Holding

The Tribunal had allowed the claim for interest, the Act permits such interest as part of the estate’s liability, the interest claim is not barred by res judicata, and the estate holder is liable in his capacity as estate representative, with the interest share to be borne proportionately by all sharers.

Summary

The State Government took over a hospital that was run by the Zamindar of an impartible estate and claimed recovery of endowment amounts (Rs 1,00,000 for the hospital and Rs 1,00,000 for a charitable fund) with interest at 6% per annum from the compensation paid on abolition of the estate under the Andhra Pradesh (Andhra Area) Estates (Abolition and Conversion into Ryotwari) Act, 1948. The Estates Abolition Tribunal initially allowed the principal amounts but rejected interest and priority; in subsequent applications the Tribunal allowed interest, a point contested by the estate holder who argued that the Act did not provide for interest, that the claim was barred by res judicata, and that liability should be shared among all estate sharers. The High Court held that the Tribunal had indeed permitted interest and directed payment, a view appealed to the Supreme Court. The Supreme Court affirmed that the Tribunal’s order included interest, that the Act authorises such interest as part of the estate’s total liability, and that the interest claim was not barred by res judicata. It further held that the estate holder, in his capacity as representative of the estate, is liable to pay the interest proportionately with the other sharers. Consequently, both appeals were dismissed.

Issues considered

Whether the Tribunal's order of 15-12-62 allowed the claim for interest on the endowment amounts.
Whether the claim for interest is barred by res judicata.
Whether the Andhra Pradesh (Andhra Area) Estates (Abolition and Conversion into Ryotwari) Act, 1948 permits payment of interest on the endowment amounts.
Whether liability for interest falls on the estate holder personally or on all sharers of the abolished estate proportionately.

Legislation cited

Andhra Pradesh (Andhra Area) Estates (Abolition and Conversion into Ryotwari) Act, 1948s. 45(3)

Subjects

Estate abolitionCompensationInterest on endowmentRes judicataLiability of estatePriority of creditorsAndhra Pradesh Estates ActRyotwari conversion

Judgment

P.V.G. RAJU GARU
A
v.

STATE OF ANDHRA PRADESH

JANUARY 24, 1990
B
[SABYASACHI MUKHARJI, CJ, P.B. SAWANT AND
K. JAYACHANDRA REDDY, JJ.)

Andhra Pradesh (Andhra Area) Estates (Abolition and Conver-
sion into Ryotwari) Act, 1948: Section 45(3)-Compensation paid on
abolition of Estate-En_dowmen[ created by Estate for maintenance of
c hospital-Government taking over hospital-Liability of Estate to pay
the endowed amounts from out of compensation-Whether includes
interest-Payment of interest-Whether all sharers liable to contribute.

Under the provisions of the Andhra Pradesh (Andhra Area)
D Estates (Abolitimumd Conversion into Ryotwari) Act, 1948, (the Act),
the Government took over a hospital which was run by a Zamindar of
an impartible estate. After the take-over, the Government made appli-
cations before the Estafo Abolition Tribunal claiming recovery of cer-
tain amounts which were endowed to the hospital hy the erstwhile ruler,
from out of the compensation paid on the abolition of the estate. Claims
E for interest and priority over other creditors were also made.

In the first of such applications, the Tribunal allowed the amount
claimed without specific reference to interest but rejected the claim for
priority. In the subsequent proceedings, the Tribunal rejected the claim
for interest as also priority and held that in the earlier proceeding also,
F it has disallowed the claim for interest.

Aggrieved against the Tribunal's orders, Government preferred
appeals before the High Court. The High Court took the view that while
allowing the claim the Tribunal bad not only allowed the claim for
principal but also interest thereon, and ordered payment of interest as
G claimed.

These appeals are against the High Court's orders and the appel-
lant contended that there was no provision in the Act for payment of
interest; that the expression 'amount' claimed before the Tribunal
should be construed to mean the principal amount only; that the subse-
H quent claims for interest were barred by resjudicata; that it would be
134
P .V.G. RAJU v. STATE OF A.P. 135

inequitable to claim interest on the amounts endowed since no interest
A
was paid on compensation; that while the compensation was shared by
,./\ others also, the appellant cannot be singled out to pay the interest.

