Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL No.7835 OF 2011  (Arising out of S.L.P. (C) No. 10580 of 2006)

  Kerala State Housing Board & Ors.   …  Appellants

Versus

Kerala State Housing Board, Nellikode Housing Colony Allottees Assn. & Ors.         … Respondents

WITH

CIVIL APPEAL No.7836 OF 2011  (Arising out of S.L.P. (C) No. 21478 of 2008)

Kerala State Housing Board & Anr.   …  Appellants

Versus

K. Narayana Poduval & Ors.                         … Respondents

AND

CIVIL APPEAL No.7837 OF 2011  (Arising out of S.L.P. (C) No. 21817 of 2008)

Kerala State Housing Board & Anr.   …  Appellants

Versus

Smt. M. P. Meenakshi  & Ors.                         … Respondents

O R D E R

A. K. PATNAIK, J.

Leave granted.  2. Civil Appeal arising out of S.L.P.(C) No.10580 of 2006  

is  against  the  judgment  dated  28.02.2006  in  Writ  

Appeal No.1760 of 2004 of the Division Bench of the  

Kerala High Court.  Civil Appeal arising out of S.L.P.(C)  

No.21478  of  2008  is  against  the  order  dated  

13.06.2008 in Writ Appeal No.1968 of 2007 disposing  

of  the  Writ  Appeal  in  terms  of  the  judgment  dated  

28.02.2006  in  Writ  Appeal  No.1760  of  2004.   Civil  

Appeal  arising  out  of  S.L.P.(C)  No.21817  of  2008  is  

against the order 13.06.2008 in Writ Appeal No.1940  

of 2008 disposing of the Writ Appeal in terms of the  

judgment dated 28.02.2006 in Writ Appeal No.1760 of  

2004.  These three appeals are being disposed of by  

this common order as common questions of fact and  

law arise in the appeals.

3. The facts very briefly are that in the years 1984 and  

1985 land was acquired for allotment of plots under  

the  Chevayur  Housing  Scheme  and  the  Nellikode  

Housing Scheme respectively undertaken by the Kerala  

State  Housing  Board  (for  short  ‘the  Board’).   The  

landowners  did  not  accept  the  compensation  offered  

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for  the  acquired  land and sought  a  reference to the  

Civil Court under Section 18 of the Land Acquisition  

Act, 1894.  While the dispute in regard to quantum of  

compensation  was  pending,  the  Board  entered  into  

agreements of sale with various allottees of the plots of  

land during the years 1988-1990 and made a provision  

therein that the Board shall  be entitled to re-fix the  

final  price  of  the  property  agreed  to  be  sold  to  the  

allottees taking into account  inter  alia the enhanced  

compensation  awarded by  the  Courts  and Tribunals  

and that the decision of the Board in fixing the revised  

price of the property shall be conclusive and final.  It  

was also expressly  agreed in the  agreements of  sale  

that  after  finalization  of  the  price  of  the  property  

agreed to be sold by the Board, the allottee shall pay to  

the Board together with interest at the rate of 15% per  

annum, the difference between the tentative price fixed  

and the price finally fixed for the property by the Board  

within  thirty  days  of  the  date  of  a  registered  notice  

demanding the payment thereof or in such quarterly  

installments over a period not exceeding two years to  

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be determined by the Board.  After the reference cases  

were finalized and disposed of in the year 1997, the  

Board  deposited  the  enhanced  compensation  with  

interest,  but  did  not  promptly  serve  the  demand  

notices on the allottees for payment of the difference  

between  the  tentative  price  and  the  final  price  with  

interest  and  it  was  only  in  the  year  1999  that  the  

Board served the notices on the allottees to pay the  

said  difference  with  interest  at  the  rate  of  15% per  

annum.   

4. The allottees then filed Writ Petitions before the Kerala  

High  Court  and  the  learned  Single  Judge  passed  

orders refusing to interfere with the claim of interest  

on  the  enhanced  amounts  of  compensation  on  the  

differential amount till 1997 when the references were  

finally  disposed  of  by  the  Court  and  the  Board  

deposited  the  enhanced  compensation  with  interest.  

