Full Judgment Text
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PETITIONER:
R.V.M. NEELADRI RAO & ANR.
Vs.
RESPONDENT:
BOARD OF REVENUE, HYDERABAD & ORS.
DATE OF JUDGMENT:
23/09/1969
BENCH:
ACT:
Andhra Pradesh (Andhra Area) Estates (Abolition and
Conversion into Ryotwari) Act (26 of 1948), s. 20 and Rule
1(ii)of the Rules made thereunder--If rule repugnant to s.
20--Lessee from proprietor of impartible estate--Rent--If
cesses could be deducted--Compensation-Net annual
income--How determined--If interest payable to lessee on
amount collected as rent and withheld by Government.
Madras Estates Land (Reduction of Rent) Act (30 of 1947),
s. 3-Lessee’s right to rent--Reduced rent or land revenue
settled by Ryotwari settlement.
Interest Act (32 of 1839)--Payment of interest
under--When permissible.
HEADNOTE:
The appellants were the transferees of lease-hold rights
granted by the proprietor of an impartible estate in respect
of lands in the estate. The estate was notified and
abolished in 1948 under the Andhra Pradesh (Andhra Area)
Estates (Abolition and Conversion into Ryotwari) Act, 1948.
The Manager who was appointed collected the rent as reduced
under the Madras Estates Land (Reduction of Rent) Act. 1947.
direct from the tenants in possession of the lease-hold
lands from the fasli year 1357, but did not pay it over to
the appellants. Ryotwari settlement was introduced in the
lands in 1959 (fasli 1369), and in 1960 (fasli 1370), the
lease, which was covered by s. 20 of the Abolition Act, was
terminated, the unexpired portion of the lease period being
26 years. The appellants were paid in 1961: (1) certain
sums towards the amount collected as rent till the
termination of the lease, and (2) compensation.. No
interest was paid on the rent collected by the Manager.
On the question regarding the correctness of the basis of
the calculations made by the respondent,
HELD: (1) The respondent was right in holding that the
appellants were entitled only to the rents collected, under
s. 3(4) of the Rent Reduction Act, and not to the assessment
made by way of ryotwari settlement under s. 22 of the
Abolition Act. That assessment was a matter between the
Government and the tenant and if, by virtue of it, the
Government was entitled to more amount as land revenue than
the rent payable under the Rent Reduction Act, the
appellants had no right to such excess amount. [542 F H]
(2) (a) Under s. 20(2) of the Abolition Act rules for
determining compensation had to be framed having regard to
the value of the right and the unexpired portion of the
period for which the right was created. Rule 1 (ii) framed
under the section, provides that in the case of a right
which was created for a specified number of years, the
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compensation shall be limited either to twenty times. the
net annual income or the net annual income multiplied by the
unexpired portion of the period of such right, whichever is
less; and, under r. 2, net annual income is the average net
income during 3 lash years preceding the lash year in which
the right was terminated. Since the rule is framed having
regard to the unexpired period, there is no repugnancy
between the section and the rule. [543 B-G; 544 E---H; 545
A]
539
(b) The settlement rates under the ryotwari settlement
represent what is payable to the Government as revenue and
do not represent what is due as rent to the appellants from
their tenants. Therefore, the respondent was right in
determining the net annual income under r. 1 (ii) by taking
into account only the rent as fixed under the Rent Reduction
Act in the three preceding fasli years 1367--1369 and not
the settlement rate for the fasli year 1369. [544 D-E]
(c) The definition of rent in the Madras Estates Land
Act, 1908, incorporated into the Abolition Act, and the
sections of the Abolition Act show that ’rent’ includes any
local tax, eess etc. The original patta granted by the
proprietor of the impartible estate provided that the
lessees should pay the cesses. Hence, the net income could
only be arrived at by taking into account the eesses payable
by the lessee. Therefore, the respondent was justified in
deducting from the annual gross income the cesses, for
arriving at the net annual income which is the basis of
compensation. [54-5 E--G]
(3) On general principles of equity as well as under the
Interest Act, 1839, the appellants were entitled to interest
on the amount of rents collected by the Manager on behalf
of the Government and not paid to the appellants, even
though, under the statute, there is no provision for payment
of interest. [546 E--G]
National Insurance Co. Ltd. Calcutta v.L. I. C. India,
[1963] Supp. 2 S.C.R. 971, followed.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1648 of 1966.
