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Mohammad Akil Khan Vs. Premraj Jawanmal Surana and anr. - Court Judgment

LegalCrystal Citation
SubjectProperty;Contract
CourtMumbai High Court
Decided On
Case NumberA.F.O.D. No. 209 of 1969
Judge
Reported inAIR1972Bom217; (1972)74BOMLR225; ILR1972Bom1040; 1972MhLJ483
ActsLand Acquisition Act, 1894 - Sections 3, 9(1), 23 and 30; Transfer of Property Act, 1882 - Sections 55(6)
AppellantMohammad Akil Khan
RespondentPremraj Jawanmal Surana and anr.
Appellant AdvocateF.G. Vaishnav, Adv.
Respondent AdvocateV.T. Gambhirwalla, Asst. Govt. Pleader, ;M.V. Paranjpe and ;A.N. Dabir, Advs.
Excerpt:
land acquisition act (1 of 1894), sections 30, 23, 3(b), 9 (1), 11 -- transfer of property act (iv of 1882), section 55(0)(h) -- agreement for sale of land -- seller receiving earnest money and giving temporary possession of land to buyer -- possession as owner to be given when sale-deed executed -- land acquired by state under land acquisition act before execution of sale-deed -- apportionment of compensation how to be made between seller and buyer.;claimant no. 1 who was the owner of certain land executed an agreement of sale relating to this land in favour of claimant no. 2. under this agreement claimant no. 1 received rs. 10,000 from claimant no. 2 as earnest money and the balance was to be paid at the time of the execution of the sale-deed. the agreement also stated that possession.....deshmukh, j.1. this appeal raises a question of some importance relating to the apportionment of compensation on compulsory acquisition of land between the intending vendor and the intending vendee whose contract has been frustrated by the act of acquisition by the state.2.the facts of this litigation are not in dispute except for the amount which has flowed from the purchaser to the buyer. we will give appropriate direction in respect of that dispute in due course. the undisputed position is that claimant no. 1 mohammad akil khan was the owner of s. no. 4 measuring 34 acres 35 gunthas situate at village garkheda in aurangabad. he executed an agreement of sale relating to 30 acres out of this land in favour of claimant no. 2 premraj jawanmal surna, who is respondent no. 1 in the present.....
Judgment:

Deshmukh, J.

1. This appeal raises a question of some importance relating to the apportionment of compensation on compulsory acquisition of land between the intending vendor and the intending vendee whose contract has been frustrated by the act of acquisition by the State.

2.The facts of this litigation are not in dispute except for the amount which has flowed from the purchaser to the buyer. We will give appropriate direction in respect of that dispute in due course. The undisputed position is that claimant No. 1 Mohammad Akil Khan was the owner of S. No. 4 measuring 34 Acres 35 Gunthas situate at village Garkheda in Aurangabad. He executed an agreement of sale relating to 30 acres out of this land in favour of claimant No. 2 Premraj Jawanmal Surna, who is respondent No. 1 in the present appeal. Under this agreement of sale, Ex. 57, admittedly Rs. 10,000/- have been received by the vendor - claimant No. 1. Under the contract the price fixed was Rupees 4,000/- per acre totalling upto Rupees 1,20,000/- for the 30 acres agreed to be sold. The balance amount of Rs. 1,10,000/- was to be paid at the time of the execution of the sale - deed. It is the case of claimant No. 2 that he has advanced a further sum of Rs. 14,000/- from time to time towards the purchase price of the land. However, no dates are specified either in the claim statement before the Civil Court when reference under Section 30 of the Land Acquisition Act came to be made. As we have indicated above, specific directions will be given in due course regarding the alleged payment of Rs. 14,000/-. It is admitted that a third person named Gesudarey Khan had filed a Civil Suit against the vendor claimant No. 1 in respect of S. No. 4. The agreement. Ex. 57, recites that this was a suit without any substance whatsoever and was sure to be dismissed. An important term of the contract is that after the disposal of that Civil Suit the sale - deed was to be executed within four months. The agreement of sale also states that possession was temporarily being transferred to the purchaser - claimant No. 2 and at the time of the execution of the sale - deed he will have the final possession as the owner of the land.

3. While the Civil Suit filed by the third person was pending, both the parties, it appears, were willing to perform their respective part of the contract. However, Government notified S. No. 4 for acquisition for what is known as Jayakwadi Project by its notification under Section 4(1) of the Land Acquisition Act dated March 25, 1965. This was followed by another notification under Section 6 dated April 6, 1965. Urgency clause under Section 17 was applied and possession was taken by the State of Maharashtra on October 9, 1965. It may be noted that the Civil Suit filed by the third person came to be dismissed on November 3, 1965. In view of the terms of the agreement the sale deed was executable on payment of the balance of the amount on or before March 3, 1966. However, even before the Civil Suit came to be dismissed and even before the third of four months contemplated by the parties executing the sale - deed commenced, the State stepped in and acquired the land for a public purpose. All private ownership came to an end free from all encumbrances, if any, on the 9th of October 1965 when the State claimed and recovered possession under Section 17 of the Land Acquisition Act.

4.When this happened and when the Collector issued notice under Section 9 of the Land Acquisition Act requiring the parties to put in their claims to compensation for all interests in the land acquired. Claimant No. 1 appeared and put in his claim for the entire compensation. He claimed amount at the rate of Rs. 4,000/- per acre and further added that he had not lost his title at all, though a contract of sale was executed in favour of claimant No. 2. He was still the owner of the land and as such entitled to the entire compensation that may be determined by the Land Acquisition Officer. In the same proceedings, claimant No. 2 who had the contract of sale in his favour and which was frustrated due to the acquisition appeared and put in a claim to the entire compensation amount. According to him, not only there was a contract in his favour for the sale of the property acquired but he was put in possession thereof in part performance of the contract. He was ready and willing to perform his part of the contract. In the circumstances his possession was protected under Section 53-A of the Transfer of Property Act and the vendor could not displace him from the property. This right of possession together with the right to obtain the sale - deed should be considered as amounting to almost full title and as such the entire amount of compensation should be paid to him.

