Analysis of Section 31 LAA 1894

Section 31 of the Land Acquisition Act, 1894: A Comprehensive Analysis of Payment, Deposit, and Judicial Interpretation in India

Introduction

Section 31 of the Land Acquisition Act, 1894 (hereinafter "LAA 1894"), stands as a cornerstone in the procedural framework governing the disbursement of compensation to landowners whose property is acquired by the State. This provision delineates the obligations of the Collector concerning the payment of awarded compensation or, in specified circumstances, its deposit into court. The principles enshrined in Section 31 are not merely procedural; they are intrinsically linked to the landowner's right to receive timely and fair compensation, a fundamental aspect of the eminent domain power. Despite the enactment of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (hereinafter "LARR Act 2013"), which repealed the LAA 1894, Section 31 continues to hold significant interpretive relevance, particularly in the context of savings clauses and the determination of whether acquisition proceedings under the old Act have lapsed. This article undertakes a comprehensive analysis of Section 31, examining its statutory mandate, judicial interpretations of its key terms like "payment" and "deposit," its interplay with other provisions of the LAA 1894, and its enduring legacy in contemporary land acquisition jurisprudence in India.

The Statutory Mandate of Section 31: Payment and Deposit of Compensation

Section 31 of the LAA 1894 lays down a two-fold primary duty upon the Collector after an award is made under Section 11. These duties pertain to the tendering of payment and, failing that under specific conditions, the deposit of the compensation amount into court.

Obligation to Tender Payment

Section 31(1) stipulates that on making an award under Section 11, the Collector shall tender payment of the compensation awarded by him to the persons interested entitled thereto according to the award. The Collector is also obligated to pay it to them unless prevented by some one or more of the contingencies mentioned in sub-section (2). The use of the word "shall" indicates the mandatory nature of this obligation. The primary mode of discharging this duty is by offering the compensation amount directly to the entitled landowners.

Deposit in Court

Section 31(2) addresses situations where direct payment under sub-section (1) is not feasible. It mandates that if the persons interested do not consent to receive it, or if there is no person competent to alienate the land, or if there is any dispute as to the title to receive the compensation or as to the apportionment of it, the Collector *shall* deposit the amount of the compensation in the Court to which a reference under Section 18 would be submitted.[1] The Supreme Court in Hissar Improvement Trust v. Rukmani Devi And Another reiterated this, stating that if compensation is not paid for reasons mentioned in the section, the Collector should deposit it in the court.[2] This provision ensures that the compensation amount is secured and available for disbursement once the impediment to direct payment is resolved. Early case law, such as Brojendra Sundar Banerjee v. Niladrinath Mukerjee, dealt with the practical application of deposits under Section 31(2) in cases involving complex claims.[3] The Andhra Pradesh High Court in D. Gopal Krishan Rao And Others v. District Collector also affirmed that in cases of rival claimants, the Land Acquisition Officer is bound to deposit the compensation in court.[4]

A crucial proviso to Section 31(2) states that any person admitted to be interested may receive such payment under protest as to the sufficiency of the amount. The second proviso is particularly significant: "Provided also that no person who has received the amount otherwise than under protest shall be entitled to make any application under Section 18." This implies that accepting compensation without protest forfeits the right to seek enhancement via a reference to the court under Section 18.[5]

Investment of Deposited Amount

Sections 32 and 33 of the LAA 1894 further elaborate on the management of compensation amounts deposited in court. Section 32 deals with the investment of money deposited in respect of lands belonging to persons incompetent to alienate (e.g., purchase of other lands, government securities). Section 33 allows the court to order the investment of money deposited in other cases, pending final disbursement.

Consequences of Non-Compliance: Section 34

Failure to adhere to the mandate of Section 31 regarding payment or deposit of compensation before taking possession of the land triggers Section 34 of the LAA 1894. Section 34 provides for the payment of interest on the compensation amount from the time of so taking possession until it shall have been so paid or deposited.[2] The Supreme Court in Sunder v. Union Of India clarified that solatium forms part of the compensation amount on which interest is payable, thus impacting the total sum to be paid or deposited under Section 31.[6]

Judicial Interpretation of "Payment" and "Deposit" under Section 31

The terms "paid" and "deposited" within Section 31, and their interpretation in the context of the LARR Act 2013, have been subjects of extensive judicial scrutiny, leading to significant jurisprudential developments.

The "Tender" Requirement

The obligation under Section 31(1) is to "tender payment." A mere willingness to pay, without a formal offer, may not suffice. The act of tendering implies a formal offer of money in satisfaction of a debt or liability. If this tender is refused, or if other contingencies under Section 31(2) arise, the obligation shifts to depositing the amount in court.

Meaning of "Paid" and "Deposited": The LARR Act 2013 Context

The interpretation of "paid" became particularly contentious with the advent of Section 24(2) of the LARR Act 2013, which provides for the lapsing of acquisition proceedings under the LAA 1894 if an award was made five years or more prior to the commencement of the LARR Act 2013, and physical possession of the land has not been taken or the compensation has not been "paid."

In Pune Municipal Corporation And Another v. Harakchand Misirimal Solanki And Others, the Supreme Court held that for the purposes of Section 24(2) of the LARR Act 2013, compensation can be regarded as "paid" if it is offered to the person interested and such compensation has been deposited in the court where reference under Section 18 can be made, upon the happening of any contingencies contemplated under Section 31(2) of the LAA 1894. Crucially, the Court ruled that depositing the compensation amount in the government treasury is of no avail and cannot be held to be equivalent to compensation "paid" to the landowners or "deposited" in court.[7] This view was reiterated in several subsequent judgments, including Delhi Development Authority v. Sukhbir Singh And Others.[8] Many High Court decisions, such as Sewaram & Ors. v. Land Acquisition Collector & Anr.,[9] ANU v. Government Of National Capital Territory Of Delhi And Ors.,[10] Rama Shankar Khemka Petitioner v. Government Of National Capital Territory Of Delhi And Ors.,[11] and NUTAN GUPTA AND ORS. v. UNION OF INDIA & ORS.,[12] followed this interpretation, leading to the lapsing of numerous acquisition proceedings.

