2006 (10) TMI 493 - SC - Indian Laws

Scheme of compensation - Expression compensation u/s 23(1) of the Land Acquisition Act 1894 as amended by Act 68 of 1984 ( the Act ) read in the context of Section 28 or Section 34 - Rule of appropriation in execution of money decrees - whether the rule of what may be called the different stages of appropriation set out in Prem Nath Kapur (supra) is correct or whether the rule requires to be re-stated on the scheme of the Land Acquisition Act understood in the context of the general rules relating to appropriation and the rules relating to appropriation in execution of money decrees and mortgage decrees - HELD THAT - It is clear from the scheme of the Act and the express language used in Sections 23(1) and (2) 34 and 28 and now Section 23(1-A) of the Act that each component is a distinct and separate one. When compensation is determined u/s 23(1) its quantification though made at different levels the liability to pay interest thereon arises from the date on which the quantification was so made but as stated earlier it relates back to the date of taking possession of the land till the date of deposit of interest on such excess compensation into the court. The liability to pay interest is only on the excess amount of compensation determined u/s 23(1) and not on the amount already determined by the Land Acquisition Officer under Section 11 and paid to the party or deposited into the Court or determined u/s 26 or Section 54 and deposited into the court or on solatium u/s 23(2) and additional amount u/s 23(1-A). Though a decree holder may have the right to appropriate the payments made by the judgment-debtor it could only be as provided in the decree - if there is provision in that behalf in the decree or as contemplated by Order XXI Rule 1 of the Code as explained by us. The Code or the general rules do not contemplate payment of further interest by a judgment debtor on the portion of the principal he has already paid. His obligation is only to pay interest on he balance principal remaining unpaid as adjudged either by the court of first instance or in the court of appeal. On the pretext that the amount adjudged by the appellate court is the real amount due the decree-holder cannot claim interest on that part of the principal already paid to him. Of course as indicated out of what is paid he can adjust the interest and costs first and the balance towards the principal if there is a shortfall in deposit. But beyond that the decree- holder cannot seek to re-open the entire transaction and proceed to recalculate the interest on the whole amount and seek a re-appropriation as a whole in the light of the appellate decree. On the scheme of the Act especially the wording of Section 34 and Section 28 of the Act it is not possible to say that the said approach made in Prem Nath Kapur 1995 (11) TMI 441 - SUPREME COURT is erroneous or is unreasonable or is not a line of approach that is not warranted. Therefore when the judgment debtor State makes a deposit along with the calculation appropriating distinct sums towards various heads of compensation as awarded by the reference court or by the appellate court in the appellate decree and the amount is received by the decree holder the decree holder must be taken to be not entitled to seek an appropriation as if the judgment debtor has not made any intimation and that he is entitled to appropriate at his volition. Considering the scheme of compensation under the Act in the context of the specific nature of the items specifically referred to in Section 23 of the Act we are of the view that the approach adopted in Prem Nath Kapur (supra) is justified. A reappropriation by seeking to reopen the satisfaction already rendered might result in interest being made payable even on that part of the principal amount that had already been deposited and received by the decree holder and that would be in the realm of unjust enrichment. We are satisfied that the essential ratio in the Prem Nath Kapur (supra) on appropriation being at different stages is justified though if at a particular stage there is a shortfall the awardee decree holder would be entitled to appropriate the same on the general principle of appropriation first towards interest then towards costs and then towards the principal unless of course the deposit is indicated to be towards specified heads by the judgment debtor while making the deposit intimating the decree-holder of his intention. We thus approve the ratio of Prem Nath Kapur (supra) on the aspect of appropriation. It is well settled that an execution court cannot go behind the decree. If therefore the claim for interest on solatium had been made and the same has been negatived either expressly or by necessary implication by the judgment or decree of the reference court or of the appellate court the execution court will have necessarily to reject the claim for interest on solatium based on Sunder 2001 (9) TMI 1121 - SUPREME COURT on the ground that the execution court cannot go behind the decree. But if the award of the reference court or that of the appellate court does not specifically refer to the question of interest on solatium or in cases where claim had not been made and rejected either expressly or impliedly by the reference court or the appellate court and merely interest on compensation is awarded then it would be open to the execution court to apply the ratio of Sunder (supra) and say that the compensation awarded includes solatium and in such an event interest on the amount could be directed to be deposited in execution. Otherwise not. We also clarify that such interest on solatium can be claimed only in pending executions and not in closed executions and the execution court will be entitled to permit its recovery from the date of the judgment in Sunder (September 19 2001) and not for any prior period. We also clarify that this will not entail any re-appropriation or fresh appropriation by the decree-holder. This we have indicated by way of clarification also in exercise of our power under Articles 141 and 142 of the Constitution of India with a view to avoid multiplicity of litigation on this question. The appeals will now be placed before the appropriate Bench for being disposed of in the light of the answers given by us.

