MAHESH LALL SEAL AND ORS. versus UNION OF INDIA AND ORS.

KAPADIA, J. This civil appeal by grant of special leave appeal seeks to challenge judgment and order dated 6.12.04 passed by a Division Bench of the Calcutta High Court allowing F.M.A.T. No.151 of2004 filed by Union of India (respondents herein) challenging the Award of the Arbitrator dated 25.10.2000.

p. 699, margin F

Before the High Court the main contention advanced by Union of India, on whose behest the property was acquired, was that the claimants had entered into agreement with the Government on 18.7 .75 for sale of properties under Section 8(l)(a) of the Requisitioning and Acquisition of Immovable Property Act, 1952 (hereinafter referred to as "the 1952 Act") at a fixed price of Rs.18,98,000/- and in terms of such agreement the full price was paid upon execution of an agreement in Form Kon 26.5.93 and, therefore. there was question of any dispute being referred to arbitration.

pp. 699–700, margin G

The short question which arises for determination in this civil appeal whether the impugned Award of the Arbitrator dated 25.10.2000 was null and void on account of absence of referable dispute to the Arbitrator. The background facts are as follows:

p. 700, margin A

At all material times, appellants (claimants) were the joint owners of Dag Nos.6I3, 6I4, 617 and 6I8 measuring 7.16 acres in area, witlrin Mouza Nainan, P. S. Baranagar, District North 24 Parganas, being portion of premises No.46, B. T. Road, Calcutta (hereinafter referred to as "the acquired property"). The said acquired property was initially requisitioned by Union of India under Defence of India Act and Rules. This was on 22.4. I 942. On 3.3. I 987 the said property was acquired under the I 952 Act along with other properties when Form J was published. Up to 31.12.74 the rent of the <:cquired property was assessed by the L.A. Collector at the rate of Rs.4 I 0/- per month. However, this rate of rent was subsequently increased to Rs.55.465/- per annum. The claimants were paid rent at the rate of Rs.55,465/- per annum during the period 1.1.75 till 2.3.87 when, as stated above, the property stood acquired. In meantime, prior to 10.3.87 U.L.C. Act I976 (for short, "the 1976 Act") came into force. The claimants filed an application under Section 27(2) of 1976 Act for exemption from vesting excess land and for permission to transfer favour of Union of India. The State Government did not finalise the solatium. The State Government failed to decide as to which portion of the aforesaid premises was liable for vesting in the State Government under the said 1976 Act. As the requisition of the disputed premises under the I 952 Act was due to expire on 10.3.87, an order of acquisition was made on 3.3.87. On 27.3.87 Union of India informed the land acquisition officer that the acquiring body had decided to place Rs. I 8,98,000/- for disbursement to the claimants in terms of the agreement dated I8.7.75. Accordingly, the land acquisition officer published an award for Rs.18,98,000/- on 8.6.88. However, the State Government on 6.8.88 appointed an Arbitrator vide notification no.492-Reqn. which was later on cancelled on 16.3.90 at the behest of the Central Government.

p. 700, margin B

On 26.5.93 ultimately the claimants received the entire amount Rs. I 8,98,000/- under protest. They filed writ petition praying for reference under Section 18( 1) of the Land Acquisition Act for enhancement compensation. On 24.1.96 High Court directed the claimants to approach collector. Accordingly on 23.2.96 an application was made for reference before the L.A. Collector under Section 18( I) of the L.A. Act.

