Satinder Singh And Others vs Amrao Singh And Others

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: supreme-court

Case Number: Civil Appeals Nos. 396 to 398, 419 to 421 of 1959, and 152 of 1960

Decision Date: 2 February, 1961

Coram: P.B. Gajendragadkar, K.N. Wanchoo, K.C. Das Gupta

Satinder Singh and others filed a petition against Amrao Singh and others, and the matter was listed for decision on 2 February 1961 before the Supreme Court of India. The judgment was authored by P. B. Gajendragadkar, who was joined by Justices K. N. Wanchoo and K. C. Das Gupta. The parties were identified respectively as the petitioners Satinder Singh and others and the respondents Amrao Singh and others. The date of the judgment is recorded as 02‑02‑1961, and the bench is described as the Gajendragadkar, P. B. bench, with the full composition of Gajendragadkar, P. B., Wanchoo, K. N., Gupta, K. C., and Das. The case can be cited from the All India Reporter at 1961 AIR 908 and from the Supreme Court Reporter at 1961 SCR (3) 676. Numerous citator references are associated with the decision, including R 1962 SC1305 (21), R 1967 SC1030 (4), RF 1967 SC1032 (5), F 1968 SC 129 (10, 11), RF 1975 SC 32 (24), RF 1975 SC1303 (15‑17, 21), R 1976 SC1721 (15‑16), R 1985 SC 998 (5, 11), F 1987 SC2177 (3), D 1988 SC1520 (18), RF 1990 SC1340 (13), RF 1992 SC 732 (10, 22‑23). The statutes mentioned in the judgment include the Land Acquisition Act relating to the Cis‑Sutlej Jagir and the principles of inalienable land, compensation, apportionment and the timing of interest; the East Punjab Acquisition and Requisition of Immovable Property (Temporary Powers) Act, 1948 (E. P. 48 of 1948), section 5; the Land Acquisition Act, 1894, sections 23, 32 and 34; and the Interest Act, 1839 (32 of 1839), sections 1 and 2.

The factual background reveals that lands in four villages, which formed part of the Cis‑Sutlej Jagir, were compulsorily acquired under the East Punjab Acquisition and Requisition of Immovable Property (Temporary Powers) Act, 1948. At the time of acquisition, the holder of the jagir was a person designated as A. Possession of one of the villages had been transferred to A’s wife, identified as G, as maintenance under a consent decree. The question of payment of compensation for the acquisition was referred to an arbitrator. A asserted that, being the current holder of the jagir, he was entitled to receive the entire compensation amount. A’s son, identified as S, contended that the acquired lands were inalienable, that A possessed only a life interest in them, and therefore the compensation money should be kept in deposit, with A receiving only the interest payable for the duration of his life. G claimed that she was entitled to the whole compensation in respect of the lands over which she was in possession. All three claimants further demanded interest on the compensation from the date they took possession until the compensation was actually paid. The arbitrator’s award held that (i) the acquired lands were indeed inalienable and A possessed only a life interest; (ii) S was entitled to a share of the compensation awarded; (iii) the compensation for the first three villages should not be deposited but should be divided between A and S in the proportion of three‑quarters to one‑quarter; (iv) the compensation for the fourth village should be deposited, with the interest thereon payable to G, and after G’s death the principal should be divided equally between A and S; and (v) none of the claimants were entitled to any interest on the principal amount of compensation. The High Court, on appeal, affirmed the arbitrator’s award in its entirety. The claimants then sought special leave to appeal to the Supreme Court. The Supreme Court held that the acquired lands formed part of a Cis‑Sutlej Jagir which was inalienable, that A was merely a limited owner and therefore not entitled to the whole compensation, and that the reversionary interests of the heirs were also entitled to a share of the compensation.

In this matter the Court observed that the appellant was not entitled to the whole compensation sum because the reversionary owners also possessed a right to a portion of that sum. The Court held that the compensation could not be permanently placed in a deposit whereby the parties would be limited to receiving only the income generated therefrom. Even if the equitable principle contained in section 32 of the Land Acquisition Act, 1894, were invoked, such principle would not support a permanent investment of the compensation amount. Section 32(1)(b) was intended to operate only on a provisional basis for short periods, specifically where the compensation money needed to be employed to purchase other lands that were not immediately available; in such cases the money could be invested as an interim measure until the required lands could be acquired.

Applying this understanding, the Court found it just to divide the compensation relating to the first three villages equally between the appellant and the respondent. In determining the equitable apportionment, the Court considered it material that none of the sum paid to the appellant would reach the reversionary owners, that the respondent had a son, and that the reversionary interest required protection. The Court referred to the authorities Shri Somashekhar Swami v. Bapusaheb Narayanrao Patil (AIR 1948 Bom 176), K. C. Banerjee, Official Receiver?, In re: (AIR 1928 Cal 402), Mt. Gangi v. Santu (AIR 1929 Lah 736) and Special Deputy Collector, Ramnad v. Rajah of Ramnad (AIR 1935 Mad 215).

