Defence Estate vs Mohd.Sultan Malik and another

A short but significant question whether interest under section 28 of the J and K Land Acquisition Act, 1990 (1934 AD) (hereinafter referred to

as the J and K Act) is payable from the date of notification under section 4 or the date of declaration under section 6 is involved in this civil

revision. The court below by the impugned order has held that the awardee decree holder is entitled to interest from the date of notification under

section 4. Contending to the contrary, the Defence Estates Officer judgment debtor no.2 has come in revision. The plea is supported by the

Collector / Assistant Commissioner, Land Acquisition, Srinagar judgment debtor no.l respondent no.2 herein.

As the question involved is a pure question of law it is not necessary to state facts of the case. Suffice it to say that the notification under section

4 of the Act was issued on 15th December, 1978 followed by declaration under section 6 on 30th June, 1986, award of the Collector and

reference to the civil court culminating in judgment dated 2nd February, 1998 giving rise to execution case no.3/1998. Application in terms of

section 47 of the Code of Civil Procedure was filed on behalf of the petitioner raising a number of objections one of them was that interest is

payable from the date of declaration under section 6. The court below held that interest is payable from the date of taking possession, and though

in the present case possession had been taken prior to initiation of the proceedings i.e. notification under section 4 of the Act, but as the

decreeholder himself claimed interest from the date of notification under section 4, namely 15th December, 1978, he was entitled to interest (cv,

6% per annum from that date.

Before noticing the provisions relating to interest, it may be appropriate to briefly notice the scheme of the Land Acquisition Act in order to

decide the question as to whether interest is payable from the date of notification under section 4 or date of declaration under section 6. The Act

provides a complete mechanism for acquisition of land, taking possession thereof and payment of compensation to the land owner. Subsection (1)

of section 4 provides for publication of preliminary notification. It lays down that whenever land in any locality is needed or is likely to be needed

for any public purpose, notification in the manner laid down shall be published.

Under subsection (2) after such notification is made by the Collector in the manner prescribed, it shall be lawful for any officer, either generally or

specially authorised by the government in this behalf, and for his servants and workmen, to enter upon and survey the land and to do certain other

things as mentioned in the subsection. Under section 5A any person interested in the land notified under section 4(1) may file objection against

acquisition of the land. After hearing the objections and making further enquiry, if any. the Collector shall submit the case for decision of the

Government. On receipt of report, if the State Government is satisfied that the land is needed for public purpose, a declaration is made to that

effect. Public notice is thereafter issued under section 9 to the effect that the government intends to take possession of the land and that claims to

compensation may be made to the Collector. After making enquiry into the objections, if any, the Collector makes an award under section 11.

After making the award the Collector may take possession of the land under section 16 which thereafter vests in the State Government free from

all encumbrances. The Act contains special provisions relating to emergency acquisition which need not be noticed in the present case. After

making the award, under section 32 the Collector is required to tender the compensation determined by him to the persons interested and entitled

thereto. If they decline to receive the payment, the Collector is required to deposit the amount in the court to which a reference under section 18

would be submitted. Where the amount of such compensation is not paid or deposited on or before taking possession, section 35 provides for

interest on the amount awarded @ 6% per annum from the time of taking possession. Any person feeling aggrieved by the award so made by the

Collector meanwhile may apply for reference to the civil court under section 18 for determination of compensation. The civil court would then

determine the compensation taking into consideration factors specified in section 23 and 24. Section 28 provides for compensation on the excess

amount of compensation so determined by the court.

It would thus appear that there are two separate provisions relating to award of interest. Whereas section 35 provides for interest on the unpaid

/ undeposited amount of compensation determined by the Collector, section 28 provides for interest on the enhanced amount of compensation

determined by the court. Though the dispute in the instant case relates to interest on the enhanced amount of compensation both sections 28 and

35 may be quoted, for the sake of convenience, as under:

If the sum which, in the opinion of the Court, the Collector ought to have awarded as compensation is in excess of the sum which the

Collector did award as compensation, the award of the Court may direct that the Collector shall pay interest on such excess at the rate of six per

centum per annum from the date on which he took possession of the land to the date of payment of such excess into Court.

