Union Of India v. Shri Harbans Lal Jain.

Prakash Narain, J.:— This judgment will dispose of Execution First Appeal No. 1 of 1976 and L.P.A 85 of 1976. The appeal under Clause 10 of the Letters Patent is directed against an interim order made on July 27, 1976, by a learned Judge of this court in E.F.A 1 of 1976.

2. Inasmuch as we have heard and are deciding the Execution First Appeal, the Letters Patent Appeal really becomes infructuous. The same is, accordingly, hereby dismissed.

3. The Execution First Appeal raises an important question of law as to the manner in which interest is to be calculated when either the District Judge or the High Court or even the Supreme Court enhances the compensation awarded by respectively the Land Acquisition Collector, the District Judge and the High Court in the case of land acquired under the Land Acquisition Act, 1894, hereinafter referred to as the Act.

4. Briefly stated, the facts of the case are as stated hereafter. Land belonging to Harbans Lal Jain in Village Dhirpur, measuring 76 bighas and 6 biswas was acquired under the Act. The Collector assessed the market value of the land acquired at Rs. 2500 per bigha and made his award No. 1478 of 1963. Possession of the land was taken on March 23, 1963 and the compensation assessed by the Collector was paid at that time. Harbans Lal Jain being dissatisfied by the award of the Land Acquisition Collector moved for a reference under Section 18 of the Act. This reference was made to the District Judge, Delhi. An Additional District Judge, Delhi, increased the compensation by assessing the market value of the land at Rs. 8 per sq. yard. The Government paid the excess being the difference of the compensation assessed. Harbans Lal Jain still not being satisfied by the compensation awarded to him, preferred a first appeal to the High Court which increased the market value to Rs. 10 per sq. yard. The Government thereupon paid the difference. On a second appeal to the Supreme Court, the market value was increased to Rs. 16 per sq. yard. The Government again paid the difference. It is not in dispute that successively as and when compensation was increased, the same was paid including the interest on such enhancements. Harbans Lal Jain, however, then filed an application under Order 21, rules 1 and 2 read with Section 151 and Section 152 of the Code of Civil Procedure in the court of the Additional District Judge, Delhi, praying that the Union of India be directed to deposit certain amounts which, according to his calculations, were still payable to satisfy the decretal amount as worked out by him on the basis of the final decree that was made as a consequence of the judgment of the Supreme Court. On notice being issued to the Union of India, it took up a stand that it had paid all the amounts and nothing was payable. The point for decision, therefore, was whether the payment to the petitioner, Harbans Lal Jain, was not made by the Land Acquisition Collector in accordance with the judgement and decree of the Supreme Court and, if so, to what effect.

5. The Additional District Judge noticed the rival contentions and came to the conclusion that the Land Acquisition Collector had not made payments to Harbans Lal Jain in accordance with the judgement and decree of the Supreme Court and that Harbans Lal Jain was entitled to interest at the rate of 6 per cent per annum from the date of possession till the date of payment under Section 28 of the Act. A direction was given that the Land Acquisition Collector should make fresh calculation of the interest due under Section 28 of the Act and pay the said amount. Aggrieved by that order the Union of India has come up in appeal.

6. According to Harbans Lal Jain, compensation has to be calculated on the basis of Rs. 16 per sq. yard, the market value determined by the Supreme Court, and then on the figure arrived at interest at the rate of 6 per cent per annum has to be calculated from March 23, 1963. From this amount a sum of Rs. 19,95,557.45 has to be deducted, leaving a balance of Rs. 2 lakhs and odd, which remains payable. The various payments made from time to time are admitted. According to Harbans Lal Jain the amount of compensation in terms of the judgment of the Supreme Court calculated at the rate of Rs. 16 per sq. yard comes to Rs. 14,15,144 including solatium at the rate of 15 per cent but without interest. He claims that he is entitled to interest on this amount from March 23, 1963 till March 20, 1974. According to the appellant, Union of India, this will not be the proper way of calculating in view of the admitted payments made from time to time. It is submitted that adjustment has to be given for payment of the compensation and interest as and when made and interest is payable only on the enhanced compensation as and when it has been enhanced. This the Union of India claims it has already done.

