Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 14
PETITIONER:
SATINDER SINGH AND OTHERS
Vs.
RESPONDENT:
AMRAO SINGH AND OTHERS.
DATE OF JUDGMENT:
02/02/1961
BENCH:
GAJENDRAGADKAR, P.B.
BENCH:
GAJENDRAGADKAR, P.B.
WANCHOO, K.N.
GUPTA, K.C. DAS
CITATION:
1961 AIR 908 1961 SCR (3) 676
CITATOR INFO :
R 1962 SC1305 (21)
R 1967 SC1030 (4)
RF 1967 SC1032 (5)
F 1968 SC 129 (10,11)
RF 1975 SC 32 (24)
RF 1975 SC1303 (15,16,17,21)
R 1976 SC1721 (15,16)
R 1985 SC 998 (5,11)
F 1987 SC2177 (3)
D 1988 SC1520 (18)
RF 1990 SC1340 (13)
RF 1992 SC 732 (10,22,23)
ACT:
Land Acquisition--Cis-Sutlej Jagir--Inalienable Land--Com-
pensation, apportionment of--Interest, when payable--East
Punjab Acquisition and Requisition of Immovable Property
(Temporary Powers) Act,1948 (E. P. 48 of 1948), s.5--Land
Acquisition Act, 1894 (1 of 1894), ss. 23, 32, 34--Interest
Act, 1839 (32 of 1839) SS. 1, 2.
HEADNOTE:
Lands in four villages forming part of the Cis-Sutlej jagir
were compulsorily acquired under the East Punjab Acquisition
and Requisition of"Immovable Property (Temporary Powers)
Act, 1948. At the time of the acquisition A was the holder
of the jagir. Possession over one of the villages had been
given to
677
A’s wife G in lieu of maintenance under a consent decree.
The matter of payment of compensation was referred to an
arbitrator. A claimed that he was entitled to the entire
compensation amount as he was the present holder of the
jagir. A’s son S claimed that the lands, acquired were
inalienable, that A merely had a life interest therein and
that the compensation money should be deposited out of which
A should get only the interest for his life. G claimed that
she was entitled to the entire compensation in respect of
the lands over which she was in possession. All the
claimants claimed interest on the compensation amount from
the date of taking of possession to the date of payment of
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 14
compensation. The arbitrator held: (i) the acquired lands
were inalienable and A merely had a life interest thereiq,
(ii) S was entitled to a share in the compensation awarded,
(iii) the amount of compensation for the first three
villages should not be deposited but should be divided
between A and S in the proportion of 3/4th to 1/4th, (iv)
the compensation for the fourth village should be deposited
and the interest thereof be paid to G and after the death of
G the amount be divided between A and S half and half, and
(v) the claimants were not entitled to any interest on the
amount of compensation. On appeal the High Court confirmed
the awards in toto. The claimants appealed to the Supreme
Court by special leave.
Held, that the acquired lands formed part of a Cis-Sutlej
Jagir which was inalienable, that A was merely a limited
owner thereof and was not entitled to the entire amount of
compensation and that the reversioners were also entitled to
a share therein. The compensation amount could not be
permanently deposited leaving the parties the right to enjoy
only its- income. Even if the equitable principle of s. 32,
Land Acquisition Act, 1894, was applied it would not justify
the permanent investment of the compensation amount.
Section 32(1)(b) was intended to be applied provisionally
for short periods, where other lands had to be purchased out
of the compensation money but were not immediately available
and the money had to be invested as an interim measure till
such lands were available. It was fair to divide the
compensation money in respect of the first three villages
half and half between A and S. In deciding the question of
apportionment on equitable grounds it was relevant and
material to take into account the facts that no part of the
amount paid to A would reach the reversioners, that S
himself had a son and that the reversionary interest had to
be safeguarded.
Shri Somashekhar Swami v. Bapusaheb Narayanrao Patil A.I.R.
1948 Bom. 176, K. C., Banerjee, Official Receive?, In re:
A.I.R. 1928 Cal. 402, Mt. Gangi v. Santu A.I.R. 1929 Lah.
736 and Special Deputy Collector, Ramnad v. Rajah of Ramnad
A.I.R. 1935 Mad. 215, referred to.
Held, further, that the claimants were entitled to interest
at 4% per annum on the compensation amount from the date
when possession was taken by the State to the (late on which
it deposited
678
or paid the amount of compensation to the claimants’ The
provision in S. 5(e) of the 1048 Act which made S. 23(1) of
the Land Acquisition Act, 1894, applicable did not exclude
the application of SS. 28 and 34 of the latter Act which
dealt with the payment of interest. On general principles,
the act of taking possession of immovable property generally
implied an agreement to pay interest on the value of the
property ; the right to receive interest took the place of
the right to retain possession. The application of this
rule was not excluded by S. 5 of the 1948 Act. Even under
the Interest Act, 1839, the power to award interest on
equitable grounds was expressly saved by the proviso to S.
