2011 ALL SCR 672
SUPREME COURT

R.V. RAVEENDRAN AND A.K. PATNAIK, JJ.

Godavari Sugar Mills Ltd. Vs. State Of Maharashtra & Ors.

Civil Appeal No.819 of 2011,S.L.P. (C) No.6685 of 2006

20th November, 2011

Petitioner Counsel: P. H. PAREKH, SUMIT GOEL, ANAND JHA, Ms. SHIVANI B., M/s. Parekh & Co.
Respondent Counsel: Ms. MADHAVI DIVAN, SANJAY V. KHARDE, Ms. ASHA GOPALAN NAIR

(A) Maharashtra Agricultural Lands (Ceiling on Holdings) Act (1961), S.26 - Interest on compensation - For period beyond 20 years interest at 6% would be appropriate and payable, on equitable principles. (Para 12)

(B) Maharashtra Agricultural Lands (Ceiling on Holdings) Act (1961), S.26 - Compensation and interest payable thereon - Possession of land taken over by Govt. under Land Ceiling Act and compensation and interest @ 3% granted - Writ petition challenging compensation and interest @ 3% - Held dismissal of writ petition at threshold considering it as a petition to enforce a money claim was improper. Constitution of India, Art.226. AIR 1965 SC 1740 - Disting. (Paras 6, 7)

Cases Cited:
Krishnakumar Vithalrao Jamdar Vs. State of Maharashtra, WP No.83/1986, Dt.29.6.1991 [Para 6]
Shree Changdeo Sugar Mills Vs. State of Maharashtra, WP No.3805/2000, Dt.7.7.2000 [Para 6]
Suganmal Vs. State of M.P., AIR 1965 SC 1740 [Para 7]
U.P. Pollution Control Board Vs. Kanoria Industrial Ltd., 2001(2) SCC 549 [Para 7]
ABL International Ltd. Vs. Export Credit Guarantee Corporation of India Ltd., 2004(3) SCC 553 [Para 7]
Burmah Construction Co. Vs. State of Orissa, (1962) Supp 1 SCR 242 [Para 7]
State of Madhya Pradesh Vs. Bhailal Bhai, AIR 1964 SC 1006 [Para 7]
Salonah Tea Co. Ltd. Vs. Superintendent of Taxes, Nangaon, (1988)1 SCC 401 [Para 7]
Sanjana M. Wig Vs. Hindustan Petroleum Corporation Ltd., (2005)8 SCC 242 [Para 7]
Union of India Vs. Parmal Singh, 2009(3) ALL MR 961 (S.C.)=(2009)1 SCC 618,AIR 2008 SC (Supp) 1031 [Para 10]


JUDGMENT

R. V. RAVEENDRAN, J.:- Leave granted.

2. The appellant was the owner of a large extent of sugarcane land. The Special Deputy Collector, Ahmednagar issued a notification dated 15.6.1961 under section 21 of the Maharashtra Agricultural Lands (Ceiling on Holdings) Act, 1961 ("Act" for short) declaring that the appellant held 12127.4 acres as surplus agricultural land. In pursuance of it, possession of 7407 acres and 33-1/2 guntas of land at Sakarwadi and 2910 acres and 4 guntas in Lakshmiwadi was taken over on 25.5.1968. Possession of another 608 acres and 38-1/2 guntas in Sakarwadi and 525 acres, 1-1/2 gunta in Lakshmiwadi was taken on 23.1.1976. Ultimately possession of the remaining 99 acres 13 guntas at Lakshmiwadi was taken on 6.4.1990.

3. On 13.11.1978 the appellant submitted its claim in regard to the entire lands (except the 99 acres, 13 guntas which was taken subsequently) under Section 24(1) of the Act. Several reminders were sent by the appellant wherein the delay was highlighted and demand was made for payment of interest at 9% per annum. Ultimately on 13.12.2001 proceedings for determination of compensation were commenced by issue of notices for enquiry under Section 24(1) and (2) of the Act. The second respondent made an award dated 30.3.2005 determining the amount due as Rs.88,77,538,49 comprising Rs.43,22,656.65 as compensation and Rs.45,54,88 1.84 as interest thereon at 3% per annum from the date of possession to 31.3.2004. The said payment was accepted under protest by the appellant on 31.3.2005.

