Karnataka High Court
Hindustan Aeronautics Limited, ... vs Muniswamy Reddy Deceased By L.Rs. 1(A) ... on 10 August, 1992
Equivalent citations: AIR1993KANT77, AIR 1993 KARNATAKA 77, (1992) ILR (KANT) 3319 (1992) 7 LACC 585, (1992) 7 LACC 585
JUDGMENT
1. Both these appeals are by the Hindustan Aeronautics Limited, Bangalore for whose benefit the land in question was acquired. There is no dispute that the land was occupied by the Hindustan Air Crafts Limited in the year 1943 and ever since then either the said Hindustan Air Crafts Limited or its successor the present appellant has been in possession continuously. There is also no dispute that the owner-respondent No. 1 was not in possession of any portion of this land and no rent or licence fee was being paid for this occuption. On 4th June, 1981, preliminary notification was published under Section 4(1) of the Land Acquisition Act, 1894 ('the Act") proposing to acquire the land for the benefit of H.A.L. In November, 1981 final notification under Section 6 was issued. On 24-3-1982, the Land Acquisition Officer made his award granting compensation at the rate of Rs. 40,000/- per Acre. This was enhanced by the reference Court in LAC No. 207/1982 on 8th August, 1984. The enhanced compensation was at the rate of Rs. 1,25,500/- per Acre. The City Civil Court also ordered interest at 5% payable on the compensation with effect from 15th September, 1943, the date on which possession was taken from the owner by the HAL and 5% was also ordered under the amended provisions of the Act. In these appeals two questions are raised by Mr. Narayana Rao, learned Senior Counsel appearing for the appellant.
1. Award of interest with effect from 15th September, 1943 is unwarranted because of the vast time gap between the taking of the possession and the date of award.
2. The interest payable ought to be on the market value and not on the entire compensation which includes solatium on the market value.
2. The law is quite clear, as on to-day, and we do not think we can accept any of these submissions. Section 28 of the Act which provides for a direction regarding interest states that interest may be awarded from the date on which possession is taken from the owner by the collector. The provision is quite clear. The contention of the learned counsel assumes that compensation is awarded with reference to the market value prevailing on the date of the preliminary notification and therefore any award of interest on the said amount for a period prior to the said date is inequitable and not called for and that the owner is compensated for an amount which is not due to him.
3. This contention overlooks the concept of interest payable under the Act. It has been clarified judicially now that interest is payable to the owner in consideration of his right to possession which he is deprived of when possession is taken from him. The interest payable has nothing to do with the concept of compensation payable to the claimant though interest is computed with reference to the said compensation. In Satinder Singh v. Umrao Singh, , the question was considered by the Supreme Court, at p. 915, as follows :
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 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 v. C.V. Board of Trade (1925) AC 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".
This principle has been recognised ever since the decision in Birch v. Joy, (1852) 3 HLC 565. In his speech, Viscount Cave, L.C., added that "this practice rests upon the view that the act of taking possession is an implied agreement to pay interest", and he points out that the said rule has been extended to cases of compulsory purchase under the Lands Clauses Consolidation Act, 1845. In this connection distinction is drawn between acquisition or sales of land and requisition of goods by the State. In regard to cases falling under the latter category this rule would not apply.
(18) In Inglewood Pulp and Paper Co. Ltd. And New Brunswick Electric Power Commission, 1928 AC 492 : AIR 1928 PC 287, 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 agreement 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".
Again the Supreme Court pointed out in a subsequent passage that 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.
4. In Dr. Sham Lal Narula v. The Commissioner of Income-tax, , the Supreme Court again had to consider the nature of interest payable under the Act for the purpose of levying lax. The Supreme Court pointed out that the interest payable was not compensation and was in the nature of income and therefore that portion of the interest was liable to tax under the Income-tax Act. After referring to the scheme of the Act the Supreme Court observed thus :
"A perusal of the provisions of S. 23 shows that interest is not an item included in the compensation for any of the matters mentioned therein; nor is it mentioned as a consideration for the acquisition of the land. Under cl.(2) of S. 23, the Legislature in express terms states that in addition to the market value of the land the Court shall in every case award a sum of 15%, of such market value in consideration of the compulsory nature of the acquisition. If interest on the amount of compensation determined under S. 23 is considered to be a part of the compensation or given in consideration of the compulsory nature of the acquisition, the Legislature would have provided for it in ,S. 23 itself. But instead, payment of interest is provided for separately under S. 34 in Part V of the Act under the heading "Payment". It is so done, because interest pertains to the domain of payment after the compensation has been ascertained. It is a consideration paid either for the use of the money or for forbearance from demanding it after it has fallen due. Therefore, the Act itself makes a clear distinction between the compensation payable for the land acquired and the interest payable on the compensation awarded."