Appeal from the judgment and decree dated July 9, 1964
of the Andhra Pradesh High Court in Writ Appeal No. 116 of
1963.
D. Narsaraju, A. Subba Rao and A.V.V. Nair, for the
appellants.
P. Ram Reddy and .A. V. Rangam, for the respondents.
The Judgment of the Court was delivered by
Grover J. This is an appeal by certificate from a
judgment of the Andhra Pradesh High Court given in a
petition filed under Art. 226 of the Constitution by the
appellants.
The facts may be stated. The previous Maharajah of the
impartible estate of Pithapuram in East Godavari District
granted a lease on June 22, 1887 in favour of his third wife
late Rani Subbayyamma Bahadur in respect of lands in
various villages covering an area of acres 2669.65 cents.
The Rani executed a will on November 8, 1914 bequeathing all
her property including the lease-hold rights to the first
appellant and on her death he succeeded to her estate. On
December 10, 1956 the first appellant transferred his lease-
hold rights in acres 2519.63 cents to the second ’appellant
and reserved to himself the rights in and over the remaining
area of acres 150.52 cents. The third appellant an assignee
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from the second appellant.
L3 Sup.CI/70)- -4.
540
On the enactment of the Madras Estates (Abolition &
Conversion into Ryotwari) Act, (Act XXVI of 1948),
hereinafter called’ the Act, the title of which was changed
to the Andhra Pradesh (Andhra Area) Estates (Abolition and
Conversion into Ryotwari) Act, 1948, XXVI of 1948, the
Pithapuram Estate was notified and abolished with effect
from September 7, 1949. The lands in-question were taken
over by the Government under the provisions of the Act and
the Manager who had been ,appointed ordered that the rent
should be collected direct from the tenants in possession of
the lease-hold lands under s. 55(1) of the Act from the
fasli year 1357 onwards on the reduced rates notified under
the Madras Estates Land (Reduction of Rent) Act later called
Andhra Pradesh (Andhra Area) Estates Land (Reduction of
Rent) Act, Act XXX of 1947. The first appellant filed a
petition before the Estates Abolition Tribunal Vizianagram
for payment of the proportionate share of compensation out
of compensation payable for the estate of Pithapuram. That
petition was opposed by the Government and the principal
land holder, according to whom, the claim of the first
appellant was governed by s. 20 of the Act. This objection
was upheld by the Tribunal. On January 8, 1959 the High
Court confirmed the order of the Tribunal in appeal holding
that the first appellant’s rights were covered by s. 20 of
the Act. In March 1960 the appellants filed a petition
under Art. 226 of the Constitution praying for Various
reliefs. On September 9, 1960 the Government decided that
as the lease was covered by s. 20 of the Act the Board of
Revenue be asked to terminate the same and to pay all the
,amounts collected as also the compensation payable under s.
20 to the appellants. On September 17, 1960 the Board of
Revenue issued a notice to the appellants calling upon them
to show cause as to why the lease-hold rights in respect of
acres 2669.65 cents should not be terminated. The
appellants sent a reply on October 17, 1960 representing
that they had ,no objection to the termination of the lease
provided the Government paid compensation to the appellants
together with all the ,amounts so far collected by the
Government from the lease-hold lands without deducting any
collection charges together with interest accruing thereon
till the date of the payment. On November 17, 1960 the
Board formally terminated the lease and informed the
appellants that compensation and all the amounts collected
from the lease-hold lands would be paid to them after
deducting fist at 4 annas per acre and cesses etc. but that
no interest would be paid on the amounts collected by the
Government and further that the Government was also
entitled to deduct the collection charges. On January 25,
1961 the Board made an order directing that the appellants
should be’ paid a sum of Rs. 24,949.20 which was stated to
be the net of collection made by the Government on the
lease-hold lands after deducting the cist at 4 annas per
acre, cesses ’at 50% of the total
541
cesses payable and collection charges at 10% of the gross
revenue collected. The Board further observed that the
actual extent of the lease-hold lands came only to acres
2277.82 cents after the survey of which the portion
transferred by the first appellant to the second appellant
came to acres 2025.91 cents. The amounts sanctioned by
the Board represented the amounts collected on account of an
area of acres 2025.91 cents. The appellants raised
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objections to the extent of the land as also the amount of
collections determined by the Board. On October 23, 1961
the Board determined that a sum of Rs. 44,351.80 should be
paid to the second appellant towards compensation payable
under s. 20 of the Act. The payment, however, which was
made was not for that amount and ’a sum of Rs. 4,000/- was
deducted on the plea that some excess collection had been
made by the lessee prior to the notified date. Ultimately
the second appellant was paid out of these amounts a sum of
Rs. 1,499.16. It was held that with regard to the extent of
acres 150.52 cents on which the first appellant claimed
compensation this area belonged to the Government and was
not part of the estate. The appellants raised various
objections but without success.
