1. In this appeal under Section 12 of the Karnataka Contract Carriages (Acquisition) Act, 1976 (for short 'the Act'), by the State of Karnataka (for short 'the State'), the sustain-ability of the award of the Mandya District Judge, who was appointed as an Arbitrator under the Act, determining the amount to be paid for a contract carriage acquired under the Act, has been questioned.
2. A contract carriage bearing Registration No. MYQ 1227 belonging to the respondent (the operator), was acquired under the Act, by the State on 30-1-1976. As the amount payable by the State to the operator for the contract carriage so acquired, was not agreed upon between them, the State Government, by its order No. HD. 16. TMI. 84 dated 22-3-1984. appointed the District Judge, Mandya, as the arbitrator for determining the amount of compensation payable respecting the said contract carriage. Thereupon, the District Judge, Mandya, accepted his appointment as an arbitrator and initiated proceedings relating thereto in C.C.A. No. 5/84. In that procesding, the operator was treated as the petitioner and the State Government represented by its Chief Secretary, the Deputy Commissioner, Mandya, and the Regional Transport Officer, Mandya, were treated as respondents. In his claim statement, the petitioner claimed a sum of Rs. 80.000/- and odd, as amount payable by the State for the contract carriage acquired. On the other hand, in their objection statement, respondents 1 to 3 took the stand that it is not the State which is liable to pay an amount to the petitioner for his contract carriage acquired, but it is the petitioner who is liable to pay a sum of Rs. 19,477-33 to the State therefor. On receipt of these statements, the arbitrator allowed the parties to the case to adduce evidence supporting their rival claims and heard arguments of their learned Counsel. He has, thereafter, made an award determining the amount payable for the contract carriage acquired, as Rs. 56.000/-. He has added to that amount, a sum of Rs. 11,600/- alleged to be payable for the unexpired period of the permit of the acquired contract carriage and the sum of Rs. 1.500/- alleged to be payable for the insurance policy of that contract carriage. But, out of the total amount held to be payable for the contract carriage acquired, he has deducted a sum of Rs. 10.000/-which had been received by the operator and a sum of Rs. 7,374-20, the tax due to the State on the contract carriage. The balance amount is made payable to the operator together with interest at 6% per annum from the date of acquisition till the date of payment and costs. It is the sustainability of this award which the State wants us to decide in this appeal.
3. Shri Kothavale, learned High Court Government Pleader, contended that the arbitrator's determination of the amount of Rs. 56,000/- as that payable for the contract carriage acquired, was wholly erroneous. According to him, in determining the amount payable for the contract carriage, the Arbitrator had no option but to find out the aggregate cost of the chasis as well as the body of the mini-bus before it was converted into a contract carriage, as incurred by its original purchaser before its first registration on 30-5-1966 and fix the amount payable for it on the date of its acquisition under the Act, adopting the basis of the percentage provided for in the Schedule thereto, inasmuch as it was the only method adoptable by him under Section 6(1) of the Act for determining the amount payable for a contract carriage acquired under the Act. It was his submission that the arbitrator had acted in excess of his authority in taking the acquisition cost of the contract carriage for purposes of the Act, as the price paid by the operator for the purchase of a mini-bus in the year 1974 plus the cost incurred by him for replacing that mini-bus's petrol engine with a diesel engine plus the cost incurred by him for converting that mini-bus into a contract carriage by re-building its body on 27-12-1975, minus the depreciated value of the original minibus as on 27-12 1975 and in determining the amount payable thereto on percentage basis as provided in the Schedule to the Act.
4. On the contrary, Shri B. Ramaswamy Iyengar, Learned Counsel for the operator, contended that the sum of Rs. 56.000/- determined by the arbitrator as the amount payable for the acquired contract carriage was just and reasonable and the method adopted by the arbitrator for determining that amount was appropriate in the facts and circumstances of the case.
5. The said rival contentions have led us to the need to refer to the law governing the determination of the amount payable under the Act to the property acquired thereunder, before we take up for examination the correctness of the award by which the arbitrator has determined the amount payable for the contract carriage acquired.