Further, the Court held that the claimants were entitled to interest at the rate of four per cent per annum on the compensation from the date the State took possession until the date the compensation was deposited or paid to the claimants. The provision in section 5(e) of the 1948 Act, which made section 23(1) of the Land Acquisition Act, 1894, applicable, did not bar the application of sections 28 and 34 of that Act, which govern the payment of interest. On general principles, taking possession of immovable property creates an implied obligation to pay interest on the value of the property; the right to receive interest substitutes for the right to retain possession, and this rule was not excluded by section 5 of the 1948 Act. Even under the Interest Act, 1839, the power to award interest on equitable grounds was expressly preserved by the proviso to section 1. The Court applied the decisions in Swift & Co. v. Board of Trade [1925] AC 520, Birch v. Joy (1852) 3 HL C 565 and Inglewood Pulp and Paper Co. Ltd. v. New Brunswick Electric Power Commission [1928] AC 429. It also approved Surjan Singh v. The East Punjab Government (AIR 1957 Punj 265) and referred to Seth Thawardas Pherumal v. The Union of India [1955] 2 SCR 48 and Nachiappa Chettiar v. Subramaniain Chettiar [1960] 2 SCR 209.

The judgment was delivered in the Civil Appellate Jurisdiction concerning Civil Appeals Nos. 396‑398 and 419‑421 of 1959, and 152 of 1960, which were filed by special leave from the Punjab High Court order dated 5 November 1958 in the first appeals.

The matters before the Court were identified as Orders Nos. 42 to 44, 60 to 62 and 55 of 1955. Counsel appearing for the appellants in Civil Appeals Nos. 396 to 398 of 1959 included M. C. Setalvad, Attorney‑General for India, together with S. N. Andley, J. B. Dadachanji and Rameshwar Nath. The same counsel also represented Respondent No. 2 in Civil Appeals Nos. 419 to 421 of 1959 and in Appeal No. 152 of 1960. For the appellant in Civil Appeals Nos. 419 to 421 of 1959, and for Respondent No. 1 in Civil Appeals Nos. 396 to 398 of 1959 as well as Respondent No. 3 in Appeal No. 152 of 1960, A. V. Viswanatha Sastri and G. C. Mathur appeared. G. C. Mathur also acted for the appellant in Appeal No. 152 of 1960. Gopal Singh and D. Gupta represented Respondent No. 2 in Civil Appeals Nos. 396 to 398 of 1959 and Respondent No. 1 in Civil Appeals Nos. 419 of 1959 and 152 of 1960. The judgment was delivered on 2 February 1961 by Justice Gajendra D K Ragkar. This case comprised a group of seven appeals arising from the same land‑acquisition proceedings. The Punjab Government had originally issued a notification under section 4 of the Land Acquisition Act, 1894, on 23 March 1948, declaring its intention to acquire land in the Ambala District for the construction of the new capital of East Punjab. No action followed that initial notification. Subsequently, the Punjab Legislature enacted the East Punjab Requisition of Immovable Property (Temporary Powers) Act, 48 of 1948. Under that Act the Government requisitioned the same land for the purpose of resettling persons who were likely to be displaced by the capital project. The land was formally acquired on 20 May 1951. The acquired parcel formed part of a jagir known as “Singh Purian” and comprised the areas of the villages of Mataur, Dhirpur, Saneta and Giddarpur in Ambala District, lands that had formerly been within the boundaries of the Cis‑Sutlej States. The records listed S. Amrao Singh as the owner of the acquired land; his wife was Sardarani Gurdial Kaur and his son was Satinder Singh. At that time the estate of Amrao Singh was administered by the Court of Wards. In accordance with the provisions of the Land Acquisition Act, the estate officer assessed compensation, which the State Government then offered to the Court of Wards. The Court of Wards accepted the amount, and Amrao Singh himself did not raise any objection. Satinder Singh, however, refused to accept the compensation, contending that it was wholly inadequate. He also objected to the payment being made either to the Court of Wards or to his father, Amrao Singh, and asserted that, because the estate had formerly formed part of the Cis‑Sutlej States, Amrao Singh possessed only a life‑interest (usufruct) and had no authority to alienate the corpus of the property.