The above passage also brings out the distinction between the compensation payable under Section 23 and other amounts payable under the Act and that the compensation would include the amount payable under Section 23(2) of the Act also. In other words, the necessary implication of the above reasoning is that a solatium is part of the compensation, which has a bearing on the second contention raised by Mr. Narayana Rao. There are two decisions of this Court on this question. The first one is Subhadra Bai v. State of Mysore, 1973 (1) Mys LJ 175 : (AIR 1979 Mys 13). This was a case where the land get submerged earlier and subsequently the land was acquired. The Court considered the submission of the land as the date on which possession was taken and award interest from the said date. In this connection the Bench observed as follows (at page 14; of AIR) :
"The next question that arises for consideration is whether under S. 34 of the Land Acquisition Act, it is permissible for the Court holding an enquiry into the compensation payable to a claimant to award interest in respect of the period prior to the date on which the proceedings under the Land Acquisition Act are initiated. S. 34 of the Act provides that the claimant would be entitled to interest at the rate of 5% per annum on the compensation awarded from the date on which the possession of the land is taken from him by the Deputy Commissioner. In this case, as already stated, no physical possession of the property was taken after the land acquisition proceedings were started. The appellant lost possession of the property prior to 31-3-1959. It is argued on behalf of the Land Acquisition Officer by Sri Annadanayya Puranik, the learned High Court Government Pleader, that S. 34 of the Act is applicable only to cases where the Deputy Commissioner takes possession of the property under the Act and not to a case of this nature where the claimant is deprived of the possession of the property on a date anterior to the commencement of the proceedings under the Act. We find that it would be both inequitable and illogical to accept the submission made on behalf of the Land Acquisition Officer. S. 34 does not expressly prohibit the payment of interest on the market value of the land for the period anterior to the date on which the proceedings were actually initiated. It only states that interest is payable from the date on which the Deputy Commissioner takes possession of the land. In the instant case we have already held that the Deputy Commissioner did not take physical possession of the property at all after the proceedings were initiated. What was however done was the regularisation of the act of the Government by which the claimant was dispossessed of the land. In such a case, it would not be unreasonable to hold that the date on which the claimant lost possession of the property by reason of a certain act on the part of the Government which necessitated the initiation of the proceedings under the Act should be taken as the relevant date for the purpose of awarding interest under S. 34 of the Act. The position is the same even under S. 28 of the Act which requires payment of interest payable under S. 34 of the Act by the Land Acquisition Officer if it is wrongly with held".
The Bench also noticed a decision of the Andhra Pradesh High Court in Revenue Divisional, Officer, Guntur v. Vasireddy Rama Bhanu Bhupal, , wherein a similar view was expressed. The Andhra Pradesh High Court pointed out that possession need not be taken by the acquiring authority himself but the possession taken by the Municipality earlier to the acquisition should be treated as the possession taken under the Act, because acquisition proceedings were initiated to acquire the same land for the purpose for which possession was taken earlier. The same is the effect of the decision of another Bench of this Court.
5. In Land Acquisition Officer, Chicikaballapurv. Suryanarayana Rao, , the claimant had sought crop compensation for the period commencing from the date of taking possession prior to the date of acquisition. This was negatived by the Bench. The Court held that the claimant was entitled to interest from the date on which possession was taken from the claimant. At page 149 the Court observed as follows :
"When a land is taken possession of prior to the commencement of acquisition proceedings and the owner of the land is deprived of his possession, he is entitled to interest on the compensation amount from the date of taking possession. The right to receive interest from the date of taking possession takes the place of the right to retain possession. When an owner of the land is deprived of his land, he should be put in possession of the compensation immediately; if not. In lieu of possession taken by compulsory acquisition, interest should be paid to him on the said amount of compensation from the date of taking possession. That is the principle laid down by the Supreme Court in Satinder Singh v. Umran Singh".