5.So far as the inquiry under Section 9 of the Land Acquisition Act and the further making up of the award under Section 11 were concerned, the Land Acquisition Officer heard the parties and declared the true area of the land acquired and the total compensation which in his opinion was allowable for the land in terms of the provisions of Section 23. So far as the apportionment was concerned, as there was dispute between the claimants and the Land Acquisition Officer had no option but to refer the dispute to the court under Section 30 of the Act. He accordingly made a reference.

6.In the reference before the Civil Court, the two claimants who are now appellant and respondent No. 1 put in their claims in writing. They urged the same grounds which we have summarised above. Each one of them claimed the entire amount of compensation. It also appears that an application for reference under Section 18 was also made by claimant No. 1 before the Collector. We were told that the Collector rejected the application for reference under Section 18 made by claimant No. 1 on the ground that it was a belated application which was barred by limitation. We were also told that a revision application has been filed by claimant No. 1 in this Court against that order and that the matter is still pending. If at all that revision application succeeds and a reference under Section 18 is directed to be made to the Civil Court, the only result will be enhancement of compensation, if any. However, the apportionment of compensation under Section 30 is a distinct and different matter and need not wait till the disposal of the reference under Section 18. The principle which will be laid down in this application and the method of apportionment that would be proposed between the parties would govern not only the amount of compensation which is now awarded but also the additional amount, if any, which may be in due course awarded by the Civil court.

7.The learned trial Judge after hearing the parties came to the conclusion that claimant No. 2 is 'a person interested' under Section 3(b) of the Land Acquisition Act and was entitled to make an application under Section 9 for compensation. The learned trial Judge further assumed, which we are told is an error, that claimant No. 2 had filed a suit for specific performance of the contract covered by Exh. 57 in the Civil Court at Aurangabad and that that suit was pending. On that assumption the learned trial Judge concluded that claimant No. 2 must be deemed to be as if an owner, if not an actual owner of the property. On that footing the entire amount of compensation is directed to be paid to claimant No. 2 alone. Being aggrieved by this order of apportionment passed by the trial Court, claimant No. 1 has filed this appeal.

8.The first point that was raised before us by Mr. Vaishnav on behalf of claimant No. 1 was that this was a case of contingent contract and would give no right whatsoever to claimant No. 2. He based his argument on the wording of the agreement, Ex. 57. He also argued that not only this was a contingent contract but possession was not delivered to claimant No. 2 in part performance of the contract. Since claimant No. 1 as vendor had obtained an amount of Rs. 10,000/- which would be locked up for quite some time in view of the pending litigation instituted by Gesudarey Khan, possession was delivered to cover the interest that claimant No. 2 might have otherwise earned on this amount. He, therefore, argued that this was not a completed contract where possession was delivered in part performance of the contract. We find no substance in both these points.

9.Having gone through the entire wording of the contract, Ex. 57, in its original we find that the contracting parties have first described the property that was agreed to be sold together with its boundaries. The price is then indicated as being Rs. 4,000/- per acre totalling upto Rs. 1,20,000/-. The pertinent wording relating to the contract is that the vendor having agreed to sell the property at Rs. 4,000/- per acre has received under this contract Rs. 10,000/- as earnest money. It then recites that after the frivolous litigation of Gasudarey Khan comes to an end the sale - deed will be executed and the balance amount will be paid before the Sub - Registrar. At that stage claimant No. 2 will be not only made owner of he property but will be placed in possession thereof as such. the further recital shows that an advance of Rs. 10,000/- has been made to claimant No. 1 by claimant No. 2 and that the amount was likely to be locked up for some time. In order that the purchaser may not be put to loss in pursuance of this contract, possession is being handed over to claimant No. 2 for the time being. These are all the relevant recitals so far as the questions raised before us are concerned. A plain reading of this contract does not indicate that the agreement itself depended upon the successful termination of the litigation started by Gasudarey Khan. A contract was made forthwith with all the terms being settled, but the execution of the document was postponed till the termination of that litigation. Simply because the time for performance of the contract is deferred, it does not make it a contingent contract. In the same manner even though the intention is to cover up the loss which may be occasioned to claimant No. 2 by payment of Rs. 10,000/- the recitals show that the possession was handed over in pursuance of this document Ex. 57. There is therefore no doubt that the description of the possession is a temporary possession or possession for the time being. The other recitals show that at the time of the execution of the contract, the possession was to be converted on the basis of full ownership. In a contract of sale, even though possession is delivered in part performance it does not become possession of an owner, as the contract by itself does not create any right in the land. We are, therefore, of the view that neither of the points raised by Mr. Vaishnav has any substance.