Satinder Singh argued that his father, Amrao Singh, held only a life‑long usufruct over the estate and therefore possessed no authority to alienate or otherwise deal with the principal of the land. On that basis, Satinder contended that once the amount of compensation was finally fixed, the sum should either be invested in Government Securities or, alternatively, a portion of it should be paid directly to him as compensation for the land to which he held reversionary rights. This request was made with respect to the three villages of Mataur, Saneta and Giddarpur. In the case of the fourth village, Dhirpur, the wife of Amrao Singh, Sardarani Gurdial Kaur, asserted that she was in possession of that village because a compromise decree had been issued in her favour, charging the village for the payment of her maintenance against her husband. Consequently, she claimed the entire amount of compensation for herself. The dispute over how the compensation should be divided therefore assumed a triangular shape, involving the claims of Satinder Singh, his father Amrao Singh (through the Court of Wards), and the wife Sardarani Gurdial Kaur.

To understand the legal framework governing these proceedings, the Court referred to the statutes that were in force at the relevant times. The original governing legislation was the East Punjab Act 48 of 1948. Section 2 of that Act dealt with the requisitioning of property, while Section 3 empowered the State Government to acquire requisitioned properties. Section 5 prescribed the principles for payment of compensation for acquired properties; in particular, Section 5(e) required the arbitrator, when making an award, to consider the provisions of sub‑section (1) of Section 23 of the Land Acquisition Act, 1894, insofar as they could be applied. The 1948 Act was later amended by the Punjab Requisitioning of Immovable Property (Amendment and Validation) Act, 1951 (President’s Act No 2 of 1951). By virtue of Section 5 of the 1951 amendment, an additional provision was inserted into Section 5 of the 1948 Act. That provision stipulated that when property was acquired in connection with the new capital of the State of Punjab, compensation could be paid either by agreement or by arbitrator’s award, and could be made wholly in money, wholly in kind, or partly in both. It further addressed situations where there was no person competent to alienate the property, where a person possessed only a limited interest, or where a dispute existed as to who was entitled to receive compensation or how it should be apportioned. In such cases, the arbitrator was required to make an award or arrangement that was equitable, taking into account the interests of the persons concerned. Effectively, this introduced the principle of equitable apportionment, which had previously been recognised in Section 32 of the Land Acquisition Act, 1894. Finally, the Punjab Requisitioning and Acquisition of Immovable Property Act, 1953 (XI of 1953) came into force. Section 24 of that Act repealed both the 1948 and 1951 Acts, and thereafter the provisions of the 1953 Act governed all requisitioning and acquisition proceedings in Punjab.

The proceedings concerning the requisitioning and acquisition of immovable property in Punjab were governed by the Punjab Requisitioning and Acquisition of Immovable Property Act, 1953. The equitable principle that had been introduced into the 1948 Act by the 1951 amendment was preserved in the 1953 Act by section 8(3). Section 23(1) of the 1953 Act validates the requisitions and acquisitions specified therein, and subsection (2) declares that any acquisition purportedly made before the Act’s commencement shall be treated, for all purposes, as if the acquisition had been made under the provisions of the 1953 Act, as if those provisions had been in force at the time of acquisition. A Full Bench of the Punjab High Court, in Colonel His Highness Raja Sir Harindar Singh Brar Bans Bahadur, Ruler, Faridkot State v. The State of Punjab (1957) 59 Punj. L.R. 386, held that compensation for property acquired under the Land Acquisition Act, 1894 or under the Punjab Act of 1948 must be paid according to the principles laid down in those earlier Acts, not according to the principles of the 1953 Act. Neither party in the present suit disputes this position. Consequently, both parties accept that the amount of compensation and its apportionment among the competing claimants must be determined according to the provisions of the 1948 Act, even though the proceedings themselves were conducted under the 1953 Act. The arbitrator who conducted the present arbitration was appointed by the State Government pursuant to section 8(1)(b) of the 1953 Act. It has already been observed that the provisions of section 8(3) of the 1953 Act originated from an amendment to the 1948 Act made by the 1951 amendment.

Before the arbitrator, the acquisition matters were presented in four separate cases, each relating to land in one of the four villages involved. The arbitrator first addressed two preliminary questions raised by the parties: first, whether Satinder Singh possessed the standing to object to the compensation awarded, and second, whether the arbitrator’s appointment was invalid because of an agreement between the State and the Court of Wards concerning the amount of compensation payable by the State to the Court of Wards. Amrao Singh contended that his son Satinder Singh lacked locus standi and that, owing to the prior agreement between Amrao Singh and the Court of Wards, the arbitrator had no jurisdiction to entertain Satinder Singh’s claim. The arbitrator rejected Amrao Singh’s arguments, concluding that he was duly authorized and bound to conduct the proceedings and to consider the merits of Satinder Singh’s contentions.

