Full Judgment Text
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PETITIONER:
P.V.G. RAJU GARU
Vs.
RESPONDENT:
STATE OF ANDHRA PRADESH
DATE OF JUDGMENT24/01/1990
BENCH:
SAWANT, P.B.
BENCH:
SAWANT, P.B.
MUKHARJI, SABYASACHI (CJ)
REDDY, K. JAYACHANDRA (J)
CITATION:
1990 AIR 650 1990 SCR (1) 134
1990 SCC (2) 61 JT 1990 (1) 86
1990 SCALE (1)72
ACT:
Andhra Pradesh (Andhra Area) Estates (Abolition and
Conversion into Ryotwari) Act, 1948: Section 45(3)--Compen-
sation paid on abolition of Estate--Endowment created by
Estate for maintenance of hospital--Government taking over
hospital--Liability of Estate to pay the endowed amounts
from out of compensation--Whether includes interest--Payment
of interest----Whether all sharers liable to contribute.
HEADNOTE:
Under the provisions of the Andhra Pradesh (Andhra Area)
Estates (Abolitian and Conversion into Ryotwari) Act, 1948,
(the Act), the Government took over a hospital which was run
by a Zamindar of an impartible estate. After the take-over,
the Government made applications before the Estate Abolition
Tribunal claiming recovery of certain amounts which were
endowed to the hospital by the erstwhile ruler, from out of
the compensation paid on the abolition of the estate. Claims
for interest and priority over other creditors were also
made.
In the first of such applications, the Tribunal allowed
the amount claimed without specific reference to interest
but rejected the claim for priority. In the subsequent
proceedings, the Tribunal rejected the claim for interest as
also priority and held that in the earlier proceeding also,
it has disallowed the claim for interest.
Aggrieved against the Tribunal’s orders, Government
preferred appeals before the High Court. The High Court took
the view that while allowing the claim the Tribunal had not
only allowed the claim for principal but also interest
thereon, and ordered payment of interest as claimed.
These appeals are against the High Court’s orders and
the appellant contended that there was no provision in the
Act for payment of interest; that the expression ’amount’
claimed before the Tribunal should be construed to mean the
principal amount only; that the subsequent claims for inter-
est were barred by resjudicata; that it would be
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inequitable to claim interest on the amounts endowed since
no interest was paid on compensation; that while the compen-
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sation was shared by others also, the appellant cannot be
singled out to pay the interest.
Dismissing the appeals, this Court,
HELD: 1.1 The High Court was right in holding that the
Tribunal by its order of 15.12.02 had allowed the claim for
interest. Under the scheme of the Act itself, the Tribunal
was required to apportion the amounts according to the
priorities depending upon the amount of compensation depos-
ited at the time of giving of the direction in question. It
was, therefore, only to be expected that the Tribunal would
first give directions with regard to the payment of princi-
pal amounts and defer the payment of interest to a future
date. That is exactly what the Tribunal had done in the
present case and, hence, in the second set of applications
made by the Government, the Government had not only claimed
the balance of the principal amounts but also interest
thereon. Thus, the issue with regard to the claim for inter-
est in the subsequent applications was not barred by resju-
dicata. [141B-C, D].
1.2 All that the Tribunal had done was to direct the
Estate to pay the amounts in question to the Government
together with interest at the admitted rate, which interest
was in any case payable towards the endowment objects. Under
the Act, the Tribunal had, among other things, to determine
the liability of the Estate. The endowment amounts together
with the interest admittedly accruing thereon formed the
total liability of the Estate. The interest, further was a
recurring one and the objects of the endowment were to be
financed from out of the said interest. When the Tribunal
directed the payment of interest together with the principal
amount, it did nothing more than direct the Estate to honour
its liability. [141F-G]
2. Whether or not interest was paid on compensation due
to the Estate, it has nothing to do with the Estate’s li-
ability towards the endowments. The interest directed to be
paid by the Tribunal was not interest over and above the
endowed amounts. It is the principal amount together with
the interest accruing thereon which constituted the total
endowed amounts at the time of abolition of the Estates,
[142A-B]
3. The direction of the High Court to pay the said
amount will have to be read as a direction to the appellant
to do so in his capacity as the Estate-holder and not in his
individual capacity. If the final amounts
136
are already distributed among all the sharers and/or the
creditors, the Government has to look for the amount of
interest to all the sharers and/or their creditors including
of course the appellant. All the sharers will be liable to
contribute towards the payment of the amount of interest in
proportion to their share in the compensation. That is how
the order of the High Court and the earlier order passed by
the Tribunal will have to be read and construed. [142E-H;
143A]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 80405 of
1975.