6. Sub-section (1) (e) of Section 6 of the Act empowers the arbitrator to determine the amount payable to every property including a contract carriage, acquired under Section 4 thereof. It provides that the arbitrator shall make an award determining the amount which appears to him just and reasonable, and in doing so, he shall have regard to the circumstances of each case and the provisions of the Schedule so far they are applicable.
7. The Supreme Court, in State of Karnataka -v.- Ranganatha Reddy, has, in construing the phrase "shall have regard to" found in Section 6(1) of the Act, indicated that such a phrase, when found in a provision of a statute, shall be understood as "guide and not a fetter", endorsing the view of Fletcher Moulten L.S. in England's Court of Appeal decision in Perry -v.- Wright, (1980) 1 KB 441 expressed in interpreting a Similar phrase found in a statutory provision under his consideration. Besides, the Supreme Court, in Ranganatha Reddy's case, (supra), has explained the ambit of power of an arbitrator under Section 6(1), thus :
"The arbitrator, therefore, reading Section 6(1) as a whole is not obliged to fix the amount as specified in the Schedule. But he has to fix the amount which appears to him just and reasonable on the totality of the facts and circumstances keeping primarily in mind the amount mentioned in the Schedule."
8. Law governing the determination of the amount payable under the Act to the property acquired thereunder, which emerges from the aforesaid enunciation of the Supreme Court on the construction to be placed upon the phrase "shall have regard to" found in Section 6(1) of the Act and also from its aforesaid pronouncement relating to the ambit of power of the Arbitrator under that sub-section both made in the context of saving the Act from being violative of Article 41(2) of the Constitution, may be stated thus :
(i) The Arbitrator, in determining the amount payable for the acquired property under Section 6(1) of the Act, shall bear in mind the amount mentioned therefor under the Schedule to the Act ;
(ii) However, the amount mentioned in the Schedule as payable for the acquired property, shall be a guide to the Arbitrator and not a fetter in his way of determining the just and reasonable amount for the acquired property ;
(iii) In any event, the Arbitrator determining the amount payable for the acquired property, shall ensure that the amount to be so determined is just and reasonable, regard being given to the totality of facts and circumstances affecting the value of such property as on the date of its acquisition."
9. In the light of the said law governing the determination by an Arbitrator of the amount payable under the Act for a property acquired thereunder, we shall how proceed to examine the correctness or otherwise of the amount determined by the Arbitrator in his award under appeal, for the contract carriage respecting which he had to determine the amount.
10. The Arbitrator has found the operator's acquisition cost of the contract carriage as Rs. 70,000/- as on 27-12-1975, the date on which the Certificate of Registration thereto as a contract carnage had been issued. He has determined the amount payable for it on 30-1-1976, the date of its acquisition under the Act, as Rs. 56,000/- procesding on the basis that that amount would be 80% of the acquisition cost under the Schedule to the Act.
11. As regards the acquisition cost of the contract carriage, as it was acquired on 30-5-1966, the date of its original registration, there is the evidence of K. Madaiah, Chief Mechanical Engineer, K.S.R.T.C., Bangalore, who has been examined on behalf of the State as R.W. 1. Exhibit D-1 is the Valuation Sheet of the contract carriage prepared by him. From that sheet, it is seen that the cost of chassis and the cost of body building of the contract carriage on me dace of its original registration are Rs. 30,000/- and Rs. 11,784/- respectively. The total cost of the contract carriage as it stood on the date of its original registration, has been fixed accordingly as Rs. 41,784/-. But, the basis on which the cost of chassis was fixed and the cost of body building was so fixed, is not furnished in Exhibit D-1. Even in his evidence, R.W. 1 does not furnish the basis on which the said figures relating to cost of chassis and cost of body building were arrived at. He has admitted in his evidence that he was not even a qualified automobile Engineer. He has also said that he cannot say whether a vehicle of the type had bean purchased by the K.S.R.T.G., M. Nazibullah, Regional Transport Officer, Mandya, who had been nominated by the State Government as an expert, to assist the Arbitrator in evaluating the contract carriage acquired, though is examined as R.W. 2, has not spoken even a word about either the cost of chassis or the cost of body building, of the acquired contract carriage in relation to the date of its original registration. On the other hand, the evidence adduced by the operator regarding the acquisition cost of the contract carriage, consists of his own evidence as P.W.1 and the