Disputed acquisition compensation must be deposited with the civil court pending title adjudication.

The petitioners claimed an interest in 2 acres 37 guntas in Sy. No. 133/2, Goraghatta Village, said to have been endowed for village service and subsequently re-granted.

They had filed O.S. No. 1158/2024 seeking a declaration of title and related reliefs.

After the land was acquired by the Karnataka Industrial Areas Development Board (KIADB) under Section 28(1) of the Karnataka Industrial Areas Development Act, 1966, notices under Sections 9 and 10 of the Land Acquisition Act, 1894 were issued to respondent No. 3 and the petitioners.

The petitioners sought to prevent payment of compensation to respondent No. 3 and to have it deposited before the Civil Court.

Respondent No. 3 did not dispute the pendency of the title suit.

1. Whether KIADB could release compensation for the acquired land to respondent No. 3 while the competing claims to title were pending before the Civil Court.

2. Whether KIADB should deposit the compensation before the Civil Court pending determination of entitlement.

The Court referred to Section 28(1) of the Karnataka Industrial Areas Development Act, 1966, under which the land was acquired, and to Sections 9 and 10 of the Land Acquisition Act, 1894, under which acquisition notices were issued.

It applied the principle that when entitlement to compensation depends on a disputed question of title pending before a Civil Court, the acquiring authority cannot determine which competing claimant is entitled to receive it; the compensation should instead be deposited before the Civil Court in accordance with law.

The petitioners’ title claim was the subject of a pending civil suit, and respondent No. 3 acknowledged that proceeding.

Because deciding which party was entitled to compensation would require resolution of the disputed title, KIADB could not decide the competing claims itself.

The Court therefore directed that payment not be released to respondent No. 3 and that the compensation be deposited before the Civil Court.

KIADB was directed not to release compensation for the specified 2 acres 37 guntas to respondent No. 3 and to deposit the compensation before the Civil Court in accordance with law, notifying the parties.

The Civil Court was directed to place the deposited amount in an interest-bearing fixed deposit with a nationalized bank for an appropriate period.

The directions were to be complied with within two months of receipt of a certified copy of the order.