4. Aggrieved by the interest awarded only at the rate of 3% per annum, the appellant filed a writ petition (WP No.6375/2005). The appellant sought quashing the award insofar as it awarded interest at 3% per annum and prayed for award of interest at 9% from the date of delivery of possession till date of actual payment. According to the appellant, a sum of Rs.97,66,189.16 was due as on the date of writ petition (WP No.6375/2005) being the difference in interest on calculating interest at 9% per annum on the principal amount instead of 3% awarded. The High Court dismissed the said petition at admission stage by the impugned order dated 4.10.2005 on the ground that the prayer being only for payment of money (by way of interest), the writ petition was not entertainable and it was open to the appellant to pursue any other remedy that may be available. The said order is challenged in this appeal by special leave.

5. The following two questions arise for our consideration in this appeal:

(i) Whether the writ petition was for "recovery of money" and therefore not maintainable ?

(ii) Whether the second respondent was justified in awarding interest only at the rate of 3% per annum on the compensation payable under Section 25 of the Maharashtra Agricultural Lands (Ceiling on Holdings) Act, 1961 ?

Re : Question No.(i)

6. The writ petition was for a declaration that the Notice dated 30.3.2005 informing the appellant that total compensation including interest for acquisition of 12127.4 acres of land as Rs.88,77,5381- was unjust and arbitrary and discriminatory insofar as it offered interest only at the rate of 3% per annum on the compensation amount and for a mandamus to pay the compensation with interest at 9% per annum from the date of surrender of possession to date of actual payment. The appellant contended in the writ petition that having regard to decisions of the Bombay High Court in Krishnakumar Vithalrao Jamdar Vs. State of Maharashtra (W.P. No.83 of 1986 decided on 29.6.1991) and Shree Changdeo Sugar Mills Vs. State of Maharashtra (W.P. No.3805/2000 decided on 7.7.2000) wherein interest was awarded at the rate of 9% per annum in regard to compensation payable under the said Act, the second respondent acted illegally in awarding interest at a lesser rate of 3% per annum. Therefore, the writ petition filed by appellant did not relate to a simple money claim. It required adjudication in regard to the allegations of arbitrariness and discrimination on the part of the State government and its officers in the exercise of their statutory functions, before the issue of rate of interest could be examined or determined. Primarily, therefore the writ petition was of a public law character as related to the public law functions on the part of the State government and its officers, and therefore maintainable.

7. The High Court relying upon the decision of this court in Suganmal Vs. State of M.P., AIR 1965 SC 1740 has held that the prayer in the writ petition being one for payment of interest, it should be considered to be a writ petition filed to enforce a money claim and therefore, not maintainable. The observations in Suganmal related to a claim for refund of tax and have to be understood with reference to the nature of claim made therein. The decision in Suganmal has been explained and distinguished in several subsequent cases, including in U.P. Pollution Control Board Vs. Kanoria Industrial Ltd., 2001(2) SCC 549 and ABL International Ltd. Vs. Export Credit Guarantee Corporation of India Ltd., 2004(3) SCC 553. The legal position becomes clear when the decision in Suganmal read with the other decisions of this Court on the issue, referred to below :

(i) Normally a petition under Article 226 of the Constitution of India will not be entertained to enforce a civil liability arising out of a breach of a contract or a tort to pay an amount of money due to the claimants. The aggrieved party will have to agitate the question in a civil suit. But art order for payment of money may be made in a writ proceeding, in enforcement of statutory functions of the State or its officers, [vide Burmah Construction Co. Vs. State of Orissa, (1962) Supp 1 SCR 242].

(ii) If a right has been infringed - whether a fundamental right or a statutory right - and the aggrieved party comes to the court for enforcement of the right, it will not be giving complete relief if the court merely declares the existence of such right or the fact that existing right has been infringed. The High Court, while enforcing fundamental or statutory rights, has the power to give consequential relief by ordering payment of money realized by the Government without the authority of law (vide State of Madhya Pradesh Vs. Bhailal Bhai, AIR 1964 SC 1006).