pp. 700–701, margin G

On 2.4.97 the State Government once again appointed Arbitrator which Union of India objected. This objection was filed by 25.4.97. On 22.12.97 claimants filed their claim petitions before claiming the compensation in respect of the acquired property Rs.3,00,000/- per kattah. On 5.1.98 Union of India filed its before the Arbitrator under which it stated that the fair market acquired lands on 3.3.87 would not exceed Rs. 70,000/- per the Union of India moved the High Court under Article 226 of on 10.12.98 vide Writ Petition No.2503 of 1998 seeking cancellation appointment of Arbitrator. There was no stay, therefore, proceeded. On 6.12.99 the claimants filed their reply ;,nd compensation at the rate of Rs.70,000/- per kattah as suggested India in its objection dated 5.1.98. By interim order dated Single Judge refused to stay the arbitration proceedings proceedings to continue subject to the result of the writ petition. an application was moved before the Arbitrator by Union to the leave granted by the Arbitrator, saying that the concession 5.1.98 by learned advocate conceding the rate of Rs. 70,000/without obtaining instructions and, therefore, the claimants to receive compensation at that rate. Before the Arbitrator, well as the L.A. Collector contended that on account of agreement the parties as far back as on 18.7.75 and in view of the claimants' signing K as far back as on 26.5.93, the Arbitrator was not in a position award under Section 8(3) of the 1952 Act beyond the amount agreed namely, Rs.18,98,000/-. This is the main contention all through of India. By order dated 18.5.2000 the Arbitrator held that between the claimants on one side and Union of India on the Union of India was represented by the L.A. ·collector who government pleader to appear in the case and conte.st the Union of India and accordingly the government pleader objections against the claim on 5. I .98. The Arbitrator further Vakalatnama filed by the government pleader continued to was never withdrawn. That being the position the Arbitrator conclusion that the application made by Union of India withdrawing its earlier statement of the fair value of Rs. 70,000/was not maintainable. By the said order the Arbitrator rejected filed by Union of India on 21. 1.2000 and came to the conclusion that dispute regarding compensation did exist and therefore, the A jurisdiction to try and decide such dispute.

pp. 701–702, margin A

Being aggrieved by the decision of the Arbitrator dated 18.5.2000 Union of India preferred one more writ petition in the High Court bearing No. I 2072 of2000. This writ petition was dismissed on 30.8.2000 in /imine as misconceived

p. 702

in view of the earlier order of the High Court dated I 5. I 2.99 directing the B Arbitrator to proceed with the arbitration.

p. 702

On 28.9.2000 the writ petition filed by Union of India seeking cancellation of the appointment of Arbitrator was also dismissed by learned Single Judge who took the view that the claimants had received Rs.14,80,000/- out of

p. 702

Rs.18,98,000/- by executing agreement in Form K under Rule 9(5) of the C Requisitioning and Acquisition of Immovable Property Rules 1953 under protest; that various proceedings were initiated before the L.A. Collector but determination could not be made under Section 8 of 1952 Act on account of objections raised by Union of India regarding maintainability of arbitration

p. 702

proceedings and that the State Government had the power to appoint an arbitrator under the said 1952 Act. In this connection, learned Single Judge observed that written objections were filed by the claimants protesting against the offer of Rs.18,98,000/- on the same day when Form K was executed. Learned Single Judge further observed that the Form K agreement contained clause (6) which inter a/ia provided that any dispute or difference arising out

p. 702

of the subject-matter of the agreement shall be referred to an arbitrator, to be appointed by the government, and the decision of the Arbitrator shall be conclusive on all the parties. The provisions of Arbitration Act I 940 were made applicable to such arbitration. Learned Single Judge further found that under the agreement dated I 8.7.75 the right, title and interest was never

p. 702, margin D

conveyed to the Central Government and on the contrary the premises were p acquired on 3.3.87 under the provisions of the 1952 Act after a lapse of about 12 years and, therefore, the consideration of Rs.18,98,000/- had no relevance in the matter of acquisition on 3.3.87. In this connection, learned Single Judge observed that the agreement dated I 8.7.75 can by no stretch of imagination constitute a fair amount of compensation payable in respect of acquisition on

p. 702, margin E

3.3.87. Thus, it was held that in view of Section 8(1)(b) read with clause (6) of the agreement in Form K, there existed a dispute as to the amount of compensation payable for acquisition of the premises on 3.3.87. Thus, there was a referable dispute to the arbitrator. In the circumstances, it was held that the State Government was competent to appoint an arbitrator under Section 8(1 )(b) of the 1952 Act. The writ petition was accordingly dismissed.

p. 702, margin E

On 25. l 0.2000 the Arbitrator announced his award under which he rejected the claim made by the claimants at the rate of Rs.3,00,000/- per kattah. He assessed the market value at the rate of Rs.70,000/- per kattah as on 3.3.87. In his Award it was observed that no witness was examined on either side for the reason that the claimants had accepted the rate of compensation offered by Union of India in their written reply dated 5.1.98. The Arbitrator has further held that the claimants have also filed the report of the Valuer, the sale deed of the adjoining land, the sale instances and accordingly he valued the premises at the rate of Rs.70,000/- per kattah. He also awarded solatium and interest. Accordingly, the amount of Rs.2,65,66,750/- has been awarded as compensation.

