of the Act, for the purpose of assessing the compensation to be paid to the owner of the building for its use and occupation, will include the cost of building as also the value of the land underneath and attached to the building.
10. Malik Muhammad Taugeer Afzal, learned counsel for the owner of the building lastly contended that compensation worked out on the basis of section 6 of the Act has ceased to be operative with effect from 30-6-1993, in the light of the judgment of the learned Shariat Appellate bench of the Supreme Court in Province of the Punjab v. Amin Jan Naeem PLD 1994 Supreme Court 141. He has submitted that with effect from the said date the compensation for the use and occupation of the building should be worked out on the basis of the present market rent of the requisitioned property and it should be further subjected to periodical increases in the rent or compensation in accordance with the current custom. He has heavily relied upon the para. Materia. Provisions contained in section 5-A of the Punjab Urban Rent Restriction Ordinance for periodical increase in the rent at the rate of 25% after every three years. Learned counsel has urged that the periodical increase on the principles of section 5-A of the Punjab Urban Rent Restriction Ordinance can be directed by this Court in the present appeal.
11. Mr. Shahzad Shaukat, learned counsel for the Punjab Government has, however, strongly opposed this prayer. He has argued that requisitioning of the property for the purpose of establishing a school has not been rendered void. It is only in the matter of assessment of the compensation that clause (e) of subsection (1) and subsection (2) of section 6 have been declared to be void, as they do not provide for the assessment of the compensation on the basis of the current market rent or the periodical increase in the rent. His precise argument is that requisitioning order and the compensation awarded by the arbitrator till 30-6-1993 validly hold the field. This Court in appeal will have no material before it to work out" the compensation on the basis of the current market rent. He has submitted that at the best the appellant can be asked to approach the learned District Judge/Arbitrator for making fresh assessment of compensation with effect from 1st of July, 1993 on the basis of the current market rent. However, he submits that compensation cannot now be enhanced by the learned Arbitrator.
12. To appreciate the submissions made by the learned counsel for the parties on this aspect of the case, it will be advantageous to reproduce section 6 of the Act and then examine the basis on which the Hon'ble Shariat Bench of the Supreme Court in the aforementioned case has struck down the formula for working out the compensation for the requisitioned property. Section 6 reads as under:-- "(1) Where any building is requisitioned there shall be paid to the owner compensation for its use and occupation, and the amount there(); ;Hall be determined in the manner and in accordance with the principles hereinafter set out:--
(a) Where the amount of compensation can be fixed by agreement it shall be paid in accordance with such agreement.
(b) Where no such agreement can be reached the Provincial Government shall by a general or special order, for any case or class of cases, appoint as arbitrator a person qualified under Article 193 of the Constitution for appointment as a Judge of a High Court.
(c) The Provincial Government may, in any particular case, nominate a person having expert knowledge as to the nature of the building requisitioned to assist the arbitrator and where such nomination is made, the owner may also nominate an assessor for the said purpose.
(d) At the commencement of the proceedings before the arbitrator the Provincial Government and the owner shall state what, in their respective opinions, is a fair amount of compensation.
(e) The arbitrator in making his award shall take into consideration the following factors--
(i) in the case of a building which was in existence before 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 per annum of the initial cost of the construction of that building.
(3) An appeal shall lie to the High Court against an award of an arbitrator.
(4) Save as provided in this section and in any rules made under this Act nothing in any law for the time being in force shall apply to the arbitration under this section.
(5) An award given by the arbitrator, subject to the result of the appeal, if any, shall be conclusive and final between the parties and shall not be called into question by means of a suit or otherwise except as provided by this Act.
(6) The award may, on an application being filed in the Court, be executed as if it were a decree of a Civil Court."
13. Clause (e) of subsection (1) and whole of subsection (2) of section 6 of the Act have been held to be void being repugnant to the Injunctions of Islam because these provisions neither provide for the assessm ent of the compensation on the basis of current market rent nor for the periodical increase in the compensation. The relevant conclusion of the learned Shariat Appellate Bench is as follows:-- "The formula suggested in clause (e) of subsection (1) and in subsection (2) of this section for the assessm ent of a fair amount of compensation suffers from two infirmities. Firstly, the formula is not based on the current market rent, and secondly, it does not provide for a periodical increase in the amount of rent or compensation as is provided in the laws of rent restriction. These provisions should, therefore, be declared as repugnant to the Injunctions of Islam on this score."
