Holding

The State's liability to pay interest on compensation ceases upon deposit of the amount in the reference court, so interest cannot be awarded from the date of deposit.

Summary

The Special Land Acquisition Officer (the State) awarded compensation under Section 11 of the Land Acquisition Act, 1894, but a dispute arose over its apportionment. The Collector referred the matter to a civil court under Section 30, depositing the compensation amount in that court as required by Section 31. The civil court, while apportioning the compensation, ordered interest at 9% per annum from the date of deposit until the reference court’s decision, a ruling affirmed by the High Court. The State appealed, arguing that once the amount is deposited, the statutory liability to pay interest ceases. The Supreme Court held that the reference court and the High Court erred in directing interest, as the Act expressly terminates the State’s interest liability upon deposit. Consequently, the order for interest was set aside and the appeal was allowed.

Issues considered

Whether interest is payable on the compensation amount from the date of its deposit in the reference court pending the decision under Section 30 of the Land Acquisition Act, 1894.
Whether the reference court and the High Court erred in directing payment of interest at 9% per annum.

Legislation cited

Land Acquisition Act, 1894s. 11, s. 18, s. 30, s. 31

Subjects

Land acquisitionCompensationApportionmentInterest on compensationReference courtCivil courtStatutory interpretation

Judgment

A SPECIAL LAND ACQUISITION OFFICER
v.
PUTTAIAH AND ORS.

AUGUST 16, 1995

B K. RAMASWAMY AND B.L. HANSARIA, JJ.J

Land Acquisition Act, 1894.

Ss.11 30, JI-Interest on compensation by civil court-Acquisitioll of
C Land-Compensation-Dispute regarding apportionment of compensa-
tion-Reference to civil Court-Amount deposited into reference court-Civil
Court awarding interest on the amount from date of deposit till decision of
reference under s.3()-Held, on deposit of amount into court and pending
decision of reference, liability of State to pay interest thereon ceases from date
of deposit.
D
On a dispute as to the apportionment of the compensation, the
Collector made a reference under s.30 of the Land Acquisition Act, 1894
to the Civil Court, which while apportioning the compensation among the
claimants, awarded interest at 9% per annuni. The High Court affirmed
the order in a revision petition. Aggrieved, the State filed the appeal by
E special leave.

Allowing the appeal, this C0 urt

HELD : 1.1. The reference court as well the High Court committed
an obvious illegality in direction payment of interest at 9% on the amount
F of compensation from the date of deposit by the Collector till the decision
of the reference court under s.30 of the Land Acquisition.Act, 1894. [784-D]

Puroshotham Haridas & Ors. v.Amroth Ghee Co. Ltd., Guntur& Ors.,
AIR (1961) AP 143, disapproved.
..
G 1.2. On making the award under s.11 of the Act, the Collector is
enjoined to make a reference under s.30, if there is any dispute as to the
person entitled to receive the compensation and the apportionment there·
of. On making such reference, the Collector is further enjoined under s.31
of the Act to deposit the amount of compensation in the court to which
H reference under s.18 would be submitted. On deposit of the amount into
782
·'
SPL. LAND ACQSN. OFFICER v. PUTIAIAH 783

the court and pending decision of the reference, the liability of tlie State A
to pay interest thereon ceases with effect from the date of deposit. [784-C]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7979 of
1995.

From the Judgment and Order dated 10.3.87 of the Karnataka High B
Court in C.R.P. No. 1148 of 1987.

M. Veerappa for the Appellant.

The following Order of the Court was delivered :
c
Leave granted.

Though the respondent have been served, none is appearing either
in person or through counsel. The admitted position is that there being a
dispute as to the apportionment of the compensation, the Collector made D
a reference under s.30 of the Land Acquisition Act, 1894 (for short, 'the
Act') and the Reference Court formed the point thus :

"Who among the claimants are entitled to receive compensation
and to what extent?"
E
The Civil Court, while apportioning the compensation among the
claimants, awarded interest at 9% per annum on the amount of compen-
sation. When it was challenged in Civil Revision Petition No. 1148/87 dated
March 10, 1987, the High Court confirmed the same following a judgment
of the Andhra Pradesh High Court Pumshotham Haridas & Ors. v. Ammth
Ghee Co. Ltd. Guntur & Ors., AIR 1961AP143. F

The question is whether the view of the High Court is correct.
Section 11 of the Act provides that the Land Acquisition Officer shall
enquire into the respective interests of the persons claiming compensation
or believed to have an interest therein and shall make an award; and under G
clause (iii) of sub-section (1) apportion the said compensation among all
persons known or believed to be interested in land, of whom or of whose
claims, he has information whether or not they have respectively appeared
before him.

Under Section 30 of the Act, when the amount of compensation has H
784 SUPREME COURT REPORTS [1995) SUPP. 2 S.C.R.

A been settled under s.11, if any dispute arises as to the apportionment of
the 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. Under sub-section (2) of Section 31, if there is any dispute
as to apportionment of the compensation, the Collector shall deposit the
amount of compensation in the Court to which reference under Section 18
B would be submitted.

Thus, it could be seen that on making award under s.11, the Collector
is enjoined to make a reference under s.30, if there is any dispute as to the
person entitled to receive the compensation and the apportionment there-
C of. On making such reference, the Collector is further enjoined under s.31
to deposit the amount of the compensation in the Court to which reference
under s.18 would be submitted. In other words, on deposit of the amount
into the court and pending decision of the reference, the liability of the
State to pay interest thereon ceases with effect from the date of the deposit.
Therefore, the Reference Court as well as the High Court committed an
D obvious illegality in directing payment of interest at 9% on the amount from
the date of deposit by the Collector till the decision of the reference court
under s.30. The decision of the High Court of Andhra Pradesh is clearly
illegal.

E The appeal is accordingly allowed and the direction to pay interest
is set aside.

R.P. Appeal allowed.