Judgement Appeal (No. 36 of 1938) from a decree of the High Court (May 4, 1937) which reversed an award of the Subordinate Judge of Vizagapatam on a reference under the Land Acquisition Act (September 11, 1933). Law. Rep. 66 Ind. App. 104 ( 1938- 1939) Raja Vyricherla Narayana v. Revenue Divisional Officer 23 A harbour was being constructed at Vizagapatam. Land acquired by the harbour authorities on the south of the harbour was allocated by them to oil companies and other industrial concerns. This land was malarious. The appellants land, which was to the south of this land, contained a spring which yielded a constant and abundant supply of good drinking water which could easily be made available for the oil companies and people engaged in the harbour works. The appellants land was acquired for the purpose of the execution of anti-malarial works. The appellant claimed compensation on the footing of the potentialities of the land as a building site. The Land Acquisition Officer disallowed this claim and awarded compensation on a valuation of the land as partly waste and partly cultivated with an allowance for some buildings and trees. On the appellants application, the matter was, under the Act, referred to the Subordinate Judge. Before him the appellant made a further claim on the footing of potentialities as a source of water supply. The Subordinate Judge held that the water could be sold to the oil companies and others at a profit, that the only possible buyers were the oil companies and the harbour authorities and that compensation for potentialities could be awarded, even where the only possible buyer is the acquiring authority, and he assessed the value of the potentialities and made his award accordingly. He found against the potentialities of the land as a building site. On appeal, the High Court set aside the award of the Subordinate Judge and restored that of the Land Acquisition Officer, holding that the supply of drinking water had no value apart from the scheme for which the acquisition was made and the Harbour Authorities were the only possible purchasers, and that the land had no potentialities as a building site. The facts are more fully stated in the judgment of their Lordships. 1938. Nov. 14, 15, 17, 18, 21, 22. Lionel Cohen K.C., P. V. Subba Row and K. Umameshwaram for the appellant referred to ss. The facts are more fully stated in the judgment of their Lordships. 1938. Nov. 14, 15, 17, 18, 21, 22. Lionel Cohen K.C., P. V. Subba Row and K. Umameshwaram for the appellant referred to ss. 3, 4, 5 (a), 7, 9, 11, 15 to 19, 23 to 25, 31, sub-s. 2, and s. 53 of the Land Acquisition Act and the facts which led to the acquisition of the land in question and submitted In assessing the value of land, its potentialities must be taken into consideration, We are now concerned with the potentialities of the land in question only as a source of water supply, there being concurrent findings against its potentialities in other respects. This land was not included in the original harbour scheme in 1920. That is a fact which should be taken into consideration. A supply of water was wanted in connection with an anti-malarial scheme on the south of the harbour. This land held the only available source of supply on the south. It could give a constant supply of good drinking water at a comparatively small cost. A scheme to bring water from the north had been considered and abandoned on account of its prohibitive cost. The water supply from this land would be available for the oil companies and other concerns that might be established on the south of the harbour as well as the anti-malarial scheme. The special adaptability or potentialities of the land in these circumstances should be taken into account in assessing the " market value " which is the value to the owner Swarna Manjuri Dassi v. Secretary of State for India. (( 1927) I. L. R. 55 Cal. 994.) Not merely the present value, but potentialities must be considered Mohini Mohan Banerjee v. Secretary of State for India (( 1921) 25 C. W. N. 1002.); In re Gough and The Aspatria, Silloth and District Joint Water Board ([ 1903] 1 K. B. 574.) and on appeal. ([ 1904] 1 K. B. 417.) You may Law. Rep. 66 Ind. App. 104 ( 1938- 1939) Raja Vyricherla Narayana v. Revenue Divisional Officer 24 look at the ultimate purchaser in estimating the potential value In re Lucas and Chesterfield Gas and Water Board ([ 1908] 1 K. B. 571.) and on appeal. ([ 1904] 1 K. B. 417.) You may Law. Rep. 66 Ind. App. 104 ( 1938- 1939) Raja Vyricherla Narayana v. Revenue Divisional Officer 24 look at the ultimate purchaser in estimating the potential value In re Lucas and Chesterfield Gas and Water Board ([ 1908] 1 K. B. 571.) and on appeal. ([ 1909] 1 K. B. 16.) In our submission, the rights of the owner are understated in Sidney v. North Eastern Ry. Co. ([ 1914] 3 K. B. 629.) The potentiality and not the realized possibility is the matter for consideration. In Cedars Rapids Manufacturing and Power Co. v. Lacoste ([ 1914] A. C. 569.) and in Sisters of Charity of Rockingham v. The King ([ 1922] 2 A. C. 315.) the arbitrator acted on the realized possibility and it was held he had applied a wrong principle. Where the principle applied is right, the Board will not examine the account Narasingh Das v. Secretary of State for India. (( 1924) L. R. 52 I. A. 133, 136.) In my submission, the Subordinate Judge here has acted on right principles and has correctly applied them. The High Court has fallen into error in holding that the requirements of water for the harbour is not a matter to be taken into consideration. I submit that the possibility of requirement and not the actual requirement should be taken into consideration. The High Court has misdirected itself in stating the question as one of law. It is wrong to consider the Harbour Authorities as the only possible purchasers. The oil companies might have purchased. It is immaterial that the land