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2006 DIGILAW 244 (KER)

K. S. E. B. v. Kalyani Amma

2006-04-05

K.T.SANKARAN, R.BHASKARAN

body2006
ORDER R. Bhaskaran, J. 1. The common question referred to the Division Bench is whether the claimants are entitled to get interest on compensation in respect of the trees cut and removed from their properties without having any contractual obligation. When the matter was argued before us, the question was limited to the date from which interest has to be calculated, i.e., whether interest is to be paid from the date of cutting of trees or from the date on which the application for compensation was made or from the date on which compensation was awarded. Therefore, there is no dispute before us that interest is payable on the compensation for trees cut and removed. In some of the revisions, compensation was awarded for the trees cut and interest at different rates is awarded from the date of petition till the date of payment and in some others Kerala State Electricity Board has challenged the award and rate of interest. According to the persons who have filed the revisions challenging the sufficiency of compensation, interest should have been awarded from the date of cutting and not from the date of petition. There is also controversy as to what exactly is the percentage of interest to be awarded. But it is not in dispute that there cannot be any uniform percentage in all cases as it will depend on the rate of interest prevalent at the time from which interest is to be calculated. 2. Even in cases where there is no express or implied contract for payment of interest, interest can be awarded on equitable grounds as held by the Supreme Court in Ghaziabad Development Authority v. Union of India ( (2000) 6 S.C.C 113 ). That was a case where the court found that there was unreasonable delay on the part of a Public Development Authority for handing over developed plots for construction of apartments and/or flats for occupation by allottees. It was held that though there was a specific term in the brochure that no interest would be payable to claimant in case he was to withdraw his offer or surrender it, it was held that such term would apply only in case the claimant was responsible for creating circumstances resulting in necessity of refund. The Supreme Court granted interest on equitable grounds. 3. A Division Bench of this Court in State of Kerala Vs. The Supreme Court granted interest on equitable grounds. 3. A Division Bench of this Court in State of Kerala Vs. Chellappan Pillai (1961 K.L.J. 488) has held that interest for any period anterior to the date of the suit can be awarded only if there is an agreement for the payment of interest at a fixed rate, or it is payable by the usage of trade having the force of law, or under the provision of any substantive law entitling the plaintiff to recover interest. That was a case where the claim was based on S.70 of the Indian Contract Act. The Division Bench held that there was no justification for the award of interest from the date earlier than the date of suit. 4. In R.L. Jain v. D.D.A. (A.I.R. 2004 S.C. 1904) the question for consideration was whether interest could be awarded on the compensation under the Land Acquisition Act for a period prior to the Notification under S.4(1) of the Act. It was held that the Scheme of the Act does not contemplate taking over possession prior to the issuance of Notification under S.4(1) of the Act and if possession was taken prior to the said Notification it was Decided On : hors the Act and without any authority of law. In such cases, it will be open to the landowner to recover possession of the land by taking proper legal proceedings and he will be entitled to get rent or damages for use and occupation for the period Government retained possession of the property. The Supreme Court held that in such cases it would be just and equitable that the Collector may also determine the rent or damages for use of the property while determining the compensation amount payable. In Sovintorg (India) Ltd. V. State Bank of India ( (1999) 6 S.C.C. 406 ) also, it was held that interest could be awarded on equitable grounds. In that case, the appellant/company had a Bank account in the State Bank of India wherein the appellant deposited Rs. 1,00,000 in June, 1983. Though the Bank collected the amount in 1983 itself, it was not credited in the account of the appellant for a period of seven years. In that case, the appellant/company had a Bank account in the State Bank of India wherein the appellant deposited Rs. 1,00,000 in June, 1983. Though the Bank collected the amount in 1983 itself, it was not credited in the account of the appellant for a period of seven years. On the complaint of the appellant before the State Consumer Disputes Redressal Commission, the Bank was directed to pay interest at 12% from the date when the amount was received till the date of payment. That order was confirmed by the National Commission. Not satisfied with the rate of interest awarded at 12% the appellant approached the Supreme Court. The Supreme Court held that interest could be awarded in lieu of compensation or damages in appropriate cases. It can also be awarded on equitable grounds. The Supreme Court enhanced the rate of interest from 12% to 15% to serve the ends of justice from the date of deposit. 