From the Judgment and Order dated 28.12.1973 of the
Andhra Pradesh High Court in S.T.A. Nos. 1 and 3 of 1971.
P.R. Seetharaman and T.V.S.N. Chari for the Appellant.
M.C. Bhandare, A.V.V. Nair for the Respondent.
The Judgment of the Court was delivered by
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SAWANT, J: The present appeals arise out of the proceed-
ings for the determination of the claims of the creditors
and directions to pay them on the abolition of the Estates
of the Vizianagaram and taking over of the same by the State
Government under the Andhra Pradesh (Andhra Area) Estates
(Abolition and Conversion into Ryotwari) Act, 1948 (herein-
after referred to as the Act).
2. Under the provisions of the said Act, on 7-9-1949 the
Gosha hospital at Vizianagaram which was till then manned by
the hereditary landlord and zamindar of the impartible
Estate of Vizianagaram (hereinafter referred to as the
Estate) was handed over to the State. The late Maharani
Appalakondayamba otherwise popularly known as "Rani of Rewa"
had executed a Will on 14-12-1911 creating a permanent
endowment of a sum of Rs.1,00,000 for the maintenance of the
said hospital. This amount was kept in deposit with the
Estate. Since the Government had taken over the hospital by
its Application No. TOP 123/58 to the Estates Abolition
Tribunal and Distt. Judge, Vishakhapatnam, the Government
claimed the recovery of the said amount with interest at the
rate of 6% per annum and also claimed a priority over the
other creditors. The Tribunal by its Order dated 15-12-62
allowed the claim for the amount, but rejected the claim for
priority. The Tribunal also directed the payment of
Rs.36,695 to the Government out of the total amount of
compensation which was then
137
deposited with it. The Government filed an appeal against
the said Order being STA No. 1/64 in the High Court, but the
same was dismissed. It appears that subsequently, another
sum of compensation being Rs.11,78,581.09 was deposited, and
hence the Government filed another application, viz. TOP
5/69 for payment of the balance of Rs.63,305 with interest
thereon at the rate of 6% per annum from 1-7-49 till the
date of payment. In this application, the appellant did not
dispute the Government’s claim for Rs.63,305 but contended
that no interest on the sum of Rupees one lakh or on any
part thereof was payable since according to him the Tribunal
had rejected the claim for interest by its earlier Order of
15-12-62 in TOP 123/58. The Tribunal accepted the appel-
lant’s contention and held that the claim for interest was
rejected earlier and disallowed the same. Against the said
Order, the Government preferred an appeal to the High Court
being STA 1/71.