Dismissing the appeals, this Court,

HELD: 1.1 The High Court was right in holding that the Tri- B
bunal by its order of 15.12.62 had allowed the claim for interest. Under
the scheme of the Act Itself, the Tribunal was required to apportion the
-Jo.:-- amounts according to the priorities depending upon the amount of com-
pensation deposited at the time of giving of the direction in question. It
was, therefore, only to be expected that the Tribunal would first give
directions with regard to the payment of principal amounts and defer
~
the payment of interest to a future date. That is exactly what the Tri- c
bunal had done in the present case and, hence, in the second set of
applications made by the Governm_ent, the Government had not only
-~
.. claimed the balance of the principal amounts but also interest thereon •
Thus, the issue with regard to the claim for interest in the subsequent
applications was not barred by resjudicata. [141B-C, D]. D

1.2 All that the Tribunal had done was to direct the Estate to pay
the amounts in question to the Government together with interest at the
I admitted rate, which interest was in any case payable towar~s the .,-
,A.. endowment objects. Under the Act, the Tribunal had, among other
~

things, to determine the liability of the Estate. The endowment amounts E
together with the interest admittedly accruing thereon formed the .total
liability of the Estate. The interest, further was a recurring one and the
objects of the endowment were to be financed from out o,f the said
interest. When the Tribunal directed the payment of interest together
'..--~ With the principal ammint, it did nothing more than direct the Estate to
., honour its liability. [14 lF-G] F

2. Whether or not interest was paid on compensation due to the
Estate, it has nothing to do with the Estate's liability towards the
endowments. The interest directed to be paid by the Tribunal was
not interest over and above the endowed amounts. It is the prin-
cipal amount together with the interest accruing thereon which con- G
stituted the total endowed amounts at the time of abolition of the
' Estates. [142A-B]
')-
!
3. The direction of !he High Court to pay the said amount will
-. have to be read as a direction to the appellant to do so in his capacity as
the Estate-holder and not in his individual capacity. If the final amountS H
136 SUPREME COURT REPORTS [1990] 1 S.C.R.

A are already distributed among all the sharers and/or the creditors, the
Government has to look for the amount of interest to all the sharers
and/or their c~editors including of course the appellant. All the sharers
will be liable to contribute towards the payment of the amount of
interest in proportion to their share in the compensation. That is how
the order of the High Court and the earlier order passed by the Tri-
B bunal will have to be read and construed. [142E-H; 143A]

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 804-
05 of 1975.

From the Judgment and Order dated 28.12.1973 of the Andhra
C Pradesh High Court in S.T.A. Nos. 1and3 of 1971.

P.R. Seetharaman and T. V.S.N. Chari for the Appellant.

M.C. Bhandare, A.V.V. Nair for the Respondent.

D The Judgment of the Court was delivered by

SAWANT, J: The present appeals arise out of the proceedings
for the determination of the claims of the creditors and directions to
pay them on the abolition of the Estates of the Vizianagaram and
taking over of the same by the State Government under the Andhra
E Pradesh (Andhra Area) Estates (Abolition and Conversion into
Ryotwari) Act, 1948 (hereinafter referred to as the Act).

2. Under the provisions of the said Act, on 7-9-1949 the Gosha
hospital at Vizianagaran1 which was till then manned by the hereditary

F
landlord and zamindar of the impartible Estate of Vizianagaram
(hereinafter referred to as the Estate) was handed over to the State.
The late Maharani Appalakondayamba otherwise popularly known as
"Rani of Rewa" had executed a Will on 14-12-1911 creating a per-
manent endowment of a sum of Rs.1,00,000 for the maintenance of the
said hospital. This amount was kept in deposit with the Estate. Since
r
the Government had taken over the hospital by its Application No.
G TOP 123/58 to the Estates Abolition Tribunal and Distt. Judge,
Vishakhapatnam, the Government claimed the recovery of the said
amount with interest at the rate of 6% per annum and also claimed a
priority over the other creditors. The Tribunal by its Order dated
15-12-62 allowed the claim for the amount, but rejected the claim for
priority. The Tribunal also directed the payment of Rs.36,695 to the
H Government out of the total amount of compensation which was then
P.V.G. RAJU v. STATE OF A.P. [SAWANT, J.] 137

deposited with it. The Government filed an appeal against the said
A
Order being STA No. 1/64 in the High Court, but the same was dismis-
sed. It appears that subsequently, another sum of compensation being
Rs.11,78,581.09 was deposited, and hence the Government filed
another application, viz. TOP 5/69 for payment. of the balance of
Rs.63,305 with interest thereon at the rate of 6% per annum frotn
1-7-49 till the date of payment. In this ap_plication, the appellant did B
not dispute the Government's claitn for Rs.63,305 but contended that
·no interest on the sum of Rupees one lakh or on any part thereof was
payable since according to him the Tribunal had rejected the claim for
interest by its earlier Order of 15-12-62 in TOP 123/58. The Tribunal
accepted the appellant's contention and held that the claim for interest
was rejected earlier and disallowed the same. Against the said Order,
the Government preferred an appeal to the High Court-being STA
c
1/71.