A learned single judge of the High Court, who heard the
writ petition, held that the proper course for the
’appellants to follow for the determination of the extent of
the land was by way of a suit and that such a suit was not
barred by s. 20(2) of the Act. It was held that there could
have been no settlement under s. 22 of the Act for Fasli
1369’ and therefore the settlement rate in respect of that
year should not be taken into consideration for computing
the rate of compensation. The deduction of 50% of cesses
from the gross annual income was upheld. No direction was
given regarding payment of interest on the arrears of rent
which had been withheld from 1950 to 1961. It was held that
the deduction of 10% towards incidental charges out of gross
income instead o,f the net income was an error apparent on
the face of the record and the order of the Board had to be
revised accordingly. The excess collections which had been
made by the appellants from their tenants were to be
deducted from the amount of rent due to the appellants and
not from the compensation payable to them. To a limited
extent, therefore, the order of the Board was set aside and
the case was remitted to it for disposal. The appellants
preferred an appeal to the High Court which was dismissed.
The first contention that has been raised on behalf of
the ’appellants has a two-fold aspect; first is that once
there is notification of an estate under s. 3 of the Act and
the Government took possession of the lease-hold lands the
lessee ceased to have any rights relating thereto. He was
reduced to the position of a land
542
holder and whatever rights were preserved to him
subsisted under s. 20 of the Act. The Government, from the
notified date, became entitled to collect the rent as
reduced under Act XXX of 1947. But that was only till the
ryotwari settlement was made and thereafter it was the
settled rent which was payable. Therefore for the period
1959-60 intervening between the ryotwari settlement and the
termination of the lease the appellants were entitled to the
rent at the rate at which it had been settled and not at the
rate at which the reduced rent was payable under Act XXX of
1947. According to the learned counsel for the appellants
this would make a difference of about Rs. 2,200/- to which
the appellants should have been found entitled apart from
the other amounts which have been determined to be payable
by way of rents which have been collected by the Government.
This ,contention does not appear to have been raised in this
form either before the learned single judge or before the
division bench of the High Court nor has it been clearly
stated in the statement of case of the appellants. It can
be disposed of on the short ground that since it had not
been raised before the High Court it is not open to the
appellants to agitate it for the first time before this
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Court. At any rate, there seems to be little force in the
submission which has been made. It cannot be disputed that
the appellants were entitled to the amount collected by the
Government under Act XXX of 1947 because even after the
notification of the estate under s. 3 of the Act the
provisions of that Act including s. 3 (4) relating to
reduction of rents and the collection of the arrears of rent
and the obligation to pay the same to the land holder
continued to remain applicable. Under s. 16 every person
whether land holder or a ryot who became entitled to
ryotwari patta was liable to pay to the Government such
assessment as might be lawfully imposed on the land. That
assessment had to be made by way of a ryotwari settlement
under s. 22. Till the settlement was made the rent payable
under Act XXX of 1947 was to constitute the land revenue
payable to the Government from the notified date under s. 23
of the Act. But the assessment ’as settled under s. 22 was a
matter between the Government and the ryot and if, by virtue
of the settlement, the Government was entitled to more
amount than the rent which was payable under Act XXX of 1947
the appellants had no justification or right for claiming
the excess amount. The right of the lessee as land holder
till terminated under s. 20 of the Act was only to receive
the rents collected under s. 3(4) of Act XXX of 1947.
The other aspect with relates to the rate at which the
compensation for termination of the lease-hold rights
payable to the ’appellants should have been computed was
undoubtedly raised before the High Court. What was urged
and has now been reiterated is that as soon as a ryotwari
settlement was brought into
543
force the provisions of Act XXX of 1947 ceased to be
applicable owing to the provisions of s. 23 of the Act.
Therefore for the purpose of compensation it was the
settlement rate which should have been taken into account
and not the rent payable under Act XXX of 1947.