The  learned  Single  Judge,  however,  found  that  

individual  account  statements  giving  the  relevant  

details and calculations of the amounts demanded had  

not been served on the allottees and held that this was  

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on account of the lethargy of the officials of the Board  

and,  therefore,  the  Board  was  not  entitled  to  any  

interest on the differential amount from the allottees  

for  the  period  from  1997  till  the  date  of  service  of  

individual account statements on the allottees.

5. Aggrieved by the orders of the learned Single Judge,  

the Board filed Writ Appeals before the Division Bench  

of  the  Kerala  High  Court  and  by  the  impugned  

judgments  and orders  the  Division Bench dismissed  

the appeals.  In the impugned judgments and orders,  

the Division Bench of the High Court agreed with the  

view taken by the learned Single Judge that the Board  

was not entitled to claim any interest and that too at  

the rate of 15% per annum for the period from the date  

of deposit of enhanced compensation in 1997 till the  

date  of  service  of  the  individual  account  statements  

saying that the Board cannot punish the allottees for  

its own lethargies.  Aggrieved, the Board is in appeal  

before us.

6. Learned  counsel  for  the  appellant-Board  submitted  

that  there  was  a  clause  in  the  agreements  of  sale  

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executed  between  the  Board  and  the  allottees  that  

after finalization of the price of the property agreed to  

be  sold  by  the  Board,  the  allottee  shall  pay  to  the  

Board  together  with  interest  at  the  rate  of  15% per  

annum, the difference between the tentative price fixed  

and the price finally fixed for the property by the Board  

within  thirty  days  of  the  date  of  a  registered  notice  

demanding the payment thereof or in such quarterly  

installments over a period not exceeding two years to  

be determined by the Board.  He submitted that it was  

only in the year 1998 that the price was finalized and  

the demand notices were served in the year 1999 on  

the allottees to pay the difference between the tentative  

price and the final price together with interest at the  

rate of 15% per annum as per the aforesaid clause in  

the  agreements.   He  further  submitted  that  till  the  

allottees paid the difference between the tentative price  

and  the  final  price,  they  retained  the  differential  

amount  with  them and  made  use  thereof  while  the  

appellant-Board was deprived of the use of the money.  

He relied on the decision of this Court in  Chandigarh  

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Housing Board, Chandigarh v. K.K. Kalsi & Ors. [(2003)  

12 SCC 734] wherein it  has been held that in such  

cases where the allottees have retained the money with  

them and made use thereof while the Board has been  

deprived of the use of the money, it will be equitable  

for  the  allottees  to  pay  a  reasonable  interest  to  the  

Board on such money.

7. Learned counsel appearing for the respondents, on the  

other hand, supported the orders of the learned Single  

Judge and the impugned judgment and orders of the  

Division Bench of  the  Kerala  High Court  contending  

that  there  was  no  justification  whatsoever  for  the  

appellant-Board  to  claim  any  interest  on  the  

differential amount between the tentative price and the  

final  price  from  1997  till  the  date  of  service  of  

individual account statements on the allottees.

8. We  have  considered  the  submissions  of  the  learned  

counsel for the parties and we find that the reason why  

a  clause  in  the  agreements  of  sale  executed  by  the  

Board and the allottees for payment of interest at the  

rate  of  15%  per  annum  on  the  differential  amount  

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between the tentative price and the final price of the  