3. The late Rani of Rewa by her same Will had also deposited
another sum of Rupees one lakh with the Estate with the direction that
the interest thereon should be utilised in feeding Telugu Brahmin D
students studying advanced Sanskrit Literature and Shastras at
Banaras. The said fund will hereinafter be referred to as the Banaras
Charities Fund. It appears that sufficient number of Telugu Brahmin
students were not available and hence the Executor of the Will had
applied for utilisation of the said amount for the Gosha hospital, and
in that application, the High Court had directed that out of the E
accumulated surplus interest of Rs.47 ,897 in the said Banaras
Charities Fund, a sum of Rs.30,000 be capitalised and deposited with
the Estate and the interest thereon at the rate of 3% per annum be
utilised to meet the recurring annual expenditure of the Gosha hospi-
tal. After the abolition of the Estate, the Government filed before the
Tribunal a. claim application being TOP No. 124/58 for recovery of the F
said sum of Rs.30,000 with interest at the rate of 6% per annum. The
Government also claimed priority over the other creditors for the said
amount as well. The Tribunal by its same order of 15-12-62 allowed the
Government's claim for the amount, but rejected the claim for prio-
rity. The Tribunal also directed that a sum of Rs.11,008.50 be paid to
the Government from .out of the amount of compensation which was G
then deposited. Against the said order, the Government preferred an
appeal to the High Court being STA No. 2/64which was dismissed. On
the subsequent deposit of further compensation, the Government pre-
ferred another application being TOP 6/69, for the balance of
Rs.18,991.50 and for interest thereon at the rate of 6% per annum
from 1-7-49 till the date of payment. the appellant did n?t dispute the H
138 SUPREME COURT REPORTS [1990] 1 S.C.R.

A claim for the payment of the balance amount of Rs.10,991.50, but
resisted the claim for interest, firstly on the ground that there was no
provision for payment of interest in the Act and secondly on the
ground which was urged in the other appeal, viz. that in TOP 124/58 it
was rejected by the Tribunal earlier. The Tribunal accepted the appel-
lant's contention and disallowed the claim for interest. Against the
B said order, the Government prefeITed an appeal to the High Court
being STA No. 3/71.

4. Thus before the High Court the only question in both the
appeals was whether the Tribunal by its earlier order of 15-12-62 in
TOP 123 and 124/58 had allowed or rejected the claim for interest?
The High Court by its common order dated 28-12-73 held that the
C Tribunal by its earlier order of 15-12:-62 had not only allowed the claim +'
for the principal endowed amounts of Rupees one lakh and Rs.30,000
respectively, but also interest thereon, and directed the payment of
interest thereon from 1-7-49 as claimed. It is this order which is chal-
lenged by the appellant by these two separate appeals.
D
5. Civil Appeal No. 804 is against the order of the High Court in
STA No. 1/71 arising out of TOP 5/69 (coITesponding to earlier TOP
123/58) and Civil Appeal No. 805 is against the order in STA No. 3/71
arising out of TOP 6/69 (co"!esponding to earlier TOP 124/58).
.A
E 6. Mr. Bhandare, learned counsel appearing for the appellant in
both the appeals contended firstly, that the Tribunal while disposing of
TOPs Nos. 123 and 124 of 1958 should be deemed to have rejected the
claim for interest because in the operative part of the order, the Tri-
bunal did not state that it was granting interest, but only mentioned

f
that it was granting the amounts which were claimed in the applica-
lions. The expression 'amount' claimed in the application should be t--
)
construed to mean the principal amount only and not interest. He also
tried to derive support to this submission from the fact that while
directing the payment of specific amounts, the Tribunal had consi-
dered only the principal amounts in both cases as is evident from the
orders of the Tribunal in that behalf. Hence he submitted that the
0 issue with regard to the interest was barred by resjudicata and the
interest could not have been claimed by the Government in its subse-
quent applications. His second contention was that assuming without
admitting that there was a direction given by the Tribunal to pay the
interest, such direction was without jurisdiction because there was no
provision in the Act for payment of interest. Thirdly, he submitted
ff that in any case it would be inequitable to ask the Estate w pay interest
•