However, the correctness of the Pune Municipal Corporation decision was doubted by a three-Judge Bench in Indore Development Authority v. Shailendra (Dead) Through Legal Representatives And Others,[13] which led to a reference to a larger Bench.

The five-Judge Constitution Bench in Indore Development Authority v. Manoharlal And Others (hereinafter "Manoharlal (2020)")[14] significantly revisited the interpretation of Section 24(2) of the LARR Act 2013. The Bench held, inter alia, that the word "or" in Section 24(2) should be read as "or" (disjunctive) and not "and" (conjunctive). Regarding "payment," the Court held that Section 24(2) does not require actual payment to the landowner. If the landowner refuses to accept the compensation offered, the obligation to pay is discharged, and the amount can be deposited in the treasury. The Court clarified that the obligation to deposit compensation in court as per Section 31(2) of the LAA 1894 is for a different purpose (e.g., when there is a dispute as to apportionment or title) and that failure to deposit in court under Section 31(2) would not, by itself, result in a lapse of acquisition under Section 24(2) of the LARR Act 2013 if compensation had been tendered and, upon refusal, deposited in the treasury.[14] While Manoharlal (2020) primarily interpreted Section 24(2) of the LARR Act 2013, it implicitly acknowledged that the specific requirements of Section 31 of the LAA 1894 (i.e., tender of payment, and deposit *in court* upon refusal or other contingencies) remain distinct statutory obligations under the LAA 1894 itself, even if non-compliance with the "deposit in court" aspect might not automatically lead to lapse under the LARR Act 2013 as previously understood post-Pune Municipal Corporation.

Section 31 and its Interplay with Other Provisions of the LAA 1894

Section 31 does not operate in isolation and has significant linkages with other provisions of the LAA 1894.

Section 18: Reference to Court

As noted, the second proviso to Section 31(2) directly impacts the right to seek a reference under Section 18. Acceptance of the compensation amount without lodging a protest bars the landowner from subsequently challenging the sufficiency of the compensation before the Reference Court. The Punjab & Haryana High Court in Jaswant Singh v. State Of Punjab affirmed that if compensation is accepted without protest, no reference can be made.[5]

Section 34: Interest on Compensation

The failure to pay or deposit compensation as mandated by Section 31, particularly before taking possession, directly invokes Section 34, which imposes a liability to pay interest. The Supreme Court in Hissar Improvement Trust emphasized this link, holding that interest is due and payable if compensation is not paid or deposited in time in court.[2]

Sections 16 and 17: Taking Possession and Vesting

Section 16 states that when the Collector has made an award under Section 11, he may take possession of the land, which shall thereupon vest absolutely in the Government, free from all encumbrances. Section 17 allows for taking possession in cases of urgency even before an award is made, but this is often accompanied by an obligation to tender a significant portion of the estimated compensation. The timing of payment or deposit under Section 31 is thus crucial, especially in relation to when possession is taken, as it affects the liability for interest under Section 34. In Lt. Governor Of Himachal Pradesh And Another v. Sri Avinash Sharma, the Supreme Court observed that once possession is taken (under Section 17(1) in that case), the land vests in the Government, and withdrawal from acquisition under Section 48 is generally not permissible.[15] This underscores the finality associated with taking possession, which is often linked to the payment or deposit process under Section 31.

Section 48: Withdrawal from Acquisition

Section 48(1) allows the Government to withdraw from the acquisition of any land of which possession has not been taken. Section 48(2) provides for compensation to the owner for damages sustained due to acquisition proceedings if they are withdrawn. The process under Section 31, leading to payment and often followed by taking possession, marks a stage beyond which withdrawal under Section 48(1) becomes problematic.[16]

Liability for Payment and Deposit

The primary responsibility for complying with Section 31 rests with the Collector, acting on behalf of the appropriate Government. In Hissar Improvement Trust v. Rukmani Devi And Another, the Supreme Court clarified that the landowner's right to be compensated is enforceable against the State, and it is the liability of the Collector to pay the amount awarded along with interest if not paid in time.[2] The liability of a requiring body (for whom the land is acquired) towards the Government for reimbursement is a separate matter governed by their agreement.[2] The Allahabad High Court in New Okhla Industrial Development Authority v. State Of U.P. And Ors. noted that Section 31 refers to awards made by the Collector under Section 11, and the responsibility for payment thereunder is fixed on the State Government.[17]

Conclusion

Section 31 of the Land Acquisition Act, 1894, embodies a critical procedural safeguard designed to ensure that landowners whose lands are compulsorily acquired receive the awarded compensation, or that such compensation is secured for them by deposit in a court of law. Its provisions regarding tender of payment, deposit in court under specified contingencies, and the consequences of non-compliance (such as liability for interest under Section 34) are fundamental to the acquisition process. Judicial interpretations, particularly in the context of Section 24(2) of the LARR Act 2013, have highlighted the complexities surrounding the terms "paid" and "deposited." While the five-Judge Bench in Indore Development Authority v. Manoharlal (2020) has provided significant clarity on these terms for the purposes of the LARR Act 2013, the intrinsic obligations cast upon the Collector by Section 31 of the LAA 1894 remain vital for understanding the procedural integrity of acquisitions conducted under the erstwhile regime. Section 31 continues to serve as an important reference point in ensuring that the State's power of eminent domain is exercised with due regard to the financial rights of the affected landowners.

References