3. The late Rani of Rewa by her same Will had also
deposited another sum of Rupees one lakh with the Estate
with the direction that the interest thereon should be
utilised in feeding Telugu Brahmin students studying ad-
vanced Sanskrit Literature and Shastras at Banaras. The said
fund will hereinafter be referred to as the Banaras Chari-
ties Fund. It appears that sufficient number of Telugu
Brahmin students were not available and hence the Executor
of the Will had applied for utilisation of the said amount
for the Gosha hospital, and in that application, the High
Court had directed that out of the accumulated surplus
interest of Rs.47,897 in the said Banaras Charities Fund, a
sum of Rs.30,000 be capitalised and deposited with the
Estate and the interest thereon at the rate of 3% per annum
be utilised to meet the recurring annual expenditure of the
Gosha hospital. After the abolition of the Estate, the
Government filed before the Tribunal a claim application
being TOP No. 124/58 for recovery of the said sum of
Rs.30,000 with interest at the rate of 6% per annum. The
Government also claimed priority over the other creditors
for the said amount as well. The Tribunal by its same order
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of 15-12-62 allowed the Government’s claim for the amount,
but rejected the claim for priority. The Tribunal also
directed that a sum of Rs.11,008.50 be paid to the Govern-
ment from out of the amount of compensation which was then
deposited. Against the said order, the Government preferred
an appeal to the High Court being STA No. 2/64 which was
dismissed. On the subsequent deposit of further compensa-
tion, the Government preferred another application being TOP
6/69, for the balance of Rs.18,991.50 and for interest
thereon at the rate of 6% per annum from 1-7-49 till the
date of payment. The appellant did not dispute the
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claim for the payment of the balance amount of Rs.10,991.50,
but resisted the claim for interest, firstly on the ground
that there was no provision for payment of interest in the
Act and secondly on the ground which was urged in the other
appeal, viz. that in TOP 124/58 it was rejected by the
Tribunal earlier. The Tribunal accepted the appellant’s
contention and disallowed the claim for interest. Against
the said order, the Government preferred an appeal to the
High Court being STA No. 3/71.
4. Thus before the High Court the only question in both
the appeals was whether the Tribunal by its earlier order of
15-12-62 in TOP 123 and 124/58 had allowed or rejected the
claim for interest? The High Court by its common order dated
28-12-73 held that the Tribunal by its earlier order of 15-
12-62 had not only allowed the claim for the principal
endowed amounts of Rupees one lakh and Rs.30,000 respective-
ly, but also interest thereon, and directed the payment of
interest thereon from 1-7-49 as claimed. It is this order
which is challenged by the appellant by these two separate
appeals.
5. Civil Appeal No. 804 is against the order of the High
Court in STA No. 1/71 arising out of TOP 5/69 (corresponding
to earlier TOP 123/58) and Civil Appeal No. 805 is against
the order in STA No. 3/71 arising out of TOP 6/69 (corre-
sponding to earlier TOP 124/58).
6. Mr. Bhandare, learned counsel appearing for the
appellant in both the appeals contended firstly, that the
Tribunal while disposing of TOPs Nos. 123 and 124 of 1958
should be deemed to have rejected the claim for interest
because in the operative part of the order, the Tribunal did
not state that it was granting interest, but only mentioned
that it was granting the amounts which were claimed in the
applications. The expression ’amount’ claimed in the appli-
cation should be construed to mean the principal amount only
and not interest. He also tried to derive support to this
submission from the fact that while directing the payment of
specific amounts, the Tribunal had considered only the
principal amounts in both cases as is evident from the
orders of the Tribunal in that behalf. Hence he submitted
that the issue with regard to the interest was barred by
resjudicata and the interest could not have been claimed by
the Government in its subsequent applications. His second
contention was that assuming without admitting that there
was a direction given by the Tribunal to pay the interest,
such direction was without jurisdiction because there was no
provision in the Act for payment of interest. Thirdly, he
submitted that in any case it would be inequitable to ask
the Estate to pay interest
139
when the compensation which was paid to the Estate did not
bear any interest. Fourthly, he contended that in any event,
the appellant personally cannot be held liable to pay the
interest since the endowed amounts were always a part of the
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Estate which was abolished, and the compensation which was
paid and later on distributed among the sharers of the
Estate, covered the said endowed amounts. The interest,
according to him, therefore, has to come out of the shares
of all the sharers and the appellant alone cannot be direct-
ed to pay the same. Fifthly, his contention was that assum-
ing without admitting that the appellant as an executor had
retained the said amounts and applied them to purposes other
than the objects of the endowment, he cannot be penalised
for the same under the Act by making him pay the interest on
them. At the most he may be liable for misfeasance as a
trustee under the appropriate law. Lastly, he submitted that
in any case since other sharers are not made parties to the
present proceedings, no direction can be given in the
present proceedings for payment of interest which has to
come out of the compensation received by all the sharers.