1.
Swift & Co. v. Board of Trade [1925] A.C. 520, Birch v. joy
(1852) 3 H.L.C. 565 and Inglewood Pulp and Paper Co. Ltd. v.
New Brunswick Electric Power Commission [1928] A.C. 429,
applied.
Surjan Singh v. The East Punjab Government A.I.R. 1957 Punj.
265, approved.
Seth Thawardas Pherumal v. The Union of India [1955] 2
S.C.R. 48 and Nachiappa Chettiar v. Subramaniain Chettiar
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 14
[1960] 2 S.C.R. 209, referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 396 to 398
and 419 to 421 of 1959, and 152 of 1960.
Appeals by special leave from the judgment and order dated
November 5, 1958, of the Punjab High Court in First Appeals
from Orders Nos. 42 to 44, 60 to 62 and 55 of 1955
respectively.
M. C. Setalvad, Attorney-General for India, S. N. Andley,
J. B. Dadachanji and Rameshwar Nath, for the appellants (in
C. As. Nos. 396 to 398 of 59) and Respondent No. 2 (in C.
As. Nos. 419 to 421 of 59 and 152 of 60).
A. V. Viswanatha Sastri and G. C. Mathur, for the
appellant (In C. As. Nos. 419 to 421 of 59), Respondent No.
1 (In C. As. Nos. 396 to 398 of 59) and Respondent No. 3
(In C. A. No. 152 of 60).
G. C. Mathur, for the appellant (In C. A. No. 1.52 of 60).
Gopal Singh and D. Gupta, for Respondent No. 2 (In C. As.
Nos. 396 to 398 of 59) and Respondent No. 1 (In C. As.
Nos. 419 of 59 and 152 of 60).
1961. February 2. The Judgment of the Court was delivered
by
679
GAJEMDRAGADKAR, J.-This is a group of seven appeals all of
which arise from the same land acquisition proceedings in
respect of which the Punjab Government originally issued a
notification under s. 4 of the Land Acquisition Act, 1894,
on March 23, 1948. By this notification the State
Government declared its intention to acquire land in the
Ambala District for the construction of the new Capital for
East Pun ab. No action was, however, taken in pursuance of
this notification. Meanwhile the Punjab Legislature passed
the East Punjab Requisition of Immovable Property (Temporary
Powers) Act, 48 of 1948. Under the provisions of this Act
the Government requisitioned the land in question for the
purpose of resettling the persons who were likely to be
evicted from their fands as a result of the construction of
the new Capital. The said land was actually acquired on May
20,1951. This land forms part of a Jagir known as "Singh
Purian " and comprises the areas of villages Mataur,
Dhirpur, Saneta and Giddarpur in the District of Ambala. It
appears that these villages originally formed part of the
area covered by the Cls Sutlej States. S. Amrao Singh was
entered as owner of the land thus acquired. His wife is
Sardarani Gurdial Kaur and his son is Satinder Singh. The
estate of Amrao Singh was at the relevant time being managed
by the Court of Wards. Pursuant to the provisions of the
Act compensation was assessed by the estate officer and was
accordingly offered by the State Government to the Court of
Wards. The Court of Wards agreed to the amount of
compensation thus offered and Amrao Singh himself did not
object to it. Satinder Singh, however, was not willing to
accept the said compensation and he raised several
objections contending that it was wholly inadequate. He
also objected to the compensation being paid either to the
Court of Wards or to his father Amrao Singh, and in support
of this contention he urged that since the estate once
formed part of Cis Sutlej States, Amrao Singh was entitled
only to its usufruct for his life and had no right to
alienate or otherwise deal with its corpus. Satinder
Singh’s plea was that after the
87
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 14
680
amount of compensation was finally determined it should be
deposited in Government Securities or alternatively a part
of it should be paid to him as compensation for the land of
his reversionary rights. This plea applied to the three
villages of Mataur, Saneta and Giddarpur. In regard to the
village of Dhirpur, Amrao Singh’s wife Sardarani Gurdial
Kaur claimed that she was in possession of the said village
as it was charged for the payment of her maintenance by a
compromise decree passed in her favour and against her
husband Amrao Singh. She therefore claimed for herself the
entire amount of compensation. Thus the contest about the
apportionment of the compensation amount took a triangular
form.
At this stage it would be convenient to refer to the
relevant provisions of the statute under which the present
proceedings have been taken. In 1948 the relevant Punjab
statute was East Punjab Act, 48 of 1948. Section 2 of the
said Act deals with the requisitioning of property, and s. 3
empowers the State Government to acquire requisitioned
properties. Section 5 prescribes the principles according
to which compensation had to be paid in regard to acquired
properties. Section 5(e) provides that the arbitrator, in
making his award, shall have regard to the provisions of
sub-s. (1) of s. 23 of the Land Acquisition Act, 1894 (1 of
1894) so far as the same can be made applicable.
