Kerala State Housing Board & Ors. vs Kerala State Housing Brd., Nhca Assn. & Ors.

Kerala State Housing Board & Ors. ... Appellants

Versus

Kerala State Housing Board, Nellikode

Housing Colony Allottees Assn. & Ors. ... Respondents

WITH

CIVIL APPEAL No.7836 OF 2011

(Arising out of S.L.P. (C) No. 21478 of 2008)

Kerala State Housing Board & Anr. ... Appellants

Versus

K. Narayana Poduval & Ors. ... Respondents

AND

CIVIL APPEAL No.7837 OF 2011

(Arising out of S.L.P. (C) No. 21817 of 2008)

Kerala State Housing Board & Anr. ... Appellants

Versus

Smt. M. P. Meenakshi & Ors. ... Respondents

O R D E R

A. K. PATNAIK, J.

2 Leave granted.

2. Civil Appeal arising out of S.L.P.(C) No.10580 of 2006

is against the judgment dated 28.02.2006 in Writ

Appeal No.1760 of 2004 of the Division Bench of the

Kerala High Court. Civil Appeal arising out of S.L.P.(C)

No.21478 of 2008 is against the order dated

13.06.2008 in Writ Appeal No.1968 of 2007 disposing

of the Writ Appeal in terms of the judgment dated

28.02.2006 in Writ Appeal No.1760 of 2004. Civil

Appeal arising out of S.L.P.(C) No.21817 of 2008 is

against the order 13.06.2008 in Writ Appeal No.1940

of 2008 disposing of the Writ Appeal in terms of the

judgment dated 28.02.2006 in Writ Appeal No.1760 of

2004. These three appeals are being disposed of by

this common order as common questions of fact and

law arise in the appeals.

3. The facts very briefly are that in the years 1984 and

1985 land was acquired for allotment of plots under

the Chevayur Housing Scheme and the Nellikode

Housing Scheme respectively undertaken by the Kerala

State Housing Board (for short `the Board'). The

landowners did not accept the compensation offered

3

for the acquired land and sought a reference to the

Civil Court under Section 18 of the Land Acquisition

Act, 1894. While the dispute in regard to quantum of

compensation was pending, the Board entered into

agreements of sale with various allottees of the plots of

land during the years 1988-1990 and made a provision

therein that the Board shall be entitled to re-fix the

final price of the property agreed to be sold to the

allottees taking into account inter alia the enhanced

compensation awarded by the Courts and Tribunals

and that the decision of the Board in fixing the revised

price of the property shall be conclusive and final. It

was also expressly agreed in the agreements of sale

that after finalization of the price of the property

agreed to be sold by the Board, the allottee shall pay to

the Board together with interest at the rate of 15% per

annum, the difference between the tentative price fixed

and the price finally fixed for the property by the Board

within thirty days of the date of a registered notice

demanding the payment thereof or in such quarterly

installments over a period not exceeding two years to

4

be determined by the Board. After the reference cases

were finalized and disposed of in the year 1997, the

Board deposited the enhanced compensation with

interest, but did not promptly serve the demand

notices on the allottees for payment of the difference

between the tentative price and the final price with

interest and it was only in the year 1999 that the

Board served the notices on the allottees to pay the

said difference with interest at the rate of 15% per

annum.

4. The allottees then filed Writ Petitions before the Kerala

High Court and the learned Single Judge passed

orders refusing to interfere with the claim of interest

on the enhanced amounts of compensation on the

differential amount till 1997 when the references were

finally disposed of by the Court and the Board

deposited the enhanced compensation with interest.

The learned Single Judge, however, found that

individual account statements giving the relevant

details and calculations of the amounts demanded had

not been served on the allottees and held that this was

5

on account of the lethargy of the officials of the Board

and, therefore, the Board was not entitled to any

interest on the differential amount from the allottees

for the period from 1997 till the date of service of

individual account statements on the allottees.

5. Aggrieved by the orders of the learned Single Judge,

the Board filed Writ Appeals before the Division Bench

of the Kerala High Court and by the impugned

judgments and orders the Division Bench dismissed

the appeals. In the impugned judgments and orders,

the Division Bench of the High Court agreed with the

view taken by the learned Single Judge that the Board

was not entitled to claim any interest and that too at

the rate of 15% per annum for the period from the date

of deposit of enhanced compensation in 1997 till the

date of service of the individual account statements

saying that the Board cannot punish the allottees for

its own lethargies. Aggrieved, the Board is in appeal

before us.

6. Learned counsel for the appellant-Board submitted

that there was a clause in the agreements of sale

6

executed between the Board and the allottees that

after finalization of the price of the property agreed to

be sold by the Board, the allottee shall pay to the

Board together with interest at the rate of 15% per

annum, the difference between the tentative price fixed

and the price finally fixed for the property by the Board

within thirty days of the date of a registered notice

demanding the payment thereof or in such quarterly

installments over a period not exceeding two years to

be determined by the Board. He submitted that it was

only in the year 1998 that the price was finalized and

the demand notices were served in the year 1999 on

the allottees to pay the difference between the tentative

price and the final price together with interest at the

rate of 15% per annum as per the aforesaid clause in

the agreements. He further submitted that till the

allottees paid the difference between the tentative price

and the final price, they retained the differential

amount with them and made use thereof while the

appellant-Board was deprived of the use of the money.

