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CASE NO.: Appeal (civil)  723 of 2006

PETITIONER: Mahesh Lall Seal & Ors.

RESPONDENT: Union of India & Others

DATE OF JUDGMENT: 01/09/2006

BENCH: ARIJIT PASAYAT & S.H. KAPADIA

JUDGMENT: J U D G M E N T

KAPADIA, J.

This civil appeal by grant of special leave appeal  seeks to challenge judgment and order dated 6.12.04  passed by a Division Bench of the Calcutta High Court  allowing F.M.A.T. No.151 of 2004 filed by Union of India  (respondents herein) challenging the Award of the  Arbitrator dated 25.10.2000.

Before the High Court the main contention  advanced by Union of India, on whose behest the  property was acquired, was that the claimants had  entered into agreement with the Government on 18.7.75  for sale of properties under Section 8(1)(a) of the  Requisitioning and Acquisition of Immovable Property  Act, 1952 (hereinafter referred to as "the 1952 Act") at a  fixed price of Rs.18,98,000/- and in terms of such  agreement the full price was paid upon execution of an  agreement in Form K on 26.5.93 and, therefore, there  was no question of any dispute being referred to  arbitration.

The short question which arises for determination  in this civil appeal is: whether the impugned Award of the  Arbitrator dated 25.10.2000 was null and void on  account of absence of referable dispute to the Arbitrator.   The background facts are as follows:  

At all material times, appellants (claimants) were  the joint owners of Dag Nos.613, 614, 617 and 618  measuring 7.16 acres in area, within Mouza Nainan, P.  S. Baranagar, District North 24 Parganas,  being portion  of premises No.46,  B.T. Road, Calcutta (hereinafter  referred to as "the acquired property").  The said acquired  property was initially requisitioned by Union of India  under Defence of India Act and Rules.  This was on  22.4.1942.  On 3.3.1987 the said property was acquired  under the 1952 Act along with other properties when  Form J was published.  Up to 31.12.74 the rent of the  acquired property was assessed by the L.A. Collector at  the rate of Rs.410/- per month.  However, this rate of  rent was subsequently increased to Rs.55,465/- per  annum.  The claimants were paid rent at the rate of  Rs.55,465/- per annum during the period 1.1.75 till  2.3.87 when, as stated above, the property stood  acquired.  In the meantime, prior to 10.3.87 U.L.C. Act  1976 (for short, "the 1976 Act") came into force.  The

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claimants filed an application under Section 27(2) of  1976 Act for exemption from vesting excess land and for  permission to transfer in favour of Union of India.  The  State Government did not finalise the solatium.  The  State Government failed to decide as to which portion of  the aforesaid premises was liable for vesting in the State  Government under the said 1976 Act.  As the requisition  of the disputed premises under the 1952 Act was due to  expire on 10.3.87, an order of acquisition was made on  3.3.87.  On 27.3.87 Union of India informed the land  acquisition officer that the acquiring body had decided to  place Rs.18,98,000/- for disbursement to the claimants  in terms of the agreement dated 18.7.75.  Accordingly,  the land acquisition officer published an award for  Rs.18,98,000/- on 8.6.88.  However, the State  Government on 6.8.88 appointed an Arbitrator vide  notification no.492-Reqn. which was later on cancelled  on 16.3.90 at the behest of the Central Government.  

On 26.5.93 ultimately the claimants received the  entire amount of Rs.18,98,000/- under protest.  They  filed writ petition praying for reference under Section  18(1) of the Land Acquisition Act for enhancement of  compensation.  On 24.1.96 High Court directed the  claimants to approach the collector.  Accordingly on  23.2.96 an application was made for reference before the  L.A. Collector under Section 18(1) of the L.A. Act.