was, at the time, undeveloped. There was a possibility of developing it and that possibility must be taken into consideration. The owner himself might have developed and exploited it. H. U. Willink K.C., W. Wallach and W. W. K. Page for the respondent. The water is of no value to the appellant as a potential source of supply outside his land. The possible buyer would not pay more for the land on account of the water supply if the harbour was not made. No allowance can be made for it Sidney v. North Eastern Ry. Co. ([ 1914] 3 K. B. 629.) and Countess of Ossalinsky v. Manchester Corporation. The possible buyer would not pay more for the land on account of the water supply if the harbour was not made. No allowance can be made for it Sidney v. North Eastern Ry. Co. ([ 1914] 3 K. B. 629.) and Countess of Ossalinsky v. Manchester Corporation. (Reported in Browne and Allan on Compensation, 2nd ed., Appendix, p. 659.) [Reference was made to Secretary of State for Foreign Affairs v. Charlesworth, Pilling & Co. ([ 1901] A. C. 373.), In re Gough and The Aspatria, Silloth and District Joint Water Board ([ 1903] 1 K. B. 574 ; on appeal [ 1904] 1 K. B. 417.), In re Lucas and Chesterfield Gas and Water Board ([ 1908] 1 K. J3. 571; on appeal [ 1909] 1 K. B. 16.), Odium and Others v. Vancouver (City of) (( 1915) 85 L. J. P. C. 95 ; 113 L. T. 795.), Fraser v. Fraserville (City of) ([ 1917] A. C. 187.), Vallabhdas Naranji (Khot of Kanjor) v. The Collector under Act I. of 1894 ([ 1929] 33 C. W. N. 549.), Inland Land Revenue Commissioners v. Clay ([ 1914] 1 K. B. 339, 348.), Cedars Rapids Manufacturing and Power Co. v. Lacoste ([ 1914] A. C. 569.), and Corrie v. MacDermott. ([ 1914] A. C. 1056, 1062.)] Secretary of State for Foreign Affairs v. Charlesworth, Pilling & Co. ([ 1901] A. C. 373.) differs from this case. In that case all the land in the proximity of the railway went up in value. The purpose for which the land is to be acquired ought not to be taken into account. The valuation ought to be on the following principles — (1.) Th exigencies of the purchaser must be excluded. (2.) Public need cannot appreciate private competition. (3.) Any value due to carrying out the purpose of the acquisition (here the harbour or malarial schemes) must be excluded. Law. Rep. 66 Ind. App. 104 ( 1938- 1939) Raja Vyricherla Narayana v. Revenue Divisional Officer 25 (4.) Only the general value is to be given and not the particular value to the acquiring authority. (5.) The general value must be based on possibility of competition. On the facts of the present case, there is no evidence that any body other than the Harbour Authorities would have been in the market. (5.) The general value must be based on possibility of competition. On the facts of the present case, there is no evidence that any body other than the Harbour Authorities would have been in the market. The possibilities or potentialities must, therefore, be included on the principles laid down by Fletcher Moulton L.J. in In re Lucas and Chesterfield Gas and Water Board. ([ 1909] 1 K. B. 16, 31.) W. W. K. Page followed. In India no one could purchase with a view to providing a water supply except a public body or some one licensed or authorized by Government, so there could be no competition. The value to the owner is to be ascertained under s. 4 of the Act on the footing of a voluntary transaction between a willing buyer and a willing seller, that is as between a purchaser not under compulsion to buy and a seller not under compulsion to sell. The value is not the value in use, but the value at a specified date. That value may be greater or less than the value calculated on the revenue obtained by the owner in the past or that might be obtained by him in the future, if he retained the property. Potentialities at the date of the sale may legitimately be taken into account, but only so far as the owner can use them to influence a willing buyer. The price that might be offered by speculators on the date of the acquisition may be con sidered, but not the use to which the property will be put by the acquiring body after acquisition. Lionel Cohen K.C. in reply. The evidence shows that a profit could be made by selling water to the community or settlement which would follow the making of the harbour. There is no prohibition against selling water in India. Profit that can be made is an element that can be taken into consideration Trent-Stoughton v. Barbados Water Supply Co., Ld. ([ 1893] A. C. 502, 504.) This land was left out in the original scheme. The value of it rose on that scheme. The carrying out of anti-malarial work was a certainty. It began in 1926. Any purchaser might and would assume that this work would be carried out and a water supply would be a necessity. The supply from this land would be the cheapest and most convenient. The value of it rose on that scheme. The carrying out of anti-malarial work was a certainty. It began in 1926. Any purchaser might and would assume that this work would be carried out and a water supply would be a necessity. The supply from this land would be the cheapest and most convenient. It is said there was no possibility of another buyer. The value is the value to the owner. If deprived of the land, he is deprived of what he might earn. If the water were brought to the boundary of the harbour, would the Harbour Authorities forbid their workmen and tenants buying and using the water ? "Urgency" has been referred to. " Urgency " in s. 24 means, I submit, urgency in point of time. It has that meaning in s. 17 clearly, and prima facie the word would bear the same meaning throughout the Act. In s. 24 only enhancement is considered, not initial potentiality. Proof of competition is not necessary. Competition affords one way of ascertaining the value, but that is not the only way. If there is no competition, the value must be ascertained in some other way, e.g., the profit the owner could get if he retained the land. In every case in which Lucass case ([ 1909] 1 K. B. 16.) was approved, except in Sidneys case ([ 1914] 3 K. B. 629.), it was approved not on the point raised here of absence of competition, but on the point not disputed that potential value may be considered. In Sidneys case ([ 1914] 3 K. B. 629.) the reason given by Rowlatt J. is against me, but the decision is in my favour. [The other cases cited by the respondent were referred to.] Willink K.C. replied on the point raised in Trent-Stoughton v. Barbados Water Supply Co., Ld. ([ 1893] A. C. 502.), and asked that s. 26 of the Act, which had not been referred to, might be considered. 