In the proceeding, the arbitrator stated that he was required to consider the substance of the arguments presented by Satinder Singh. He then examined the factual and legal issues set out by the parties. The arbitrator concluded that the land involved formed part of the historical Cis Sutlej States, and therefore Amrao Singh possessed only a limited interest in the property and lacked any authority to transfer it. Consequently, the arbitrator held that Satinder Singh, as the next heir in line, had the right to challenge the amount of compensation that had been proposed and was also entitled to claim a share of the compensation that would be distributed.

Regarding the land situated in Dhirpur, the arbitrator found that Sardarani Gurdial Kaur was lawfully permitted to retain possession of the village for the purpose of her maintenance, as established by a compromise decree. He further observed that both Amrao Singh and Satinder Singh were bound by the terms of that decree. Based on this finding, the arbitrator fixed the compensation amount for Dhirpur and ordered that the entire sum be invested in Government Securities in the name of the holder of the Manauli Estate, creating a charge in favour of Gurdial Kaur that would allow her to receive the annual interest as maintenance. He additionally directed that upon Gurdial Kaur’s death, the principal amount should be divided equally between the then‑holder of the estate and the surviving heir or heirs taken together.

For the lands located in the three remaining villages, the arbitrator directed that the compensation he had determined be paid in cash. He ordered that three‑quarters of that cash amount be paid to Amrao Singh and the remaining one‑quarter to the sole heir, Satinder Singh. The arbitrator then listed the original government offers and his final awards as follows: for Mataur, the government offered Rs 93,309.00 and the arbitrator awarded Rs 1,82,813.00, which included fifteen percent acquisition charges; for Saneta, the offer was Rs 42,179.00 and the award Rs 55,377.00; for Giddarpur, the offer stood at Rs 15,726.00 and the award at Rs 27,640.00; and for Dhirpur, the government offered Rs 1,17,912.00 while the arbitrator awarded Rs 2,27,860.00.

From these figures, it was evident that Satinder Singh’s challenge to the government’s original compensation proposals was largely successful, because the arbitrator increased the total compensation by Rs 2,24,564.00. The arbitrator recorded his orders in the four separate cases that addressed each of the villages. Those orders subsequently became the subject of multiple appeals before the Punjab High Court. The State of Punjab filed four appeals numbered 67 to 70 of 1955; Satinder Singh filed three appeals numbered 42 to 44 of 1955; Amrao Singh filed four appeals numbered 59 to 62 of 1955; and Sardarani Gurdial Kaur filed Appeal No. 55 of 1955.

In the State’s appeal before the High Court, the argument was presented that Satinder Singh lacked the legal standing to object to the compensation offered by the State, rendering the arbitrator’s proceedings void. Alternatively, the State contended that neither Amrao Singh nor Sardarani Gurdial Kaur were entitled to the higher compensation rates that the arbitrator had awarded, and that the benefit of the award should be confined solely to Satinder Singh. The State further claimed that the compensation fixed by the arbitrator was excessive. All of these arguments were rejected by the High Court, which dismissed the State’s appeals. The State did not challenge the High Court’s correctness, and consequently the present appeals do not address the merits of the State’s contentions before the High Court.

The State of Punjab argued that Satinder Singh was not competent to contest the compensation offered by the Government and that the arbitrator’s award was excessive. All of the State’s objections were rejected by the Punjab High Court, and the State’s appeals were consequently dismissed. The State did not challenge the correctness of the High Court’s decision, and therefore the present Supreme Court appeals do not address the merits of the State’s contentions that were raised before the High Court. In the appeals filed by Satinder Singh, the High Court dismissed his claim that the valuation fixed by the arbitrator for certain properties was insufficient. The Court also rejected his request that the compensation amount, which was to be divided between him and his father Amrao Singh, be deposited in Government Securities. The High Court explained that although equitable considerations could be relevant to the question of apportionment, directing the amount to be placed in Government Securities would be impractical because, under such an arrangement, no party would ever acquire absolute entitlement to the funds. Furthermore, the Court observed that the State, which might ultimately acquire the estate by escheat, had not objected to the arbitrator’s apportionment, and consequently there was no justification to disturb the order concerning the division of the award between father and son, which the arbitrator had deemed reasonable. While examining the father’s alleged reckless extravagance, which the son had cited as a basis for a different apportionment, the High Court held that such alleged conduct was irrelevant to the determination of the award. As a result, all three of Satinder Singh’s appeals were dismissed by the High Court.

The High Court then turned to the appeal presented by Amrao Singh. It affirmed the arbitrator’s finding that the land in dispute originally formed part of the Cis Sutlej States and that, according to settled law, jagirs—whether large or small—within the Cis Sutlej States are non‑transferable, exempt from attachment as political pensions, and vested only with a life interest for the holder. The corpus of such estates must remain intact so that it can pass from heir to heir and, in the absence of a legal heir, ultimately lapse to the Government. The Court further held that even when the property is examined under the general customs of Punjab, the same conclusion follows because the land was undeniably ancestral immovable property held by the father in relation to his son. Consequently, the father possessed no right to alienate the property to the detriment of his son unless there was a legal necessity or another compelling reason. This reasoning rejected the principal point raised by the father against the son’s claim, and Amrao Singh’s appeals were dismissed. The appeal filed by Sardarani Gurdial Kaur met an identical outcome and was likewise dismissed. It appears that all three claimants who had argued before the High Court had their pleas rejected, leaving the arbitrator’s award fully confirmed.