On 2.4.97 the State Government once again  appointed Arbitrator to which Union of India objected.   This objection was filed by Union of India on 25.4.97.  On  22.12.97 claimants filed their claim petitions before the  Arbitrator claiming the compensation in respect of the  acquired property at the rate of Rs.3,00,000/- per kattah.   On 5.1.98 Union of India filed its written objection before  the Arbitrator under which it stated that the fair market  value of the acquired lands on 3.3.87 would not exceed  Rs.70,000/- per kattah.  However, the Union of India  moved the High Court under Article 226 of the  Constitution on 10.12.98 vide Writ Petition No.2503 of  1998 seeking cancellation of the appointment of  Arbitrator.  There was no stay, therefore, the Arbitrator  proceeded.  On 6.12.99 the claimants filed their reply  and agreed to receive compensation at the rate of  Rs.70,000/- per kattah as suggested by Union of India in  its objection dated 5.1.98.  By interim order dated  15.12.99 learned Single Judge refused to stay the  arbitration proceedings and directed the proceedings to  continue subject to the result of the writ petition.  On  21.1.2000 an application was moved before the Arbitrator  by Union of India, pursuant to the leave granted by the  Arbitrator, saying that the concession made on 5.1.98 by  learned advocate conceding the rate of Rs.70,000/- per  kattah was without obtaining instructions and, therefore,  the claimants were not entitled to receive compensation  at that rate.  Before the Arbitrator, Union of India as well  as the L.A. Collector contended that on account of  agreement between the parties as far back as on 18.7.75  and in view of the claimants’ signing Form K as far back  as on 26.5.93, the Arbitrator was not in a position to  make the award under Section 8(3) of the 1952 Act  beyond the amount agreed upon, namely,   Rs.18,98,000/-.  This is the main contention all through  out by Union of India.  By order dated 18.5.2000 the  Arbitrator held that the dispute was between the

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claimants on one side and Union of India on the other  side; that Union of India was represented by the L.A.  Collector who had engaged the government pleader to  appear in the case and contest the case on behalf of  Union of India and accordingly the government pleader  filed his written objections against the claim on 5.1.98.   The Arbitrator further found that the Vakalatnama filed  by the government pleader continued to remain in force.   It was never withdrawn.  That being the position the  Arbitrator came to the conclusion that the application  made by Union of India on 21.1.2000 withdrawing its  earlier statement of the fair value of Rs.70,000/- per  kattah, was not maintainable.  By the said order the  Arbitrator rejected the objections filed by Union of India  on 21.1.2000 and came to the conclusion that the  dispute regarding compensation did exist and therefore,  the Arbitrator had jurisdiction to try and decide such  dispute.

Being aggrieved by the decision of the Arbitrator  dated 18.5.2000 Union of India preferred one more writ  petition in the High Court bearing No.12072 of 2000.   This writ petition was dismissed on 30.8.2000 in limine  as misconceived in view of the earlier order of the High  Court dated 15.12.99 directing the Arbitrator to proceed  with the arbitration.

On 28.9.2000 the writ petition filed by Union of  India seeking cancellation of the appointment of  Arbitrator was also dismissed by learned Single Judge  who took the view that the claimants had received  Rs.14,80,000/- out of Rs.18,98,000/- by executing  agreement in Form K under Rule 9(5) of the  Requisitioning and Acquisition of Immovable Property  Rules 1953 under protest; that various proceedings were  initiated before the L.A. Collector but determination could  not be made under Section 8 of 1952 Act on account of  objections raised by Union of India regarding  maintainability of arbitration proceedings and that the  State Government had the power to appoint an arbitrator  under the said 1952 Act.   In this connection, learned  Single Judge observed that written objections were filed  by the claimants protesting against the offer of  Rs.18,98,000/- on the same day when Form K was  executed.  Learned Single Judge further observed that  the Form K agreement contained clause (6) which inter  alia provided that any dispute or difference arising out of  the subject-matter of the agreement shall be referred to  an arbitrator, to be appointed by the government, and  the decision of the Arbitrator shall be conclusive on all  the parties.  The provisions of Arbitration Act 1940 were  made applicable to such arbitration.   Learned Single  Judge further found that under the agreement dated  18.7.75 the right, title and interest was never conveyed to  the Central Government and on the contrary the  premises were acquired on 3.3.87 under the provisions of  the 1952 Act after a lapse of about 12 years and,  therefore, the consideration of Rs.18,98,000/- had no  relevance in the matter of acquisition on 3.3.87.  In this  connection, learned Single Judge observed that the  agreement dated 18.7.75 can by no stretch of  imagination constitute a fair amount of compensation  payable in respect of acquisition on 3.3.87.  Thus, it was  held that in view of Section 8(1)(b) read with clause (6) of  the agreement in Form K, there existed a dispute as to