1939. Feb. 23. The judgment of their Lordships was delivered by Lord Romer. This appeal is concerned with the question of what is the proper sum to be awarded to the appellant by way of Law. Rep. 66 Ind. App. 1939. Feb. 23. The judgment of their Lordships was delivered by Lord Romer. This appeal is concerned with the question of what is the proper sum to be awarded to the appellant by way of Law. Rep. 66 Ind. App. 104 ( 1938- 1939) Raja Vyricherla Narayana v. Revenue Divisional Officer 26 compensation in respect of the compulsory acquisition by the Vizagapatam Harbour Authority of certain land of his adjoining the harbour, the respondent being the representative of such authority for the purposes of this appeal. The circumstances in which the land was acquired are as follows The Vizagatapam Harbour, the construction of which appears to have been begun in the year 1920, was formed by making excavations in swampy land situate to the south-west of the town of Vizagatapam and by dredging a deep water channel in the creek to the south of that town that led from the swampy land into the Bay of Bengal. On the south of the land acquired by the Harbour Authority for the purpose of these works is situated the property of the appellant known as the Lova Gardens. These gardens are formed by a valley which runs down from high ground on the south-west to low ground on the north-east adjoining the land of the Harbour Authority on the south of the above-mentioned creek. The upper portion of this valley consists of a shallow basin in the hills which forms the catchment area of a spring of water that emerges from the ground at the north-east end of the basin. This spring, which appears to yield even in the dry season an average flow of 50,000 gallons a day of excellent drinking water, is situated at a height of 150 feet above sea level. Until a part of it was diverted by the Harbour Authority, as narrated hereafter, the whole of the water from this spring ran down the valley to the lower end of Lova Gardens and from thence discharged itself into the creek. By the early part of the year 1926 the construction of the harbour had made considerable progress and it was hoped that it would be ready for opening by the end of 1929. With that end in view a portion of the harbour site had been allocated by the Harbour Authority for the purpose of being used by oil companies and other industrial concerns. With that end in view a portion of the harbour site had been allocated by the Harbour Authority for the purpose of being used by oil companies and other industrial concerns. The entire south side of the harbour had indeed been allocated for industrial purposes. But the harbour land was very malarious, and so, too, was much of the land to the south of the harbour, including the lower part of the Lova Gardens ; a circumstance that gave rise to some anxiety in the minds of the Harbour Authority. They accordingly consulted Mr. Senior White, who is an expert upon the subject, and upon May 1, 1926, that gentleman, after making an " anti-malarial survey" of the area, embodied the results of his survey in a report. This report disclosed a serious state of affairs in the villages situated in the area of which there appear to have been at that time no less than thirty-two of which nine were on the south side of the creek. These villages, or many of them, seem to have been dependent upon wells for their water supply, and these wells formed breeding grounds for the malaria-bearing mosquitoes. It is plain from the report that persons carrying on business at the harbour would run a serious risk of contracting malaria as matters then stood, and this would greatly hamper the development of the harbour site for industrial purposes. Further, as Mr. White pointed out, there was the possibility of shipping at the quays becoming infected, and the mere possibility, which had already been suggested in the Indian press, was detrimental to the interest of the port. It appears from a letter written by Mr. Rattenbury, the Deputy Engineer in Chief to the Harbour Authority, dated July 14, 1926, that in these circumstances, Mr. White was "very keen on closing the wells along the “south side," and this, the letter adds, could be done if a gravity water supply were provided instead. Such a supply could be furnished by the spring at the upper end of Lova Gardens, and accordingly the Harbour Authority conceived the idea of using the water from the spring for the purp6se of freeing the harbour from malaria. Such a supply could be furnished by the spring at the upper end of Lova Gardens, and accordingly the Harbour Authority conceived the idea of using the water from the spring for the purp6se of freeing the harbour from malaria. But apart altogether from the assistance that this supply of water would give to the prevention of malaria, there was much to justify its acquisition on its own merits, as was pointed out in a letter of October 2, 1926, written by one of the harbour officials. For the water could be made available as a supply to the oil companies and other industrial concerns that might be established in the southern part of the harbour area. The method of utilizing the water for these purposes that was ultimately adopted was this The water was to be