10. The next point argued before us is that if this is a complete contract and possession has been transferred to claimant No. 2 under this contract, then the rights of the parties should be determined, in view of the provisions of Section 53-A of the Transfer of Property Act, Possession of claimant No. 2 would be protected under the principles of part performance incorporated in Section 53-A of the Transfer of Property Act. Mr. Vaishnav added that this a peculiar case when both the sides were willing to perform its part of the contract. Claimant No. 1 was willing to accept the price at the rate of Rs. 4,000/- per acre and deliver possession as well as execute a registered document in due course as provided by the agreement. They are now prevented by the intervention of the State which has acquired the entire property. If the claimant No. 1 was a willing seller and claimant No. 2 was a willing buyer, but their contract cannot proceed to the execution of the document for no fault of either of them, both of them must be made to share the effects of the acquisition by the State in proportion to their respective rights. What is argued is that the price privately fixed was Rs. 1,20,000/- and the compensation awarded by the land Acquisition Officer is only Rs. 34,500/-. Out of the agreed price of Rs. 1,20,000/- only Rs. 10,000/- have been advanced by claimant No. 2 to claimant No. 1. This amount bears the proportion of 1/12th to the total price. That being so, the interest of the purchaser - claimant No. 2 would be 1/12th in the compensation amount and that of the vendor 11/12th. We are unable to appreciate the logic of this argument.

11.Provisions of Section 54 of the Transfer of Property Act provide that a mere contract of sale does not of itself, create any interest in or charge on such property. What has happened between the parties is that a contract of sale was executed and Rs. 10,000/- were advanced as earnest under this contract. What is the effect of payment of earnest amount will be separately considered. However, mere execution of contract of sale does not of itself create any right, interest or charge in the property proposed to be demised. We cannot therefore treat claimants Nos. 1 and 2 as if they are sharers in losses and gains as if co - owners of the property. The ownership continued to vest in claimant No. 1 alone until all private rights were extinguished by the process of acquisition. That being so, the procedure suggested and the calculations made by Shri Vaishnav do nor appear to be logical. We would therefore reject them.

12.Third alternate argument of Mr. Vaishnav was that the contract between the parties has now been frustrated and it has become impossible of performance by either side because of fortuitous circumstances of acquisition by the State. He therefore wishes to draw upon the principle incorporated in Section 65 of the contract Act. According to him, the agreement is now discovered to be void or has now become void for no fault of either of the party. In the circumstances a person who has received any advance on agreement or contract is bound to restore or make compensation for it to the person from whom he received it. In this view, he says that claimant No. 2 may be at best be paid Rs. 10,000/- which he has advanced and the rest of the compensation amount should be paid to claimant No. 1. The result which is proposed by Mr. Vaishnav is acceptable to us but it does not appear that the reasoning on which he has based his claim can be accepted.

13.The trial Court has assumed that claimant No. 2 has filed a suit for specific performance of the contract, viz, Ex 57 itself. It is admitted before us that this was an erroneous assumption and no such suit has been filed by claimant No. 2. There is undoubtedly some other litigation between claimant No. 1 and claimant No. 2 but that does not relate to S. No. 4 which was the subject - matter of acquisition. On the assumption that claimant No. 2 being ready and willing to perform his part of the contract and further assumption that he has filed a suit for specific performance of the contract, which it is further assumed might result in a decree for specific performance of the contract, the trial Court has treated claimant No. 2 as entitled to recover the entire amount of compensation. Since this conclusion is based on erroneous assumption of facts it must at once be set aside.

14.The learned trial Judge has further relied upon a judgment of this Court in Dossibai Nanabhov v. P. M. Bharucha : (1958)60BOMLR1208 . We are of the view that the reasoning in that report and the conclusions drawn by the learned Judges are of very limited assistance to us in deciding the disputed question before us. In that case claimant No. 2 had in his favour an agreement to lease of certain plots of land for a period of 99 years at a certain rent per annum with option to renew the lease for a further period of 99 years. There were two such contracts. Though the lease money varied the period for which the leases were contemplated were the same, viz., 99 years in the first instance with an option to renew for a further period of 99 years. Out of the two properties separately demised, one was further agreed to be leased by claimant No. 2 to claimant No. 3 for the purpose of co - operative housing. There were written agreement to lease. There were not registered nor any registered lease - deed executed. However, claimant No. 2 the lessee from the original owner was handed over possession in pursuance of the agreement to lease. Claimant Nos. 2 and 3 put in claims before the Collector along with the original owner lessor, who was claimant No. 1. One of the questions raised was that claimants Nos. 2 and 3 had no right to apply either under Section 9 of the Land Acquisition Act and had no further right to claim any share in the compensation. The learned Judges have examined several reported cases and have come to the conclusion that so far as the lease is concerned where it is accompanied by delivery of possession and the period for which the lease was to be executed was a very long period like 99 years with an option for further 99 years, the possession of the intending lessee must be treated as if it was a possession of the lessee. it is on that reasoning that the learned Judges accepted the right of claimants Nos. 2 and 3 to apply under Section 9 read with Section 3(b) of the Land Acquisition Act. The interest of claimants Nos. 2 and 3 was treated as interest in the land and apportionment was made on a certain basis. In the course of their discussion reference was made to judgment of the Punjab High Court in Chuttan Lal v. Mul Chand AIR 1917 Lah 40. That was a case where an agreement to sell was executed but was not yet rescinded when acquisition took place. Mr. Justice Shadilal who delivered the judgment of the Bench of the Court observed that the expression 'person interested' has been defined in Section 3(b) of the Land Acquisition Act as including all persons claiming interest in compensation awarded on account of the acquisition of land under the Act and this definition in their opinion was wide enough to include the equitable interest that Mulchand claimed in that case. It may be pointed out that the judgment of the Punjab High Court was delivered where the Transfer of Property Act was not applicable. The learned trial Judge has been influenced by this judgment to hold that the case of an intending purchaser could be equated with the case of a person having a contract of lease for a long period in his favour which contract is accompanied by possession. We are of the view that it would not be possible to equate the rights and liabilities of a vendor and vendee under an agreement of sale with those of intending lessor and lessee, as their rights and liabilities are governed by different statutory provisions of the Transfer of Property Act. Where specific statutory provisions exist they must be given effect to when the rights and liabilities of the parties are to be determined. We would therefore prefer to consider the relevant provisions which govern the rights and liabilities of vendors and vendees when their contract is unable to reach fulfillment without their being any fault of either of them. We would also then examine the provisions of the Land Acquisition Act for the purpose of determining whether there is any specific provision to settle such rights of vendors and vendees when their contract has become impossible of performance due to a fortuitous circumstances like acquisition of land by the State.