(iii) A petition for issue of writ of mandamus will not normally be entertained for the purpose of merely ordering a refund of money, to the return of which the petitioner claims a right. The aggrieved party seeking refund has to approach the civil court for claiming the amount, though the High Courts have the power to pass appropriate orders in the exercise of the power conferred under Article 226 for payment of money. (vide Suganmal Vs. State of Madhya Pradesh, AIR 1965 SC 1740).

(iv) There is a distinction between cases where a claimant approaches the High Court seeking the relief of obtaining only refund and those where refund is sought as a consequential relief after striking down the order of assessment etc. While a petition praying for mere issue of a writ of mandamus to the state to refund the money alleged to have been illegally collected is not ordinarily maintainable, if the allegation is that the assessment was without a jurisdiction and the taxes collected was without authority of law and, therefore, the respondents had no authority to retain the money collected without any authority of law, the High Court has the power to direct refund in a writ petition [vide Salonah Tea Co. Ltd. Vs. Superintendent of Taxes, Nangaon, (1988)1 SCC 401].

(v) It is one thing to say that the High Court has no power under Article 226 of the Constitution to issue a writ of mandamus for making refund of the money illegally collected. It is yet another thing to say that such power can be exercised sparingly depending on facts and circumstances of each case. For instance, where the facts are not in dispute, where the collection of money was without the authority of law and there was no case of undue enrichment, there is no good reason to deny a relief of refund to the citizens. But even in cases where collection of cess, levy or tax is held to be unconstitutional or invalid, refund is not an automatic consequence but may be refused on several grounds depending on facts and circumstances of a given case. (Vide U.P. Pollution Control Board Vs. Kanoria Industrial Ltd., 2001(2) SCC 549].

(vi) Where the lis has a public law character, or involves a question arising out of public law functions on the part of the State or its authorities, access to justice by way of a public law remedy under Article 226 of the Constitution will not be denied. [Vide Sanjana M. Wig Vs. Hindustan Petroleum Corporation Ltd., (2005)8 SCC 242].

We are, therefore, of the view that reliance upon Suganmal (AIR 1965 SC 1740) was misplaced, to hold that the writ petition filed by the appellant was not maintainable.

Re : Question (ii)

8. The appellant contended that the compensation amount became due when possession of the lands was taken and as it was unjustly withheld, the appellant was entitled to interest on the compensation amount at a reasonable rate of 9% per annum, upto the date of payment. In support of their claim, they relied upon two decisions of the Bombay High Court in Krishna Kumar and Shree Changdeo Sugar Mills where interest was awarded at 9% per annum in similar matters. The respondents on the other hand submitted that there was sufficient indication in section 26 of the Act to indicate that the rate of interest should be only 3% per annum, and therefore, interest can be awarded only at 3% per annum. The respondents submitted that the two decisions of the Bombay High Court were distinguishable as they related to cases where compensation had not been paid at all whereas in this case compensation with interest at 3% per annum had already been paid on 31.3.2005 and therefore the said decisions would not apply. It was pointed out that in Krishnakumar possession of surplus land were taken in the year 1973 but till the date of disposal of the writ petition, no compensation had been paid; in Shree Changdeo Sugar Mills possession of surplus land had been taken by the State Government and though compensation payable was determined on 29.12.1966, 23.2.1967 and 13.12.1968, it was not paid; and that in those circumstances, the High Court had directed payment of compensation with interest at the rate of 9% per annum from the date of taking possession of lands till date of actual payment. Alternatively it was submitted that the said decisions not having considered section 26 of the Act, they were not rightly decided.

9. There is considerable force in the submissions of Mrs. Madhavi Divan, the learned counsel for the respondents that the decisions of Bombay High Court in Krishna Kumar and Changdeo are not sound, as they completely ignore section 26 of the Act, while awarding interest at 9% per annum on the belated payment of compensation.