Summary

Issues Involved:
1. Rule of appropriation in execution of money decrees.
2. Applicability of the rule to award decrees under the Land Acquisition Act.
3. Impact of the Land Acquisition (Amendment) Act, 1984 on the rule of appropriation.
4. Appropriation of payments by debtor and creditor.
5. Interest cessation on deposited amounts.
6. Reopening of transactions for re-appropriation after appellate court enhancements.
7. Claim of interest on solatium in execution proceedings.

Detailed Analysis:

1. Rule of Appropriation in Execution of Money Decrees:
The general rule of appropriation, as established in various legal texts and precedents, is that when a debtor makes a payment, it is first applied to the interest due and then to the principal. This principle is embedded in Indian law under Section 60 of the Indian Contract Act, 1872, and is also indicated in Order XXI Rule 1(3)(c) of the Code of Civil Procedure (CPC).

2. Applicability of the Rule to Award Decrees under the Land Acquisition Act:
The Supreme Court examined whether the normal rule of appropriation applies to award decrees under the Land Acquisition Act. The Court noted that the decision in Prem Nath Kapur held that the principles of Order XXI Rule 1 of the CPC could not be extended to execution of award decrees under the Land Acquisition Act. However, the Constitution Bench in Sunder v. Union of India overruled part of Prem Nath Kapur, holding that 'compensation' includes all sums under Section 23 of the Act.

3. Impact of the Land Acquisition (Amendment) Act, 1984 on the Rule of Appropriation:
The Court considered the amendments brought by the Land Acquisition (Amendment) Act, 1984, which introduced additional amounts under Section 23(1A) and solatium under Section 23(2). The amendments did not alter the fundamental rule of appropriation but clarified the components of compensation and interest payable.

4. Appropriation of Payments by Debtor and Creditor:
The Court outlined the principles of appropriation, emphasizing that if a debtor does not specify which debt a payment is for, the creditor may appropriate it to any outstanding debt. This principle applies unless the context or specific provisions of the Land Acquisition Act dictate otherwise.

5. Interest Cessation on Deposited Amounts:
Order XXI Rule 1 of the CPC, as amended in 1976, stipulates that interest ceases to run on the amount deposited from the date of notice to the decree holder. The Court affirmed that this rule applies to execution of money decrees and award decrees under the Land Acquisition Act, meaning no further interest is payable on deposited sums once notice is given.

6. Reopening of Transactions for Re-appropriation after Appellate Court Enhancements:
The Court rejected the argument that decree holders could reopen transactions and seek re-appropriation of amounts after appellate court enhancements. The principle is that interest ceases on the deposited amount, and further obligations are limited to the additional amounts awarded by the appellate courts.

7. Claim of Interest on Solatium in Execution Proceedings:
The Court clarified that execution courts cannot go behind the decree. If interest on solatium was not specifically granted by the decree, it cannot be claimed in execution. However, if the decree did not address interest on solatium, execution courts could apply the ratio of Sunder to award interest on solatium from the date of the judgment in Sunder (September 19, 2001).

Conclusion:
The Supreme Court upheld the essential ratio in Prem Nath Kapur regarding appropriation at different stages, affirming that the scheme of the Land Acquisition Act does not warrant reopening transactions for re-appropriation. The decision in Sunder modified the understanding of 'compensation awarded,' but did not impact the rule of appropriation. The Court emphasized that decree holders cannot claim further interest on principal amounts already paid or deposited, preventing unjust enrichment.