This Act was followed by the Punjab Requisitioning of
Immovable Property (Amendment and Validation) Act, 1951
(President’s Act No. 2 of 1951). By s. 5 of this Act s. 5
of the earlier Act was amended, inter alia, by adding one
provision. This provision provides that where any property
is acquired in connection with the new Capital of the State
of Punjab compensation may be paid whether by agreement or
by award of the arbitrator, either in money or in kind or
partly in money and partly in kind, and where there is no
person competent to alienate the property, or there is a
person with limited interest in such property, or there is
any dispute as to the persons entitled to receive the
compensation or as to the apportionment thereof, the
arbitrator shall make an award in such a manner or
681
make an arrangement in such a way as may be equitable having
regard to. the interests of the persons concerned; in other
words, the principle of equitable apportionment which had
been recognised by s. 32 of the Land Acquisition Act of 1894
has in effect been added by this amending Act.
In 1953 the Punjab Requisitioning and Acquisition of
Immovable Property Act, 1953 (XI of 1953), came into force.
Section 24 of this Act repeals the two earlier Acts of 1948
and 1951, and after this Act came into force it was the
provisions of this Act that governed the proceedings
relating to the requisitioning, and acquisition of immovable
properties in Punjab. The equitable principle which was
inserted in the Act of 1948 by the amending Act of 1951 has
been retained in the present Act under s. 8 (3). Section 23
(1) of this Act validates requisitions and acquisitions of
properties there specified, while sub-s. (2) of the said
section provides, inter alia, that acquisition of immovable
property purporting to have been made before the
commencement of this Act shall be deemed for all purposes to
have been validly made as if the provisions of the said
enactment or order had been included and enacted in this
section, and this section had beenin force on and from the
date of the acquisition. It has been held by a Full Bench
of the Punjab High Court in Colonel His Highness Raja Sir
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 14
Harindar Singh Brar Bans Bahadur, Ruler, Faridkot State v.
The State of Punjab (1) that compensation for property
acquired under the Land Acquisition Act, 1894 or under the
Punjab Act of 1948 must be paid in accordance with the
principles set out in those Acts and not in accordance with
the principles set out in the later Act of 1953. This
position is not disputed by either party in the present
proceedings. Thus it is common ground that for determining
the amount of compensation and its apportionment amongst the
rival claimants the provisions of the relevant Act of 1948
are applicable though the proceedings were held under the
relevant provisions of the later Act of 1953. In fact, the
appointment of the arbitrator who conducted the proceedings
(1) (1957) 59 Punj. L.R. 386.
682
in the present case was made by the State Government under
s. 8(1)(b) of the Act of 1953. We have already noticed that
the provisions of s. 8 (3) of this Act were included by an
amendment in the earlier Act of 1948 by the amending Act of
1951.
Before the arbitrator the acquisition proceedings were dealt
with in four different cases, each one being related to the
lands in one of the four villages in question. On the
contentions raised by the parties the arbitrator first
considered two preliminary issues. They were: (1) Is
Satinder Singh competent to object to the amount of
compensation awarded in the case, and (2) Is the appointment
of the arbitrator invalid on account of the agreement
between the State and the Court of Wards about the amount of
compensation payable by the State to the Court of Wards. It
appears that Amrao Singh contended that his son Satinder
Singh had no locus standi in the matter, and that since he
and the Court of Wards had agreed to the amount of
compensation offered by the State the arbitrator had no
jurisdiction to hold any enquiry on the claim put forward by
Satinder Singh. The arbitrator, however, rejected Amrao
Singh’s pleas, and held that he was entitled and bound to
hold the proceedings and to consider the merits of the pleas
raised by Satinder Singh.