diverted from the lower part of the valley to which reference has been made and led from a short distance below the spring directly to the harbour area by means of a tunnel to be made through the hilly land to the north-west of the valley. This scheme, which was in due course carried out and is now in operation, involved the acquisition from the appellant of the shallow basin forming the catchment area of the spring, the site of the spring itself, and a narrow strip of land Law. Rep. 66 Ind. App. 104 ( 1938- 1939) Raja Vyricherla Narayana v. Revenue Divisional Officer 27 below the spring. In due course the necessary steps were taken for the compulsory acquisition of this land under the provisions of the Land Acquisition Act, 1894, the notification under s. 4, sub-s. 1, of the Act being given on February 13, 1928. The public purpose for which the land was needed was stated in the notification to be the execution of anti-malarial works, the total area to be acquired from the appellant being 108-9 acres. Of this acreage the catchment area, including the site of the spring referred to as 2-1D and 2-1E, accounted for 105-92 acres, and the land below the spring referred to as 2-1B (0-53 acres), 2-1C (0.48 acres) and 2-3B (1.97 acres) accounted for the rest. After the giving of the notification, and the procedure laid down in ss. 6, 7 and 8 of the Act having been followed, the Collector took the steps prescribed by ss. After the giving of the notification, and the procedure laid down in ss. 6, 7 and 8 of the Act having been followed, the Collector took the steps prescribed by ss. 9, 10 and 11 to determine the compensation that ought to be allowed to the appellant for his land. It is provided by s. 15 of the Act that in so doing, the Collector shall be guided by the provisions contained in ss. 23 and 24, and it will be convenient before continuing this narrative to turn to these provisions. So far as material to the present purpose they are as follows — " 23.—(1.) In determining the amount of compensation to be "awarded for land acquired under this Act, the Court shall " take into consideration— "first, the market-value of the land at the date of the "publication of the declaration relating thereto under "section 6; "secondly, the damage sustained by the person interested, "by reason of the taking of any standing crops or trees "which may be on the land at the time of the Collectors "taking possession thereof; "thirdly, the damage (if any) sustained by the person "interested, at the time of the Collectors taking possession "of the land, by reason of severing such land from his other "land ; "fourthly, the damage (if any) sustained by the person "interested, at the time of the Collectors taking possession "of the land, by reason of the acquisition injuriously "affecting his other property, moveable or immoveable, in "any other manner, or his earnings. "24. But the Court shall not take into consideration— "first, the degree of urgency which has led to the "acquisition ; "secondly, any disinclination of the person interesed to "part with the land acquired; "fifthly, any increase to the value of the land acquired "likely to accrue from the use to which it will be put when "acquired." The general principles for determining compensation that are specified in these sections differ in no material respect from those upon which compensation was awarded in this country under the Lands Clauses Act of 1845 before the coming into operation of the Acquisition of Land (Assessment of Compensation) Act of 1919. As was said by Wadsworth J. when giving judgment in the High Court in the present case, "It is well settled that English decisions under the Lands "Clauses Act of 1845 lay down principles which are equally "applicable to proceedings under the Indian Act." The compensation must be determined, therefore, by reference to the price which a willing vendor might reasonably expect to obtain from a willing purchaser. The disinclination of the vendor to part with his land and the urgent necessity of the purchaser to buy must alike be disregarded. Neither must be considered as acting under compulsion. This is implied in the common saying that the value of the land is not to be estimated at its value to the purchaser. But this does not Law. Rep. 66 Ind. App. 104 ( 1938- 1939) Raja Vyricherla Narayana v. Revenue Divisional Officer 28 mean that the fact that some particular purchaser might desire the land more than others is to be disregarded. The wish of a particular purchaser, though not his compulsion, may always be taken into consideration for what it is worth. But the question of what it may be worth, that is to say, to what extent it should affect the compensation to be awarded, is one that will be dealt with later in this judgment. It may also be observed in passing that it is often said that it is the value of the land to the vendor that has to be estimated. This, however, is not in strictness accurate. The land, for instance, may have for the vendor a sentimental value far in excess of its " market value." But the compensation must not be increased by reason of any such consideration. The vendor is to be treated as a vendor willing to sell at " the market price/ to use the words of s. 23 of the Indian Act. It is perhaps desirable in this connection to say something about this expression " the market price." There is not in general any market for land in the sense in which one speaks of a market for shares or a market for sugar or any like commodity. The value of any such article at any particular time can readily be ascertained by the prices being obtained for similar articles in the market. The value of any such article at any particular time can readily be ascertained by the prices being obtained for similar articles in the market. In the case of land, its value in general can also be measured by a consideration of the prices that have been obtained in the past for land of