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the amount of compensation payable for acquisition of  the premises on 3.3.87.  Thus, there was a referable  dispute to the arbitrator.  In the circumstances, it was  held that the State Government was competent to  appoint an arbitrator under Section 8(1)(b) of the 1952  Act.  The writ petition was accordingly dismissed.

On 25.10.2000 the Arbitrator announced his award  under which he rejected the claim made by the claimants  at the rate of Rs.3,00,000/- per kattah.  He assessed the  market value at the rate of Rs.70,000/- per kattah as on  3.3.87.  In his Award it was observed that no witness was  examined on either side for the reason that the claimants  had accepted the rate of compensation offered by Union  of India in their written reply dated 5.1.98.  The  Arbitrator has further held that the claimants have also  filed the report of the Valuer, the sale deed of the  adjoining land, the sale instances and accordingly he  valued the premises at the rate of Rs.70,000/- per  kattah.  He also awarded solatium and interest.   Accordingly, the amount of Rs.2,65,66,750/- has been  awarded as compensation.  

Aggrieved by the decision dated 28.9.2000 delivered  by learned Single Judge dismissing Writ Petition No.2503  of 1998 regarding maintainability of the arbitration  proceedings, Union of India preferred writ appeal APOT  No.42 of 2001 filed on 7.1.2001.  By decision dated  28.8.2001 the Division Bench dismissed the writ appeal.   The main contention advanced by Union of India before  the Division Bench was that the claimants had received  compensation amounting to Rs.18,98,000/- under the  agreement in Form K and, therefore, there did not exist  any dispute as to the amount of compensation payable  for the same to the owners for which an arbitration was  required to be entered into in exercise of the power under  Section 8(1)(b) of the 1952 Act.  This argument was  rejected by the Division Bench holding that there was no  material on record to show that the claimants had  communicated their acceptance to the offer made by  Union of India.  On the contrary the Division Bench  found that when Form K came to be executed in 26.5.93,  the amount of Rs.14,80,000/- was accepted by the  claimants under protest.  The Division Bench further  found that Union of India has never denied receipt of  objections from the claimants at the time of receiving  compensation.  In the circumstances, the Division Bench  found that there existed disputes between the claimants  and Union of India regarding the quantum of  compensation and, therefore, it was not open to Union of  India to challenge the notification issued under Section  (8)(1)(b) of the 1952 Act appointing the Arbitrator.  The  Division Bench further found that the agreement dated  18.7.75 for Rs.18,98,000/- was in fact cancelled by the  Estates Officer on 15.9.76.  The premises in question  comprised of 8.90 acres of land.  In 1975 the rate was  around Rs.5,000/- per kattah.  The Division Bench found  that the premises are located in a posh area in  Barrackpore Trunk Road, Calcutta.  The Division Bench  agreed with the view expressed by learned Single Judge  that Form K contained clause (6) which itself stipulated  that any dispute or difference in the matter of  determination of compensation shall be decided by  arbitration.  It was observed that in the present case  Union of India made an offer of Rs.18,98,000/- in 1975