p. 703, margin A

Aggrieved by the decision dated 28.9.2000 delivered by learned Single Judge dismissing Writ Petition No.2503 of 1998 regarding maintainability of the arbitration proceedings, Union of India preferred writ appeal APOT No.42 of 2001 filed on 7.1.2001. By decision dated 28.8.2001 the Division Bench dismissed the writ appeal. The main contention advanced by Union of India before the Division Bench was that the claimants had received compensation amounting to Rs.18,98,000/- under the agreement in Form K and, therefore, there did not exist any dispute as to the amount of compensation payable for the same to the owners for which an arbitration was required to be entered into in exercise of the power under Section 8(!)(b) of the 1952 Act. This argument was rejected by the Division Bench holding that there was no material on record to show that the claimants had communicated their acceptance to the offer made by Union of India. On the contrary the Division Bench found that when Form K came to be executed in 26.5.93, the amount of Rs.14,80,000/- was accepted by the claimants under protest. The Division Bench further found that Union of India has never denied receipt of objections from the claimants at the time of receiving compensation. In the circumstances, the Division Bench found that there existed disputes between the claimants and Union of India regarding the quantum of compensation and, therefore, it was not open to Union of India to challenge the notification issued under Section (8)(1)(b) of the 1952 Act appointing the Arbitrator. The Division Bench further found that the agreement dated 18.7.75 for Rs.18,98,000/- was in fact cancelled by the Estates Officer on 15.9.76. The premises in question comprised of 8.90 acres of land. In 1975 the rate was around Rs.5,000/- per kattah. The Division Bench found that the premises are located in a posh area in Barrackpore Trunk Road, Calcutta. The Division Bench agreed with the view expressed by learned Single Judge that Form K contained clause (6) which itself stipulated that any dispute or difference in the matter of detennination of compensation shall be decided by arbitration. It was observed that in the present case Union of India made an offer of Rs.18,98.000/- in 1975 under the agreement dated.18.7.75 when the premises were under requisition and by such an agreement no right, title or interest was ever transferred the claimants to Union of India. Therefore, it was held that the notification under Section 8(l)(b) of the 1952 Act was valid. This was the main aspect be decided by the Division Bench. However, when the writ appeal APOT No.42 of 200 I came for decision the Award of the Arbitrator had come existence and, therefore, the Division Bench observed that the question of validity of the Award, whether by consent or otherwise, was not required be gone into because the only question before the Division Bench was whether the notification issued under Section 8( I )(b) of the 1952 Act was with or without jurisdiction. The High Court, therefore, did not go into the question of the merits of the Award. The High Court declared that the notification under Section 8(l)(b) of the 1952 Act was valid in law as there existed dispute as to compensation between the claimants and Union of India.

pp. 703–704, margin C

Aggrieved by the decision dated 28.8.200 I, Union of India preferred S.L.P ..... (C) ...... CC2417.

p. 704, margin D

On 18.3 .2002 the following order was passed by the Supreme Court S.L.P.:

p. 704, margin D

"Learned Additional Solicitor General appearing for the petitioners seeks leave of the Court to withdraw this petition to pursue other remedies that may be perraissible under the law. The Special Leave Petition is dismissed as withdrawn."

p. 704, margin E

Union of India thereafter preferred an application for review before Division Bench of the High Court against the judgment delivered on 28.8.2001 by the earlier Division Bench of the High Court. The review application dismissed on 14.1.2003 with an observation that Union of India was free challenge the Award in que~tion in accordance with law. It was made clear that in its decision dated 28.8.200 I the earlier Division Bench has not gone into the merits of the Award.

p. 704, margin A

Since the claimants did not receive compensation, on 11.11.2003 claimants moved the High Court vi de Writ Petition No.3001 of 2003 realization of the compensation as per the Award. They sought execution the Judgment of the High Court. At that stage Union of India filed an appeal bearing f.M.A.T. No.151 of 2004 under Section 11 of the 1952 Act against the Award of the Arbitrator dated 25.10.2000.