The arbitrator then proceeded to examine the merits of the
rival contentions. He found that the property in suit was a
part of Cis Sutlej States and so Amrao Singh had only a
limited interest in it and had no right to alienate it. As
a result of this conclusion the arbitrator held that
Satinder Singh, who was the next heir, was entitled to
contest the amount of compensation and was also entitled to
claim a share in the distribution of the amount. In regard
to Dhirpur land he held that Sardarani Gurdial Kaur was
entitled to retain the possession of the village for her
maintenance under a compromise decree and that both Amrao
Singh and Satinder Singh were bound by the said decree. In
the result the arbitrator determined the amount of
compensation and directed that the entire amount of
compensation in regard to Dhirpur
683
should be invested in Government Securities in the name of
the holder of Manauli Estate with a charge in favour of
Gurdial Kaur which would entitle her to its annual profits
in lieu of maintenance. He also directed that on the death
of Gurdial Kaur the amount should be divided half and half
between the then holder of the Estate and the next heir or
heirs taken together. In regard to the lands in the three
other villages the arbitrator directed that the amount of
compensation determined by him should be paid in cash,
3/4ths to Amrao Singh and 1/4th to the next sole heir
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 14
Satinder Singh. The amount originally offered by the
Government and ultimately awarded by the arbitrator were
as follows:
Village Govt. Offer Award
Mataur (Plus Rs. 93,309.00 Rs. 1,82,813.00 15% acquisi-
tion charges)
Saneta Rs. 42,179.00 Rs. 55,377.00
Giddarpur Rs. 15,726.00 Rs. 27,640.00
Dhirpur Rs. 1,17,912.00Rs. 2,27,860.00
It would thus be seen that the contest made by Satinder
Singh in respect of the amount of compensation originally
offered by the Government substantially succeeded inasmuch
as the total amount offered was increased by the arbitrator
by Rs. 2,24,564/-.
The order thus passed by the arbitrator was recorded by him
in the four cases tried before him in respect of the four
villages. These orders became the subject matter of several
appeals in the Punjab High Court. The State of Punjab
preferred four appeals 67 to 70 of 1955; Satinder Singh
preferred three appeals 42 to 44 of 1955; Amrao Singh
preferred four appeals 59 to 62 of 1955; and Sardarani
Gurdial Kaur preferred Appeal No. 55 of 1955. In its appeal
the State urged before the High Court that Satinder Singh
was not competent to object to the compensation offered by
the State and so the proceedings held before the arbitrator
were invalid. It was also urged alternatively that Amrao
Singh and Sardarani Gurdial Kaur were not entitled to
compensation at the higher rates directed by the arbitrator,
and that the benefit
684
of the award should be available only to Satinder Singh, and
it was contended that the amount of compensation fixed by
the arbitrator was excessive. All these contentions have
been rejected by the High Court and the appeals preferred by
the State have been dismissed. The State has not challenged
the correctness of the decision of the High Court, and so we
are not concerned in the present appeals with the merits of
the pleas raised by the State before the High Court.
In the appeals preferred by Satinder Singh the High Court
rejected his plea that the valuation fixed by the arbitrator
in respect of certain properties was inadequate. It also
rejected his plea that the amount of compensation ordered to
be divided between him and his father Amrao Singh should be
deposited in Government Securities. The High Court held
that though equitable considerations would be relevant in
deciding the question of apportionment, it would be
inexpedient to direct that the amount should be deposited in
Government Securities because in that case no one will ever
be absolutely entitled to it. The High Court also thought
that since the State in whose favour the estate may finally
lapse owing to escheat did not object to the apportionment
made by the arbitrator there was no reason to interfere with
the actual order. as to apportionment between father and son
which the arbitrator thought was reasonable. In dealing
with this question the High Court took the view that the
alleged reckless extravagance of the father on which the son
relied was not relevant. In the result the three appeals
filed by Satinder Singh were dismissed.
The High Court then dealt with the appeal preferred by Amrao
Singh, and it confirmed the finding of the arbitrator that
the property acquired originally formed part of Cis Sutlej
States and that in regard to the said States the rule is now
well settled that the Jagirs large or small in Cis Sutlej
States are non-transferable and are even exempt from
attachment as political pensions, the holder for the time
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 14
being having only life interest in the estate, the corpus of
which is to be
685
kept intact so that it may pass from heir to heir and lapse
in favour of the Government in the absence of any legal
heir. The High Court also held that even if the character
of the property was considered from the angle of the general
custom of Punjab the same conclusion followed because the
property in question was undoubtedly ancestral immovable
property in the hands of the father qua his son and as such
the father had no right to alienate it to the prejudice of
his son without legal necessity or any other compelling
reason. That is how the principal point urged by the father
against the claim set up by his son was rejected and his
appeals were dismissed. The appeal preferred by Sardarani
Gurdial Kaur also met the same fate and was dismissed.
It appears that all the three claimants urged before the
High Court that they were entitled to interest at a
reasonable rate on the amount of compensation from the time
that the property was acquired and they lost possession of
it. This contention was likewise rejected by the High
Court, and it was held that under the relevant Act of 1948,
it was not permissible to award interest on the amount of
compensation, The result was that the decision of the
arbitrator was fully confirmed and all the appeals preferred
before the High Court were dismissed. This decision of the
High Court is challenged by special leave by the three
claimants Amrao Singh, Satinder Singh and Sardarani Gurdial
Kaur respectively. The appeals preferred by Satinder Singh
are Civil Appeals Nos. 396 to 398 of 1959; Amrao Singh’s
appeals are Civil Appeals Nos. 419 to 421 of 1959, whereas
Sardarani Gurdial Kaur’s appeal is Civil Appeal No. 152 of
1960. That is how this group of seven appeals arises from
the same land acquisition proceedings taken by the State of
Punjab in respect of the lands situated in the four villages
already mentioned. We would hereafter refer to Satinder
Singh as the appellant, Amrao Singh as respondent 1, the
State of Punjab as respondents, and Sardarani Gurdial Kaur
as Sardarani.