Payment of interest. When the amount of such compensation is not paid or deposited on or before taking possession of the land, the Collector

shall pay the amount awarded with interest thereon at the rate of six per centum per annum from the time of so taking possession until it shall have

been so paid or deposited.

Provided that if such compensation or any part thereof is not paid or deposited within a period of one year from the date on which possession is

taken, interest at the rate of ten per centum shall be payable from the date of expiry of the said period of one year on the amount of compensation

or part thereof which has not been paid or deposited the date of such expiry.

Adverting to the question which arises for consideration, it may be observed that interest is always paid to compensate a person for some loss. In

the context of Land Acquisition

Act interest is paid to compensate the loss caused due to delay in payment of compensation whether on the unpaid / undeposited amount of

compensation as determined by the Collector under section 35 or on the enhanced amount of compensation as determined by the court under

section 28. The answer to the question formulated would thus lie in the answer to another question as to when compensation becomes payable

under the Land Acquisition Act? Though brief reference has been made to the relevant provisions of the Act above, it may be appropriate to quote

some of them verbatim as under:

Enquiry and award by the Collector.(1) On the day so fixed or any other day to which the enquiry has been adjourned, the Collector shall

proceed to enquire into the objections, (if any), ... (a)... ... and into the value of the land at the date of the publication of the notification under

subsection (1) of section 4 ......

Matters to be considered and neglectedIn determining the amount of compensation, the Collector shall be guided by the provisions contained

in sections 23 and 24.

Power to take possession. When the Collector has made an award under section 11, he may take possession of the land, which shall

thereupon vest absolutely in the Government free from all encumbrances. 23. Matters to be considered in determining compensation. (1) In

determining the amount of compensation to be awarded for land acquired under the Act, the Court shall take into consideration

first, the market value of the land at the date of the publication of the declaration relating thereto under section 6;

Payment of compensation or deposit of same in Court. (1) On making an award under section 11, the Collector shall tender payment of the

compensation awarded by him to the persons interested entitled thereto according to the award, and shall pay it to them unless prevented by some

one or more of the contingencies mentioned in the next subsection. (2) If they shall not consent to receive it, or there be no person competent to

alienate the land, or if there be any dispute as to the title to receive the compensation or as to the apportionment of it, the Collector shall deposit

the amount of the compensation in the Court, to which a reference under section 18 would be submitted; Provided....

The question as to from which date or time interest is payable on the amount of compensation awarded by the Collector or determined by the

court is to be considered on the basis of the afore quoted provisions. On a combined reading of the above provisions it would appear that

possession of the land can be taken in the eye of law after award is made by the Collector under section 11 of the Act which amounts to absolute

vesting of the land free from any encumbrance in the government. After the award is so made, section 32 enjoins upon the Collector to ""tender

payment of the compensation awarded by him"" and to pay to the persons interested and entitled thereto unless prevented by any contingency

mentioned in subsection (2) in which case he is required to deposit the amount in the court. Thus, compensation becomes payable only after the

award is made under section 11 of the Act.

Though we are not concerned in the instant case with the scope of section 35 which relates to interest on the unpaid / undeposited amount of

compensation, the provision has to be understood in this background. In other words, under section 35 where the amount of compensation

awarded by the Collector is not paid or deposited on or before taking possession of the land, interest is to be paid on such amount @ 6% per

annum from the time of taking possession. It is to be borne in mind that possession can be taken in the eye of law only after making of award and

vesting the land in the government in terms of section 11.

Section 28 also refers to interest from the date of taking possession of the land as under section 35. A question arose in R. L. Jain v D. D. A,

(2004) 4 SCC 79, that when possession is taken before issuance of notification under section 4(1) of the Act, whether interest for the period

anterior to the publication of notification is payable under the Act? Answering the question in the negative, the Supreme Court held that if

possession is taken prior to the issuance of notification under section 4(1) it is not in accordance with section 16 and will be without any authority

of law and consequently it cannot be recognized for the purpose of the Act. Taking such possession would be de hors the provisions of the Act

which may entitle the person to damages but not interest.