In the proceedings before the High Court the claimants contended that they were entitled to receive interest at a reasonable rate on the compensation amount from the moment the land was acquired and they were dispossessed of possession. The High Court rejected this contention, holding that under the Act of 1948 it was not permissible to award interest on the compensation sum. Consequently, the High Court fully affirmed the arbitrator’s decision and dismissed all the appeals that had been filed against it. The three claimants—namely Amroo Singh, Satinder Singh and Sardarani Gurdial Kaur—have challenged the High Court’s order by seeking special leave. Satinder Singh’s challenges are recorded as Civil Appeals Numbers 396 to 398 of 1959, Amroo Singh’s as Civil Appeals Numbers 419 to 421 of 1959, and Sardarani Gurdial Kaur’s as Civil Appeal Number 152 of 1960. These seven appeals arise from the same land‑acquisition proceedings instituted by the State of Punjab concerning the lands situated in the four villages previously identified. For convenience, the Court will refer to Satinder Singh as the appellant, Amroo Singh as respondent 1, the State of Punjab as the respondents, and Sardarani Gurdial Kaur simply as Sardarani. The first issue that requires consideration is the nature of the property and the title held by respondent 1 in respect of it. This point formed the chief argument raised by Mr Viswanatha Sastri on behalf of respondent 1. Both the arbitrator and the High Court examined this question in detail and reached a unanimous finding against respondent 1. The High Court’s judgment notes that the lands in dispute were originally part of the domain of S. Budh Singh or, more broadly, of the Cis‑Sutlej States, a fact that was not seriously contested before the High Court. That acknowledgement makes it difficult for Mr Sastri to succeed on his plea. Moreover, the Court is not persuaded that the plea raised by Mr Sastri contains any substantive merit. The history of the property was extensively examined by the arbitrator, who, together with the High Court, relied heavily on statements found in the Punjab Land Administration Manual compiled by Sir James Mac Douie and revised in 1931. Additional reliance was placed on the publication entitled “Chiefs and Families of Note in the Punjab,” issued by the Punjab Government in 1940. The pedigree table in that publication shows that the Singh Purian family was founded by S. Kapur Singh, who bore the title of Nawab; his grandson S. Budh Singh was head of the family in 1809. Amroo Singh is a descendant of Gopal Singh, one of the seven sons of Budh Singh. The large jagirs owned by the family were situated in

The Court noted that the Kharar and Rupar Tehsils of Ambala District formed part of the area formerly known as the Cis Sutlej States. It observed that Paragraphs 100, 101 and 102 of Douie’s Land Administration Manual provide a detailed account of the families and the associated properties, and that a brief mention of the same material appears in the Punjab Gazetteer dealing with Ambala District. From these sources, the Court inferred that the Sardars in the Cis Sutlej States were originally independent rulers whose ancestors came under British protection around 1809. Between 1809 and 1847 the British Government sought to enforce good governance among the semi‑independent states; to achieve this aim it gradually strengthened its control and tightened its reins. The Court further observed that the Government exercised the right of escheat freely and, whenever an heirship lapsed, assumed direct management and administration of the area. After 1846 the Government began to introduce sweeping reforms, which reduced the privileges and rights of the petty chieftains. In 1849 the chieftains lost their sovereign powers and were deprived of criminal, civil and fiscal jurisdiction, becoming merely Jagirdars, although their rights in the lands they held were left untouched. The Court explained that rules concerning succession to these Jagirs were periodically framed by the Central Government, while family custom was respected within reasonable limits. One such rule appears in paragraph III of Douie’s Manual, where clause (c) provides that “alienations by a Jagirdar or pattidar of portions of his holding, whether to his relations or strangers, shall neither be officially recognised nor officially recorded.” Paragraph 164 likewise emphasized the inalienable character of the Jagirs and cited the opinion of the Court of Directors, which stated, “We should have supposed … that there could be no necessity for notifying this as a rule, since it follows from the very nature of a Jagir, which cannot be alienated and can only be attached for the life of the holder.” The Court concluded that there was no doubt that the authorised publications relied upon by the High Court and the arbitrator conclusively show that the holder of property in the Cis Sutlej States did not own the property absolutely but held it as a limited owner. The Kaiflat Taluka of the Singh Purian family produced in these proceedings supports the same conclusion. The Court recorded that Mr Sastri sought to argue that the evidence on record was insufficient to justify the finding that the lands under acquisition formed part of the original estate of S. Budh Singh; however, he fairly conceded that respondent 1 had not taken the witness stand nor attempted to justify his position.

