Allowed

Terrai Tea Co. Ltd. v. State of W.B.

Calcutta HC25 Aug 2026COT/1175/2007

Case brief

AI extract

What is this about?

The High Court allowed an appeal against a reference judgment that failed to award market value compensation for leased land acquired for an Airport Authority. The Court held the reference court erred in ignoring the tenant's perpetual renewal rights and limiting compensation for loss of earnings, directing a recomputation.

What did the court decide?

The appeal was allowed, setting aside the impugned judgment and remanding the matter to the reference court to compute compensation based on the market value of the entire land, including vacant porti

Terrai Tea Co. Ltd. Vs State of W.B. — Land Acquisition | Calcutta HC (2026)

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Form No. J(2)

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In the High Court at Calcutta Civil Appellate Jurisdiction Appellate Side

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Present: The Hon’ble Justice Sabyasachi Bhattacharyya And The Hon’ble Justice Sandip Kumar De

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FA No. 77 of 2012

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Terai Tea Co. Ltd. Vs.

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State of West Bengal and another

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With

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COT 1175 of 2007

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Terai Tea Co. Ltd. Vs. State of West Bengal and another

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With

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FAT 4329 of 2004

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State of West Bengal and another Vs. Terai Tea Co. Ltd.

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For the appellantTerai Tea Co. Ltd. : Mr. Sagar Bandyopadhyay, Sr. Adv., Ms. Soma Har Ghosh, Mr. Ratul Das, Ms. Shilpi Ghosh, Ms. Suparna Paul, Ms. Shristi Paul, Advs. For the Airport Authority of India : Mr. Anup Kanti Poddar, Ms. Anjali Shaw, Ms. Gargi Mukhopadhyay, Advs.

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Heard on	: 25.08.2026.
Judgment on	: 25.08.2026.

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Sabyasachi Bhattacharyya, J.:-

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When the appeal is taken up for hearing, learned counsel having instruction to appear for the Airport Authority of India Ltd., the body for which the subject plots were acquired, submits that in the order dated August 11, 2026, it was erroneously recorded that the Hon’ble Supreme Court remanded the matter for computation of compensation under the Fair Compensation, and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, whereas from the order of the Hon’ble Supreme Court dated February 20, 2018 it will be evident that the Hon’ble Supreme Court observed that the provisions of the 2013 Act would not be applicable and that the matter was remitted back to this Court to decide the appeal as to the quantum of compensation under the Land Acquisition Act, 1894.

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Learned counsel for the appellant agrees with such submission. Accordingly, let the order dated August 11, 2026 be deemed to stand corrected to the limited extent that whereas we had recorded that the Hon’ble Supreme Court had remanded the matter for computation of compensation under the 2013 Act, the name of the said Act should be read as the “Land Acquisition Act, 1894” instead of the 2013 Act.

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Let this order be deemed to stand incorporated in the order dated August 11, 2026.

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Despite service, none appears for the respondent-State at the time of call.

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Accordingly, the appeal is taken up for hearing ex parte against the State.

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Learned senior counsel appearing for the appellant/land loser argues that the reference Court, while passing the impugned judgment, failed to calculate market value of the land as a component of compensation, thereby giving a go-bye to the first component of Section 23 of the Land Acquisition Act, 1894 (for short “the LA Act”).

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Secondly, it is argued that the reference Court, while calculating compensation, omitted to include the vacant portion of the subject property, which is in the nature of a tea garden, from the calculation of compensation.

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It is further argued that the reference Court granted loss of earning, as incorporated in Section 23 by the West Bengal Amendment of 1963, only up to the purported date of expiry of the lease which was granted in favour of the appellant.

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However, it is submitted that the lease was granted within the contemplation of Section 6(3) of the West Bengal Estate Acquisition Act, 1953 (hereinafter referred to “the 1953 Act”), read in conjunction with the West Bengal Estate Acquisition Rules, 1954, in particular, Rule 4, read with Schedule – F and Form – I thereof.

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Thus, in terms of the said provisions, the lessee/appellant had an unfettered right of renewal in perpetuity and the appellant only had to show that an application had been made prior to the expiry of the original lease which was granted to the appellant.

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It is pointed out that an application for renewal, which was filed well before the expiry of the original lease, was also a part of the evidence before the reference Court. In view of the said application, the renewal ought to have been construed as quasi-automatic.