14. The Punjab Government has not so far amended the Act so as to bring it in conformity with the law laid down in the aforesaid judgment of the Hon'ble Shariat Appellate Bench of the Supreme Court. At least none has been brought to my notice. This judgment was to take effect on 30th June, 1993. The result that follows, therefore, is that with effect from the said date clause (e) of subsection
(1) and subsection (2) of section 6 of the Act have ceased to exist. The compensation worked out on the basis of the aforesaid provisions has also become invalid with effect from 30-6-1993. A question then arises, as to how and on what basis further compensation of a requisitioned property should be worked out. The answer lies in the judgment of the Hon'ble Shariat Appellate Bench of the Supreme Court. The compensation should be based on the current market rent of the property and the compensation so fixed should be liable to periodically increase, as is provided in the laws of rent restriction. This will ensure that the owner of the property is dealt with fairly and he is not deprived of his property without compensation/rent at the market rates.
15. A further question arises, whether .This Court in appeal can fix future compensation with effect from 30-6-1993 or the matter should be left to be decided by the District Judge/Arbitrator. I fully agree with Mr. Shahzad Shaukat, learned counsel for the Punjab Government that this Court in appeal has no material before it-with regard to the market rent of the property as on 30-6-1993, therefore, no future compensation can be fixed by this Court. The owner of the prope can approach the District Judge/Arbitrator for refutation of the is msation/rent on the basis of the market rent of the property as on I le said date. While the compensation the District Judge/Arbitratot can also order periodi,a1 increase in the compensation in the light of the para materia provisions contained in section 5-A of the Punjab Urban Rent Restriction Ordinance, which is reproduced below:- "Increase of rent of non-residential buildings.---(1) The rent of nonresidential building shall stand automatically increased at the end of every three years of its tenancy by twenty-five per cent. Of the rent already being paid by the tenant.
(2) The first increase under subsection (1) shall accrue.--(i) On the first day of July, 1989 in the case of a tenancy existing for three years or more preceding that date; and
(ii) on the completion of three years of tenancy, in the case of a tenancy which has not been existing for three years on the first day of July, 1989.
(3) Where, during the period of three years, in cases mentioned in subsection (2).--(i) The rent has already been increased by an amount less then twenty-five per cent. Of the total rent, the amount of such increase shall be deducted from the increase under subsection (1); and
(ii) if the rent has already been increased by an amount equal to or more than twenty-five per cent. Of the total rent, no increase under subsection (1) shall accrue until the expiry of three years from the date of such increase.
(4) The arrears becoming due as a result of the increase of rent under this section shall, unless paid earlier, be deemed to be rent due under clause (1) of subsection (2) of section 13, on the expiry of sixty days from the date on which this Ordinance comes into force.
(5) All proceedings arising from the provisions of sections 4 and 5, ir respect of a non-residential building, and pending before the Controller or the Appellate Authority or any Court shall abate.
(6) The provisions of subsections (1) to (5) shall not apply if a landlord and a tenant agree to increase the rent by an agreement in wiring executed before the Controller."
16. The upshot of the whole discussion is that F.A.O. No,169 of 1989 is accepted. The rate of compensation is enhanced from Rs,940 per month to Rs,15,280 per annum with effect from 30-7- 1977. The arrears shall be paid within three months from today. It is further directed that the appellant, if so advised, may move the learned District Judge/Arbitrator for fresh assessment of compensation with effect from 30-6-1993, on the basis of current market rent of the property and for periodical increase thereof. The learned District Judge, if moved in that behalf, shall proceed in the matter in the light of the observations made above for refixation of the compensation of the requisitioned property with effect from 30-6-1993. F.A.O. No,182 of 1989 filed by the Punjab Government is, however, dismissed. Parties are left to bear their own costs in both the appeals.