Logically then the first point which we must consider is the
nature of the property and the title of
686
respondent 1 in relation to it. That is the principal point
which Mr. Viswanatha Sastri sought to raise before us in the
appeal filed by respondent 1. This question has been
considered both by the arbitrator and the High Court
elaborately and they have concurred in making a finding
against respondent 1. As the judgment of the High Court
points out the fact that the lands in question originally
formed part of the domain of S. Budh Singh or of the Cis
Sutlej States was not seriously disputed before the High
Court. This implied concession naturally makes Mr. Sastri’s
task very difficult. Besides, we are not satisfied that
there is any substance in the plea which Mr. Sastri has
raised before us on this point. The history of the property
has been considered by the arbitrator, and the arbitrator as
well as the High Court have placed considerable reliance on
the relevant statements made in the Punjab Land
Administration Manual compiled by Sir James Mac. Douie and
revised in 1931. Reliance has also been placed on the
relevant statements in the compilation known as the " Chiefs
and Families of Note in the Punjab " published by the Punjab
Government in 1940. The pedigree table of the Singh Purian
family given in this publication shows that the family was
founded by S. Kapur Singh who held the title of Nawab. S.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 14
Budh Singh was his grandson and he was the head of the
family in 1809. Amrao Singh is a descendant of Gopal Singh
who was one of the seven sons of Budh Singh. The large
Jagirs owned by the families are situated in Kharar and
Rupar Tehsils of Ambala District and they formed part of the
area formerly known as Cis Sutlej States. Paragraphs 100,
101 and 102 of Douie’s Land Administration Manual give a
detailed account of the families and the in properties. The
same is also briefly mentioned in the Punjab Gazetteer
dealing with Ambala, District.
It appears from this material that the Sardars in the Cis
Sutlej States were independent Rulers whose ancestors
ultimately came under the protection of the British
Government in about 1809. Between 1809 to 1847 the British-
Government tried to enforce good
687
government amongst the semi-independent States; in order to
achieve this object the British Government gradually
strengthened its hold and tightened the reins with a view to
enforce good government. It appears that the Government
exercised the right of escheat very freely and whenever
there was lapse of heirs it G.. took up the management and
government of the area in its own hands. After 1846
Government began to introduce sweeping measures of reform
and with that object Government reduced the privileges and
rights of the petty chieftains. In 1849 the chieftains lost
their sovereign powers and were deprived of their criminal,
civil and fiscal jurisdiction so that they became no more
than Jagirdars. Their rights in the lands held by them
were, however, left untouched. Rules regarding succession
to these Jagirs were framed by the Central Government from
time to time and family custom was respected within
reasonable limits. One of these rules is to be found in
paragraph III of Douie’s Manual. Clause (c) of this
paragraph laid down " that alienations by a Jagirdar or
pattidar of portions of his holding, whether to his
relations or strangers, shall neither be officially
recognised nor officially recorded." Similarly paragraph 164
emphasised the inalienable character of the Jagirs and
referred to the opinion expressed by the Court of Directors
whereby the said character was clearly and unambiguously
notified. " We should have supposed ", said the Court of
Directors, " that there could be no necessity for notifying
this as a rule, since it follows from the very nature of a
Jagir, which cannot be alienated and can only be attached
for the life of the holder." There is thus no doubt that the
statements in the authorised publications to which we have
just referred and on which the High Court and the arbitrator
have relied conclusively show that the holder of property
which was a part of Cis Sutlej States did not own the
property absolutely but held it as a limited owner. The
Kaiflat Taluka of Singh Purian family which has been
produced in these proceedings supports the same conclusion.
688
Mr. Sastri, however, wanted to contend that the evidence on
the record was insufficient to justify the conclusion that
the lands under acquisition formed part of the original
estate of S. Budh Singh; but he fairly conceded that
respondent 1 had not gone into the witness box and had not
purported to justify his plea that any of the lands in
dispute have been acquired either by him or by his ancestors
in such manner that they could be treated as the absolute
properties of the holder. The circular issued by the Office
of the Commissioner and Superintendent of Cis Sutlej States
on February 26, 1857, unambiguously shows that " all
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 14
proprietary right to any part of the lands forming a part of
the Jagir which may be held by the Jagirdar will be
considered as pertaining to the Jagir and will go to the
holder of the Jagir for the time being." This principle was
applicable even to houses and other buildings standing on
the Jagir which are in the nature of forts and may be
considered to appertain to the estate. The only exception
made was in regard to the shops built or acquired by the
Jagirdar in a town apart from his place of residence.