He relied on the decision of this Court in Chandigarh

7

Housing Board, Chandigarh v. K.K. Kalsi & Ors. [(2003)

12 SCC 734] wherein it has been held that in such

cases where the allottees have retained the money with

them and made use thereof while the Board has been

deprived of the use of the money, it will be equitable

for the allottees to pay a reasonable interest to the

Board on such money.

7. Learned counsel appearing for the respondents, on the

other hand, supported the orders of the learned Single

Judge and the impugned judgment and orders of the

Division Bench of the Kerala High Court contending

that there was no justification whatsoever for the

appellant-Board to claim any interest on the

differential amount between the tentative price and the

final price from 1997 till the date of service of

individual account statements on the allottees.

8. We have considered the submissions of the learned

counsel for the parties and we find that the reason why

a clause in the agreements of sale executed by the

Board and the allottees for payment of interest at the

rate of 15% per annum on the differential amount

8

between the tentative price and the final price of the

land allotted to the allottees was inserted was that in

the proviso to Section 34 of the Land Acquisition Act,

1894 it is provided that if the compensation for the

acquired land or any part thereof is not paid or

deposited within a period of one year from the date on

which possession of the acquired land is taken,

interest at the rate of fifteen per centum per annum

shall be payable from the date of expiry of the said

period of one year on the amount of compensation or

part thereof which has not been paid or deposited

before the date of such expiry. Since references under

Section 18 of the Land Acquisition Act, 1894 were

pending in the Civil Court when the agreements of sale

were executed by the Board and the allottees, a

stipulation had to be made in the agreements of sale

that as and when the Court finally determines the

compensation and the Board becomes liable to pay

enhanced compensation, the Board will have to deposit

not only the enhanced compensation but also interest

at the rate of 15% per annum on such enhanced

9

compensation. If this was the purpose of the clause in

the agreements of sale between the Board and the

allottees, once the compensation was finalized by the

Court and the enhanced compensation was paid or

deposited in the year 1997, the Board was not liable

for any interest under the proviso to Section 34 of the

Land Acquisition Act, 1894 from the date of such

payment or deposit. Since the purpose of stipulating

the rate of interest of 15% per annum was to take care

of the liability on the enhanced compensation provided

in the Land Acquisition Act, 1894 and not to enrich

the Board by recovery of high rate of interest from the

allottees, we agree with the view taken by the High

Court that the Board was not entitled to interest at the

rate of 15% per annum on the difference between the

tentative price and the final price after the finalization

of the compensation and payment or deposit of the

enhanced compensation by the Board in the year

1997.

9. We, however, do not think that the High Court was

right in taking a view that the appellant-Board was not

10

entitled to any interest for the period from the date of

payment or deposit of the enhanced compensation in

1997 till the date of service of individual account

statements on the allottees. The relevant clause in the

agreements of sale requires the Board to serve only a

notice of demand on the allottee and such notice of

demand must obviously indicate the tentative price

and the final price as determined by the Board and the

differential amount between the tentative price and the

final price, which the allottee was required to pay along

with interest. The clause did not stipulate that the

individual account statements giving the details and

calculations as enumerated in the orders of the

learned Single Judge were also required to be served

on the allottees by the Board. It is not disputed that

notices of demand were served on the allottees not

immediately after finalization of the compensation by

the Court and payment or deposit of the enhanced

amount by the Board in the year 1997, but after a

period of more than an year some time in 1999.

During the period the allottees did not make payment

11

of the differential amount between the tentative price

and the final price, they retained the differential

amount in their hands and used the same and the

Board lost the opportunity to utilize this for its

activities, the Board would be entitled to interest on

the differential amount at a reasonable rate as has

been held by this Court in Chandigarh Housing Board,

Chandigarh v. K.K. Kalsi & Ors. (supra). In our

considered opinion, interest at the rate of 8% per

annum on such differential amount between the

tentative price and the final price would be reasonable,

which the allottees must pay to the Board.

10. We accordingly set aside the order passed by the

learned Single Judge and the impugned judgment and

orders of the Division Bench of the High Court and

dispose of the Writ Petitions of the respondents with

the direction that the respondents will be liable to pay

interest to the appellant-Board on the differential

amount between the tentative price and the final price

at the rate of 8% per annum from the date of deposit

or payment of the enhanced compensation by the

12

Board in 1997 till payment of the differential amounts

by the allottees. The appeals are allowed to the extent

indicated above with no order as to costs.

..........................J.

(R.V. Raveendran)

..........................J.

(A. K. Patnaik)

New Delhi,

September 14, 2011.