15.We have hardly any doubt that it must be assumed in the present case that the vendor and the vendee, viz. claimant Nos. 1 and 2 were willing to perform their respective part. Before, however, occasion arose to proceed further with the agreement, the State notified the property for acquisition on March 25, 1965. Not only that but after completing all formalities the possession was obtained on October 9, 1965. This determines all the private rights and completes the vesting of the property in the State for a public purpose. We have already pointed out earlier that the Civil Suit which was then pending came to a successful termination on November 3, 1965, whereby the rights to execute the sale - deed was exercisable within four months thereafter upto March 3, 1966. All this became impossible because the private ownership of the land came to be terminated on October 10, 1965. Undoubtedly, therefore, the contract of sale has been frustrated as it became impossible of performance. We have already pointed out that a contract for the sale of immovable property is a contract that a sale of such property shall take place on terms settled between the parties. It does not, of itself, create any interest in or charge on such property. Claimant No. 2 had while making this contract of sale also advanced a sum of Rs. 10,000/- by way of earnest. When the contract became frustrated due to the acquisition by the State, a situation arose where the mutual rights of the parties must be determined and settled. In our view, to a situation like this the provisions of Section 55 and more particularly sub - section 96) Clause (b) would be attracted. Claimant No. 2 is undoubtedly a buyer and the expression 'buyer' as used in sub - section (60 of Section 55 also includes a person who has agreed to buy. So far as the buyer is concerned, sub - section (6) conceives of both the positions where the ownership is transferred to him. Sub - clause (a) deals with a situation where the ownership of the property is passed to a buyer. As soon as that happens that buyer is entitled to the benefit of any improvement in, or increase in value of the property, and to the rents and profits thereof. In other words, he is entitled to all the attributes of full ownership of the property. However, where the agreement is yet to culminate into transfer of ownership but where the buyer is willing to perform his part of the contract, his rights are indicated in sub - clause (b) of sub -section (6) of S. 55. The relevant sub - clause is as follows :-

'55 (6) (b) : Unless he has improperly declined to accept delivery of the property, to a charge on the property, as against the seller and all persons claiming under him, to the extent of the seller's interest in the property, for the amount of any purchase - money properly paid by the buyer in anticipation of the delivery and for interest on such amount and, when he properly declines to accept the delivery, also for the earnest (if any) and for the costs (if any) awarded to him of a suit to compel specific performance of the contract or to obtain a decree for its rescission'.

The clause quoted above, contemplated a case that a buyer shall not decline to accept delivery improperly. If he is willing to accept delivery of the property then he is entitled to charge on the property as against the seller and all persons claiming against him to the extent of seller's interest in the property for the amount of any purchase money properly paid by the buyer in anticipation of the delivery and for interest on such amount. Where, however, there is good ground why the buyer should deliver (decline ?) to accept delivery, he is also entitled for the earnest (if any) and for the costs (if any) awarded to him of a suit compel (sic) specific performance of the contract or to obtain a decree for its rescission. This statutory charge is created as soon as the buyer advances any part of the sale price or earnest to the seller. This charge is against the seller and all persons claiming under him to the extent of the interests of the seller in the property and also for the amount of purchase money properly paid. The property and the interest of the seller therein is in the nature of security for the purchase money properly paid, as also for the earnest amount. In the circumstances indicated in the above specific clause, the extent of the charge is not only confined to the purchase money properly paid and the earnest but also extends to the interest upon this amount. What is the nature of this charge and how will it operate when the subject matter of the contract has been acquired by the State and is no more available for going ahead with the contract It appears that when the seller and buyer are both willing to perform their respective parts of the contract but the specific performance of the contract has become impossible by the unexpected interference by the State in acquiring the property, the relative rights between the parties would continue to be the same as under the T. P. Act. In other words due to the impossibility of the performance of the contract, the buyer will be entitled to recover from the seller any purchase money properly paid together with interest and also earnest with interest and to that extent he would have had under the statutory provisions quoted above a charge on the land. However, the land or the property is no more available to the parties as the State has acquired it and by deciding its compensation has converted the property into a sum certain. The property is in a sense transformed into the sum certain and that rights of respective parties would continue to be the same. In respect of this sum or the amount of compensation, which they had or which they would have had against the property. In other words the buyer would be entitled to claim from the compensation amount, which represents the converted form of property, his purchase money and earnest together with interest. It is in this sense that the buyer whose contract is now frustrated appears to have a claim or share in the compensation which becomes payable to the owner of the property by reason of the acquisition thereof.