Therefore, on the material as it stands it is difficult to
sustain the plea that the concurrent findings made by the
arbitrator and the High Court on the question about the
character of the property and the nature of the title held
by the holder of the said property are wrong. Incidentally
it may be added that the same conclusion has been reached
by the High Court on the ground of the customary law
prevailing in the Punjab. We must accordingly proceed to
deal with the rest of the dispute between the parties on the
basis that the respondent 1 is not the absolute owner of the
property and that the appellant is entitled to represent the
reversionary interest in the present proceedings.
That takes us to the pleas raised by the appellant in his
appeals. On his behalf it has been urged by the learned
Attorney-General that the whole amount of compensation in
respect of the three villages Matsur, Sunets and Giddarpur
should be appropriately invested Pond both he and respondent
1 should
689
be allowed to enjoy the income coming from the said
investment in the share which may ultimately be fixed
between them. In support of this contention he relies on
the provisions of s. 32 (1) (b) of the Land Acquisition Act
1 of 1894. This provision empowers the Court to direct that
the compensation amount payable to the owners should be
invested either in Government or approved securities and the
payment of interest or other proceedings arising from such
interest should be directed to the person or persons who
would for the time being have been entitled to the
possession of the lands under acquisition. The argument is
that since respondent 1 was not entitled to alienate the
property and was under an obligation to keep the corpus in
tact for the benefit of the reversioners the compensation
amount payable in respect of the acquisition of the said
property should be similarly treated and saved for the
benefit of the reversioners; in other words, it is urged
that the compensation amount should be treated as a
conversion of the corpus of lands and the same should not be
distributed as directed by the High Court. Section 32 deals
with cases where the land acquired belonged to any person
who had no power to alienate the same; and since respondent
1 was not entitled to alienate the property the principle
enunciated by s. 32(1) (b) is pressed into service as an
equitable principle which should be applied to the present
case. In support of this argument the learned Attorney-
General has relied on decisions of different High Courts
where this principle has been extended to watan property
(Shri Somashekhar Swami v. Bapusaheb Narayanrao Patil (1) ),
to the property belonging to an idol (K. C. Bannerjee,
Official Receiver, In re (2) ), to the property held by a
widow (Mt. Gangi v. Santu & Others (3)), or to land
belonging to an impartible estate (Special Deputy Collector,
Ramnad v. Rajah of Ramnad (4) ).
This contention, however, ignores that the provisions of s.
32 (1) (b) are intended to be applied only provisionally and
for a short period. The scheme of
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 14
(1) A.I.R. 1948 Bom. 176.
(2) A.I.R. 1928 Cal 402.
(3) A.I.R. 1929 Lah. 736.
(4) A.I.R. 1935 Mad. 215.
690
s. 32 is that in cases to which the said section applies the
Court shall order the compensation amount to be invested in
the purchase of other lands which would be held under the
right, title and conditions of ownership as the land in
respect of which the compensation amount has been deposited.
That is the plain effect of s. 32(1)(a). Section 32 (1) (b)
comes into operation if such purchase cannot be effected
forthwith; and it has to remain in operation until such
purchase is made. In other words, if the compensation
amount cannot be immediately invested in the purchase of
other lands, as an interim measure the said amount may be
invested in the prescribed securities and income thereof
distributed to those who were entitled to it. Therefore,
even if the principle underlying s. 32 is extended to the
present case on equitable considerations it would not
justify the appellant’s claim that the compensation amount
should itself be treated as corresponding to the corpus of
lands acquired and should be permanently invested in
suitable securities leaving to the parties concerned the
right to enjoy only its income. Such a course is plainly
inconsistent with the principle recognised by s. 32(1)(a).
Therefore, we are not prepared to accede to the argument
that the compensation amount should not be divided between
the parties and should be permanently deposited in the fund
set apart in proper investments.
If the said amount must, therefore, be divided between the
appellant and respondent 1 how should it be divided? That
is the next question which calls for our decision. The
appellant contends that the fairest way to distribute this
amount would be to divide it half and half between him and
respondent 1. We are inclined to hold that this contention
is well founded. As the High Court has observed, it is not
at all easy to estimate the relative value of the two
interests represented by the appellant and respondent 1. The
High Court thought that the ratio may be 2/3 and 1/3 or 3/4
and 1/4 there being little to choose between the two; and so
it confirmed the apportionment made by the arbitrator. This
decision, however, suffers from one serious infirmity. The
High Court thought that
691
the conduct of respondent 1 which was characterized by the
appellant as the conduct of a reckless spend. thrift and
squanderer was wholly irrelevant in determining the shares
to which the appellant and, respondent 1 were respectively
entitled. In our opinion, in deciding the question of
apportionment on equitable grounds it is relevant and
material to take, into account the grievance made by the
appellant that the money which would be left with respondent
1 would be frittered away by him and no part of it would
reach the reversioner. In support of this contention, the
appellant relied on the past conduct of respondent 1.