similar quality and in similar positions, and this is what must be meant in general by " the market value " in s. 23. But sometimes it happens that the land to be valued possesses some unusual, and it may be, unique features, as regards its position or its potentialities. In such a case the arbitrator in determining its value will have no market value to guide him, and he will have to ascertain as best he may from the materials before him, what a willing vendor might reasonably expect to obtain from a willing purchaser, for the land in that particular position and with those particular potentialities. For it has been established by numerous authorities that the land is not to be valued merely by reference to the use to which it is being put at the time at which its value has to be determined (that time under the Indian Act being the date of the notification under s. 4, sub-s. 1), but also by reference to the uses to which it is reasonably capable of being put in the future. No authority indeed is required for this proposition. It is a self-evident one. No one can suppose in the case of land which is certain, or even likely, to be used in the immediate or reasonably near future for building purposes, but which at the valuation date is waste land or is being used for agricultural purposes, that the owner, however willing a vendor, will be content to sell the land for its value as waste or agricultural land as the case may be. It is plain that, in ascertaining its value, the possibility of its being used for building purposes would have to be taken into account. It is plain that, in ascertaining its value, the possibility of its being used for building purposes would have to be taken into account. It is equally plain, however, that the land must not be valued as though it had already been built upon, a proposition that is embodied in s. 24, sub-s. 5, of the Act and is sometimes expressed by saying that it is the possibilities of the land and not its realized possibilities that must be taken into consideration. But how is the increase accruing to the value of the land by reason of its potentialities or possibilities to be measured ? In the case instanced above of land possessing the possibility of being used for building purposes, the arbitrator (which expression in this judgment includes any person who has to determine the value) would probably have before him evidence of the prices paid, in the neighbourhood, for land immediately required for such purposes. He would then have to deduct from the value so ascertained such a sum as he would think proper by reason of the degree of possibility that the land might never be so required or might not be so required for a considerable time. In the case, however, of land possessing potentialities of such an unusual nature that the arbitrator has not similar cases to guide him, the value of the land must be ascertained in some other way. In such a case, moreover, there will, in all probability, be only a very limited number of persons capable of turning the potentialities of the land to account. If the owner of the land is the only person who can do so, the value to him must be ascertained by reference to what profit he might thereby have been able to derive from the land in the future. Take as an example the case of an owner of vacant land that adjoins his factory. The land possesses the potentiality of being profitably used for an extension of the factory. But the owner is the only person Law. Rep. 66 Ind. App. 104 ( 1938- 1939) Raja Vyricherla Narayana v. Revenue Divisional Officer 29 who can turn that potentiality to account. In valuing the land, however, as between him and a willing purchaser, the value to him of the potentiality would necessarily have to be included. But the owner is the only person Law. Rep. 66 Ind. App. 104 ( 1938- 1939) Raja Vyricherla Narayana v. Revenue Divisional Officer 29 who can turn that potentiality to account. In valuing the land, however, as between him and a willing purchaser, the value to him of the potentiality would necessarily have to be included. The same consideration will apply to cases where the owner is not the only person but merely one of the persons able to turn the potentiality to account. The value to him of the potentiality will not be less than the profit that would accrue to him by making use of it had he retained it in his own possession. But now take the case where the owner is himself unable to turn the potentiality to account whether by promotion of a company or otherwise. In such a case there may be several other persons who would be able to do so, or there may be only one. If there are more than one, it is recognized by all the authorities that have been cited to their Lordships, and seems to be consistent with common sense, that the owner is entitled to be paid the value to him of the potentiality, though the ascertainment of its value may in many cases be a matter of considerable difficulty. It has been suggested that in order to ascertain it, the arbitrator is to hold an imaginary auction. But with all respect to those who have made the suggestion, their Lordships are unable to see how this is going to help the arbitrator. At such imaginary auction, all possible purchasers must, no doubt, be imagined as attending. They will include, therefore, persons who are in no way interested in the lands potentialities, and such persons will bid no higher price than the value of similar land without its potentialities. This value in this judgment is referred to as the " poramboke " value. But they will also include what may be called the purchasers of the potentialities. There may also be present some speculative buyers who will be willing to bid more than the " poramboke " value upon the chance of being able to resell to a purchaser of the potentiality at a profit. It would seem, however, logically, that such purchasers should be disregarded. There may also be