16. At this stage we may consider the provisions of the Land Acquisition Act for the purposes of finding out whether the buyer of this type, whose contract is frustrated, is in a position to make a claim before the Land Acquisition Officer. The first definition in this behalf that must be seen is that 'person interested' contained in Section 3(b) of the Land Acquisition Act. According to this definition, 'person interested' includes all persons claiming an interest in compensation to be made on account of the acquisition of land under this Act, and it further provides that a person shall be deemed to be interested in land if he is interested in an easement affecting the land. In this inclusive definition a person interested includes a person claiming an interest in compensation. This claim to an interest in the compensation, must arise out of acquisition of the land. A plain reading of the wording of Section 3(b) does not require that a person for being interested, but have an interest in the land which is acquired as such. It is enough that he has an interest in the compensation which has become payable on account of the acquisition of the land. In other words the occasion for claiming the interest in the compensation is the acquisition of the land. The claim of interest in compensation made is not necessarily dependent upon the interest in the land itself. Under Section 9 of the Land Acquisition Act, the Land Acquisition Officer or Collector has to issue notice that the Government intends to take possession of the land and that claims to compensation for all interests in such land may be made to him. A question arises for consideration as to whether a claimant like claimant No. 2 who is undoubtedly interested in the compensation payable for the acquisition of the land, could be described as a person having claim to compensation for any interest in the land. A charge extending to the recovery of the purchase money and earnest paid together with interest would not be described as an interest in the land in the sense of right in the immovable property. According to Section 100 of the Transfer of Property Act, where immovable property of one person by act of parties or operation of law made security for the payment of money to another and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property and all the provisions herein before contained which apply to a simple mortgage shall, so far as may be, apply to such charge. The difference between a mortgage and a charge is that in a charge there is no transfer of an interest in the property but the creation of a right of payment out of the property is specified, and as such it cannot be enforced against a bona fide purchaser for value. A broad distinction between the two would be that whereas a charge only gives right to payment out of a particular fund or particular property without transferring that fund or property , a mortgage is in essence a transfer of an interest in specific immovable property. Even though therefore a buyer like claimant No. 2 may have charge for the recovery of certain amount, he would not be said to be a transferee of an interest in the immovable property. However, the intention of the Land Acquisition Act is to acquire property for a public purpose by extinguishing all private rights, by awarding compensation at the same time for all interests in the land, which are required to be reckoned with at the time of acquisition. We have already pointed out that under the definition of Section 3(b) a buyer like claimant No. 2 would be undoubtedly a person interested as he can claim the amount advanced by him together with interest from the land and in the absence of the land from the money which represents the converted value of that land. When Section 9 calls upon all person to put in claims to compensation for all interests in such land, we are of the view that an interest of the present type held by claimant No. 2 is also intended to be covered. There need not be a transfer of immovable property in favour of a person before he could be described as a person entitled to claim for an interest in the land. the language of Section 9(1) of the Land Acquisition Act appears to us to be broad enough to include interest and claim for charge on land which would amount to an interest in the land for the purpose of Section 9(1). This being so claimant No. 2 had undoubtedly right to apply under the Land Acquisition Act to the Collector for apportionment of the compensation amount.

17.Once it is held that claimant No. 2 was entitled to apply and a dispute has arisen between the two rival claims, the Collector and the Land Acquisition Officer had no option but to refer that dispute to a Court under Section 30 of the Land Acquisition Act. Shri Paranjpe, appearing for claimant No. 2 made a claim only on the basis of Section 55(6)(b) of the Transfer of Property Act. He, however, added that the amount for which his client makes claim is not only Rs. 10,000/- but the disputed payment of Rs. 14,000/- together with interest on both these amounts. He further argued that not only these two amounts together with interest must be paid to claimant No. 2 but he is entitled to claim solatium at the rate of 15 % on these two items of Rs. 10,000/- and Rs. 14,000/- under the provisions of sub - section (2) of Section 23. So far as the claim of Rs. 14,000/- is concerned, an issue was also framed in the trial Court. Unfortunately it was deleted and the parties were not permitted to lead evidence on the same. Shri Vaishnav attacked that claim on the ground that no dates of payment have been mentioned in the claim before the Collector as also in the claim petition before the Civil Court. Since no evidence has been permitted to be led it would not be possible to express any view on the disputed alleged payment. It will be enough to point out that in the claim petition put in by claimant No. 2 before the Civil Court he has alleged in para 2 that Rs. 10,000/- were advanced as earnest under the agreement dated 7-4-1964. Thereafter subsequently from time to time claimant No. 2 has paid an amount of Rs. 14,000/- towards the sale consideration of the property agreed to be purchased. Since this is the pleading of claimant No. 2 he must be permitted to prove whether he really advanced Rs. 14,000/- from time to time as pleaded towards the consideration of the property. Not only he will be entitled to this amount but from the date of payment of the various items which go to make Rs. 14,000/- he will be entitled to claim interest. To the extent of deciding that dispute whether Rs. 14,000/- were really advanced at all and whether they were towards the consideration of the property the matter will have to be remanded to the trial Court for disposal according to law in the light of the directions which we propose to give in this judgment. For the present we are disposing of this appeal on the footing that Rs. 10,000/- have been paid as earnest at the time of the execution of the agreement of sale.