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In fact, renewal has subsequently been granted and a fresh lease has been executed in favour of the appellant, which is annexed to CAN 2 of 2022, filed in connection with the present appeal.

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Learned senior counsel cites Tandon Brothers Vs. State of West Bengal and others , reported at (2001) 5 Supreme Court Cases 664 , where the Hon’ble Supreme Court laid down the scope and parameters of a lease within the contemplation of Section 6(3) of the 1953 Act.

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Learned senior counsel further cites Inder Prashad Vs. Union of India and others , reported at (1994) 5 Supreme Court Cases 239 , and Brij Behari Sahai Vs. State of U.P. , reported at (2004) 1 Supreme Court Cases 641 , where the Hon’ble Supreme Court held that in cases of lease such as the present case, the compensation in respect of the market value of the land should be apportioned in the ratio of 75 : 25 respectively between the lessee/land loser and the Government.

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Learned senior counsel next contends that it was not for the reference Court to adjudicate on whether the appellant used the entire let-out property for the purpose of tea garden. However, transgressing beyond its jurisdiction, the reference Court took into consideration the purported non-use of the vacant part of the property in terms of the lease. It is further submitted that the reference Court erred in law and in fact in

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assuming that the said vacant portion of the subject property was not appurtenant to the tea garden.

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Learned senior counsel places reliance on Section 23 of the LA Act, as amended in West Bengal, to reiterate the contentions in respect of market value.

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From a bare perusal of the impugned judgment, we find substance in the arguments of the appellant.

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The matter has a chequered history.

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Initially, a notification under Section 4(1) of the LA Act was issued in respect of the subject property on May 7, 1999, which was published in the Official Gazette on May 29, 1999, thereby initiating a process of acquisition. Compensation was initially assessed by the Collector, which was referred for enhancement under Section 18 of the LA Act at the behest of the appellant/land loser. The reference was answered, against which the matter travelled up to the Hon’ble Supreme Court, ultimately being remanded to this Court for computation of the quantum of compensation.

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Much prior to the initiation of the acquisition proceeding, in view of the appellant being entitled to retain the subject plot, which is a tea garden, within the contemplation of Section 6(1)(f), read with Section 6(3), of the 1953 Act, a lease deed was duly executed, which was due to expire after thirty years, that is, on August 24, 2002.

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Thus, at the juncture when the acquisition process was initiated, the lease was already subsisting.

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Hence, by default, the first component enumerated in Section 23 of the LA Act would be applicable and the Collector as well as the reference Court were required to calculate the market value of the land at the date of publication of the notification under Section 4(1) of the LA Act.

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Secondly, the reference Court refused to calculate the market value of the land on the premise that the lease of the appellant was due to expire on August 24, 2002.

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However, we find from the materials on record that an application for renewal of lease was made by the appellant on March 16, 2002, which was received by the concerned authority on March 21, 2002.

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A comprehensive reading of Section 6(3) of the 1953 Act, along with Rule 4, read with Schedule- F and Form- I thereunder of the 1954 Rules, clearly indicates that in case of such statutory leases, the right of renewal of the lessee is in perpetuity, subject to the limited rider that in the event the terms and condition of the lease are violated by the lessee, the State would be entitled to re-enter/resume the property. It may be noted that in the present case, there is no whisper of contravention of the terms of the lease by the appellant from the end of the State.

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Thus, merely by dint of the application for renewal of lease before its expiry, a valuable right accrued in favour of the appellant of renewal of the lease for at least a further period of thirty years.

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In any event, from the documents annexed to CAN 2 of 2022, we find that a fresh lease was actually granted pursuant to such application for renewal, with retrospective effect from immediately after the expiry of the earlier lease. Such lease, it is to be noted, is still subsisting.

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Hence, at all relevant points of time, the appellant was a lessee in respect of the subject property and was entitled to compensation for the land at its market value as on the date of the notification under Section 4(1) of the LA Act.

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Accordingly, the reference Court committed perversity by refusing to calculate market value of the land as on the date of the notification under Section 4(1) of the LA Act on the erroneous premise that the appellant was not a lessee.

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On the other aspect of the matter, the appellant is justified in contending that it was beyond the jurisdiction of the reference Court, within the limited scope of Section 18 of the LA Act, which is confined to the quantum of the compensation, to interpret the terms of the lease and to come to a conclusion that the appellant had frustrated the purpose of the lease by not using the vacant portion of the property for the purpose of growing tea bushes.