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under the agreement dated 18.7.75 when the premises  were under requisition and by such an agreement no  right, title or interest was ever transferred by the  claimants to Union of India.  Therefore, it was held that  the notification under Section 8(1)(b) of the 1952 Act was  valid.  This was the main aspect to be decided by the  Division Bench.  However, when the writ appeal APOT  No.42 of 2001 came for decision the Award of the  Arbitrator had come into existence and, therefore, the  Division Bench observed that the question of the validity  of the Award, whether by consent or otherwise, was not  required to be gone into because the only question before  the Division Bench was whether the notification issued  under Section 8(1)(b) of the 1952 Act was with or without  jurisdiction.  The High Court, therefore, did not go into  the question of the merits of the Award.  The High Court  declared that the notification under Section 8(1)(b) of the  1952 Act was valid in law as there existed a dispute as to  compensation between the claimants and Union of India.

Aggrieved by the decision dated 28.8.2001, Union of  India preferred S.L.P.(C)\005.CC\0052417.    

On 18.3.2002 the following order was passed by the  Supreme Court in S.L.P.:  "Learned Additional Solicitor General  appearing for the petitioners seeks leave of  the Court to withdraw this petition to pursue  other remedies that may be permissible  under the law.  The Special Leave Petition is  dismissed as withdrawn."

Union of India thereafter preferred an application  for review before a Division Bench of the High Court  against the judgment delivered on 28.8.2001 by the  earlier Division Bench of the High Court.  The review  application was dismissed on 14.1.2003 with an  observation that Union of India was free to challenge the  Award in question in accordance with law.  It was made  clear that in its decision dated 28.8.2001 the earlier  Division Bench has not gone into the merits of the  Award.

Since the claimants did not receive compensation,  on 11.11.2003 the claimants moved the High Court vide  Writ Petition No.3001 of 2003 for realization of the  compensation as per the Award.  They sought execution  of the Judgment of the High Court.  At that stage Union  of India filed an appeal bearing F.M.A.T. No.151 of 2004  under Section 11 of the 1952 Act against the Award of  the Arbitrator dated 25.10.2000.

By impugned judgment dated 6.12.2004 the  Division Bench allowed the appeal preferred by Union of  India.  In appeal, Union of India once again contended  that the property in question was acquired on the basis  of the agreement dated 18.7.75 under which  compensation was ultimately received at the rate of  Rs.18,98,000/- when Form K executed and, therefore,  there was no dispute in existence to be referred to  arbitration.  It was urged that the impugned Award was  passed by the Arbitrator on the basis of the concession  made vide objections dated 5.1.98 and without noticing  the fact that the said objection was withdrawn by Union  of India on 21.1.2000 when fresh objections were filed

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saying that the claimants were not entitled to  compensation exceeding Rs.18,98,000/-.  It was also  urged on behalf of Union of India that claimants were not  entitled to solatium and interest as awarded by the  Arbitrator.  On behalf of the claimants it was once again  submitted that the agreement dated 18.7.75 offering the  price of Rs.18,98,000/- cannot constitute compensation  for acquisition which took place after 12 years on 3.3.87  and that reference of such dispute to arbitration cannot  be disputed as illegal.  It was urged that the balance  amount of Rs.14,80,000/- received on 26.5.93 when  Form K was signed, have been received under protest  and, therefore, the dispute continued to exist.  The  claimants also placed reliance on the judgment of the  Division Bench dated 28.8.2001 in writ appeal APOT  No.42 of 2001 in support of their contention that the  notification under Section 8(1)(b) of the 1952 Act  appointing an arbitrator was legal, valid and in  accordance with law.   

