Union Of India vs Parmal Singh & Ors

Reportable IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 2319-2327 OF 2001

Union of India ... Appellant

Vs.

Parmal Singh & Ors. ... Respondents

WITH

CA Nos. 332-336/2008, CA Nos. 354-359/2008, CA Nos.6789-6790 of 2008 (@ SLP (C) Nos. 4505-4506/2008) CA Nos.6792-6796 of 2008 (@ SLP (C) Nos. 4632-4636/2008) CA Nos.6791 of 2008 (@ SLP (C) No. 4637/2008) CA Nos.6804-6806 of 2008 (@ SLP (C) Nos. 7110-7112/2008) CA Nos.6826-6839 of 2008 (@ SLP (C) Nos.9132-9145/2008) CA Nos.6798-6803 of 2008 (@ SLP (C) Nos. 11266-11271/2008) CA Nos.6808-6824 of 2008 (@ SLP (C) Nos. 19273-19289/2003)

JUDGMENT

R.V. RAVEENDRAN, J.

The lands of respondents in village Mola Agri (now district

Ghaziabad) were requisitioned by the Central Government in 1963 under

section 29 of the Defence of India Act, 1962 (for short the `Act'). The said 2

requisitioned lands were subsequently acquired under section 36 of the Act

in the year 1965. The Special Land Acquisition officer, Meerut, determined

the compensation payable to the respondents in the year 1966 (varying

between Rs.2400 and Rs.3625 per bigha by adopting belting method of

valuation). Not being satisfied with the compensation determined by him,

the respondents sought reference to arbitration under section 37(2) of the

Act, for determination of proper compensation. The Central Government

appointed different Arbitrators to decide their claims. In one arbitration, an

award dated 16.3.1979, was made awarding compensation at the rate of

Rs.2.60 per sq.yd with interest at 6% per annum from the date of acquisition

till date of deposit. In another arbitration, an award dated 8.9.1986 was

made awarding compensation at Rs.2.60 per sq. yd. with solatium at the rate

of 30% and interest at 9% per annum on the additional amount from the date

of acquisition till date of payment. Not being satisfied with the

compensation, respondents filed writ petitions challenging the awards of the

arbitrators before the Allahabad High Court. The High Court by its orders

dated 1.4.1999 increased the compensation to Rs.3.60 per sq. yd. Wherever

solatium had been awarded, the High Court set aside the same. Wherever

interest had been awarded at a rate in excess of six percent per annum, the 3

High Court reduced the rate and awarded a uniform interest at the rate of

6% per annum from the date of acquisition till the date of payment/deposit.

2. Union of India has filed these appeals by special leave against the

said orders of the High Court, challenging the award of interest at 6% per

annum. It has not challenged the enhancement of compensation from

Rs.2.60 to Rs.3.60 per sq. yd. Appellant contends that as the Act provides

for payment of only compensation and does not provide for either solatium

or interest, interest could not have been awarded. Reliance is placed on the

decisions of this Court in Union of India Vs. Hari Krishan Khosla [1993

Supp (2) SCC 149] and Union of India Vs. Chajju Ram [2003 (5) SCC 568].

3. The learned counsel for respondents submitted that there has been

enormous delay at every stage. He pointed out that the acquisition was of

the year 1965; that there was delay in appointing arbitrator; that only the

amount awarded by the arbitrator has been paid; and that neither the

enhancement in compensation (from Rs.2.60 to Rs.3.60 per sq. yd.) made by

the High Court, nor the interest has been paid. Learned counsel for the

respondents submitted that the decisions in Chajju Ram and Hari Krishan

Khosla did not prohibit award of interest on equitable grounds when there

was inordinate delay. He drew attention to the fact that ultimately in the said 4

two decisions, the amount already paid as interest was directed not to be

recovered. He also placed reliance on two other decisions of this Court

namely Prabhu Dayal v. Union of India [1995 Supp (4) SCC 221] and

Girdhari v. Union of India [2005 (11) SCC 291] relating to acquisitions

under the Requisitioning and Acquisition of Immovable Property Act, 1952

(`RAIP Act' for short, provisions of which, relating to acquisition and

compensation are in pari materia with the provisions of the Act), to show

that interest can be awarded from the date of acquisition till the date of

payment.

4. On the contentions urged, the only question that arises for

consideration is whether award of interest by the High Court on the

compensation for acquisition of requisitioned property under Defence of

India Act, 1962 is impermissible.

5. Section 36 of the Act provides for the manner of acquisition of

requisitioned property. Section 37 of the Act deals with determination of

compensation for acquisition of requisitioned property. Sub-section (1)

thereof which is relevant is extracted below :

"37. (1) The compensation payable for the acquisition of any property under section 36 shall be -

5 (a) the price which the requisitioned property would have fetched in the open market if it had remained in the same condition as it was at the time of requisitioning and been sold on the date of acquisition, or

(b) twice the price which the requisitioned property would have fetched in the open market if it had been sold on the date of the requisition,

whichever is less."