pp. 704–705, margin G

By impugned judgment dated 6.12.2004 the Division Bench allowed the appeal preferred by Union of India. In appeal, Union of India once again contended that the property in question was acquired on the basis of the agreement dated 18.7.75 under which compensation was ultimately received B at the rate of Rs.18,98,000/- when Form K executed and, therefore, there was no dispute in existence to be referred to arbitration. It was urged that the impugned Award was passed by the Arbitrator on the basis of the concession made vide objections dated 5.1.98 a;id without noticing the fact that the said objection was withdrawn by Union of India on 21.1.2000 when fresh objections were filed saying that the _claimants were not entitled to compensation exceeding Rs.18,98,000/-. It was also urged on behalf of Union of India that claimants were not entitled to solatium and interest as awarded by the Arbitrator. On behalf of the claimants it was once again submitted that the agreement dated 18. 7 .75 offering the price of Rs.18,98,000/- cannot constitute compensation for acquisition which took place after 12 years on 3.3.87 and that reference of D such dispute to arbitration cannot be disputed as illegal. It was urged that the balance amount of Rs.14,80,000/- received on 26.5.93 when Form K was signed, have been received under protest and, therefore, the dispute continued to exist. The claimants also placed reliance on the judgment of the Division Bench dated 28.8.2001 in writ appeal APOT No.42 of2001 in support of their contention that the notification under Section 8(1 )(b) of the 1952 Act appointing an arbitrator was legal, valid and in accordance with law.

p. 705

On the above contentions the Division Bench in the second round of litigation held that there was no res judicata because the findings given by the earlier Division Bench in its decision dated 28.8.2001 were tentative in nature. Accordingly in the second round the Division Bench records a finding, contrary to the decision of the Division Bench in the first round, that at the time of receiving the balance amount of Rs. 14,80,000/- and at the time of signing of Form K on 26.5.93 there did not exist any objection from the claimants. In this connection the Division Bench observed that the claimants had received Rs.14,80,000/- on execution ofform K agreement on 26.5.93 but G there was no simultaneous objection from the claimants who in fact objected to the amount only after receiving the balance amount of Rs.14,80,000/- and, therefore, according to the Division Bench it cannot be said that the claimants received compensation under protest. One fails to understand how in the second round of litigation the subsequent Division Bench gave contrary view on the same point. Realising this difficulty. the subsequent Division Bench holds that the findings given on the above question by the Division Bench in the earlier round were tentative findings and since they were tentative findings the subsequent Division Bench once again goes into the same question and holds that the claimants received the compensation amounting to Rs. 18.98.000/- without any protest and consequently the arbitration proceedings were without jurisdiction. On the merits of the Award the subsequent Division Bench however holds that on 5.1.98 written objections were filed on behalf of Union of India under which it was conceded that the rate of the fair market value was Rs.70,000/- per kattah and not Rs.3,00,000/ per kattah as cont.ended by the claimants. However, these written objections dated 5.1.98 were subsequently withdrawn on 21.1.200 and, therefore, the Arbitrator erred in fixing compensation at the rate of Rs.70,000/- per kattah. The subsequent Division Bench observed that there was no material on record for assessing valuation, particularly, when no evidence was taken by the Arbitrator. In the circumstances, the subsequent Division Bench has set aside the Award dated 25.10.2000. Hence this civil appeal by the claimants.

pp. 705–706

The short question which arises for determination is: whether the subsequent Division Bench was right in holding that the findings given by the earlier Division Bench on the maintainability of the arbitration proceedings, were tentative in nature and, therefore. not binding on the subsequent Division Bench.

p. 706, margin D

On behalf of Union of India it was vehemently urged that no interference is called for in the present case. It was contended on behalf of Union of India that this Court had granted liberty to Union of India vide its order dated 18.3.2002 to pursue other remedies permissible under law. It was urged that even the Division Bench of the Calct1tta High Court clarified the position vide order dated 14.1.2003 saying that Union of India was free to challenge the Award and, therefore, according to Union of India, it was open to it to raise the same contentions regarding maintainability of arbitration proceedings once again in the appeal filed before the Division Bench against the Award under Section I I of the 1952 Act. In this connection, it was submitted by Ld. Additional Solicitor General that the findings of the earlier Division Bench dated 28.8.2001 were tentative in nature and, therefore, the subsequent Division Bench was right in holding, vide impugned judgment, that the arbitration proceedings were not maintainable as the acquisition had taken place under the agreement dated 18.7.75. Consequently, according to Union of India, the Award has been rightly set aside by the Division Bench vide impugned

p. 706, margin E

MAHESl-1 LALL SEAL U.0.1. IKAPADIA. J] judgment dated 6.12.2004.