P.V.G. RAJU v. STATE OF A.P. [SAWANT, J.] 139

when the compensation which was paid to the Estate did not bear any A
interest. Fourthly, he contended that in any event, the appellant
personally cannot be held liable to pay the interest since the endowed
amounts were always a part of the Estate which was abolished, and the
compensation which was paid and later on distributed among the
&harers of the Estate, covered the said endowed amounts. The
interest, according to him, therefore, has to come out of the shares of B
all the sharers and the appellant alone cannot be directed to pay the
same. Fifthly, his contention was that assuming without admitting that
the appellant as an executor had retained the said amounts and applied
them to purposes other than the objects of the endowment, he cannot
be penalised for the same under the Act by making him pay the
interest on them. At the most he may be liable for misfeasance as a
trustee under the appropriate law. Lastly, he submitted that in any
c
case since other sharers are not made parties to the present proceed-
ings, no direction can be given in the present proceedings for payment
of interest which has to come out of the compensation received by all
the sharers.
D
7. As regards the first contention, namely, that the Tribunal had
not directed the payment of interest in TOPs 123 and 124/58, it may be
pointed out that in the applications made by the State Government to
the Tribunal for the recovery of the two endowed amounts, the
Government had in clear terms claimed that they were entitled to the
said sums with interest @ 6% per annum from 1-7-49 till the date of E
payment, and that the Government was entitled to this amount after
the compensation was deposited. The Government had also made a
further claim that it was entitled to the payment of the said amount in
priority over the claims of all other persons. Pursuant to these aver-
--'( ments, the Tribunal had framed Issue No. 2 in TOP 123/58 and Issue
No. 3 in TOP 124/58 in identical terms as follows: F
(.\
,
"Whether the Government is entitled to claim the said
amount with interest from the date of abolition ....... ?"

While recording its findings in both the TOPs, the Tribunal had in
paragraph 21 state as follows'. G

"Under these circumstances, I hold under point 3 that the
T Government is entitled to get payment of the amounts
claimed in TOPsNos. 123-24/58."

The tribunal further reiterated the said finding in paragraph 29 as H
follows:
140 SUPREME COURT REPORTS [1990] 1 S.C.R.

"It is not in dispute that the amount of these two lakhs ·of
A
rupees continued to be with the Samsthanam and the Sam-
sthanam was paying interest on those amounts for the
purposes of the endowments . . . . . . . . . From that time
onwards all along these two amounts have been treated as
debts payable by the Samsthanam. The amounts claimed
under TOP Nos ....... 123-24/58 relate to this amount of
Rupees two lakhs and interest accrued thereon. Under
these circumstances I hgl\l that the amounts claimed under
the said petitions are debts payable from and out of the
assets of the lmpa.rtible Estate."

C Again later in the same paragraph, it is stated as follows:

"Under these circumstances I hold·under point 15 that the
-
>

amounts claimed in TOP Nos ................... 113-24/
58 .................... are debts to be paid from and out
of the assets of the Impartible Estate of Vizianagaram and
D therefore they are debts which come under the category of
debts contemplated under Section 45(3) of the Abolition
Act and those debts are liable to be paid from out of the
compensation amount before any division of it can be made
between the sharers and maintenance holders."

E In paragraph 32 the Tribunal has observed as follows:

"From the above discussion it is clear that out of the
amount of Rs.3,63,007 in dispute concerned in the first
instance the State Government is entitled to payment of
the amount due to it under TOP No. 122/58 and out of the
F balance remaining the amounts payable under TOP Nos.
... 123-24/58 ......... should be paid."

It is, therefore, more than clear that the Tribunal had by its order in
question given a finding that the Government was entitled to the entire
amount claimed by it, namely, the principal endowed amount and also
G interest claimed thereon.

8. The contention that because the Tribunal had not reiterated
the word 'interest' in the next sentence of its direction and had only Y
mentioned "the amount" payable under the TOPs and, therefore, it
should be held that the Tribunal had rejected the claim for interest is
H too facile to_~ accepted. For the same reason, we are also not irllpres-
P.V.G. RAJU v. STATE OF A.P. [SAWANT, J.] 141

