M.R Agnihotri, J. — In these two Civil Revision Nos. 3336 and 3337 of 1986, which have been referred for decision by a larger Bench, the question of law involved is, as to whether the landowners whose lands have been acquired, by the State are entitled to the payment of interest, that is, interest on the principal amount of compensation including the amount of interest accrued thereon, or to simple interest, that is, interest on the principal amount of compensation awarded only, and not on the interest accrued thereon.
2. Briefly stated, the facts are that on 13th October 1970, a notification under section 4 of the Land Acquisition Act, 1894, was issued for the acquisition of certain land. The award was given by the Collector on 27th March, 1971, and on 31st March, 1971, the amount of compensation as awarded by the Collector was deposited in the Revenue Deposit in accordance with the provisions of Standing Order No. 75 issued by the Financial Commissioner, Revenue, Punjab, calling upon the claimants to withdraw the amount of compensation by producing the respective title deeds of the land acquired, in their favour. Ultimately, the compensation was paid on the basis of the award on 23rd April, 1975. Thereafter, a reference under section 18 of the Land Acquisition Act, 1894, was made on 14th May, 1975, and the learned District Judge Bhatinda, vide his order dated 7th January, 1986, enhanced the amount of compensation. On the basis of the order of the enhancement of compensation. Execution Application No. 3 of 10th January, 1986, was filed for realisation of the decretal amount, that is, Rs. 41,95,388.55. The amount, of compensation as enhanced by the learned District Judge was deposited by the State on 28th January, 1986. This execution application has been decided by the learned Additional District Judge, Bhatinda, on 14th August, 1986.
3. Contesting this application before the Executing Court, the State of Punjab took the stand that interest was payable only on the principal amount of compensation and not on the interest accrued thereon, as the interest was not a part of the compensation payable to the claimants under section 34 of the Land Acquisition Act. The learned Additional District Judge, Bhatinda, rejected the contention of the Government Pleader and took the view that according to section 34 of the Land Acquisition Act, interest was to be paid on the amount of compensation till that amount was deposited. When the Government did not pay the amount to the decree-holder, he goes on getting interest on the principal but when some amount out of that was paid and the balance remains, that balance amount becomes the compensation and interest was to be calculated on the balance amount that remained to be paid. Consequently, the execution application was allowed holding that the “decree-holder is entitled to recover Rs. 11,54,210.36 (Rs. 13,33.14631 minus Rs. 1,78,935.95 deposited vide cheque dated 28-7-86) plus interest at the rate of 15% on Rs. 13,33,146.31 from 28-6-1986 to 28-7-1986.”
Challenging the order of the learned Additional District Judge, Bhatinda, it has been contended on behalf of the State that the calculation of the amount of interest made in the impugned order is not correct. According to Mr. Bhandari, on payment of the amount of Rs. 3,07,912.50, out of the total amount of enhanced compensation and the additional amount at the rate of 12 per cent annum payable thereon under section 23(1-A), and solatium at the rate of 30 per cent per annum thereon under section 23(2) of the Land Acquisition Act, totalling Rs. 12,18,785.35, the balance amount on which interest at the rate of 15 per cent per annum was to be calculated for the period subsquent to 23rd April, 1975, should have been Rs. 9,10,172.85 and not Rs. 18,90,452.90. Consequently, the amount of Rs. 11,54,210.36 as calculated by the learned Additional District Judge, Bhatinda, plus 15 per cent interest thereon, was not in accordance with law.
4. On the other hand, Mr. J.S Randhawa, learned counsel appearing on behalf of the respondent, has pleaded that the lanldowners are entitled to the payment of compound interest on the entire amount that is, the principal amount of compensation as well as the interest accruing thereon. Hence, there was no infirmity in calculation of the amount, made by the learned Additional District Judge, Bhatinda.
5. Law relating to acquisition of land and payment of compensation therefore, is almost a century old in India and the question regarding the payment of interest on the amount of compensation has also been the subject matter of litigation in various forums during this long period.
6. As has been settled by their Lordships of the Supreme Court in Satinder Singh and others v. Umrao Singh and another, AIR 1961 Supreme Court 908, where lands are acquired under the Land Acquisition Act and the claimants are awarded compensation, the claimants are entitled to interest on the amount of the compensation, for the period between the taking of possession of the land by the State and payment of compensation by it to the claimants. 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 possesssion taken by compulsory acquisition, interest should be paid to him. On the said amount of compensation. For payment of interest, sufficient and adequate provision has been made in sections 23(1-A) 28 and 34 of the Land Acquisition Act, 1894. These provisions are reproduced below:—
“23. Matters to be considered in determining compensation.—(1) In determining the amount of compensation to be awarded for land acquired under this Act, the Court shall take into consideration—
(1-A) In addition to the market-value of the land, as above provided, the Court shall in every case award an amount calculated at the rate of twelve per centum per annum on such market-value for the period commencing on and from the date of the publication of the notification under Section 4, subsection (1), in respect of such land to the date of the award of the Collector or the date of taking possession of the land, whichever is earlier.