Relying on the above decision, it was submitted on behalf of the decreeholder / respondent that though section 28 of the Act in terms provides

for interest from the date of taking possession of the land, in view of the decision there cannot be any doubt that interest is payable from the date of

notification under section 4(1) of the Act. That is why, it was stated, the decreeholder molded the claim for interest from the date of notification

under section 4(1) and not the date of taking of possession which was much prior to the notification.

The decision at the first sight does appear to support the case of the decreeholder, but on a close reading thereof it transpires that the judgment

supports the case of the judgmentdebtor rather than the decreeholder. The first thing which may be pointed out about the decision in R. L. Jain

(supra) is that the question which had fallen for consideration was whether the person is entitled to interest from the date of possession even though

taking such possession was prior to the date of notification under section 4(1). While answering the question, in the negative, their Lordships went

into the rationale of the relevant provisions and observed that if compensation has to be determined on the basis of the market value of the land on

the date of notification under section 4(1), interest cannot be claimed for the anterior period. It is relevant to point out that the observations were

made in context of the Central Act. Whereas in the Central Act, under section 23(1) compensation is determined taking into consideration ""the

market value of the land at the date of publication of the notification under section 4 subsection (1)"", in the J and K Act, compensation is to be

determined under section 23(1) on the ""market value of the land at the date of publication of the declaration relating thereto under section 6"". It

may be mentioned here that the provision in the Central Act was the same as in the J and K Act until 1923 when by Act 38 of 1923 the words

notification under section 4 subsection (1)"" were substituted for ""declaration relating thereto under section 6"". As seen above, section 15 also

provides that in determining the amount of compensation the Collector shall be guided by the provisions contained in sections 23 and 24.

It was accordingly submitted on behalf of the petitioner that the reckoning date for determining compensation in the J and K Act being the date of

declaration under section 6, following the ratio decidendi of the R. L. Jain case (supra) interest cannot be claimed for period prior to the date of

declaration under section 6. According to the counsel, if compensation is determinable with reference to date of declaration under section 6,

interest can be paid on the amount of compensation so determined or to be precise on the excess amount of compensation so determined under

section 28. The submission appears to be in accord with the observations of the Supreme Court in R. L. Jain v D.D.A (supra) which may usefully

be quoted in extenso as under:

The expression 'the Collector shall pay the amount awarded with interest thereon at the rate of nine per centum per annum from the time of so

taking possession until it shall have been so paid or deposited' should not be read in isolation divorced from its context. The words 'such

possession' (sic for 'such compensation') and 'so taking possession' are important and have to be given meaning in the light of other provisions of

the Act. 'Such compensation' would mean the compensation determined in accordance with other provisions of the Act, namely, Ss. 11 and 15 of

the Act which by virtue of S. 23(1) mean market value of the land on the date of Notification under S. 4(1) and other amounts like statutory sum

under subsection (1A) and solatium under subsection (2) of S. 23....

As indicated at the outset, interest is paid to compensate a person for the loss. In the scheme of things envisaged in the Land Acquisition Act

compensation is determined at two stages: initially by the Collector in the shape of award under section 11 and then by the court on reference

under section 18. It is only on the unpaid amount or deferred payment of the amount that interest can be claimed. That is evident from a bare

reading of section 35. In the context of section 28 it is to be understood mutatis mutandis to mean deferred payment of excess amount of

compensation determined by the court.

It is true that going by the words of the statute at the first sight it does appear that interest is payable on such compensation from the date of

taking possession but as interpreted by the Supreme Court 'such compensation' means compensation determined in accordance with the provisions

of the Act namely sections 11 and 15 read with section 23(1) of the Act. While in the context of the Central Act it is on the basis of, among others

things, market value of the land on the date of notification under section 4(1), in the context of the J and K Act it is on the basis of the market value

of the land on the date of declaration under section 6. If compensation is payable on the basis of market value of the land on the date of declaration

under section 6, how interest cant be payable from the date of section 4 notification or any other earlier date? I am fortified in my views by the

decision of the Supreme Court in Lila Ghosh v State of West Bengal, (2004) 9

SCC 337, the relevant observations wherein may usefully be quoted as under:

The next question which arises is from what date interest is payable. On behalf of the claimants it was argued that possession was taken as far

back as on 24th December, 1975. Reliance was placed on S. 34 of the Land Acquisition Act. It was submitted that interest has to be paid from

the date of taking possession. It was pointed out that the Reference Court had directed payment of interest from the date of taking possession.