Several alienations made by him are cited and attention is
invited to the fact that after respondent 1 became a major
his estate has been taken over by the Court of Wards for
management under s. 5(2) (b) of the Court of Wards Act,
1903, from 1928 to 1938, 1939 to 1947, 1948 to 1954. It has
also been urged that since 1954 respondent 1 has made
several unauthorised alienations. We do not propose to
consider the validity of each one of these allegations but
we have no hesitation in holding that on the material
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 14
available on the record it would be difficult to reject as
unfounded the apprehensions which the appellant entertains
in regard to the fate of the amount which may be given to
respondent 1. Besides, we are also inclined to take into
account the fact that the appellant himself has a son and in
apportioning the amount we have to bear in mind the fact
that the amount is being paid in respect of the lands which
respondent 1 holds as a limited owner and the reversionary
interest in respect of which has to be safeguarded. We
would, therefore, direct that the amount of compensation in
respect of the three villages should be divided between the
appellant and respondent 1 half and half. It is significant
that the amount of compensation in respect of the fourth
village which is at present charged for the maintenance of
Sardarani has been ordered to be divided half and half.
Therefore, we would uphold the contention raised by the
learned Attorney-General on behalf of the appellant and
direct that the said amount should be divided not as
692
2/3 and 1/3 but half and half between the father and son.
The next point which the learned Attorney-General wanted to
urge was that the increase in the amount of compensation
directed by the arbitrator should be paid to him
exclusively. His case was that the Court of Wards and
respondent 1 had accepted the amount offered by the State
Government, and it was because he raised contentions that
the proceedings were referred to the arbitrator whose award
ultimately enhanced the compensation amount to a very large
extent. This contention was not raised either before the
arbitrator or before the High Court, and we have therefore
not allowed the appellant to raise it before us.
That takes us to the question of interest which has been
urged before us by all the three claimants alike. The
argument is that the amount of compensation awarded should
carry a reasonable rate of interest from the date of
acquisition when the claimants lost possession of their
properties. This argument has been rejected by the High
Court principally on the ground that the relevant Act of
1948 makes no provision for payment of interest and omission
to make such a provision amounts in law to an intention not
to award interest in regard to compensation amount
determined under it. In support of this conclusion the High
Court has referred to the fact that s. 5(e) of the Act
specifically makes applicable the provisions of s. 23(1) of
the Land Acquisition Act of 1894, and that, it is said,
inevitably leads to the inference that ss. 28 and 34 of the
Act which deal with the payment of interest are not intended
to apply to the proceedings under it. In our opinion, this
conclusion is not wellfounded. It would be legitimate to
hold that by the application of s. 23(1) in terms the
provisions of s. 23(2) are by necessary implication
excluded. If the Legislature has provided that only one
part of s. 23 should be applied it would be reasonable to
hold that the other part of s. 23 was not intended to be
applied; but we do not see how it would be reasonable to
hold
693
that by the application of s. 23(1) the principles under-
lying the provisions of ss. 28 and 34 are also excluded.
Therefore, it is necessary to examine this question on
general grounds and principles without assuming that the
application of these general considerations is excluded by
any of the provisions of the Act.
What then is the contention raised by the claimants? They
contend that their immovable property has been acquired by
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 14
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 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 & Co. v. Board of Trade (1) 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." This principle has been
recognised ever since the decision in Birch v. Joy (2). In
his speech, Viscount Cave, L.C., added that " this practice
rests upon the view that the act of taking possession is an
implied agreement to pay interest ", and he points out that
the said rule has been extended to cases of compulsory
purchase under the Lands Clauses Consolidation Act, 1845.
In this connection distinction is drawn between acquisition
or sales of land and requisition of goods by the State. In
regard to cases falling under the latter category this rule
would not apply.
(1) [1925] A.C. 520. 532.
(2) (1852) 3 H.L.C. 565,
694
In Inglewood Pulp and Paper Co. Ltd. v. New Brunswick
Electric Power Commission (1), 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 inter-
pretation 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. The question which we have to consider is
whether the application of this rule is intended to be
excluded by the Act of 1948, and as we have already
observed, the mere fact that s. 5(3) of the Act makes s.