On the above contentions the Division Bench in the  second round of litigation held that there was no res  judicata because the findings given by the earlier Division  Bench in its decision dated 28.8.2001 were tentative in  nature.  Accordingly in the second round the Division  Bench records a finding, contrary to the decision of the  Division Bench in the first round, that at the time of  receiving the balance amount of Rs.14,80,000/- and at  the time of signing of Form K on 26.5.93 there did not  exist any objection from the claimants.  In this  connection the Division Bench observed that the  claimants had received Rs.14,80,000/- on execution of  Form K agreement on 26.5.93 but there was no  simultaneous objection from the claimants who in fact  objected to the amount only after receiving the balance  amount of Rs.14,80,000/- and, therefore, according to  the Division Bench it cannot be said that the claimants  received compensation under protest.  One fails to  understand how in the second round of litigation the  subsequent Division Bench gave contrary view on the  same point.  Realising this difficulty, the subsequent  Division Bench holds that the findings given on the above  question by the Division Bench in the earlier round were  tentative findings and since they were tentative findings  the subsequent Division Bench once again goes into the  same question and holds that the claimants received the  compensation amounting to Rs. 18,98,000/- without any  protest and consequently the arbitration proceedings  were without jurisdiction.  On the merits of the Award  the subsequent Division Bench however holds that on  5.1.98 written objections were filed on behalf of Union of  India under which it was conceded that the rate of the  fair market value was Rs.70,000/- per kattah and not  Rs.3,00,000/- per kattah as contended by the claimants.   However, these written objections dated 5.1.98 were  subsequently withdrawn on 21.1.200 and, therefore, the  Arbitrator erred in fixing compensation at the rate of  Rs.70,000/- per kattah.  The subsequent Division Bench  observed that there was no material on record for  assessing valuation, particularly, when no evidence was  taken by the Arbitrator.  In the circumstances, the  subsequent Division Bench has set aside the Award  dated 25.10.2000.  Hence this civil appeal by the  claimants.

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The short question which arises for determination  is: whether the subsequent Division Bench was right in  holding that the findings given by the earlier Division  Bench on the maintainability of the arbitration  proceedings, were tentative in nature and, therefore, not  binding on the subsequent Division Bench.

On behalf of Union of India it was vehemently urged  that no interference is called for in the present case.  It  was contended on behalf of Union of India that this Court  had granted liberty to Union of India vide its order dated  18.3.2002 to pursue other remedies permissible under  law.  It was urged that even the Division Bench of the  Calcutta High Court clarified the position vide order  dated 14.1.2003 saying that Union of India was free to  challenge the Award and, therefore, according to Union of  India, it was open to it to raise the same contentions  regarding maintainability of arbitration proceedings once  again in the appeal filed before the Division Bench  against the Award under Section 11 of the 1952 Act.  In  this connection, it was submitted by Ld. Additional  Solicitor General that the findings of the earlier Division  bench dated 28.8.2001 were tentative in nature and,  therefore, the subsequent Division Bench was right in  holding, vide impugned judgment, that the arbitration  proceedings were not maintainable as the acquisition had  taken place under the agreement dated 18.7.75.   Consequently, according to Union of India, the Award  has been rightly set aside by the Division Bench vide  impugned judgment dated 6.12.2004.

We find merit in this civil appeal.  There is a  difference between the validity of the notification issued  under Section 8(1)(b) of the 1952 Act on one hand and  the validity of the Award on merits announced by the  Arbitrator on 25.10.2000 on the other.  In the earlier  round of litigation the question which arose for  determination before the High Court was: whether the  notification issued under Section 8(1)(b) of the 1952 Act  appointing an arbitrator was valid in law.  In that  litigation there was no question of deciding on merits the  validity of the Award dated 25.10.2000.  A concurrent  finding was recorded by learned Single Judge and by the  Division Bench upholding the validity of the notification  under Section 8(1)(b) of the 1952 Act.  The notification  was upheld.  By no stretch of imagination one can say  that the concurrent findings given were tentative in  nature.  In this connection, it is important to note that  the premises in question were acquired on 3.3.87 which  is 12 years after the agreement dated 18.7.75.  Under the  scheme of the 1952 Act as in the case of Land Acquisition  Act fair market value has to be determined as on the date  of acquisition.  In this case acquisition had taken place  on 3.3.87.  If the contention of Union of India is to be  accepted it would amount to pegging of the price which is  not permissible under the law of acquisition.  The  Division Bench in the earlier round had given a finding  that the premises in question are located in a posh area.   In the earlier round a concurrent finding was given by  the High Court, both by  learned Single Judge and by the  Division Bench, that the claimants had received  compensation under protest.  In the circumstances, it  cannot be said by the subsequent Division Bench that  the earlier findings were tentative.  There is one more fact  which is required to be noted.  Before the Arbitrator the