Sub-section (2) of section 37 provides for reference of applications for

enhancement of compensation filed by a persons interested, to an Arbitrator

appointed by the Central Government. Sections 36 and 37 of the Act

correspond to sections 30 and 31 of Defence of India Act, 1971 (`DI Act of

1971' for short) which replaced the Act. Section 37(1) of the Act is also in

pari materia with section 8(3) of the RAIP Act. One significant common

feature of these enactments is that they provide for acquisition of

requisitioned land and do not contain any provisions similar to sections 23

(2) and 28/34 of the Land Acquisition Act, 1894 (`LA Act' for short)

providing for payment of solatium or interest.

6. The validity of Section 8(3) of RAIP Act came up for consideration

in Union of India v. Hari Krishan Khosla [1993 Supp (2) SCC 149]. This

Court held that absence of any provision for payment of solatium and

interest, similar to sections 23 and 34 of Land Acquisition Act, 1894, in

regard to acquisition of requisitioned land under section 8(3)(a) of the RAIP 6

Act did not render the said provisions invalid. This Court held that

acquisition of land under the RAIP Act stood on a different footing when

compared to an acquisition under the LA Act as the property acquired under

RAIP Act was subject to a prior requisition, which was not the case in

regard to acquisitions under the LA Act. The decision in Hari Krishan

Khosla (supra) was followed in Union of India v. Dhanwanti Devi [1996 (6)

SCC 44].

7. The decision in Hari Krishan Khosla was also followed by a

Constitution Bench of this Court in Union of India v. Chajju Ram [2003 (5)

SCC 568] dealing with the challenge to the validity of Sections 30 and 31 of

the Defence of India Act, 1971 (which replaced the Act) on a ground

similar to what was urged in Hari Krishan Khosla with reference to section

8(3)(a) of RAIP Act. Accepting the challenge, the High Court had held that

section 31 of the DI Act of 1971 was violative of Article 14 of the

Constitution of India and the land owners were entitled to claim solatium at

15% and interest at 6% per annum on the lines of what was provided under

the LA Act. This Court reversed the decision of the High Court and upheld

the validity of sections 30 and 31 of the DI Act of 1971. This Court held

that the DI Act of 1971 was a self-contained Code and that adoption of

different classifications for determination of compensation for acquisition of 7

requisitioned land under the Defence of India Act, 1971 and acquisition of

non-requisitioned land under the Land Acquisition Act, 1894, was

reasonable and valid.

8. But what is relevant for our purpose is that both in Hari Krishan

Khosla and Chajju Ram, the question considered was whether the

provisions relating to acquisition of requisitioned land under the provisions

of the RAIP Act and DI Act of 1971, were invalid for not providing for

payment of solatium and interest, similar to the LA Act. In neither of those

two cases, this Court considered whether interest could be awarded or not,

on belated payment of compensation amount for acquisitions under the

relevant Acts, on equitable grounds. In fact, in both Hari Krishan Khosla

and Chajju Ram, this court after upholding the validity of provisions

relating to acquisition and determination of compensation, directed the

Union of India not to recover back the interest which had already been paid

to the land owners. This direction was on equitable grounds. In Prabhu

Dayal and Girdhari, this Court awarded interest on equitable grounds,

though the RAIP Act did not contain any provision for award of interest.

9. When a property is acquired, and law provides for payment of

compensation to be determined in the manner specified, ordinarily 8

compensation shall have to be paid at the time of taking possession in

pursuance of acquisition. By applying equitable principles, courts have

always awarded interest on the delayed payment of compensation in regard

to acquisition of any property. When a requisitioned property is acquired, as

possession had already been taken from the landholder, the compensation

becomes payable from the date of acquisition. When a property is

requisitioned, the land owner is compensated for the denial of possession by

paying compensation based on the rent it would have fetched had it not been

requisitioned. But once the property is acquired, the rent is stopped, as

compensation based on open market value becomes payable against

acquisition. Therefore while interest is payable, it is not awarded from the

date of requisition (taking over of possession) but only from the date of

acquisition. This principle has been recognized and applied by courts

consistently. Whenever the Arbitrator or High Court increases the

compensation for the acquired land, the increase relates back to the date of

acquisition as they are merely doing what the Special Land Acquisition

Officer ought to have done in the first instance. Therefore, interest is

awardable on the increased amount also from the date of acquisition. The

said general principle will not apply in two circumstances. One is where a

statute specifies or regulates the interest. In that event, interest will be 9

payable in terms of the provisions of the statute. The second is where a

statute or contract dealing with the acquisition specifically bars or prohibits

payment of interest on the compensation amount. In that event, interest will

not be awarded. Where the statute is silent about interest, and there is no

express bar about payment of interest, any delay in paying the compensation

or enhanced compensation for acquisition would require award of interest at

a reasonable rate on equitable grounds. We are fortified in this view by the

enunciation in Satinder Singh v. Umrao Singh [AIR 1961 SC 908], which

has been reiterated in Hirachand Kothari v. State of Rajasthan [1985

(Supp.) SCC 17].