18.Since we are taking the view that claim of claimant No. 2 is awardable to him under the provisions of Section 55(6)(b) of the Transfer of Property Act, we would agree with Mr. Paranjpe that his client will be entitled to claim reasonable interest. We think that interest should be allowed at the rate of 6 per cent. We will also indicate a little ahead as to how we made calculations and what the trial Court need of, if it finds that Rs. 14,000/- or any portion thereof are found to have been advanced towards the purchase money. In this regard Shri Vaishnav also argued that it should be open to his clients to press all points of fact as well as law against the alleged payment before the trial Court. For instance, he argues, that the notification under Section 4(1) was issued on March 25, 1965. From that date onwards the performance of the contract became impossible. Claimant No. 2 has not given any dates in his pleadings as to when he advanced Rs. 14,000/- or the various items which go to make up Rs. 14,000/- Shri Vaishnav argued that as soon as notification under Section 4(1) was published, it became known to the parties that the contract was impossible of performance. If any advances are made by claimant No. 2 to claimant No. 1 after that date it would be for the Court to see whether it could be purchase money and if so whether it was properly paid by the buyer as contemplated by S. 55(6)(b). He suggested that this is one of the points which claimant No. 1 would be taking up and if advised he might resist the claim on such other grounds as are available in fact and in law. So far as the claim for Rs. 14,000/- is concerned, nothing at all is yet decided and the entire matter is at large for being decided by the trial Court. It would be open to both the sides to lead further evidence to prove and disprove the payment as also to urge all points of law in support of or against the claim. It is for the trial court to find out whether Rs. 14,000/- or any part thereof are really advanced to claimant No. 1 by claimant No. 2 towards the purchase price. Since that issue was not dealt at all by the trial Court and all the grounds that both the sides may be inclined to urge before the trial Court are at large, it is permissible for both of them to plead them before that Court.

19.However, as indicated earlier we are disposing of this appeal on the footing that the admitted amount which is paid by the claimant No. 2 to claimant No. 1 is Rs. 10,000/-. The calculation which we have made and the final order which we have passed would obviously be subject to such variations as become necessary by the findings, which the trial Court might give in respect of the additional claim of Rs. 14,000/- for which the matter is being specifically remanded. The calculations which we have made would in that sense be provisional but if no further amount is found by the trial court as due to claimant No. 2 then the calculations would be final and would represent the apportionment of the total compensation.

20.The above discussion leads to the conclusion that because of the frustration of the contract by unforeseen event of acquisition by the State, claimant No. 2 has acquired a right to enforce his charge to the extent of Rs. 10,000/- and interest thereof under Section 55(6)(b) of the Transfer of Property Act. Can he add to this charge the solatium of 15 per cent, which is awarded under sub - section (2) of S. 23 of the Land Acquisition Act Shri Paranjpe argued that in the view which we have taken of the provisions of Section 3(b), claimant No. 2 is a person who is now interested in the land and that interest has been acquired by the State at the time of the acquisition of the land S. No. 4. The definition of 'land' in clause (a) of Section 3 is again inclusive and is therefore, a broad definition. The expression 'land' includes benefits to arise out of land, and things attached to the earth or permanently fastened to anything attached to the earth. This being an inclusive definition Shri Paranjpe argued that the expression 'land' would also include an interest in the land. When Government acquired land it acquired all interests and such interests must be valued in terms of the provisions of Section 23 (2). With this premise he wanted us to read the provisions of Section 23. Sub - section (1) thereof indicates that while awarding the amount of compensation for the land acquired, the Court is required to take into consideration clauses first to sixth which fall thereafter. Clauses secondly to sixthly are not relevant for the present purpose. The first clause says that the Court shall take into consideration the market value of the land at the date of the publication of the notification under Section 4, sub - section (1). Shri Paranjpe therefore argued that the market value of the interest of claimant No. 2 in the land, with reference to the expression 'land' within the meaning of that expression contained in clause 3 (a) would be that value which the Land Acquisition Officer has fixed for the land or which the Court might ultimately fix for the land. Sub - section (2) thereof says that in addition to the market value of the land, as above provided, the Court shall in every case award a sum of fifteen per centum of such market value in consideration of the compulsory nature of the acquisition. This payment which is known as solatium is made because of the compulsory nature of the acquisition. It is not the market value or the value which is otherwise payable for the damages under the various clauses firstly to sixthly of Section 23. Under Section 6(1) an unwilling person is made to part with his land and therefore an additional payment of 15 per cent is given to him. This, according to Mr. Paranjpe must also be made available to claimant No. 2 whose interest in the land has been compulsorily acquired.

21.We are unable to agree with this reason as it contains an obvious fallacy. What is acquired is land or property which has been described by the inclusive definition of land in clause (a) of Section 3. What is payable under the Act is compensation for the compulsory acquisition. Now, compensation is not merely confined to market value. Shri Paranjpe seems to assume that compensation is market value besides which 15 per cent is an additional payment. Section 23 as a whole deals with the matters which must be considered by the Court in determining the compensation payable.. While awarding compensation, the first items that must be taken into consideration is the market value of the land. While the land is being acquired with the standing crop, damages are to be paid for that purpose which are included in clause secondly of Section 23(1). If the acquisition results in serving the land from other portion and that results in damages, they must be made good. In this manner each of the clauses of sub - section (1) of S. 23 deals with a separate item which has to be valued and added up together. To this amount of 15 per cent, over the market value. When a sum total of all these items is made, the ultimate sum represents the compensation payable for the compulsory acquisition of the land. It is this amount which is now payable for the land. To whom to pay, and how much to pay each, is a matter of apportionment or distribution. In drawing support to this argument Shri Paranjpe referred us to the provisions of Section 11 which relate us to the inquiry to be made by the Land Acquisition Officer and the award to be ultimately passed. He points out that the award must contain three items : (i) the true area of land, (ii) the compensation which in the opinion of the Land Acquisition Officer should be allowed for the land; and (iii) the apportionment of the compensation among all the persons known or believed to be interested in the land, or whom, of whose claim, he has information, whether or not they have respectively appeared before him. Mr. Paranjpe therefore submits that claimant No. 2 is having interest in the land and as such a person to whom the compensation must be apportioned by the Collector under Section 11 while making the award.