evidence of motor vehicle's body builder, Ikramulla Hassan (P.W.2), and a letter and two invoices marked as Exhibits P-1, P-2 and P-3 respectively. Exhibit P-1, letter dated 26-6-1974 issued by the Central Machine Tools Institute, Bangalore, shows that the contract carriage was originally a Fargo Omnibus of 1966 model and it was purchased by the operator on 28-3-1974 for a sum of Rs. 20,000/- and that vehicle had a petrol engine. This latter is spoken to by the operator as P.W. 1. Exhibit P-3 is the invoice issued in respect of the contract carriage by P.W. 2 for "Engineers and Automobiles Specialists" showing that he was charged Rs. 40,000/- towards the body building (luxury), painting and providing extra fittings and Rs. 20,000/- towards cost of fitting a second hand diesel engine. Exhibit P-2 is the duplicate invoice of Exhibit P-3. P.W. 2 as well as P.W. 1 (operator) have spoken to the expenditure incurred for the contract carriage as per the invoices. The Arbitrator having found that there was no proper basis for the acquisition cost of the contract carriage as fixed and spoken to on behalf of the State, has refused to accept the evidence of the operator (P.W. 1) and his witness (P.W. 2) based on Exhibits P-1 to P-3 as to the acquisition cost of the contract carriage, as on 27-12-1975. which works out, in all, to Rs. 80.000/. However, that acquisition cost is reduced to Rs. 70.000/., by the Arbitrator after showing a deduction of Rs. 10,000/- out of Rs 80,000/- treating the sum of Rs. 10,000/-as the value of the petrol engine and other parts removed by the operator from the original vehicle and retained with him.
12. No doubt, in the facts and circumstances of the case, it is difficult to find that the Arbitration was unjustified in not relying upon the evidence adduced on behalf of the State as regards the original acquisition cost of the contract carriage. However, we may state having regard to the letter, Exhibit P-1 given by the Central Machine Tools Institute, Bangalore, that the operator might have purchased the contract carriage when it was an Omnibus on 28-3-1974 for a sum of Rs. 20,000/-, as held by the Arbitrator. Then, as regards the conversion of the Omnibus into a contract carriage, there is the evidence of P.W. 3, the expert appointed by the State Government to assist the Arbitrator in assessing the amount payable to the contract carnage acquired. In his evidence, he has stated thus :
"The height of the body was altered in compliance with the provisions contained in Section 32 of the M.V. Act. Originally, the seating capacity was 14. It was increased to 21+1 subsequently. It is true that the minibus was changed by the petitioner and converted it into a contract carriage."
Further, as regards replacement of petrol engine in the Omnibus, it is admitted by R.W.1 in his evidence that at the time of acquisition of the contract carriage under the Act, it had a diesel engine. Hence, it has to be taken that the Omnibus was converted into a contract carriage and its petrol engine had been replaced by diesel engine, before its acquisition.
13. Now, the question is whether the cost of conversion of the Omnibus into a contract carriage by re-building its body and the cost of changing its petrol engine into diesel engine, could have been Rs. 60,000/- as shown in Exhibits P-2 and P-3 and as spoken to by P.W. 1 and P.W. 2, the operator and the body builder, respectively. If the said evidence has to be accepted as true, the total acquisition cost of the contract carriage as on 27-12-1975 comes to Rs. 80,000/- including the cost incurred in the purchase of the minibus from its original owner. But, there is one clinching circumstance which makes us think that the cost incurred by the operator on account of body building and change of engine cannot he. Rs. 60,000/- i.e., his claim petition made in Form 2 annexed to the Karnataka Contract Carriages (Acquisition) Rules, 1978, along with Appendix-I, which states that the acquisition cost of the contract carriage is only Rs. 60,000/-. When this sum of Rs. 60,000/- should necessarily include the sum invested for purchase of the vehicle, the cost incurred for re-building the body of the vehicle and changing the engine, cannot be more than Rs. 40.000/-. If it is remembered that the operator had the benefit of the petrol engine replaced by the diesel engine and other scrap material of the old vehicle, some value has to be given for them and that value has to be deducted out of the said sum of Rs. 40.000/-. If we give deduction of Rs. 6,000/- on this account, which sum, in our view, could be regarded as a proper sum in the circumstances of the case, then the total cost of acquisition of the contract carriage as on 27-12-1975 would be Rs. 20,000/-, the purchase cost of the Omnibus and Rs. 34,000/-, the cost of replacement of engine of the old vehicle as also the cost of re-building of its body, in all coming to Re. 54,000/-. In the facts and circumstances of the case, we consider that this amount of Rs. 54,000/ could be treated as the acquisition cost of the contract carriage acquired.