sed by the argument that since the Tribunal had while directing the
payment of specific amounts had only referred to a part of the princi- A
pal amounts it should be held that the Tribunal had rejected the ciaim
for interest. Under the scheme of the Act itself, the Tribunal was
required to apportion the amounts acoording to the priorities depending
upon the amount of compensation deposited at the time of the giving
of the direction in question. It was, therefore, only to be expected that B
the Tribunal would first give directions with regard to the payment of
the principal amounts and defer the payment of interest to a future
date. That is exactly what the Tribunal had done in the present case
and, hence, in the second set of applications made by the Government,
the Government had not only claimed the balance of the principal
amounts but also interest on the entire of the said amounts from
1-7-49. The High Court was, therefore, right in holding that the Tri- c
bunal by its order of 15-12-62 had allowed the claim for interest. In the
circumstances, the issue with regard to the claim for interest in the
subsequent applications, namely, applications TOPs 5/69 and 6/69 was
not barred by resjudicata, as contended by Shri Bhandare.
D
9. The second contention that the Tribunal could not have
directed the payment of interest because there was no jurisdiction to
do so is also misconceived, for the simple reason that in the WHI in
question, both the said amounts were deposited by the testator with
)-. the Estate, and the .beneficiaries of the endowment, namely, Gosha
hospital and the Banaras Charities Fund were to be financed from the E
interest accruing on the said two amounts respectively. It was not in
dispute that these two amounts were lying deposited with the Estate
and the Estate was paying interest 1,@6% per annum on the' amount of
Rupees one lakh which was meant f~r Gosha hospital and:@5% per
annum on the amount meant for the Banaras Charities Fund·: Hence,
all that the Tribunal had done was to direct the Estate 1to pay the F
amounts in question to the Government together with interest at the
admitted rate, which interest was in any case payable towards the
endowmen(objects. Under the Act tl_ie Tribunal had, among other
things, to determine the liability of the Estate. The endowment
amounts together with the interest admittedly accruing. thereon
together formed the total liability of the Estate. The. interest, further G
was a recurring one and the objects of the endowment were to be
financed from out of the said interest. When, therefore, the Triounal
directed the payment of interest together with the principal amount it
did nothing more than direct the Estate to honour its liability.

10. As regards the third contention that it was inequitable for H
142 SUPREME COURT REPORTS [1990] 1 S.C.R.

the Tribunal to ask the Estate to pay the interest since the compensa-
A
tion paid to the Estate did not bear any interest, we are afraid that the
submission is beside the point. In the first instance, under the scheme
of the Act the amount of compensation was to be paid in stages as and
when the compensation was deposited. Secondly, whether the Estate
was paid or not paid the interest on compensation due to it, has
B nothing to do with the Estate's liability towards the endowments. The
interest directed to be paid by the Tribunal was not interest over and
above the endowed amounts. It is the principal amount together with
the interest accruing thereon which constituted the total endowed
amounts at the time of the abolition of the Estates.

11. The next three contentions can be dealt with together. There
c is no doubt that the amounts were deposited with the Estate, and it
.
+

was the Estate which was paying interest to the beneficiary or
beneficiaries under the endowments. Hence, as observed by the Tri-
bunal, in the first instance, the endowment amounts together with the
interest accruing thereon had to be set apart, from out of the compen-
D sation payable to the Estate, and it is the balance which had to be
distributed among the sharers or the creditors of the sharers ilS the case
may be. As we read the Tribunal's order of 15-12-62 as well as the
impugned order of the High Court, we see no direction to the appel-
lanHo pay the said amount personally, as indeed on such direction
could have been given, since the facts show, that both the amounts
E were lying with the Estate and not with the appellant in his individual
capacity. What is recorded in the Tribunal's order is that it is the
Estate-holder who had not made over the two amounts to the Govern-
ment on the date of its taking over. Hence, the direction of the High
Court to pay the said amount will have to be read as a direction to the
appellant to do so in his capacity as the Estate-holder and not in his
-
F individual capacity. If the final amounts are already distributed among
all the sharers and/or the creditors, the Government has to look for
the amount of interest to all the sharers and/or their creditors includ-
ing of course the appellant. All the sharers will be liable to contribute
towards the payment of the amount of interest in proportion to their
share in the compensation. That is .how the impugned order of the
G High Court and the earlier .order of .15-12-62 passed by the Tribunal
will have to be read and construed. In the circumstances, it matters not
whether all the sharers were parties to the proceedings. The proceed-
ings were essentially against the Estate, and the present appellant in
his capacity as an Estate-holder represented the Estate and all the
sharers. The order passed in the proceedings is, therefore, binding on
H all the sharers in the Estate notwithstanding the fact that all the sharers
P.V.G. RAJU v. STATE OF.A.P. [SAWANT, J.J 143

were not parties to the proceedings. We, therefore, find no substance A
in the contention that the present proceedings were bad in law because
'
~,
all the sharers were not made parties to the same.

12. In the result, both the appeals fail. In the circumstances,
however, there will be no order as to costs.
B
G.N. Appeals dismissed.

T