present some speculative buyers who will be willing to bid more than the " poramboke " value upon the chance of being able to resell to a purchaser of the potentiality at a profit. It would seem, however, logically, that such purchasers should be disregarded. For the object of the imaginary auction is to discover what a purchaser of the potentiality will be willing to pay for it, and this cannot depend upon the presence at the auction of persons willing to pay less, unless it be that such ultimate purchaser is to be considered willing to pay whatever fantastic price he may be forced up to by competition. And no one suggests this. Proceeding, therefore, with the imaginary auction at which are present two classes of buyers—namely, the " poramboke buyers" and the potentiality buyers,"—the former will disappear from the bidding as soon as the “poramboke " value has been reached, and the bidding will thereafter be confined to the " potentiality buyers." But at what figure will this bidding stop ? As already pointed out it cannot be imagined as going on until the ultimate purchaser has been driven by the competition up to a fantastic price. For he is ex hypothesi a willing purchaser and not one who is by circumstances forced to buy. Nor can the bidding be imagined to stop at the first advance on the " poramboke " value. For the vendor is a willing vendor and not one compelled by circumstances to sell his potentiality for anything that he can get. The arbitrator will, therefore, continue the imaginary bidding until a bid is reached which, in the arbitrators estimate, represents the true value to the vendor of the potentiality. The auction will, therefore, have been an entire waste of the arbitrators imagination. If the value of the potentiality be Rs. X, the imaginary auction will have taken place to ascertain the value of X from the imaginary bidding, and all that can be said is that the bidding will stop at Rs. X. The truth of the matter is that the value of the potentiality must be ascertained by the arbitrator on such materials as are available to him and without indulging in feats of the imagination. X. The truth of the matter is that the value of the potentiality must be ascertained by the arbitrator on such materials as are available to him and without indulging in feats of the imagination. Their Lordships would not have thought it necessary to deal with this question of the imaginary auction at such length, were it not for the fact that in the argument before them the respondents counsel endeavoured to show, by reference to such an auction, that when there was only one possible Law. Rep. 66 Ind. App. 104 ( 1938- 1939) Raja Vyricherla Narayana v. Revenue Divisional Officer 30 purchaser of the potentiality the value of it to the vendor was nil—that is to say that the value of the land with the potentiality was substantially nothing in excess of its value without it. This argument, it may be observed, commended itself to Lord Cullen in the Scottish case of Glass v. Inland Revenue ( 1915 S. C. 449.), referred to below, but was rejected by the majority of the Court. Upon the question of the value of the potentiality where there is only one possible purchaser, there are some authorities to which their Lordships will have to refer. But dealing with the matter apart from authority it would seem that the value should be the sum which the arbitrator estimates a willing purchaser will pay and not what a purchaser will pay under compulsion. It was contended on behalf of the respondent that, at an auction where there is only one possible purchaser of the potentiality, the bidding will only rise above the " poramboke " value sufficiently to enable the land to be knocked down to that purchaser. But if the potentiality is of value to the vendor if there happen to be two pr more possible purchasers of it, it is difficult to see why he should be willing to part with it for nothing merely because there is only one purchaser. To compel him to do so is to treat him as a vendor parting with his land under compulsion and not as a willing vendor. The fact is that the only possible ainpurchas e r of a pote ntiality is us ually quite willing to pay for it. To compel him to do so is to treat him as a vendor parting with his land under compulsion and not as a willing vendor. The fact is that the only possible ainpurchas e r of a pote ntiality is us ually quite willing to pay for it. An ins tance of this is to be found in the cas e of Inland Re ve nue Commis sione rs v. Clay, (i) That was a cas e unde r s . 25, s ub-s . 1, of the Finance ( 1909- 1910) Act, 1910, and is not pe rhaps s trictly re le vant to the pre s e nt cas e . The facts of it, howe ve r, are worth re calling. The re was a hous e of which the value to anyone e xce pt ce rtain trus te e s was no more than 750/. The s e trus te e s we re the owne rs of a nurs e s home which adjoine d the hous e , and the y we re de s irous of e xte nding the ir pre mis e s . The y accordingly purchas e d the hous e for 1000/., the owne r thus re ce iving 250/. for the pote ntiality his hous e pos s e s s e d by re as on of its pos ition adjoining the nurs e s home . It was he ld by the Court of Appe al that 1000/. was the value of the hous e to a willing s e lle r. "To s ay,” s aid Lord Coze ns Hardy M .R., " that a s mall farm in the middle of a "wealthy landowners es tate is to be valued without re fe re nce "to the fact that he will probably be willing to pay a large "price , but s ole ly with re fe re nce to its ordinary agricultural "value , s e e ms to me abs urd." Had the hous e in that cas e be e n acquire d compuls orily by. a railway company, or local authority unde r the provisions of the Lands Claus e s Consolidation Act, 1845, be fore its purchase by the trus te e s , the hous e ought, in the ir Lords hips opinion, and for the re as ons alre ady give n, to have be e n value d at 1000/. and not me re ly at 750/. A cas