7. We will first dispose of the question as to whether interest is payable on solatium of 15 per cent which amount is, admittedly, included in the sum of Rs. 14,15,144 mentioned by Harbans Lal Jain in his reply to the application of Union of India, under Order 41, rule 5 C.P.C The compensation payable by the Collector before taking possession of the land, unless the provisions of Section 17 of the Act are invoked, is the market value assessed by him and 15 per cent of such market value. This 15 per cent is commonly known as solatium. According to Section 28 of the Act if the sum which, in the opinion of the Court, the Collector ought to have awarded as compensation is in excess of the sum which the Collector did award as compensation, the award of the court may direct that the Collector shall pay interest on such excess at the rate of 6 per cent per annum from the date on which he took possession of the land to the date of payment of such excess into court. Inasmuch as the solatium is part of the compensation and if the market value is increased, the solatium is also increased, interest would be payable on the excess amount of compensation which includes the market value and the solatium.

8. The next and the crucial question in the case is how the interest is to be calculated. As noticed earlier, the case of Harbans Lal Jain is that the market value should be computed at the rate of Rs. 16 per square yard ultimately fixed by the Supreme Court, 15 per cent solatium should be worked out on that amount and 6 per cent interest on the market value and solatium should then be calculated from the date of possession till the date of the final payment. This method of calculation is contested by the Union of India. According to it 6 per cent interest is to be calculated on the excess amount awarded by the ‘Court’, as defined by Section 2 (d) of the Act, and if the excess and interest thereon is paid but further increased by the High Court, it is to be calculated on the excess awarded by the High Court over and above that awarded by the court, which amount in turn, if paid, the interest is to be calculated on the excess amount of compensation that is awarded by the Supreme Court. It is further submitted on behalf of Union of India that Harbans Lal Jain is not entitled to claim interest in the manner in which he is calculating because that would amount to his being paid 6 per cent interest from the date of possession till the last payment made by the Land Acquisition Collector even on amounts which he had earlier taken on compensation being increased by the “Court” and the High Court. The contention is that interest is payable on the theory that the excess amount of compensation should have been in the hands of the party and inasmuch as the excess amount was not paid at the time when possession was taken, the party concerned should be compensated for the amount not paid to it though it should have been paid to it. One may look at it from another point of view and that is that if the manner in which Harbans Lal Jain wants to calculate interest is accepted, interest would be paid to him for amounts which he has already received and utilised. Learned counsel for the Union of India also submits that though Sections 59 to 61 of the Contract Act in terms are not attracted, the principle of law underlying these provisions of law would be attracted and should be made applicable. It is submitted that when the “court” increased the compensation or the High Court increased the compensation, deposit was made by the Land Acquisition Collector clearly stipulating which amount was being paid towards compensation and which amount was towards interest. The Land Acquisition Collector, as debtor, having made the appropriation, Harbans Lal Jain cannot now be allowed to adjust the entire amount paid till now first towards compensation and claim that there is a shortfall in the amount of interest.

Section 28 of the Act reads as under: —

“28. If the sum which, in the opinion of the Court, the Collector ought to have awarded as compensation is in excess of the sum which the Collector did award as compensation, the award of the Court may direct that the Collector shall pay interest on such excess at the rate of six per centum per annum from the date on which he took possession of the land to the date of payment of such excess into Court.”

9. On a plain reading of the section, in our opinion, interest is payable only on the excess amount awarded by the Court. This means that if the High Court and the Supreme Court further increased the compensation, interest will be payable respectively on the excess amounts awarded by the High Court and the Supreme Court. It will be a wholly incorrect way of calculating the interest by first fixing the market value on the basis of the rate ultimately fixed by the Supreme Court and then working out 6 per cent interest on the compensation for the entire period from the date of possession. This would be not only unjust but an incorrect way of calculating interest. If no amount has been paid by the Land Acquisition Collector till the final decision by the High Court or the Supreme Court then, of course, the calculation as sought to be made by Harbans Lal Jain would be justified. If, however, payments have been made, as in this case, from time to time as and when each successive court enhanced the compensation then to pay interest even on amounts already in the hand of the party concerned, in the present case Harbans Lal Jain, would be inequitable and incorrect. In the present case it is not in dispute that the amount, as awarded by the Land Acquisition Collector and the enhanced compensation, as awarded by the “Court”, the High Court and the Supreme Court, along with interest on the enhanced amounts was paid. Thus, the enhanced compensation awarded by the “Court”, the High Court and the Supreme Court was paid, as and when awarded. The debts were created from time to time and were paid along with interest calculated from the date of possession till the respective payment of the enhanced amount. The following table would show the manner in which payment was made: —