The Court observed that the respondent’s argument that any of the disputed lands had been acquired by him or his ancestors in a manner that would render them absolute possessions of the holder could not be sustained. The circular issued by the Office of the Commissioner and Superintendent of Cis Sutlej States on 26 February 1857 clearly states that “all proprietary right to any part of the lands forming a part of the Jagir which may be held by the Jagirdar will be considered as pertaining to the Jagir and will go to the holder of the Jagir for the time being.” The Court noted that this rule extended even to houses and other buildings situated on the Jagir that were of a fort‑like nature and thus deemed part of the estate, with the sole exception being shops that the Jagirdar built or acquired in a town separate from his residence. Consequently, based on the material before it, the Court found it difficult to accept the plea that the findings of the arbitrator and the High Court regarding the character of the property and the nature of the title held by the holder were erroneous. The Court further noted that the High Court had arrived at the same conclusion based on the customary law prevailing in the Punjab. Accordingly, the Court proceeded to consider the remaining aspects of the dispute on the premise that respondent 1 was not the absolute owner of the property and that the appellant was entitled to represent the reversionary interest in these proceedings. Turning to the pleas raised by the appellant, the Court recorded that counsel for the appellant, the Attorney‑General, urged that the entire compensation payable for the three villages—Matsur, Sunets and Giddarpur—should be invested appropriately so that both the appellant and respondent 1 could share the income from that investment in a proportion to be determined. In support of this submission, the counsel relied on section 32(1)(b) of the Land Acquisition Act 1894, which empowers a court to order that compensation due to owners be invested in government or approved securities and that any interest earned be paid to the persons who, at the relevant time, would have been entitled to possession of the acquired lands. The argument advanced was that, because respondent 1 lacked the power to alienate the property and was obliged to preserve the corpus for the benefit of the reversioners, the compensation amount should likewise be held in trust for the reversioners, effectively treating the compensation as a continuation of the protected corpus.

In the present case, the appellant urged that the compensation amount should be regarded as a conversion of the corpus of the lands that had been acquired and therefore should not be distributed in the manner ordered by the High Court. The appellant relied on section 32 of the Land Acquisition Act, contending that this provision applied because respondent 1 did not possess the power to alienate the property. Accordingly, the appellant argued that the equitable principle articulated in section 32(1)(b) ought to be applied to the present facts. The learned Attorney‑General supported this submission by referring to several decisions of various High Courts where the principle of section 32(1)(b) had been extended to different categories of property. Those authorities included Shri Somashekhar Swami v. Bapusaheb Narayanrao Patil (1), K. C. Bannerjee, Official Receiver, In re (2), Mt. Gangi v. Santu & Others (3), and Special Deputy Collector, Ramnad v. Rajah of Ramnad (4). The cited cases illustrated the extension of the principle to watan property, to property belonging to an idol, to property held by a widow, and to land belonging to an impartible estate. The appellant’s argument, however, overlooked the fact that the provisions of section 32(1)(b) were intended to operate only on an interim basis and for a short duration. The scheme of section 32 required that, where the provision applied, the Court first order that the compensation amount be invested in the purchase of other lands that would be held under the same right, title and conditions of ownership as the land for which the compensation had been paid. This requirement represented the plain effect of section 32(1)(a). Section 32(1)(b) came into play only when such a purchase could not be effected immediately, and it remained operative only until such purchase could be completed. In other words, if the compensation amount could not be promptly used to acquire substitute land, the amount could be temporarily invested in prescribed securities, and the income from that investment would be distributed to those who were entitled to the land. Consequently, even if the underlying principle of section 32 were stretched to the present case on equitable grounds, it would not justify the appellant’s claim that the compensation sum should be permanently treated as the corpus of the acquired lands and kept invested in suitable securities, leaving the parties merely with a right to the income. Such a permanent arrangement conflicted with the principle enshrined in section 32(1)(a). The Court therefore declined to accept the contention that the compensation should remain undivided and be permanently deposited in a fund of investments.

The Court then turned to the question of how the compensation amount should be allocated between the appellant and respondent 1, given that division was necessary. The appellant contended that the fairest method of distribution would be an equal split, allocating half of the amount to the appellant and the remaining half to respondent 1. This issue of apportionment formed the next point for determination by the Court.