5. The learned counsel for the claimants relied on the decision of the Supreme Court in Satinder Singh Vs. Umrao Singh (A.I.R. 1961 S.C. 908). In that case, the Supreme Court relied on the decision of the Privy Council in Ingelwood Pulp and Paper Co. Ltd. Vs. New Brunswick Electric Power Commission (A.I.R. 1928 P.C. 287) wherein it was held that "upon the expropriation of land under statutory power, whether for the purpose of private gain or of good to the public at large, the owner is entitled to interest upon the principal sum awarded from the date when possession was taken, unless the statute clearly shows a contrary intention". It was held by the Supreme Court as follows: 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 possession taken by compulsory acquisition interest should be paid to him on the said amount of compensation. In our opinion, therefore, the fact that S.5(1) deals with the compensation both for requisition and acquisition cannot serve to exclude the application of the general rule to which we have just referred." It was therefore held that interest was payable on the amount of compensation from the date of taking of the land. In National Insurance Co. v. Life Insurance Corporation (A.1.R. 1963 S.C. 1171) the Supreme Court noticed that there was no provision in the Life Insurance Corporation Act or the Rules made thereunder for payment of interest on the delayed payment of compensation. But it was held that the claim for interest proceeded on the assumption that when the owner of immovable property lost possession of it he was entitled to claim interest in place of the right to retain possession. In Executive Engineer, Dhenkanal Minor Irrigation Division v. N.C. Budharaj, (2001) 2 S.C.C. 721 ) majority of the Judges held that a person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation by whatever name it may be called, namely, interest, compensation or damages. Normally, the person whose trees are cut is entitled to for compensation from the date of cutting. It is as he is deprived of the benefit of the improvements from that date onwards that he is paid interest on compensation. Merely because it took a few years to quantify the amount, does not mean that the owner should be deprived of the interest from the date on which the trees were cut. In South Eastern Coalfields Ltd. v. State of M.P (2003) 8 S.C.C. 648 ), it was noticed that applicability of the rule to award interest in equity is attracted when the existence of the state of circumstances is established which justify the exercise of such equitable jurisdiction and such circumstances can be many. It was therefore held that in the absence of a prohibition either in law or in the contract entered into between the two parties interest could be awarded on the amount of compensation which remained unpaid. The learned counsel for the revision petitioners relied on the decision in K.S.B.C. vs. McDowell & Co. Ltd. ( 1998 (2) K.L.T. 1087 ). It was therefore held that in the absence of a prohibition either in law or in the contract entered into between the two parties interest could be awarded on the amount of compensation which remained unpaid. The learned counsel for the revision petitioners relied on the decision in K.S.B.C. vs. McDowell & Co. Ltd. ( 1998 (2) K.L.T. 1087 ). In that case, it was noticed that the demand of the respondent was only for reimbursement of the amount of sales tax on the basis of Ext.P-5 and penal interest, if any, charged by the department. Since there was no demand for payment of interest and interest was claimed only for the first time in the original petition, it was held that interest was payable only from the date of the original petition. The learned standing counsel for the Electricity Board also submitted that even though the trees were cut, there were trees which did not yield any income and the land is still with the respondent which can be profitably made use of. Therefore, there was no total deprivation of income from the land the moment the trees were cut. Probably, this can be a fact which can be taken into account at the time of deciding the rate of interest. But for the purpose of deciding the point from which interest has to be calculated, we are of opinion that interest can be calculated from the date of cutting which is the most definite date which can be ascertained. Therefore, we hold that the interest in all these cases are payable from the date of cutting of trees. This point is found against the Electricity Board and in favour of the claimants. Now we answer the reference made by the learned Single Judge as above. These revisions are remitted to the learned Single Judge for disposal on merit.