Rs. Compensation as per Supreme Court's Decision @ Rs. 16/- per sq. yd. 12,30,560.00 Solatium. 1,84,584.00 Total Compensation. 14,15,144.00 Less paid by the Collector. 2,19,362.50 Enhanced Compensation. 11,95,781.50

Amount Amount Paid Balance Period of Interest Amount on which the interest calculated Interest Principal Interest Principal Interest (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) 23-3-63 22-1-68 1195781.50 341737.00 488209.50 134333.19 707572.00 212803.81 23-1-68 18-3-68 707572.00 6513.54 — 7323.28 707572.00 211994.00 19-3-68 1-8-71 707572.00 143181.59 176893.00 86582.39 530679.00 268593.27 2-8-71 4-10-71 530679.00 5495.79 2106.42 530679.00 271982.64 5-10-71 530679.00 78249.71 530679.00 294534.00 — 55691.45* 20-3-74 55538.77 *Paid on 29-9-71 Amount Paid on 27-4-74 158.68 *as balance.

From the above table it would be clear that when the Supreme Court enhanced the market value to Rs. 16/- per square yard, total amount of compensation came to Rs. 11,95,781.50. Interest thereon came to Rs. 3,47,137/-. The amount paid earlier for the period March 23, 1963, the date on which possession was taken, to January 22, 1968, when the Court decided the reference under Section 18 of the Act, was Rs. 4,88,209.50 towards compensation and Rs. 1,34,333.19 towards interest. This left a balance of Rs. 7,07,572/- towards principal and Rs. 2,12,803.81 towards interest. In our opinion, this was the correct way of calculating.

10. An illustration would show how, in our opinion, compensation should be calculated, taking the market value fixed by the Collector to be Rs. 100, the market value fixed by the Supreme Court to be Rs. 1600/-, 1-1-1960 as the date on which the possession was taken, 1-1-1965 as the date on which the District Judge enhanced the compensation, 1-1-1970 as the date when the High Court enhanced the compensation and 1-1-1975 as the date of the judgment of the Supreme Court: —

“Total amount awarded by Supreme Court Less paid by Collector. Rs. 1600/- Rs. 100/- Amount payable Rs. 1500/- Interest on Rs. 1500/- from 1-1-1960 to 1-1-1965: 1500 × 5 × 6/100 = 450. When part payment is made after judgement of District Judge. Principal Interest Amount payable on 1-1-1965. Rs. 1500/- Rs. 450/- Amount tendered and accepted. Rs. 500/- Rs. 150/- Balance. Rs. 1000/- Rs. 300/- Interest on Rs. 1000/- from 1-1-1965 to 1-1-1970 when further part payment is made after judgement of High Court. = 1000 × 5x 6/100 = 300 Amount payable Rs. 1000/- Rs. 600/- Amount tendered and accepted. Rs. 500/- Rs. 300/- Balance. Rs. 500/- Rs. 300/- Interest on 500/- from 1-1-1970 to 1-1-1975 after judgment of Supreme Court. 500 × 5 × 6/100 = Rs. 150/- /Rs. 500/ Rs. 450/- Amount payable on 1-1-1975. = Rs. 950/- Total amount paid. Collector Rs. 100/- District Judge. Rs. 650/- High Court. Rs. 800/- Supreme Court. Rs. 950/- Rs. 2500/-

The above is the method which has been adopted by the Land Acquisition Collector and, in our opinion, is the correct method.

11. There is one other aspect to which we might advert and that is that Harbans Lal Jain cannot appropriate the amounts paid towards the principal first and then claim that there is shortfall in payment of interest. It is not the dispute that as and when payments were made by the Land Acquisition Collector from time to time the amount deposited was specifically enumerated to be towards compensation and towards interest. The principle of law enunciated in Sections 59 to 61 of the Contract Act would be attracted. In Jia Ram v. Sulakhan Mal, A.I.R 1941 Lahore 386, a Full Bench of that Court said that Sections 59 to 61 embody the general rules as to appropriation of payments in cases where a debtor owes several distinct debts to one person and voluntarily makes payment to him. They do not deal with cases in which principal and interest are due on a single debt, or where a decree has been paid on such a debt, carrying interest on the sum adjusted to be due on the decree. The general rule of appropriation of payments towards a debt is that in the absence of a specific indication to the contrary by the debtor, the money is first applied in payment of interest and then when that is satisfied, in payment of the capital. It was urged on behalf of Harbans Lal Jain that the principles of Sections 59 to 61 of the Contract Act cannot be made applicable in the present case as there was a single debt and not several distinct debts. First of all we do not agree on this because the debts were created from time to time though they may be in respect of a single acquisition. Secondly, in principle we see nothing wrong as to why the rule should not be made applicable, particularly when there is clear election or appropriation by the debtor, namely, the Land Acquisition Collector.

