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)  

J U D G M E N T

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

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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

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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

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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 –

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(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

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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

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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

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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

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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

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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.”  

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[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

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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)            

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