23(1) of the Land Acquisition Act of 1894 applicable we
cannot reasonably infer that the Act intends to exclude the
application of this general rule in the matter of the
payment of interest. That is the view which the Punjab High
Court has taken in Surjan Singh v. The East Punjab
Government (2), and we think rightly.
It is, however, urged by Mr. Gopal Singh for respondent 2
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 14
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
(1) [1928] A.C. 429,
(2) A.I.R. 1957 Punj. 265,
695
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.
Mr. Gopal Singh then relied on some observations made by
this Court in Seth Thawardas Pherumal v. The Union of India
(1). Bose, J., who spoke for the Court has set out four
conditions which must be fulfilled before interest can be
awarded under Interest Act of 1839, and observed that not
one of those was present in the case with which the Court
was concerned. That is why it was held that the arbitrator
had erred in law in thinking that he had the power to allow
interest simply because he thought the demand was reason-
able. Having come to this conclusion the learned Judge
proceeded to make certain observations in respect of the
applicability of s. 34 of the Code of Civil Procedure. He
added that s. 34 does not apply because the arbitrator is
not a Court within the meaning of the Code, nor does the
Code apply to arbitrators, and but for s. 34 even a Court
would not have the power to give interest after the suit.
These observations were considered by this Court in
Nachiappa Chettiar v. Subramaniam Chettiar (2), and it was
pointed out that they were obviously not intended to lay
down any broad and unqualified proposition like the one
which is urged before us by Mr. Gopal Singh in the present
appeal.
In this connection we may incidentally refer to Interest
Act, 1839 (XXXII of 1839). Section 2 of this
(1) [1955] 2 S.C.R. 48.
(2) [1960] 2 S.C.R. 209.
696
Act confers power on the Court to allow interest in cases
specified therein, but the proviso to the said section makes
it clear that interest shall be payable in all cases in
which it is now payable by law. In other words, the
operative provisions of s. 1 of the said Act do not mean
that where interest was otherwise payable by law Court’s
power to award such interest is taken away. The power to
award interest on equitable grounds or under any other
provisions of the law is expressly saved by the proviso to
s. 1. This question was considered by the Privy Council in
Bengal Nagpur Railway Co. Ltd. v. Buttanji Ramji (1).
Referring to the proviso to s. 1 of the Act the Privy
Council,observed " this proviso applies to cases in which
the Court of equity exercises its jurisdiction to allow
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 14
interest. " We have already seen that the right to receive
interest in lieu of possession of immovable property taken
away either by private treaty or by compulsory acquisition
is generally regarded by judicial decisions as an equitable
right; and so, the proviso to s. 1 of the Interest Act saves
the said right. We must accordingly hold that the High
Court was in error in rejecting the claimants’ case for the
payment of interest compensation amount, and so we direct
that the said amount should carry interest at 4% per annum
from the date when respondent 2 took possession of the
claimants’ lands to the date on which it deposited or paid
the amount of compensation to them.
In the appeal preferred by the Sardarani, Mr. Mathur
attempted to challenge the propriety of the order passed by
the High Court directing that the amount of compensation in
respect of Dhirpur lands should be .invested and that the
Sardarani should receive her maintenance from the interest
accruing from such investment. Apart from the fact that the
order made in that behalf is fair and just, it is clear that
the learned counsel for the Sardarani himself had suggested
that such an order should be passed. Therefore, we cannot
allow Mr. Mathur to raise any contention against the said
order in the present appeal.
(1) (1938) L.R. 65 I.A. 66,
697
Mr. Mathur further contended that if we were to award
interest on the amount of compensation his client would be
entitled to receive the whole of the interest on the
compensation amount ordered to be paid in respect of the
lands in Dhirpur village. That no doubt is true, and indeed
Mr. Mathur’s claim in that behalf is not disputed either by
the appellant or by respondent 1. We would accordingly
modify the decree passed by the High Court by directing that
the amount of compensation payable in respect of the lands
in Mathur, Saneta and Giddarpur may be divided half and half
between the appellant and respondent 1, and that interest
should be paid on all the items of compensation determined
by the High Court at 4% per annum. The interest in regard
to the compensation payable for Dhirpur lands should be paid
to the Sardarani, whereas the interest in regard to the
lands in the three other villages should be paid half and
half to the appellant and respondent 1. In making the
payments of compensation amounts to the respective parties
whatever amounts may have been withdrawn by or on their
behalf should be taken into account and their claims should
be properly adjusted in that behalf. In the circumstances
of this case we direct that the appellant should get half
his costs from respondent 1 and the other half from
respondent 2 in his three appeals. There will be only one
set of hearing costs. The costs in the remaining four
appeals should be borne by the parties.
C. A. Nos. 396 to 398 of 1959 and
C. A. No. 152 of 1960 allowed in part.
C.A. Nos. 419 to 421 of 1959, dismissed.
698