e in many re s pe cts s imilar to Clays cas e ([ 1914] 1 K. B. 339, 348.), is that of Glass v. Inland Revenue. ( 1915 S.C. 449.) That also was a case arising under the Finance ( 1909- 1910) Act, 1910, and was one where land of an agricultural value of 3379/. had been sold in 1911 to certain Water Commissioners for 5000/., they being the only possible purchasers of the land for other than agricultural purposes. It was held that in valuing the land as on April 30, 1909, the possibility that the Commissioners might give more than the agricultural value for the land must be taken into consideration. In Lord Johnstons words, it was necessary in order to fix the value of the land on April 30, 1909, to ascertain " what is to be attributed to the probability of the " Water Commissioners, in the circumstances, desiring to . "acquire the property, and what figure, in a friendly negotiation, "they would be expected to pay for it." But however this may be, it is said that the matter assumes a totally different complexion when the only possible purchaser is the one who has obtained the compulsory powers of purchase, and that this has been established by authorities that should be followed by this Board. Of these authorities, the first one to which reference need be made is that of In re Gough and The Aspatria, Silloth and District Joint Water Board. ([ 1904] 1 K. B. 417.) In that case it was not proved that the acquiring authority was the only possible purchaser and it may be that all that the Court of Appeal decided was that it was not incumbent upon the claimant for compensation to specify that any particular body of persons were possible purchasers, though the judgment of Lord Alverstone L.C.J. seems quite consistent with the Law. Rep. 66 Ind. App. Rep. 66 Ind. App. 104 ( 1938- 1939) Raja Vyricherla Narayana v. Revenue Divisional Officer 31 view that the potentiality must be valued, even if the acquiring authority be its only possible purchaser. But it is contended that Sir Richard Henn Collins M.R. expressed the contrary view. After referring to the particular adaptability of the land that was in question and that it ought to find a place in the estimate of the amount of compensation, he said (Ibid. 423.) " That view is supported by "authority and long practice; but underlying it is the question, "which is one of fact for the arbitrator, whether there is a "possible market for the site, and in determining that the "statutory purchase is not to be considered." But the Master of the Rolls said that the purchase, not the purchaser, was to be left, out of consideration. Any enhanced value attaching to the land by reason of the fact that it has been compulsorily acquired for the purpose of the acquiring authority must always be disregarded, and the Master of the Rolls meant no more than that. The case of Lucas and Chesterfield Gas and Water Board ([ 1909] 1 K. B. 16.), must, however, be considered in greater detail, for it is on certain dicta of Fletcher Moulton L.J. in that case that the respondent chiefly relies. The land that had been compulsorily acquired in that case had potentialities for which the acquiring authority was not the only possible purchaser. The point now being considered did not therefore arise for decision. But in the Court below ([ 1908] 1 K. B. 571, 579.), Bray J. had said this "I come back to the question whether the fact that no "buyer for reservoir purposes can be found, except a buyer "who has obtained parliamentary powers, prevents the "special value of the land being marketable. But in the Court below ([ 1908] 1 K. B. 571, 579.), Bray J. had said this "I come back to the question whether the fact that no "buyer for reservoir purposes can be found, except a buyer "who has obtained parliamentary powers, prevents the "special value of the land being marketable. In my opinion "the answer I ought to give to that question is No V In the Court of Appeal ([ 1909] 1 K. B. 16, 25.), Vaughan Williams L.J% said "I agree with Bray J. that the fact that no buyer for reservoir "purposes can be found except a buyer who has obtained "parliamentary powers does not prevent the special value "being marketable," and stated that one of his reasons for so agreeing was that the fact that the board (who were the acquiring authority) might themselves become possible purchasers who would give a special price for the land, ought to be considered. Fletcher Moulton L.J., however, said that the decided cases to his mind laid down the principle that, when the special value exists only for the particular purchaser who has obtained powers of compulsory purchase, it cannot be taken into consideration in fixing the price, because to do otherwise would be to allow the existence of the scheme to enhance the value of the land to be purchased under it. He added that where there were other possible purchasers there would be competition among them and this fact would enhance the market price. The learned Lord Justice did not specify the authorities which laid down the principle in question and their Lordships are not aware of any that would justify it. It must, of course, be conceded that the existence of the scheme must not be allowed to enhance the price, if by " scheme " is meant the fact that compulsory powers of acquisition have been obtained for the purpose of carrying into effect a particular scheme for the profitable use of the potentiality. The valuation must always be made as though no such powers had been acquired, and the only use that can be made of the scheme is as evidence that the acquiring authority can properly be regarded as possible purchasers. The valuation must always be made as though no such powers had been acquired, and the only use that can be made of the scheme is as evidence that the acquiring authority can properly be regarded as possible purchasers. But their Lordships have some difficulty in seeing why the taking into consideration of the fact