10. The question as to when and what circumstances, interest could be awarded on belated payment of compensation, was considered by this Court in Union of India Vs. Parmal Singh, (2009)1 SCC 618 : AIR 2008 SC (Supp) 1031 : [2009(3) ALL MR 961 (S.C.)]. This Court first referred to the general principle and then the exception thereto, as under :

"When a property is acquired, and law provides for payment of compensation to be determined in the manner specified, ordinarily compensation shall have to be paid at the time of taking possession in pursuance of acquisition. By applying equitable principles, the courts have always awarded interest on the delayed payment of compensation in regard to acquisition of any property ....... The said general principle will not apply in two circumstances. One is where a statute specifies or regulates the interest. In that event, interest will be payable only in terms of the provisions of the statute. The second is where a statute or contract dealing with the acquisition specifically bars or prohibits payment of interest on the compensation amount. In that event, interest will not be awarded. Where the statute is silent about interest, and there is no express bar about payment of interest, any delay in paying compensation or enhanced compensation for acquisition would require award of interest at reasonable rates on equitable grounds."

This Court, dealing with an acquisition under the Defence of India Act, 1962 (which did not contain any provision either requiring or prohibiting payment of interest), upheld the award of interest at 6% per annum.

11. Section 24 of the Act requires the Collector, after possession of surplus land was taken over under Section 21(4) of the Act, to cause public notice requiring persons interested to lodge their claims. Section 25 of the Act provides for determination of compensation and apportionment thereof. Section 26 deals with mode of payment of amount of compensation and the same is extracted below :

"26. (1) The amount of compensation may, subject to the provisions of sub-section (3), be payable in transferable bonds carrying interest at three per cent. per annum.

(2) The bonds shall be-

(a) of the following denominations, namely:- Rs.50; Rs.100; Rs.200; Rs.500; Rs.1,000; Rs.5,000 and Rs.10,000; and

(b) of two classes - one being repayable during a period of twenty years from the date of issue by equated annual instalment of principal and interest, and the other being redeemable at par at the end of twenty years from the date of issue. It shall be at the option of the person receiving compensation to choose payment in one or other class of bonds, or partly in one class and partly in another.

(3) Where the amount of compensation or any part thereof, cannot be paid in the aforesaid denomination, it may be paid in cash." (Emphasis supplied)

The said section contemplates the payment of compensation with interest at 3% per annum in annual instalments spread over a period of 20 years or at the end of 20 years. It also contemplates payment being made either by transferable bonds or in cash. Sub-section (3) of Section 26 enabling payment of compensation by cash, in cases where it could not be paid by such bonds, does not disturb the rate of interest, which is 3% per annum for 20 years, provided in sub-section (1) thereof. We are, therefore, of the view that whether the payment is made by transferable bonds or by cash, the kite of interest can be only at 3% per annum for a period of 20 years from the date of taking possession.

12. The next question that requires consideration is about the rate of interest if the payment is not made even after 20 years, and whether it should be only at the rate of 3% per annum, even after 20 years. Section 26 is silent about the rate of interest payable, if the compensation is not paid within 20 years. We are, therefore, of the view that section 26 contemplates payment of the compensation within 20 years from the date of taking possession with interest at 3% per annum; and for the period beyond 20 years, the said provision regarding interest will cease to apply and the general equitable principles relating to interest will apply; and interest can be awarded at any reasonable rate, in the discretion of the court. Interest at the rate of 6% per annum, beyond 20 years would be appropriate and payable, on equitable principles.

13. We therefore allow this appeal in part and direct the respondents to pay interest on the compensation amount from the date of taking possession to date of payment, at the rate of 3% per annum for the first twenty years and thereafter (that is from the date of expiry of the period of 20 years) to 31.3.2005 (date of payment) at the rate of 6% per annum.


Date of taking possession Principal Amount
Period
Rate of Interest

20-5-1968

Rs.41,31,821.59

20-5-1968 to 19-5-1988
20-5-1988 to 31-3-2005
3% per annum
6% per annum

23-1-1996

Rs.1,77,478.61

23-1-1976 to 22-1-1996
23-1-1996 to 31-3-2005
3% per annum
6% per annum

6-4-1990 Rs.13,365.45 6-4-1990 to 31-3-2005 3% per annum

Out of the interest so calculated, the sum of Rs.45,54,881/84 already paid towards interest on 31.3.2005 shall be deducted and the balance shall be paid by the respondents to the appellants within three months from today.

Ordered accordingly.