Sub-section (2) of s. 20 provides that the person whose
right has been terminated by the Government under the third
proviso to sub-s. (1 ) of the said section shall be entitled
to compensation from the Government which shall be
determined by the Board of Revenue in such manner as may be
prescribed having regard to the value of the right and the
unexpired portion of the period for which the right was
created. Rules have been framed in exercise o,f the power
conferred by s. 67 read with s. 20(2) of the Act. These
rules are in the following terms:
Rule 1. "The person, whose right has been
terminated by the Government under the third
proviso to sub-s. (1) of s. 20 of the Andhra
Pradesh (Andhra Area) Estates (Abolition and
Conversion into Ryotwari) Act, 1948, shall be
entitled to compensation from the Government,
which shall
(i) in the case of ’a perpetual right, be
equal to twenty times the net annual income
derived by such person by virtue of such
right; and
(ii) in the case of a fight which was created
for a specified number of years, be limited
either to twenty times the net annual income
derived by such person by virtue of such fight
or the net annual income multiplied by the
number of years of the unexpired portion of
the period of such right, whichever is less.
Rule 2. For purposes of rule 1, the net
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annual income of a person shall be the average
net income during the three fasli years
preceding the fasli year in which such right
is terminated ............ "
The argument on behalf of the appellants is that the rates
of rent prevailing in Fasli years 1367 and 1368 were the
rents fixed under Act XXX of 1947 and the rate prevailing in
Fasli year 1369 was the one settled under s. 22 of the Act.
Therefore the average net income should have been computed
with reference to the net reduced rate prevailing in Fasli
years 1367 and 1368 and the settlement rate fixed in Fasli
year 1369. The view of the High Court was that till the
determination of the lease under the third proviso to s.
20(1 ) of the Act the rights which the appel-
544
lants had acquired under the patta were preserved and if the
Government had not undertaken to make these collections the
tenants would have paid the land holder only the rents as
reduced by Act XXX of 1947. The ,fact that the Government
had made the collections did not confer higher rights upon
the appellants. After referring to the provisions in s. 23
that the land revenue payable to the Government with effect
from the notified date shall, until the ryotwari
settlement effected in pursuance of s. 22 had been brought
into force in the estate, be calculated in the manner set
out in the section the question was examined by the High
Court whether the rent that could be collected from the
lease-hold land would fall within the connotation of the
land revenue payable to the Government. Its considered
opinion was that the rent payable to the land holder fell
outside the range of s. 22. Therefore only the rent as
fixed under Act XXX of 1947 in the three preceding years
could be taken into account. It must be remembered that the
settlement rates represent what is payable to the Government
as revenue in respect of the land granted on patta by the
Government in the ryotwari settlement. They do. not
represent what is due to persons like the appellants from
their tenants. We consider that it is not possible to
equate the rents payable by the tenants to the appellants
with the land revenue payable to the Government. No
exception could thus be taken to the manner and the measure
of computing compensation.
The next contention raised is that in determining the
compensation payable to the appellants it is the unexpired
portion of the period for which lease was created that
should have formed the basis and not the period provided by
rule 1 (ii). The unexpired portion of the lease, in the
present case, was nearly 26 years. It is submitted that
rule 1 (ii) itself is contrary to the intendment of s. 20(2)
of the Act. In this connection it is noteworthy that s.
20(2) of the Act simply says that the rules must be framed
having regard to the value of the right and the unexpired
portion of the period for which the right was created. That
did not, in any way, fetter the power of the rule making
authority to frame rule 1 (ii) in the manner in which it has
been done. Even where the lease creates a perpetual right
the compensation payable has to be equal to 20 times the net
annual income. Where it is created for a specified number
of years it has to be limited either to 20 times the net
annual income or the net income multiplied by the number of
years of unexpired portion of the period of lease "whichever
is less". If the unexpired portion is 26 years, as in the
present case, the compensation could not be more than what
it would be in the case of a perpetual lease. Section
20(2)does not say that the amount of compensation must be
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arrived at only by multiplying the net income by the number
of years of the un-
545
expired portion of the lease. As observed by the High Court
it only envisages that this should be taken into account
along with the value of the right. We find no repugnancy
between rule 1 (ii) and s. 20(2) of the Act.