that the special value exists for those purchasers only should be said to be allowing the existence of the scheme to enhance the value of the lands. The only difference that the scheme has made is that the acquiring authority, who before the scheme were possible purchasers only, have become purchasers who are under a pressing need to acquire the land ; and that is a circumstance that is never allowed to enhance the value. If, on the other hand, the Lord Justice meant by " the scheme " the intention formed by the acquiring authority of exploiting the potentiality of the land, his statement can only mean that the value of the land is not to be enhanced by the fact that they are possible purchasers. The result of this would be that, even in a case where there are two or more possible purchasers, their existence must not be allowed to enhance the value. For each purchaser must be deemed to have a scheme in the sense supposed, and the enhancement of value due to their competition which the Lord Justice envisages will in fact be due to Law. Rep. 66 Ind. App. 104 ( 1938- 1939) Raja Vyricherla Narayana v. Revenue Divisional Officer 32 the " schemes." In these circumstances their Lordships are not prepared to follow the dictum of Fletcher Moulton L.J. in the Lucas case ([ 1909] 1 K. B. 16.), and prefer the opinion there expressed by Vaughan Williams L.J. It is said, however, that the dictum of Fletcher Moulton L.J. has already received the approval of this Board on more than one occasion. But in no case to which their Lordships attention has been called was the question of the effect of there being only one possible purchaser of the land being considered by the Board, and any approval of the statement of the law by the Lord Justice must be regarded merely as an approval of such statement so far as it affected the particular question then before the Board. It is sufficient in this connection to refer to two of such cases. In Cedars Rapids Manufacturing and Power Co. v. Lacoste ([ 1914] A. C. 569, 576.), Lord Dunedin, in delivering the judgment of the Board, said this "The law of Canada as regards the principles upon which "compensation for land taken is to be awarded is the same as "the law of England and it has been explained in numerous "cases, nowhere with greater precision than in the case of "In re Lucas and Chesterfield Gas and Water Board ([ 1909] 1 K. B. 16.), where "Vaughan Williams and Fletcher Moulton L.JJ. deal with "the whole subject exhaustively and accurately/ As has already been pointed out, the opinions of the two Lords Justices upon the question now being considered were diametrically opposed to one another. The other case is that of Fraser v. City of Fraserville ([ 1917] A. C. 187, 194.), where Lord Buckmaster, in delivering the judgment of the Board, said " The "principles which regulate the fixing of compensation of "lands compulsorily acquired have been the subject of many "decisions, and among the most recent are those of In re "Lucas and Chesterfield Gas and Water Board ([ 1909] 1 K. B. 16.), Cedars Rapids "Manufacturing and Power Co. v. Lacoste ([ 1914] A. C. 569, 576.), and Sidney v. "North Eastern Railway Co. (4). The principles of those cases "are carefully and correctly considered in the judgments "the subject of appeal, and the substance of them is this "that the value to be ascertained is the value to the seller "of the property in its actual condition at the time of "expropriation with all its existing advantages and with all "its possibilities, excluding any advantage due to the carrying "out of the scheme for which the property is compulsorily "acquired, the question of what is the scheme being a "question of fact for the arbitrator in each case." It will be observed that Lord Buckmaster makes no reference whatsoever to the present question. But in one of the cases to which the noble and learned Lord referred— namely, Sidney v. North Eastern Ry. Co. But in one of the cases to which the noble and learned Lord referred— namely, Sidney v. North Eastern Ry. Co. ([ 1914] 3 K. B. 629.), Rowlatt J. is thought to have said much the same as had been said by Fletcher Moulton L.J. In that case certain land possessed the potentiality of being used for the purposes of a railway. That potentiality was capable of being turned to account by a railway company who had obtained compulsory powers of acquiring it and by the proprietor of an adjoining colliery. In assessing the compensation to be paid by the railway company for the land, the arbitrator took into account the possibility that, but for its acquisition by the railway company, the colliery proprietor might have purchased it, but he dd not take into consideration the possibility that the company might in friendly negotiation have been willing to pay more for it than the colliery proprietor. In their Lordships opinion he was wrong in this. The Divisional Court, however, on a case stated, upheld the decision of the arbitrator. In the course of his judgment Rowlatt J. said this " Now if and so long as there are several competitors including the actual taker who may be regarded as possibly “in the market for purposes such as those of the scheme, the "possibility of their offering for the land is an element of the "value in no respect differing from that afforded by the "possibility of offers for it for other purposes. As such it "is admissible as truly market value to the owner and not "merely value to the taker. But when the price is reached "at which all other competition must be taken to fail to "what can any further value be attributed ? The point has "been reached when the owner is offered more than the land "is worth to him for his own purposes and all that any one "else would offer him except one person, the promoter, who is "now, though he was not before, freed from competition. "Apart from Law. Rep. 66 Ind. App. 104 ( 1938- 1939) Raja Vyricherla Narayana v. Revenue Divisional Officer