7. As regards the first contention, namely, that the
Tribunal had not directed the payment of interest in TOPs
123 and 124/58, it may be pointed out that in the applica-
tions made by the State Government to the Tribunal for the
recovery of the two endowed amounts, the Government had in
clear terms claimed that they were entitled to the said sums
with interest @ 6% per annum from 1-7-49 till the date of
payment, and that the Government was entitled to this amount
after the compensation was deposited. The Government had
also made a further claim that it was entitled to the pay-
ment of the said amount in priority over the claims of all
other persons. Pursuant to these averments, the Tribunal had
framed Issue No. 2 in TOP 123/58 and Issue No. 3 in TOP
124/58 in identical terms as follows:
"Whether the Government is entitled to claim the said amount
with interest from the date of abolition ....... ?"
While recording its findings in both the TOPs, the Tribunal
had in paragraph 21 state as follows:
"Under these circumstances, I hold under point 3 that the
Government is entitled to get payment of the amounts claimed
in TOPs Nos. 123-24/58."
The Tribunal further reiterated the said finding in para-
graph 29 as follows:
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"It is not in dispute that the amount of these two lakhs of
rupees continued to be with the Samsthanam and the Samstha-
nam was paying interest on those amounts for the purposes of
the endowments ......... From that time onwards all along
these two amounts have been treated as debts payable by the
Samsthanam. The amounts claimed under TOP Nos .......
123-24/58 relate to this amount of Rupees two lakhs and
interest accrued thereon. Under these circumstances I hold
that the amounts claimed under the said petitions are debts
payable from and out of the assets of the Impartible
Estate."
Again later in the same paragraph, it is stated as follows:
"Under these circumstances I hold under point 15 that the
amounts claimed in TOP Nos ....................123-24/
58 ....................are debts to be paid from and
out
the assets of the Impartible Estate of Vizianagaram
and
therefore they are debts which come under the category of
debts contemplated under Section 45(3) of the Abolition Act
and those debts are liable to be paid from out of the com-
pensation amount before any division of it can be made
between the sharers and maintenance holders."
In paragraph 32 the Tribunal has observed as follows:
"From the above discussion it is clear that out of the
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amount of Rs.3,63,007 in dispute concerned in the first
instance the State Government is entitled to payment of the
amount due to it under TOP No. 122/58 and out of the balance
remaining the amounts payable under TOP Nos. ... 123-
24/58 ......... should be paid."
It is, therefore, more than clear that the Tribunal had by
its order in question given a finding that the Government
was entitled to the entire amount claimed by it, namely, the
principal endowed amount and also interest claimed thereon.
8. The contention that because the Tribunal had not
reiterated the word ’interest’ in the next sentence of its
direction and had only mentioned "the amount" payable under
the TOPs and, therefore, it should be held that the Tribunal
had rejected the claim for interest is too facile to be
accepted. For the same. reason, we are also not impres-
141
sed by the argument that since the Tribunal had while di-
recting the payment of specific amounts had only referred to
a part of the principal amounts it should be held that the
Tribunal had rejected the claim for interest. Under the
scheme of the Act itself, the Tribunal was required to
apportion the amounts according to the priorities depending
upon the amount of compensation deposited at the time of the
giving of the direction in question. It was, therefore, only
to be expected that the Tribunal would first give directions
with regard to the payment of the principal amounts and
defer the payment of interest to a future date. That is
exactly what the Tribunal had done in the present case and,
hence, in the second set of applications made by the Govern-
ment, the Government had not only claimed the balance of the
principal amounts but also interest on the entire of the
said amounts from 1-7-49. The High Court was, therefore,
right in holding that the Tribunal by its order of 15-12-62
had allowed the claim for interest. In the circumstances,
the issue with regard to the claim for interest in the
subsequent applications, namely, applications TOPs 5/69 and
6/69 was not barred by resjudicata, as contended by Shri
Bhandare.