22.Here again we do not think that the reference to Section 11 can be of any assistance. The Collector is not in a position to make an award relating to the apportionment since there is a dispute. The third item under Section 11 is payable only when clause falls in Section 29 contained in Part IV of the Land Acquisition Act. Section 29 says that where there are several persons interested, if such persons agree in the apportionment of the compensation, the particulars of such apportionment shall be specified in the award and as between such persons the award shall be conclusive evidence of the correctness of the apportionment. Clause (iii) of Section 11 can come into operation only when there is an agreement between the parties who claim apportionment and to the extent there is an agreement the Collector can record the apportionment. Section 30 says that when the amount of compensation has been settled under Section 11, if any dispute arises as to the apportionment of same or any part thereof, or as to the persons to whom the same or any part thereof is payable, the Collector may refer such dispute to the decision of the Court. Since dispute is raised by the claimants regarding apportionment there is no power in the Collector to decide the dispute but he has to refer it to the decision of the Court. In the present case where there were only two claimants and the apportionment was a matter of dispute there could be no pronouncement under item (iii) of Section 11 in the award, but having made his declaration under items (i) and (ii) the Land Acquisition Officer has no option but to refer the dispute to the Court. That is what he has done.

23.When the matter is referred to the Civil Court under Section 30, it is important to note that the Land Acquisition Act has not made any provision for the purpose of apportionment or distribution of the compensation. The Act provides for the persons interested in the land or persons interested in the compensation payable for the land to apply for both the purposes, viz. for the purpose of claiming an enhanced compensation for the land acquired, as also for the purpose of claiming apportionment. The dispute relating to the adequate payment of compensation is referable to the Civil Court under Section 18, but that dispute is referred after the Land Acquisition Officer makes his award with respect to the final amount as regards compensation. Further enhancement of the compensation is a matter of inquiry by the Civil Court under a reference under S. 18 of the Land Acquisition Act. That claim is to be decided in terms of S. 23 of the Act. So far as Section 30 is concerned, the Collector or the Land Acquisition Officer has no right to entertain the dispute or to decide it but has only a right to refer the dispute to a Civil Court.

24.A Division Bench of this Court in the case of : (1958)60BOMLR1208 has an occasion to consider the implication of Section 30 and the rights of the Civil Court to decide the dispute relating to apportionment. The learned Judge observed as follows :-

'Section 30 of the Land Acquisition Act merely provides that the Collector may make a reference to the District Court on a dispute as to the apportionment of the amount of compensation or any part thereof or as to the persons to whom the same or any part thereof is payable. But the Legislature has not laid down the principles by reference to which the dispute relating to apportionment has to be decided. The reason is obvious. When a dispute relating to apportionment arises, the Court is trying a dispute as to the civil rights between the parties relating to their interest in the money into which the land is transformed'.

We are in respectful agreement with these observations. Having permitted those persons to apply who had interest in the compensation or who had claim to the compensation or who had also interest in the land, the enquiry, as we had stated earlier, takes two different directions. One is the fixation of the compensation payable and the other is dispute relating to apportionment which is referred to the Court under Section 30. Since it has been so received in the Civil Court it becomes a matter to decide the civil rights of the parties and to make valuation in terms of money, of those civil rights which the parties have. There the rights of the parties are like those of two brothers who have equal moities in the land itself, it would be easy for the Civil Court to pronounce that in the total compensation payable including solatium, the interest of each one will be half. However, apart from the simple case of this kind, there are various civil interests which are required to be valued when the dispute between the claimants is to be resolved. Fro instance there may be an attaching creditor who had attached the land of his debtor for the purpose of recovering the decretal dues. If before he succeeds in enforcing his decree against the property attached, the land is acquired by the State, what would happen He would undoubtedly have a claim towards the compensation which would be awarded, as the compensation would represent the converted pool of money of the land itself. The interest of such an attaching creditor could never exceed the decretal amount. Thus his interest will have to be independently valued and a fixed compensation to the extent of his decree would be payable to such a claimant, He would not be a general sharer in the general compensation in terms of certain percentage or proportion. In the same way if there is a mortgagee who has his mortgage debt against the property and the property comes to be acquired, what would happen to the mortgaged amount Sub - section (2) of S. 73 of the Transfer of Property Act provides that where the immovable property, which was mortgaged, has been compulsorily acquired, the mortgagee shall be entitled to claim payment of the mortgage - money, in whole or in a part, out of the amount due to the mortgagor as compensation. The mortgage under the Transfer of Property Act is a transfer of an interest in the property. However, the Legislature being aware of the nature of this interest has provided for the payment of only that amount to the mortgagee which would be due under his mortgage. In other words, if the total compensation paid is much more than the mortgage amount as found due it will not be permissible for the mortgagee to say that his interest in the land was compulsorily acquired and as such he should be paid solatium of 15 per cent, under sub - section (2) of S. 23. If that is so, even when the interest was in the nature of transfer of property, or transfer of interest in the land itself, we fail to understand how a claimant like claimant No. 2, who had only contracted to purchase the property and whose contract is nor frustrated can claim any share in the solatium payable under sub - section (2) of Section 23. His interest, which is now a limited interest as indicated by Section 66(55)(6)(b) of the Transfer of Property Act is a definite amount as described in that clause. Purchase money properly paid with interest and earnest, if any, together with interest would be the only amount which he can claim and to the extent of this amount he would have a charge on the property. He has therefore a limited interest to the extent of a definite amount, as what was acquired was the land and not the interest of this claimant separately as such. In fact if the acquisition was no there, the only right available to claimant No.2 was to obtain a sale - deed by paying the full consideration under the agreement of sale. He could not have independently exercised the right to enforce the charge under Section 55(6)(b). Since that right of claimant sale - deed is not available to him because of the compulsory acquisition by the State, he is required to fall back upon the alternate right available to him to enforce the charge under S. 55(6)(b). This was a dormant right which became available to him because of the compulsory acquisition. Though therefore such a right continues to be a charge on the amount of compensation payable representing the land, it must always be remembered that this right is a limited now to recover a sum certain and nothing beyond. This right which arises as a result of the compulsory acquisition could not be considered to be an interest in the land which was acquired as such by the State. Fifteen per cent solatium payable under sub - section (2) of S. 23 represents the payment for compulsory acquisition of land and as we have indicated above there was no compulsory acquisition of the interest of this claimant at all, he could not resort to the provisions of sub - section (2) of S. 23 for claiming any additional amount.