In this case, the Court found the appellant’s argument regarding the division of the compensation to be well founded. The Court noted that the High Court had correctly observed the difficulty of measuring the relative value of the two competing interests of the appellant and respondent 1. The High Court had suggested that the appropriate ratio might be either two‑thirds to one‑third or three‑quarters to one‑quarter, and, finding little to prefer one over the other, it had affirmed the apportionment determined by the arbitrator. However, the Court identified a serious flaw in that reasoning. The High Court had treated the conduct of respondent 1, which the appellant described as reckless spending, thriftlessness and squandering, as wholly irrelevant to the determination of the respective shares. The Court held that when apportionment is decided on equitable grounds, it is both relevant and material to consider the grievance raised by the appellant that any sum left with respondent 1 would likely be dissipated and would not reach the reversioner.

To support this contention, the appellant cited the past conduct of respondent 1, pointing to several alienations made by him and noting that, after respondent 1 became a minor, his estate had been placed under the management of the Court of Wards pursuant to section 5(2)(b) of the Court of Wards Act, 1903, during the periods 1928‑1938, 1939‑1947 and 1948‑1954. It was further urged that, since 1954, respondent 1 had undertaken a number of unauthorised alienations. The Court stated that it would not examine the validity of each of these allegations individually, but, on the basis of the material placed on record, it could not dismiss as unfounded the apprehensions expressed by the appellant concerning the destiny of any amount that might be allocated to respondent 1.

The Court also took into account the fact that the appellant had a son, and that the compensation was being paid in respect of lands held by respondent 1 as a limited owner, with a reversionary interest that required protection. Accordingly, the Court directed that the compensation amount pertaining to the three villages be divided equally between the appellant and respondent 1, each receiving one‑half. It was noted that the compensation concerning the fourth village, presently charged for the maintenance of Sardarani, had already been ordered to be split equally. Consequently, the Court upheld the contention advanced by the learned Attorney‑General on behalf of the appellant and ordered that the amount be divided half and half between father and son, rather than in the two‑thirds to one‑third ratio previously suggested.

The appellant asserted that the compensation ordered by the arbitrator ought to be paid exclusively to him. He explained that the Court of Wards and respondent 1 had accepted the amount that the State Government had offered, and that because he had raised objections, the matter was referred to the arbitrator, whose award subsequently enlarged the compensation by a considerable amount. The appellant’s claim that the award should be paid only to him had not been made before the arbitrator nor before the High Court, and consequently the Court did not permit him to raise that contention before it. The discussion then moved to the question of interest, which was raised by all three claimants. Their argument was that the compensation awarded should bear a reasonable rate of interest from the date of acquisition, that is, from the date when the claimants lost possession of their properties. The High Court had rejected this argument on the ground that the Act of 1948 contained no provision for payment of interest and that the omission of such a provision indicated a legislative intention not to award interest on compensation determined under that Act. In support of that conclusion, the High Court pointed to section 5(e) of the Act, which expressly makes applicable the provisions of section 23(1) of the Land Acquisition Act of 1894, and it argued that this necessarily led to the inference that sections 28 and 34 of the 1948 Act, which deal with interest, were not meant to apply to proceedings under the Act. The Court found this reasoning unconvincing. It held that it was legitimate to conclude that the application of section 23(1) implied the exclusion of the provisions of section 23(2). If the legislature intended only one part of section 23 to apply, it would be reasonable to infer that the other part was not intended to apply; however, the Court saw no reason to infer that the application of section 23(1) also excluded the principles underlying sections 28 and 34. Accordingly, the Court decided that the issue should be examined on general principles without assuming that any provision of the Act barred the application of those general considerations. The claimants contended that the State had acquired their immovable property and taken possession of it, thereby depriving them of the right to receive the income from the property. They pointed out that there was a gap between the date the State took possession and the date it paid compensation, during which they were unable to obtain either the income from the property or interest on the compensation amount. In broad terms, they argued that the act of taking possession of immovable property created an implied agreement that interest should be payable on the value of the property.