9. The second contention that the Tribunal could not
have directed the payment of interest because there was no
jurisdiction to do so is also misconceived, for the simple
reason that in the Will in question, both the said amounts
were deposited by the testator with the Estate, and the
beneficiaries of the endowment, namely, Gosha hospital and
the Banaras Charities Fund were to be financed from the
interest accruing on the said two amounts respectively. It
was not in dispute that these two amounts were lying depos-
ited with the Estate and the Estate was paying interest @ 6%
per annum on the amount of Rupees one lakh which was meant
for Gosha hospital and @ 5% per annum on the amount meant
for the Banaras Charities Fund. Hence, all that the Tribunal
had done was to direct the Estate to pay the amounts in
question to the Government together with interest at the
admitted rate, which interest was in any case payable to-
wards the endowment objects. Under the Act the Tribunal had,
among other things, to determine the liability of the Es-
tate. The endowment amounts together with the interest
admittedly accruing thereon together formed the total li-
ability of the Estate. The interest, further was a recurring
one and the objects of the endowment were to be financed
from out of the said interest. When, therefore, the Tribunal
directed the payment of interest together with the principal
amount it did nothing more than direct the Estate to honour
its liability.
10. As regards the third contention that it was inequitable
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for
142 SUPREME COURT REPORTS [1990] 1 S.C.R.
the Tribunal to ask the Estate to pay the interest since the
compensation paid to the Estate did not bear any interest,
we are afraid that the submission is beside the point. In
the first instance, under the scheme of the Act the amount
of compensation was to be paid in stages as and when the
compensation was deposited. Secondly, whether the Estate was
paid or not paid the interest on compensation due to it, has
nothing to do with the Estate’s liability towards the endow-
ments. The interest directed to be paid by the Tribunal was
not interest over and above the endowed amounts. It is the
principal amount together with the interest accruing thereon
which constituted the total endowed amounts at the time of
the abolition of the Estates.
11. The next three contentions can be dealt with togeth-
er. There is no doubt that the amounts were deposited with
the Estate, and it was the Estate which was paying interest
to the beneficiary or beneficiaries under the endowments.
Hence, as observed by the Tribunal, in the first instance,
the endowment amounts together with the interest accruing
thereon had to be set apart, from out of the compensation
payable to the Estate, and it is the balance which had to be
distributed among the sharers or the creditors of the shar-
ers as the case may be. As we read the Tribunal’s order of
15-12-62 as well as the impugned order of the High Court, we
see no direction to the appellant to pay the said amount
personally, as indeed on such direction could have been
given, since the facts show, that both the amounts were
lying with the Estate and not with the appellant in his
individual capacity. What is recorded in the Tribunal’s
order is that it is the Estate-holder who had not made over
the two amounts to the Government on the date of its taking
over. Hence, the direction of the High Court to pay the said
amount will have to be read as a direction to the appellant
to do so in his capacity as the Estate-holder and not in his
individual capacity. If the final amounts are already dis-
tributed among all the sharers and/or the creditors, the
Government has to look for the amount of interest to all the
sharers and/or their creditors including of course the
appellant. All the sharers will be liable to contribute
towards the payment of the amount of interest in proportion
to their share in the compensation. That is how the impugned
order of the High Court and the earlier order of 15-12-62
passed by the Tribunal will have to be read and construed.
In the circumstances, it matters not whether all the sharers
were parties to the proceedings. The proceedings were essen-
tially against the Estate, and the present appellant in his
capacity as an Estate-holder represented the Estate and all
the sharers. The order passed in the proceedings is, there-
fore, binding on all the sharers in the Estate notwithstand-
ing the fact that all the sharers
143
were not parties to the proceedings. We, therefore, find no
substance in the contention that the present proceedings
were bad in law because all the sharers were not made par-
ties to the same.
12. In the result, both the appeals fail. In the circum-
stances, however, there will be no order as to costs.
G.N. Appeals dis-
missed.
144