25.We are therefore of the view that what claimant No. 2 will claim is only Rs. 10,000/-, the earnest money claimed under the agreement of sale, Ex. 57. We are inclined to allow 6 per cent, interest as reasonable. However, in this case, certain developments have taken place with regard to the payment of compensation, which was deposited by the Collector in the Court and cognizance must be taken of these facts. It is also necessary to remember that possession was handed over to claimant No. 2 under agreement, Exh. 57, in view of a loss which he may sustain for the advance of Rs. 10,000/-. So long as, therefore, claimant No. 2 was in possession he could not claim any compensation by way of interest on the advance of Rs. 10,000/-. He was deprived of the possession on the 9th of October 1965. The Land Acquisition Officer deposited the amount of Rs. 34,500/- which represented the compensation in respect of the 30 Acres of the land acquired and also referred the dispute under Section 30 of the Court. The money was lying in the Court till 17-2-1969 on which date it came to be paid to claimant No. 2. From 9-10-1965 or 10-10-1965 to 17-2-1969 claimant No. 1 was liable to pay claimant No. 2 6 per cent interest on Rs. 10,000/-. It may be borne in mind that in view of this judgment the claimant No. 2 was not entitled to keep anything more than Rs. 10,000/- with him. The payment of Rs. 24,500/- was an excess payment to him on that date. However, he was directed by the appellate Court to repay the amount in Court and he paid Rs. 10,000/- on 10-10-1969 and Rs. 24,500/- on 25-10-1969. During this period, claimant No. 1 was entitled to recover 6 per cent interest from claimant No. 2 on Rs. 24,500/- upto 10-10-1969 and on Rs. 14,500/- upto 25-10-1969. Since we have held that RS. 10,000/- were legitimately due to claimant No. 2 he could have retained that amount during the entire period and he need not pay interest to claimant No. 1 for that amount. If then appears that the entire amount of Rs. 34,500/- was repaid to claimant No. 2 on 3rd June 1970. Before this payment for the intervening period from 25-10-1969 to 3rd June 1970 he was entitled to recover interest on Rs. 10,000/- at 6 per cent. Thereafter claimant No. 2 deposited Rs. 10,000/- in Court on 1-6-1971 and Rs. 14,500/- on 1-8-1971. So far as this period is concerned, from 3rd June 1970 to 1st June 1971 claimant No. 2 will have to pay interest at 6 per cent on Rupees 24,500/- and for the remaining period upto 1-8-1971 on 14,500/-. Having made an account of interest which are respectively payable by one party to the other it has been found by the learned Advocates on both the sides that claimant No. 2 has to pay Rs. 325.50 to claimant No. 1. On the compensation that there is no further payment it would appear that out of the total compensation of Rupees 34,500/-, Rs. 9,675/- are payable to claimant No. 2, this is because he is entitled to Rs. 10,000/- and interest thereof but for the intervening period described above, he becomes liable to interest amounting to Rs. 325.50 to claimant No. 1. In this manner his claim of Rs. 10,000/- is reduced by Rs. 325/- and the claim now works out at Rs. 9,675/-. He has already retained with him Rs. 10,000/- and he will have to pay back Rs. 325/- to claimant No. 1 The balance of amount of Rs. 24,500/- is lying in the Court. In addition he is entitled to recover Rupees 325/- from claimant No. 2 by execution of this order.

26.At this stage we may point out that the dispute cannot be finally disposed of because the claimant No. 2 has alleged further payment of Rupees 14,000/- towards the purchase money. The claim having been disputed, as we have pointed out earlier, the matter will go back to the trial Court for finding out whether claimant No. 2 proves the payment of Rs. 14,000/- or any part thereof to claimant No. 1 towards the purchase price of the acquired land S. No. 4. We have already indicated that the parties are at liberty to lead further evidence and tale up all defences to which they are entitled to in law and fact. After hearing the parties in this manner, if the trial Court comes to the conclusion that some amount or the entire amount is not only paid towards the purchase price but is recoverable in view of the legal position under Section 55(6)(b) of the Transfer of Property Act, he will award that much amount together with interest at 6 per cent from the date of payment to claimant No. 2 from claimant No. 1 and that would be a claim against the compensation amount. In the meantime we give liberty to claimant No. 1 to withdraw the amount of Rs. 24,500/- from the Court on furnishing security to the satisfaction of the trial Court.

27.So far as the costs are concerned, we are inclined to award costs to the parties in proportion to their success in both the Courts. However, the claim of Rs. 14,000/- is yet to be decided on merits. After it is so decided by the trial Court, it will award proportionate costs to either side depending upon their success in this litigation.

28.Since the acquisition proceedings are fairly old we direct that the learned trial Judge will dispose of the matter as early as possible and it will be appreciated, if he could dispose of the same within two months, after receipt of record.

29.There will be no order as to costs for the State throughout.

30. Order accordingly.


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