However, the High Court has directed payment of interest only from 8th December, 1986. In support of this submission, reliance was placed on

the case of Shree Vijay Cotton and Oil Mills Ltd. v State of Gujarat, reported in 1991 (1) SCC 262. In this case the possession had been taken

much prior to the acquisition proceedings. This Court directed payment of interest under Ss. 28 and 34 from the date of taking possession. It was

submitted that this authority clearly lays down that the interest must be paid from the date of actual possession ....

Even though the authority in Shree Vijay Cotton and Oil Mills Ltd. appears to support the claimants, it is to be seen that apart from mentioning Ss.

28 and 34, no reasons have been given to justify the award of interest from a date prior to commencement of acquisition proceedings. A plain

reading of S. 34 shows that interest is payable only if the compensation, which is payable, is not paid or deposited before taking possession. The

question of payment of deposit of compensation will not arise if there is no acquisition proceeding. In case where possession is taken prior to

acquisition proceedings a party may have a right to claim compensation or interest. But such a claim would not be either under S. 34 or S. 28. In

our view interest under these sections can only start running from the date the compensation is payable. Normally this would be from the date of

the Award. Of course, there may be cases under S. 17 where by invoking urgency clause possession has been taken before the acquisition

proceedings are initiated. In such cases, compensation under the Land Acquisition Act would be payable by virtue of the provisions of S. 17. As in

cases under S. 17 compensation is payable interest may run from the date possession was taken. However, this case does not fall into this

category.

(emphasis added)

Another aspect of the mater is that allowing interest from the date of section 4 notification would amount to giving double benefit.

Determination of compensation on the 'market value' of the land on the date of declaration under section 6 gives an inbuilt advantage to the land

owner compared to determination on the market value on the date of notification under section 4. It is a common phenomenon that price of the

land even the neighborhood land shoots up on the eve of acquisition; in fact, as soon as people come to know about the proposed acquisition.

That is why, if I may say, in the Central Act, the reckoning date is the date of notification under section 4 for determination of compensation on the

market value of the land. After the notification, the rise in value is more perceptible. Thus determining compensation on the market value of the land

as on the date of declaration under section 6 gives an additional inbuilt advantage to the land owner. A judicial notice can be taken of the fact that a

considerable time elapses between the date of notification under section 4 and the date of declaration under section 6. The land owner already has

the advantage of higher compensation if it is determined on the basis of market value on the later date. Allowing interest from an earlier date even

though that date is not relevant for determination of compensation and compensation is determinable with reference to a latter date, would not be in

consonance with the scheme of the Act in Jammu and Kashmir.

It was submitted on behalf of the respondentdecree holder that allowing interest from the date of declaration under section 6 in the instant case

would be going behind the decree which is not permissible because the executing court cannot go behind the decree and it has to execute the same

as it is. The submission is attractive but cannot be accepted in the instant case. As a matter of fact, as per the award of the court, interest @ 6%

per annum is payable from the date of taking of possession. But this is not what even the decreeholder claims, or allowed by the court by the

impugned order. The award of the court is what section 28 in terms provides. But the same has been interpreted by the Supreme Court in R. L.

Jain to mean the date of notification under section 4 in the context of the Central Act, and by me, the date of declaration under section 6 in the

context of the J and K Act. If that is the true legal import of section 28, it would follow that the award has to be read down to mean the date of

declaration under section 6. Any other interpretation would render the award as regards the effective date from which the interest is payable

without jurisdiction and a nullity. The distinction between the illegal decree / award and a decree which is without jurisdiction and nullity is well

known, and it is the settled law that a decree which is null and void and without jurisdiction is not binding on the executing court. The submission of

the counsel for the decreeholder, therefore, is devoid of merit and is accordingly rejected.

In the above premises, I hold that the decreeholder / respondent is entitled to interest from the date of declaration under section 6 of the Act,

namely, 30th June, 1986. The impugned order of the court below to this extent is set aside.

In the result, the revision is allowed.