Explanation.—In computing the period referred to in this sub section, any period or periods during which the proceedings for the acquisition of the land were held up on account of any stay or injunction by the order of any court shall be excluded.” “28 Collector may be directed to pay interest on excess compensation.—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 nine 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:
Provided that the award of the Court may also direct that where such excess or any part thereof is paid into Court after the date of expiry of a period of one year from the date on which possession is taken, interest at the rate of fifteen per centum per annum shall be payable from the date of expiry of the said period of one year on the amount of such “excess or part thereof which has not been paid into Court before the date of such expiry.”
“34. Payment of interest.—When the amount of such compensation is not paid or deposited on or before taking possession of the land, the Collector shall pay the amount awarded with interest thereon at the rate of nine per centum per annum from the time of so taking possession until it shall have been so paid or deposited:
Provided that if such compensation or any part thereof is not paid or deposited within a period of one year from the date on which possession is taken, interest at the rate of fifteen per centum per annum shall be payable from the date of expiry of the said period of one year on the amount of compensation or part thereof which has not been paid or deposited before the date of such expiry.”
7. From a scrutiny of the aforesaid statutory provisions, it would be evident that nowhere it has been provided in the Land Acquisition Act that compound interest has to be awarded to the claimants, that is, on the principal amount of compensation as well as on the amount of interest which has accrued thereon. All what has been provided for is, that interest has to be awarded on the principal amount of compensation it self and not on the interest accruing thereon. That is why the argument on behalf of the claimants proceeds further to contend, that interest is certainly part of of compensation and once interest has been awarded on the principal amount of compensation, the amount of simple interest accruing thereon gets added and merged with the principal amount of compensation and it is on the aggregate amount of principal compensation and interest accrued thereon, that further interest has to accrue on the entire aggregate amount. Though in support of this proposition of the claimants, reliance has been placed on the Revenue Divisional Officer Guntur, v. Vasireddy Rama Bhanu Bhupal and others, AIR 1970 Andhra Pradesh 262, Lalsaheb Nabin Chandra Bhani Deo and another v. The State of Orissa, AIR 1975 Orissa 126, and Smt. Tribeni Devi and others v. State of Bihar, AIR 1982 Patna 77, yet in none of these cases it has been held that compound interest has to be awarded on the aggregate amount, that is, the principal amount of compensation as well as the interest accruing thereon Rather, the learned Judges deciding the aforesaid cases have followed the law laid down in Satinder Singh's case (supra) to hold that even on equitable principles where interest has not been claimed specifically, the claimants were entitled to the same on the amount of compensation.
8. On the other hand, the legal position has been made sufficiently clear by a Full Bench of Andhra Pradesh High Court in R.D Suryanarayana Rao v. The Revenue Divisional Officer, Land Acquisition Officer, Guntur, AIR 1969 Andhra Pradesh 55, in which P. Jaganmohan Reddy, C.J as his Lordship then was speaking far the Court, held that the interest accruing on compensation was certainly not a part of compernsation and it was to be treated as distinct from compesation for the purpose of Land Acquisition Act. Their Lordships of the Andhra Pradesh High Court were considering the question as to whether court-fee could be demanded on the interest payable under section 34 of the Land “Acquisition Act on compensation for the compulsory acquisition of Land. Relying on a Bench decision of the Gujarat High Court in Patel Anandilai Hisa Lal v. Addl. Spl. Land Acquisition Officer, AIR 1965 Guj. 212, their Lordships held as under:—
“In a recent case, a Bench of the Gujarat High Court in Anandilai v. Addl. Spl. Land Acquisition Officer, AIR 1965 Guj 212, arrived at a similar conclusion on analogous provisions of Section 7(1) of the Bombay Court fees Act which like Section 48 of the Andhra Pradesh Court fees Act also provided that the amount of fee payable under the Act on the memorandum of appeal against an order relating to compensation under any Act for the time being in force for the acquisition of land for public purposes shall be computed according to the difference between the amount awarded and the amount claimed by the appellant Bhagwati, J. after referring to the case of AIR 1961 SC 908 (supra) (Satinder Singh's case) and the case of National Insurance Co v. Life Insurance Corporation, AIR 1963 SC 1171, said;
‘…It is now well settled that the right to receive interest is in substitution of the right to retain possession of the land and when a claim for payment of interest is made by a person whose immoveable property has been acquired compulsorily, he does not make a claim for damages properly or technically so called but he bases his claim on the general rule that if be is deprived of his land, he should be put in possession of the compensation immediately; if not, in lieu of possession taken by compulsory acquisition interest should be paid to him on the amount of compensation.’
Continuing further. Bhagwati, J. observed:
‘…Moreover the scheme of the Land Acquisition Act, 1894, itself shows that interest is treated as distinct from compensation for the purposes of that Act. Interest cannot, therefore, be regarded as forming part of compensetion and the expressions ‘amount awarded’ & ‘amount claimed’ cannot on a true construction include the amount of interest claimed by the appellant in the memorandum of appeal… The claim for interest on the additional compensation claimed in the memorandum of appeal would stand or fall with the decision of the main claimand being merely an adjunct of the main claim, no Court-fee would be payable on it.”