p. 707

We find merit in this civil appeal. There is a difference validity of the notification issued under Section 8(l)(b) of the one hand and the validity of the Award on merits announced by on 25.10.2000 on the other. In the earlier round of litigation the arose for determination before the High Cou11 was: whether issued under Section 8(1)(b) of the 1952 Act appointing an valid in law. In that litigation there was no question of deciding validity of the Award dated 25. I0.2000. A concurrent finding was learned Single Judge and by the Division Bench upholding the notification under Section 8(l)(b) of the 1952 Act.The notification By no stretch of imagination one can say that the concurrent were· tentative in nature. In this connection, it is important to premises in question were acquired on 3.3.87 which is 12 agreement dated 18.7.75. Under the scheme of the 1952 Act as Land Acquisition Act fair market value has to be determined of acquisition. In this case acquisition had taken place on contention of Union of India is to be accepted it would amount of the price which is not permissible under the law of acquisition. Division Bench in the earlier round had given a finding that question are located in a posh area. In the earlier round a concurrent finding was given by the High Court, both by learned Single Judge Division Bench, that the claimants had received compensation In the circumstances, it cannot be said by the subsequent Division that the earlier findings were tentative. There is one more required to be noted. Before the Arbitrator the claimants enhancement of compensation at the rate of Rs.3,00,000/- per on 5.1.98 Union of India stated that the fair rate was Rs.70,000/- On 21.1.2000 an affidavit is filed by Union of India before saying that the advocate had no authority to concede the rate per kattah. By decision dated 18.5.2000 the objections filed by dated 21.1.2000 were rejected. The decision of the Arbitrator in a writ petition C.O.No.12072 of 2000. This writ petition was by the High Court on 30.8.2000 and, therefore, it is not open to now to say that Rs. 70,000/- per kattah was not the fair rate. also, therefore, concluded.

p. 707, margin A

Lastly, the most important point to be noted is that before the claimants had submitted a valuation report under which A relied upon sale instances and had calculated the fair market value of the acquired property at Rs.73,900/- per kattah (SEE: Valuation report dated 20.12.96 at page 97 of Volume I filed in the Calcutta High Court in F.M.A.T. No.151 of 2004 - Part!). In fact, even the Arbitrator in the impugned Award has referred to the report of the expert valuer and also to the sale instance dated 18.7.86

pp. 707–708, margin G

and, therefore, it cannot be said that the impugned Award is based only on the concession made by Union of India vide its objections dated 5.1.98.

p. 708

..

p. 708, margin B

Before concluding we may mention that Shri Bhaskar Gupta, learned senior advocate appearing on behalf of the claimants, has stated that the

p. 708, margin B

claimants will not press their claim for solatium. In the circumstances, we are not required to examine the question as to whether the claimants were entitled to solatium under provisions of the 1952 Act. However, we are of the view that the interest awarded by the Arbitrator at the rate of 15% per annum from the date of acquisition till payment is on the higher side and accordingly we direct payment of interest at the rate of 9% per annum instead of 15% per annum.

p. 708, margin B

For the above stated reasons, we find merit in the civil appeal and accordingly we set aside the impugned judgment dated 6.12.2004 delivered by the Division Bench of the Calcutta High Court in F.M.A.T. No.151 of2004 and accordingly we direct payment of compensation to the claimants at the rate

p. 708, margin C

of Rs. 70,000/- per kattah in respect of Danga and Bastu land and at the rate of Rs.35,000/- per kattah for the pond land with interest at the rate of 9% per annum from the date of acquisition till payment as ordered by the Arbitrator less amounts paid and received by the claimants till today. We may clarify that in the Award the Arbitrator granted interest on the aggregate amount of land

p. 708, margin C

value + solatium for the period of one year from the date of acquisition on p the basis that Union of India shall pay the requisite amount within three months from the date of the Award. However, Union of India unnecessarily litigated on unstatable points, as stated above, and in the process interest ' continued to accrue and, therefore, we direct Union of India to pay compensation that is land value at the two above-mentioned rates of Rs. 70,000/

p. 708, margin E

- per kattah in respect of Danga and Bastu land and Rs.35,000/- per kattah for the pond land without solatium with interest at the rate of 9% per annum from the date of acquisition till payment, less the amount which has already been paid till date.

p. 708, margin E

Accordingly, the civil appeal is partly allowed with no order as to costs. H A.K.T. Appeal partly allowed.

p. 708, margin G