14. If we treat the acquisition cost of the contract carriage as Rs. 54,000/- as an 27-12-1975, for purpose of finding out the just and reasonable amount payable for the contract carriage, in the peculiar facts and circumstances of the present case, the acquisition, having taken place within six months from 27.12.1975, the amount, which becomes payable thereto under the Schedule, would be 85% of the acquisition cost, which works out to Rs. 45,900/-. We, therefore, determine the amount payable for the contract carriage as Rs. 45,900/- as against the sum of Rs. 54,000/- determined by the Arbitrator.
15. Shri Kothavale, secondly contended that the Arbitrator should not have added to the amount, a sum of Rs. 11,600/- as the sum payable for the unexpired period of the permit respecting the contract carriage. There is substance in this contention. In Appendix I of claim statement in Form-2 filed by the operator, particulars relating to the date of issue of permit and the date of expiry of the permit are shown as 'nil'. If that is so, granting of any amount for the unexpired period of permit cannot arise. In this situation, the Arbitrator was unjustified in adding the sum of Rs. 11.600/- to the amount payable for the contract carriage. Hence, we disallow the said sum of Rs. 11,600/- added to the amount by the Arbitrator.
16. Shri Kothavale, thirdly, contended that a sum of Rs. l,500/-added as insurance amount payable to the operator of the contract carriage, was unjustified. When the permit itself is not obtained by the operator, the question of his taking an insurance policy respecting the contract carriage could not have arisen. There is no documentary evidence produced by the operator to support this claim. Hence, adding of this sum to the amount payable for the contract carriage by the Arbitrator was unjustified. Hence, we disallow this sum also.
17. Shri Kothavale, lastly contended that the Arbitrator should have deducted out of the amount payable for the contract carriage, a sum of Rs. 6,945-89, which, it was alleged, had been spent in making the acquired contract carriage road-worthy. No doubt, sub-para (2) of Para-1 of the Schedule to the Act, which is relevant for deciding this aspect of the matter, reads thus :
"(2) If, in the opinion of the authorised Officer, any contract carriage taken over is not road-worthy, such amount as may be determined by him as being the cost likely to be incurred in making the contract carriage road-worthy, shall be deducted from the amount payable for such carriages."
In the present case, the Deputy Commissioner (Respondent-2 before the Arbitrator) is stated to be the Authorised Officer for the purpose of the Act. Unfortunately, he has not determined the cost likely to be incurred in making the contract carriage road-worthy as required under the said sub para, so as to make that amount deductible Hence, we reject the contention urged in this behalf.
18. It is not disputed that the operator has received a sum of Rs. 10,000/- as interim payment out of the amount payable for the contract carriage and he is liable to pay a sum of Rs. 7,164-20, as arrears of tax to the State respecting the contract carriage. These two sums are liable to be deducted out of the amount of Rs. 45.900/- payable for the contract carriage. If these amounts are deducted, the balance of the amount payable for the acquisition of the contract carriage of the operator, would be Rs. 28,735-80, which figure is rounded off as Rs. 28,750/-.
19. In the result, we allow this appeal partly and in modification of the award under appeal we fix the balance amount payable for the contract carriage of the operator at Rs. 28.750/ and the interest payable thereon from 30-1-1976, the date of acquisition till the date of payment at 6% per annum, and costs levied by the Arbitrator at Rs. 500/-, and direct their payment as provided for under Section 11 of the Act treating the date of this award as the date of the award of the Arbitrator, wit, 25-2-1985.