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Nothing in the lease deed contains any term that no portion of the tea garden could be left vacant. In fact, there might be umpteen reasons as to why the said portion of the land was left vacant, technical or otherwise. 32. In any event, since there is no allegation of violation of the terms of the lease by the lessor/State Government, the referral Court acted without jurisdiction in interpreting the terms of the lease and re-writing the agreement between the parties by refusing to grant compensation by calculating market value of the purported vacant area, including the same within the tea garden.

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In terms of Section 23 of the LA Act, it was for the referral Court only to calculate compensation on the basis of the market value of the entire land, including the vacant portions thereof as well as the portions which were used for growing tea bushes and/or otherwise. However, the learned referral Judge exceeded his jurisdiction in adjudicating on the purport of the lease deed.

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Insofar as the computation of loss in terms of the seventh component of Section 23, as amended in West Bengal, is concerned, the reference Court also committed a patent error of law by calculating such loss till the date of expiry of the original lease, that is, August 24, 2002.

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It is quite surprising that such calculation was made only for the period of August, 1999 to August, 2002, evidently for the remaining period of the original lease after initiation of the acquisition proceeding.

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However, in view of the above finding that the lease of the petitioner was all along subsisting during the relevant period till date, the calculation of the loss ought to have been based on the yield for the entire period.

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Insofar as the computation of compensation is concerned, the Hon’ble Supreme Court, in Brij Behari Sahai (supra), took into consideration the discussion in Inder Prashad (supra) and under similar circumstances as the instant case, held that the compensation payable for land to the lessee/land loser would be 75% of the total payable compensation whereas the rest 25% would go the lessor (the State).

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Although we do not find any ratio being separately recorded for arriving at the particular ratio of 75 : 25, in view of the Hon’ble Supreme

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Court having consistently followed the ball park ratio of 75 : 25 for the lessee and the lessor respectively as a thumb rule, we also follow the same and hereby come to the conclusion that after computation of the entire compensation payable for the total land on the basis of the market value of the land at the juncture of the notification under Section 4(1) of the LA Act, it would only be appropriate if 75% of the market value of the land, in respect of the first component of Section 23 of the LA Act, would be payable to the appellant.

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Needless to say, insofar as the other components of compensation are concerned, those are to be paid in their entirety to the appellant.

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In view of the above, FA No. 77 of 2012 is allowed, thereby setting aside the impugned judgment and decree dated October 23, 2003 passed by the learned Additional District Judge, First Court at Darjeeling in LA Case No. 2 of 2000 and remanding the matter to the reference Court to compute compensation in the light of the above observations and on the basis of the following yardsticks:

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i) Insofar as the first component stipulated in Section 23 of the LA Act is concerned, the referral Court shall calculate the market value of the subject land at the date of the publication of the notification under Section 4(1) of the said Act, upon granting opportunity to both parties to furnish evidence in that regard and/or upon calling for reports in that regard from the appropriate authorities as to the contemporaneous market value at the juncture when such notification was issued. Out of the total

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compensation for the entire land arrived at on the basis of such market value, 75% of the same would be awarded as compensation to the appellant whereas the rest 25% shall be awarded in favour of the State.

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ii) Insofar as the other components of Section 23 of the LA Act are concerned, that is, from the second to the seventh components (as introduced by the West Bengal Amendment) as well as the components incorporated in sub-sections (1A) and (2) of Section 23, the same shall be calculated for the entire period as provided therein without limiting the same up to August 24, 2002. The total amount arrived at upon such computation shall be granted as compensation to the appellant.

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iii) While computing the market value for the land as directed in serial i) above, the referral Court shall take into account the entire subject land, including the vacant portions thereof, and compute the market value on such premise for such entire land, which will be the basis of the compensation to be granted under serial no. i) above.

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The aforesaid exercise shall be concluded as expeditiously as possible, preferably within six months from the date of communication of this judgment to the reference Court.

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The reference Court shall also direct immediate disbursement of the amount calculated by the Collector to the appellant, without prejudice to the rights and contentions of the parties.

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Such payment shall be made as expeditiously as possible, preferably within two months from the date of communication of this order to the reference Court, and will be adjusted from the total amount of compensation ultimately arrived at.

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It is made clear that while making such computations as directed above, the Airport Authority of India, for which the acquisition took place in the first place, will be at liberty to appear and adduce evidence before the referral Court for the purpose of determining the amount of compensation in terms of Section 50(2) of the LA Act.

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