6. Mr. Narayana Rao referred to a decision of Jammu and Kashmir High Court reported in State of Jammu & Kashmir v. Smt. Hamida Begum, AIR 1979 J & K 48 at page 53, the High Court held that the claimant was not entitled to the interest for the period prior to the acquisition proceedings even though possession was taken earlier. With utmost respect to the Bench we are not able to subscribe to the view expressed by the Jammu and Kashmir High Court.
7. The learned counsel for the appellant tried to derive sustenance to his proposition by citing a decision reported in Muhammad Ismail v. Secretary of State, AIR 1936 Lahore 599. The learned single Judge held that since the compensation was paid with reference to the market price prevailing on the date of the preliminary notification, interest shall not be awarded for a period earlier thereto even though possession was taken earlier. For the reasons already stated above, it is not possible for us to agree with this reasoning.
8. Coming to the next contention, it was contended that interest has to be awarded only with reference to the market value computed under S. 23(1) of the Act. This contention overlooks the clear language of S. 28 as well as S. 34 of the Act. Both these provisions refer to the interest payable on the "compensation" payable under the Act. The learned counsel for the appellant sought justification for his contention by relying on the decision in Union of India v. Ram Mehar, . In the said case the Supreme Court was concerned with S. 4 of the Amending Act referred at page 307 of the report which confined the awarding of interest on the "market value" as determined under S. 23. The discussion shows that the Supreme Court made a distinction between the market value and the compensation payable under Act. Having regard to the clear language of the provision involved in the said decision it was held that interest was payable on the market value and not on the solatium part of the compensation. At page 308 it was held as follows :
"What we are concerned with is whether the expression "market value" in S. 4(3) of the Amending Act will take in the additional amount of 15% which is to be awarded on the market value of the land acquired under S. 23(2) of the principal Act. We can find no warrant for the view which appealed to the High Court that market value would consist of not only the market value of the land but also the 15% solatium which is to be granted under S. 23(2) in consideration of the compulsory nature of acquisition. The additional amount of 15% certainly forms part of the amount of compensation because under S. 23 the compensation is to consist of what is provided for in sub-sec. (1) and the additional amount of 15% on the market value of the land acquired. But compensation and market value are distinct expressions and have been used as such in the Acquisition Act".
Again at page 309 it was observed :
"If market value and compensation were intended by the legislature to have the same meaning it is difficult to comprehend why the word "compensation" in Sections 28 and 34 and not "market value" was used. The key to the meaning of the word "compensation" is to be found in Section 23(1) and that consists (a) of the market value of the land, and (b) the sum of 15% on such market value which is stated to be the consideration for the compulsory nature of the acquisition. Market value is therefore only one of the components in the determination of the amount of compensation".
In fact this decision goes directly against the contention of the learned counsel for the appellant because the Supreme Court has specifically pointed out that the concept of compensation under the Act has two components, (i) market value, and (ii) solatium; and if so, if the interest statutarily provided as payable on the "market value" then it has to be confined only to that component part of the compensation which is paid as market value. However, if the statute provides for the interest on the compensation then both the components had to be taken into account. The second contention is therefore also rejected.
9. An incidental question as to the percentage of solatium was also raised but this question is now concluded by the decision of the Supreme Court in Union of India v. Raghubir Singh, . The award, on reference, in the instant case was made on 8th August, 1984 and therefore certainly the claimant was entitled to the solatium at 30%. No other question survives for consideration. The appeals are accordingly dismissed. No costs.
10. At the conclusion of this judgment, the learned counsel for the appellant sought stay of the operation of the decree because the claimant has already proceeded to execute the decree. The learned counsel sought stay for a period of 2 months at least to enable the appellant to move the Supreme Court. We do riot think this as a fit case where we can grant any interim order having regard to the clear provisions of law which governs fact situation.
11. Appeals dismissed.