2013 (6) TMI 23 - SC - Indian Laws

Jurisdiction - power under Article 226 to entertain writ - acquisition of land - interest on compensation - arbitrariness and discrimination on the part of the state government - Whether the writ petition was for recovery of money and therefore not maintainable? - Whether the second respondent was justified in awardin interest only at the rate of 3% per annum on th compensation payable under Section 25 of the Maharashtra Agricultural Lands (Ceiling on Holdings) Act 1961? - held that - Primarily the writ petition was of a public law character as it related to the public law functions on the part of the state government and its officers and therefore maintainable. - 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. respondents directed 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.

Issues Involved:
1. Maintainability of the writ petition for recovery of money.
2. Justification of awarding interest at the rate of 3% per annum on the compensation payable under Section 25 of the Maharashtra Agricultural Lands (Ceiling on Holdings) Act, 1961.

Issue-wise Detailed Analysis:

Re: Issue No. (i) - Maintainability of the writ petition for recovery of money:

The appellant filed a writ petition for a declaration that the compensation amount, including interest, was unjust and arbitrary, and sought a mandamus to pay the compensation with interest at 9% per annum from the date of surrender of possession to the date of actual payment. The appellant argued that the writ petition did not relate to a simple money claim but required adjudication on allegations of arbitrariness and discrimination by the state government and its officers in their statutory functions. Therefore, the writ petition was of a public law character and maintainable.

The High Court dismissed the writ petition at the admission stage, relying on the decision in *Suganmal v. State of MP* - AIR 1965 SC 1740, which held that a writ petition for payment of interest should be considered a writ petition filed to enforce a money claim and thus not maintainable. However, this decision was distinguished in subsequent cases like *UP 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, which clarified that a writ petition could be entertained to enforce statutory functions of the State or its officers.

The Supreme Court held that the reliance on *Suganmal* was misplaced, as the writ petition filed by the appellant was maintainable due to its public law character and the involvement of public law functions by the state government and its officers.

Re: Issue No. (ii) - Justification of awarding interest at the rate of 3% per annum:

The appellant contended that the compensation amount became due when possession of the lands was taken and, as it was unjustly withheld, they were entitled to interest at a reasonable rate of 9% per annum. They cited 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 argued that Section 26 of the Act indicated that the rate of interest should be only 3% per annum.

The Supreme Court noted that the decisions of the Bombay High Court in *Krishna Kumar* and *Shree Changdeo Sugar Mills* were not sound as they ignored Section 26 of the Act, which specified the interest rate. The Court referred to the general principle that compensation should be paid at the time of taking possession, and interest should be awarded on delayed payment unless a statute specifies otherwise.

Section 26 of the Act provides that the compensation amount may be payable in transferable bonds carrying interest at 3% per annum, either in annual installments over 20 years or at the end of 20 years. The Court held that whether the payment is made by transferable bonds or cash, the rate of interest can only be 3% per annum for 20 years from the date of taking possession.

For the period beyond 20 years, the Court stated that Section 26 is silent about the rate of interest, and general equitable principles would apply. The Court deemed that interest at the rate of 6% per annum beyond 20 years would be appropriate.

Conclusion:

The Supreme Court allowed the appeal in part and directed the respondents to pay interest on the compensation amount from the date of taking possession to the date of payment at the rate of 3% per annum for the first twenty years and 6% per annum thereafter until 31.3.2005. The interest already paid was to be deducted from the balance due, which was to be paid within three months from the date of the judgment.

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