12. In Moka Venkatadri Appa Rao Bahadur Zamindar Garu and others v. Raja Parthasarthy Appa Rao Bahadur Zamindar Garu, A.I.R 1922 Privy Council 233 (1), the Judicial Committee of the Privy Council laid down that when moneys are received without a definite appropriation on the one side or the other the rule which is well-established in ordinary cases is that in those circumstances the money is first applied in payment of interest and then when that is satisfied in payment of the capital. This is irrespective of Sections 59 to 61 of the Contract Act.

In Benninson and others v. Shiber A.I.R 1946 Privy Council 145 (2), the Judicial Committee again held that in the absence of any appropriation by the debtor at the time of payment as a general rule, the payment should be attributed in the first instance to interest. In Chaganlal Shrilal v. Gopilal Choturam and others, A.I.R 1954 Madhya Bharat 151 (3), following A.I.R 1922 P.C 233 and A.I.R 1946 Privy Council 145, a learned Single Judge held that unless there is an intimation by the debtor payment in a single debt can first be appropriated by the creditor towards interest. Here, however, there is a clear appropriation by the debtor, namely, the Land Acquisition Collector and if there is appropriation we do not see how Harbans Lal Jain can adjust the amounts in any manner other than the manner in which the debtor has paid the same. Even otherwise if the amounts paid are held as not with any appropriation by the debtor, then the adjustment has to be first towards interest and then principal. But that might create some complications and we choose not be dilate upon it because such a situation does not arise here.

13. Learned counsel for Harbans Lal Jain relied on a single Bench decision of this Court in E.F.A 3 of 1967, Shri Davindra Kumar v. Chhagan Lal and others, decided by B.C Misra, J. on July 27, 1970 (4). The ratio of this case is not attracted to the facts of the present case at all. The point in issue was whether the decretal amount deposited by the judgement-debtor after the decree of the trial Court which had not awarded any interest and had awarded lesser amount than originally claimed in the plaint towards principal was to be adjusted towards interest and costs up to date on the High Court increasing the amount of the decree and also calculating interest in appeal or was it to be adjusted towards costs and the principal amount due as urged by the judgment-debtor. In other words, the decree-holder after the High Court decree wanted to adjust the initial deposit towards interest and costs first and then towards the principal whereas judgment-debtor said that the amount should be adjusted towards principal and costs and not towards interest. Our brother, B.C Misra, J. held that the principle of appropriation is a part of the larger doctrine of election. Since there was no question of appropriation or election in the case and there was only one debt, namely, the principal and costs awarded by the trial Court, therefore, it would not be right to say that there was any question of appropriating the deposit towards one type of debt or another. He, therefore, directed that the initial deposit would first be adjusted towards interest and not towards principal. In the present case when the “Court” enhanced the compensation there was clearly (a) the excess amount awarded as compensation and (b) interest calculated thereon. The deposit was made for the excess amount of compensation and the interest. When the High Court increased the compensation further, once again the enhanced compensation and interest were worked out and deposited distinctly as such. The same happened when the Supreme Court further enhanced the compensation. The doctrine of election or appropriation is clearly attracted.

14. Lastly, learned counsel for Harbans Lal Jain urged that if we take the view that we are taking, we would be setting at naught the judgment of the Supreme Court which says, inter alia, that the interest shall be on the amount of compensation including solatium. It is urged that the above being the order of the Supreme Court, it must be given effect to and interest has to be calculated in the manner suggested by the claimant. We have already read Section 28 of the Act. The judgment of the Supreme Court has to be read in the light of Section 28 of the Act. We, therefore, hold that the manner in which we have held that interest is to be calculated fully complies with what is postulated by the judgment and order of the Supreme Court.

15. The result is that this appeal is accepted and the application of Harbans Lal Jain under Order 21, rules 1 and 2 read with Section 151 and Section 152 of the Code of Civil Procedure is dismissed. In the circumstances of the case there will be no order as to costs.

Appeal accepted.