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claimants had asked for enhancement of compensation  at the rate of Rs.3,00,000/- per kattah.  In reply, on  5.1.98 Union of India stated that the fair rate was  Rs.70,000/- per kattah.  On 21.1.2000 an affidavit is  filed by Union of India before the Arbitrator saying that  the advocate had no authority to concede the rate at  Rs.70,000/- per kattah.  By decision dated 18.5.2000 the  objections filed by Union of India dated 21.1.2000 were  rejected.  The decision of the Arbitrator was challenged in  a writ petition C.O.No.12072 of 2000.  This writ petition  was also dismissed by the High Court on 30.8.2000 and,  therefore, it is not open to Union of India now to say that  Rs.70,000/- per kattah was not the fair rate.  This issue  was also, therefore, concluded.   Lastly, the most important point to be noted is that  before the Arbitrator the claimants had submitted a  valuation report under which the valuer has relied upon  sale instances and had calculated the fair market value  of the acquired property at Rs.73,900/- per kattah [SEE:  Valuation report dated 20.12.96 at page 97 of Volume I  filed in the Calcutta High Court in F.M.A.T. No.151 of  2004 \026 Part I).  In fact, even the Arbitrator in the  impugned Award has referred to the report of the expert  valuer and also to the sale instance dated 18.7.86 and,  therefore, it cannot be said that the impugned Award is  based only on the concession made by Union of India  vide its objections dated 5.1.98.   Before concluding we may mention that Shri  Bhaskar Gupta, learned senior advocate appearing on  behalf of the claimants, has stated that the claimants will  not press their claim for solatium.  In the circumstances,  we are not required to examine the question as to  whether the claimants were entitled to solatium under  provisions of the 1952 Act.  However, we are of the view  that the interest awarded by the Arbitrator at the rate of  15% per annum from the date of acquisition till payment  is on the higher side and accordingly we direct payment  of interest at the rate of 9% per annum instead of 15%  per annum. For the above stated reasons, we find merit in the  civil appeal and accordingly we set aside the impugned  judgment dated 6.12.2004 delivered by the Division  Bench of the Calcutta High Court in F.M.A.T. No.151 of  2004 and accordingly we direct payment of compensation  to the claimants at the rate of Rs.70,000/- per kattah in  respect of Danga and Bastu land and at the rate of  Rs.35,000/- per kattah for the pond land with interest at  the rate of 9% per annum from the date of acquisition till  payment as ordered by the Arbitrator less amounts paid  and received by the claimants till today.  We may clarify  that in the Award the Arbitrator granted interest on the  aggregate amount of land value + solatium for the period  of one year from the date of acquisition on the basis that  Union of India shall pay the requisite amount within  three months from the date of the Award.  However,  Union of India unnecessarily litigated on unstatable  points, as stated above, and in the process interest  continued to accrue and, therefore, we direct Union of  India to pay compensation that is land value at the two  above-mentioned rates of Rs.70,000/- per kattah in  respect of Danga and Bastu land and Rs.35,000/- per  kattah for the pond land without solatium with interest  at the rate of 9% per annum from the date of acquisition  till payment, less the amount which has already been  paid till date.  

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Accordingly, the civil appeal is partly allowed with  no order as to costs.