9. Apart from the Land Acquisition Act. even under the ordinary law of the land, as governed by the Code of Civil Procedure, the position of law with regard to the payment of interest remains the same. Prior to 1956, some doubt was, of course, present in the mind of the Courts, as to whether interest was to be paid on the principal amount decreed as well as on interest accrued thereon. But even at that time, by interpreting section 34 of the Code of Civil Procedure, as it stood before 1956, the Privy Council in two decisions reported as Panna Lal and another v. Nihai Chand, AIR 1922 Privy Council 46. and Jewan Lal Daga and another v. Nilmani Chaudhuri, AIR 1928 Privy Council 80, held that compound interest could not be awarded by the Courts as Section 34 or its principle never intended to be used as a means for providing for compound interest but to relieve the debtor of a harsher rate of interest. Following these two judgments of the Privy Council, the High Courts in the country started modifying the decrees by changing the nature of interest from compound to simple, as was done in Shivaprasad Singh v. Prayagkumari Debee and others, AIR 1935 Calcutta 39, M.V Mhalinga Aiyar v. Union Bank Ltd. Kumbakonam, AIR (30) 1943 Madras 216, and Sigappiachi and others v. M. A.P.A Palaniappa Chettiar, AIR 1972 Madras 463.
10. section 34 of the Code of Civil Procedure, as it stands at present, reads as under:—
“34. Interest.
(1) Where and in so far as a decree is for the payment of money, the Court may, in the decree, order interest at such rate as the Court deems reasonable to be paid on the principal sum adjudged, from the date of the suit to the date of the decree, in addition to any interest adjudged on such principal sum for any period prior to the institution of the suit, with further interest at such rate not exceeding six per cent, per annum, as the Court deems reasonable on such principal sum from the date of the decree to the date of payment, or to such earlier date as the Court thinks fit.”
By the Civil Procedure Code (Amendment) Act (66 of 1956), the words ‘on such principal sum’ have been substituted for the words “on the aggregate sum so adjudged.” Before this amendment, the ‘aggregate sum’ contemplated the aggregate of the principal sum adjudged, the interest from the date of suit to the date of decree and the pre-suit interest. The section classifies the interest awardable after the date of the suit into two classes—
(1) Interest on the principal sum adjudged from the date of suit to date of decree; and
(2) Interest on such principal sum from date of decree to date of realisation or to such earlier date as the Court thinks fit.
Thus, interest awardable from the date of the plaint to the date of decree, under the section as it stands now, will be only upon the principal sum and not on the whole amount including interest claimed by the plaintiff. Before the above-mentioned amendment of section 34 by Act No. 66 of 1956, further interest was awardable on the aggregate of the principal and interest as on the date of the decree but it was not compound interest but only interest on a fixed sum declared to be due by the decree. (Reference may be made to AIR Commentaries on the Code of Civil Procedure by Chitaley, 10th Edition. Vol. I, pages 460 to 467)
11. The intention of the Parliament, while amending section 34 of the Code of Civil Procedure, by Act No. 66 of 1956, would be clear from the repot of the Joint Committee on the Bill as published in the Gazette of India Extraordinary, Part II, Section II, dated December 13, 1955. Para 11 of the Report relating to Clause 2 of the Bill seeking amendment of section 34 reads as under:—
“Section 34 of the Code empowers a Court to award further interest from the date of the decree upto the date of payment on the ‘aggregate sum’ which comprises principal sum with interest accrued thereon. The Committee are of the opinion that interest should not be awarded on interest but only on the principal sum. Suitable amendment has accordingly been incorporated in this clause.”
From the aforesaid amendment made in section 34 of the Code of Civil Procedure, it becomes clear that the intention of Parliament is against the grant of compound interest by the Courts, that is, on the principal amount as well as on the interest accrued thereon. Similar view has been taken recently in a Single Bench decision of this Court in Food Corpn. of India v. Samana Cooperative Marketing cum Processing Society Ltd., Samana Mandi, 1987 (1) CLJ (C. Cr. & Rev.) 778, wherein J.V Gupta, J. held as under:—
“From the perusal of the said section, it is quite evident that the Court could order interest on the principal sum adjudged from the date of the suit. Since principal sum adjudged is Rs. 65 625/- the interest could be awarded only on that amount and not on the amount of interest, which sum was adjudged as Rs. 23 375/-.”
12. In view of what has been held above, we have no hesitation in allowing both the revision petitions filed by the State of Punjab and in setting aside the order under revision passed by the Additional District Judge, Bhatinda, who may now work out the amount by allowing the execution applications in the light of this judgment. There shall be no order as to costs.
I agree.
Sd/- D.S Tewatia
Chief Justice.
Land Acquisition Act.