The next question on which a good deal of stress has
been laid relates to the deduction made on account of the
cesses. It has been submitted that owing to s. 3 (b) of the
Act the estate vested in the Government and after such
vesting there would be no land holder and therefore there
was none to whom cesses were to be paid. So the lessees
even if originally liable to pay the cess ceased to be so
Iiable after the vesting of the estate in the Government by
virtue of s. 3(f) which provides that the relationship of a
land holder and a ryot shall, as between them, be
extinguished. It is pointed out that by virtue of the
provisions of s. 16 (1 ) of the Act the land holder or the
ryot who became entitled to the ’ryotwari patta would be
liable to pay to the Government such assessment as might be
lawfully imposed on the land and these cesses were collected
from the ryots by the Government. Therefore the appellants
were under no liability to pay the cess after the
notified date.
Now in the patta dated June 22, 1887, there was a
provision that the lessees would pay the local cess and
other cesses payable by the ryots in accordance with the
rules framed by the Government previously and to be framed
in the future. The High Court was right in saying that cess
could not be excluded from the calculation of the net income
because it had to be paid by the lessees along with the rent
reserved under the lease. This is substantiated by the
definition of "rent" in s. 3 (ii) of the Madras Estates Land
Act which under section 2( 1 ) of the Act becomes
incorporated in it. The High Court referred also to
numerous sections in the Act for the purpose of which rent
includes any local tax, cess etc. and it was observed that
the word "rent" was of a comprehensive nature and there was
no warrant for restricting its content. Under rule 2 it was
the average net income which had to be taken into
consideration. If the word "rent" is to be taken in a
comprehensive sense as including taxes and cesses then the
net income could only be arrived ’at by taking into account
the cesses payable by the lessee. In our judgment cesses
had to be deducted from the annual gross income in arriving
at the net annual income which could form the basis of
compensation.
Lastly it has been contended that the appellants are
entitled to interest on the amounts of unpaid rents in the
hands of the Government for the period 1950 to 1961 as under
s. 55 of the Act after the notified date the land holder is
not entitled to collect any rent which accrued due to him
from any ryot before and is outstanding on that date. It is
the manager appointed under s. 6
546
who alone would be entitled to collect the said ’amounts
together with interest. The amounts were collected but no
payment was made to the appellants. On the language of s.
55 as well as under the general principles of law, it is
submitted, the appellants should have been held to be
entitled to the payment of interest on the amounts withheld
by the Government. Section 55 (1 ) clearly provides that it
is the duty of the manager appointed under s. 6 to collect
not only the rent but also any interest payable thereon
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together with any cost which might have been decreed and he
has to pay the same to the land holder. It would appear
that on the analogy of this provision an obligation existed
on the part of the Government to pay interest to the land
holders in case the amounts collected were not paid as and
when collected. In National Insurance Co. Ltd., Calcutta
v. Life Insurance Corporation of India(1), the appellant
carried on life insurance business in addition to other
insurance business. On the passing of the Life Insurance
Corporation Act, 1956, which was intended to
nationalise all life insurance business, "its controlled
business" stood vested in the Life Insurance Corporation of
India from the appointed date but the company was entitled
to compensation. The Life Insurance Tribunal to whom the
dispute between the company and the Life Insurance
Corporation had been referred awarded certain amount ’as
compensation out of which a set off was to be allowed on a
sum which was specified. It was held that the company was
entitled to interest on the balance at 4% per annum.
Reference was made in this case to a number of English and
Indian decisions in which the rule has been laid down that
though under the statute there is no provision for payment
of interest it should, nevertheless, be awarded, the
principle being that if the owner of an immovable property
loses possession of it he is entitled to claim interest
in place of the right to retain possession. It may be
mentioned that even under the Interest Act, 1839 the power
to award interest on equitable grounds was expressly saved
by the proviso to s. 1. In our opinion, and this position
has not been seriously controverted on behalf of the
respondents, the appellants should have been held entitled
to interest at the rate of 6% per annum.
In the result the appeal is allowed only to the extent
that it is declared that the appellants should have been
paid interest at the rate of 6% per annum on the amount of
rents collected by the manager on behalf of the Government
and the final figure of compensation should have been
determined after taking into account the amount of interest
which accrued due to such of the appellants as were entitled
to it. In view of the entire circumstances there will be no
order as to costs.
V.P.S.
Appeal dismissed but interest allowed.
(1) [1963] Supp. 2 S.C.R. 971.
547