land allotted to the allottees was inserted was that in  

the proviso to Section 34 of the Land Acquisition Act,  

1894 it  is  provided that if  the compensation for  the  

acquired  land  or  any  part  thereof  is  not  paid  or  

deposited within a period of one year from the date on  

which  possession  of  the  acquired  land  is  taken,  

interest at the rate of fifteen per centum per annum  

shall  be payable  from the date  of  expiry  of  the  said  

period of one year on the amount of compensation or  

part  thereof  which  has  not  been  paid  or  deposited  

before the date of such expiry.  Since references under  

Section  18  of  the  Land  Acquisition  Act,  1894  were  

pending in the Civil Court when the agreements of sale  

were  executed  by  the  Board  and  the  allottees,  a  

stipulation had to be made in the agreements of sale  

that  as  and  when  the  Court  finally  determines  the  

compensation  and  the  Board  becomes  liable  to  pay  

enhanced compensation, the Board will have to deposit  

not only the enhanced compensation but also interest  

at  the  rate  of  15%  per  annum  on  such  enhanced  

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compensation.  If this was the purpose of the clause in  

the  agreements  of  sale  between  the  Board  and  the  

allottees, once the compensation was finalized by the  

Court  and  the  enhanced  compensation  was  paid  or  

deposited in the year 1997, the Board was not liable  

for any interest under the proviso to Section 34 of the  

Land  Acquisition  Act,  1894  from  the  date  of  such  

payment or deposit.  Since the purpose of stipulating  

the rate of interest of 15% per annum was to take care  

of the liability on the enhanced compensation provided  

in the Land Acquisition Act,  1894 and not to enrich  

the Board by recovery of high rate of interest from the  

allottees,  we  agree  with  the  view taken by  the  High  

Court that the Board was not entitled to interest at the  

rate of 15% per annum on the difference between the  

tentative price and the final price after the finalization  

of  the  compensation  and payment  or  deposit  of  the  

enhanced  compensation  by  the  Board  in  the  year  

1997.

9. We, however,  do not  think that  the  High Court  was  

right in taking a view that the appellant-Board was not  

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entitled to any interest for the period from the date of  

payment or deposit of the enhanced compensation in  

1997  till  the  date  of  service  of  individual  account  

statements on the allottees.  The relevant clause in the  

agreements of sale requires the Board to serve only a  

notice of  demand on the allottee  and such notice  of  

demand  must  obviously  indicate  the  tentative  price  

and the final price as determined by the Board and the  

differential amount between the tentative price and the  

final price, which the allottee was required to pay along  

with interest.   The clause did not stipulate  that the  

individual  account statements giving the  details  and  

calculations  as  enumerated  in  the  orders  of  the  

learned Single Judge were also required to be served  

on the allottees by the Board.  It is not disputed that  

notices  of  demand  were  served  on  the  allottees  not  

immediately after finalization of the compensation by  

the  Court  and  payment  or  deposit  of  the  enhanced  

amount  by the  Board  in  the  year  1997,  but  after  a  

period  of  more  than  an  year  some  time  in  1999.  

During the period the allottees did not make payment  

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of the differential amount between the tentative price  

and  the  final  price,  they  retained  the  differential  

amount  in  their  hands and used the  same and the  

Board  lost  the  opportunity  to  utilize  this  for  its  

activities,  the Board would be entitled to interest  on  

the  differential  amount  at  a  reasonable  rate  as  has  

been held by this Court in Chandigarh Housing Board,   

Chandigarh v.  K.K.  Kalsi  &  Ors.  (supra).   In  our  

considered  opinion,  interest  at  the  rate  of  8%  per  

annum  on  such  differential  amount  between  the  

tentative price and the final price would be reasonable,  

which the allottees must pay to the Board.

10. We  accordingly  set  aside  the  order  passed  by  the  

learned Single Judge and the impugned judgment and  

orders of  the Division Bench of  the  High Court  and  

dispose of the Writ Petitions of the respondents with  

the direction that the respondents will be liable to pay  

interest  to  the  appellant-Board  on  the  differential  

amount between the tentative price and the final price  

at the rate of 8% per annum from the date of deposit  

or  payment  of  the  enhanced  compensation  by  the  

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Board in 1997 till payment of the differential amounts  

by the allottees.  The appeals are allowed to the extent  

indicated above with no order as to costs.                   

……………………..J.                                                                (R.V. Raveendran)

……………………..J.                                                                (A. K. Patnaik) New Delhi, September 14, 2011.     

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