Union of India Vs.
Parmal Singh & Ors.  INSC 2019 (25 November 2008)
Reportable IN THE
SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOS. 2319-2327
OF 2001 Union of India ... Appellant 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)
R.V. RAVEENDRAN, J.
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.
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
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
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.
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.
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].
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.
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.
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].
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.
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
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
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.
the reasons aforesaid, we uphold the award of interest at 6% per annum on the
compensation amount. The appeals are therefore dismissed.
and CA Nos.354 to 359/2008 12 These appeals involve the same issue. Following
the decision in C.A.
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.
(R V Raveendran)