10. In Satinder Singh, this Court while considering acquisition of land

under the East Punjab Requisition of Immovable Property (Temporary

Powers) Act, 1948, held that interest can be awarded on equitable grounds.

The following observations throw light on the issue :

"(17) What then is the contention raised by the claimants? They contend that their immovable property has been acquired by the State and the State has taken possession of it. Thus they have been deprived of the right to receive the income from the property and there is a time lag between the taking of the possession by the State and the payment of compensation by it to the claimants. During this period they have been deprived of the income of the property and they have not been able to receive interest from the amount of compensation. Stated broadly the act of taking possession of immovable property generally implies an agreement to pay interest on the value of the property and it is on this principle that a claim for 10

interest is made against the State. This question has been considered on several occasions and the general principle on which the contention is raised by the claimants has been upheld. In Swift and Co. v. Board of Trade, (1925) A C 520 at p. 532, it has been held by the House of Lords that "on a contract for the sale and purchase of land it is the practice of the Court of Chancery to require the purchaser to pay interest on his purchase money from the date when he took, or might safely have taken, possession of the land............

(18) In Inglewood Pulp and Paper Co. Ltd. v. New Brunswick Electric Power Commission [1928 A.C. 429], it was held by the Privy Council that "upon the expropriation of land under statutory power, whether for the purpose of private gain or of good to the public at large, the owner is entitled to interest upon the principal sum awarded from the date when possession was taken, unless the statute clearly shows a contrary intention." Dealing with the argument that the expropriation with which the Privy Council was concerned was not effected for private gain, but for the good of the public at large, it observed "but for all that, the owner is deprived of his property in this case as much as in the other, and the rule has long been accepted in the interpretation of statutes that they are not to be held to deprive individuals of property without compensation unless the intention to do so is made quite clear. The right to receive the interest takes the place of the right to retain possession and is within the rule." It would thus be noticed that the claim for interest proceeds on the assumption that when the owner of immovable property loses possession of it he is entitled to claim interest in place of right to retain possession.

(19) It is, however, urged by Mr. Gopal Singh for respondent 2 that what the claimants are entitled to receive is compensation and since the word "compensation" is used by s. 5(1) both in respect of requisition as well as acquisition it would not be fair to import the general rule about the payment of interest where property is acquired. Compensation, it is urged, should represent the price of the property and there is no justification for adding to the said price any amount by way of damages. We are not impressed by this argument. When a claim for payment of interest is made by a person whose immovable property has been acquired compulsorily he is not making claim for damages properly or technically so called; he is basing his claim on the general rule that if he is deprived of his land he should be put in possession of compensation immediately; if not, in lieu of possession taken by compulsory acquisition interest should be paid to him on the said amount of compensation. In our opinion, therefore, the fact that s. 5(1) deals with compensation both for requisition and acquisition cannot serve to exclude the application of the general rule to which we have just referred."

11 [emphasis supplied]

Proviso to section 1 of Interest Act, 1839 and section 4(1) of Interest Act,

1978 also recognize and preserve the power of court to grant interest in such

circumstances.

11. In this case the acquisition is of the year 1965. Though more than

four decades have elapsed, the land owners are yet to get the compensation

in entirety. It is also relevant to note that when the Arbitrator awarded

interest, it was not challenged by the appellant. It accepted the award of

interest. Only when the High Court increased the amount of compensation

in the appeals filed by the landowners, the appellant chose to challenge, not

the increase in compensation, but the award of interest. Be that as it may.

12. For the reasons aforesaid, we uphold the award of interest at 6% per

annum on the compensation amount. The appeals are therefore dismissed.

C.A. Nos.332-336/2008 and CA Nos.354 to 359/2008 12

These appeals involve the same issue. Following the decision in C.A.

Nos.2319-2327/2001, these appeals are dismissed.

SLP (C) Nos. 4505-4506/2008, SLP (C) Nos. 4632-4636/2008), SLP (C) No. 4637/2008, SLP (C) Nos. 7110-7112/2008, SLP (C) Nos.9132- 9145/2008, SLP (C) Nos. 11266-11271/2008, and SLP (C) Nos. 19273- 19289/2003

Delay condoned. Leave granted. These matters are covered by the

decision rendered in C.A. Nos.2319-2327/2001. Following the said

decision, we uphold the award of interest and dismiss these appeals.

__________________J.

(R V Raveendran)

New Delhi; __________________J. November 25, 2008. (Lokeshwar Singh Panta)