In this case the claimants argued that the loss of possession of their immovable property created a right to claim interest on the value of that property, and that such a claim should be made against the State. The Court observed that this question has been examined on several occasions and that the general principle relied upon by the claimants has consistently been affirmed. The House of Lords, in Swift & Co. v. Board of Trade (1), held that on a contract for the sale and purchase of land the Court of Chancery ordinarily requires the purchaser to pay interest on the purchase money from the date on which the purchaser actually took, or could safely have taken, possession of the land. This rule has been recognised ever since the decision in Birch v. Joy (2). In that case Viscount Cave, L.C., explained that the practice rests on the view that taking possession implies an agreement to pay interest, and he noted that the rule had been extended to situations involving compulsory purchase under the Lands Clauses Consolidation Act, 1845. The Court further distinguished between the acquisition or sale of land and the requisition of goods by the State, observing that the rule of implied interest does not apply to requisition of goods. The Privy Council, in Inglewood Pulp and Paper Co. Ltd. v. New Brunswick Electric Power Commission (1), affirmed that when land is expropriated under statutory authority—whether for private gain or for the public good—the owner is entitled to interest on the awarded principal sum from the date possession was taken, unless the statute expressly indicates a contrary intention. The Privy Council clarified that even when expropriation is undertaken for public benefit, the owner is deprived of the property in the same manner as in a private acquisition, and that statutory interpretation traditionally avoids depriving individuals of property without compensation unless the legislature’s intention is unmistakably clear. The right to receive interest therefore substitutes the right to retain possession and falls within the established rule. Accordingly, the Court noted that a claim for interest is based on the assumption that loss of possession gives the owner a right to claim interest in place of the right to retain possession. The remaining issue for determination was whether the 1948 Act intended to exclude the application of this rule. The Court observed that, because Section 5(3) of the 1948 Act simply incorporates Section 23(1) of the Land Acquisition Act of 1894, it cannot be reasonably inferred that the Act was meant to displace the general rule concerning interest on the value of the property.

The Court held that the general rule concerning the payment of interest remains applicable, a position previously adopted by the Punjab High Court in Surjan Singh v. The East Punjab Government (2), and the Court affirmed that view as correct. Counsel for respondent 2, however, contended that the claimants are entitled only to compensation, arguing that because section 5(1) uses the term “compensation” for both requisition and acquisition, it would be inappropriate to import the general rule on interest when land is acquired. According to this argument, compensation should reflect the market price of the property and should not include any additional amount described as damages. The Court found this line of reasoning unconvincing. It explained that when a person whose immovable property has been compulsorily acquired seeks interest, the claim is not a claim for damages in the strict technical sense. Rather, the claim is based on the longstanding principle that a person deprived of possession of his land is entitled either to immediate possession of the assessed compensation or, failing that, to interest on that amount as a substitute for possession. Consequently, the Court concluded that the reference in section 5(1) to compensation for both requisition and acquisition does not preclude the application of the general rule concerning interest. Counsel for respondent 2 then relied upon observations made by this Court in Seth Thawardas Pherumal v. The Union of India (1). The learned Justice Bose, speaking for the Court, had set out four conditions that must be satisfied before interest may be awarded under the Interest Act of 1839, and noted that none of those conditions were present in the case before the Court. Because of that, the Court held that the arbitrator had erred in law in assuming he possessed the power to allow interest merely because he considered the demand reasonable. After reaching that conclusion, the judge proceeded to comment on the applicability of section 34 of the Code of Civil Procedure, stating that section 34 does not apply because an arbitrator is not a “court” within the meaning of the Code, and that the Code does not govern arbitrators. The judge further observed that even if section 34 were applicable, a court would still lack the power to award interest after the suit. Those observations were later examined by this Court in Nachiappa Chettiar v. Subramaniam Chettiar (2), where it was emphasized that the earlier remarks were not intended to establish any broad or absolute proposition such as the one advanced by counsel for respondent 2 in the present appeal. The Court also made an incidental reference to the Interest Act, 1839 (XXXII of 1839), noting that section 2 of that Act is relevant to the discussion. (1) [1955] 2 S.C.R. 48. (2) [1960] 2 S.C.R. 209.

The Court examined the provisions of the Interest Act, 1839 (XXXII of 1839), noting that section 2 of that Act empowers a Court to allow interest in the cases expressly enumerated therein, and that the proviso to the section clarifies that interest shall remain payable in all situations where it is already payable by law. In other words, the operative language of section 1 does not withdraw a Court’s authority to award interest merely because interest is otherwise statutorily payable. The proviso expressly preserves the Court’s ability to grant interest on equitable grounds or under any other legal provision. This question had previously been considered by the Privy Council in the case of Bengal Nagpur Railway Co. Ltd. v. Buttanji Ramji (1938) L.R. 65 I.A. 66. Referring to the proviso to section 1, the Privy Council observed that “this proviso applies to cases in which the Court of equity exercises its jurisdiction to allow interest.” The Court further noted that the right to receive interest in lieu of possession of immovable property, whether taken away by private treaty or compulsory acquisition, has consistently been treated by judicial decisions as an equitable right; consequently, the proviso to section 1 of the Interest Act safeguards that right. Accordingly, the Court held that the High Court erred in rejecting the claimants’ claim for interest on the compensation amount, and directed that the compensation should bear interest at four per cent per annum from the date respondent 2 took possession of the claimants’ lands until the date the amount of compensation was actually deposited or paid to them.

In the appeal filed by the Sardarani, counsel for the appellant attempted to contest the propriety of the High Court’s order directing that the compensation for the Dhirpur lands be invested and that the Sardarani should receive her maintenance from the interest generated by that investment. The Court observed that, apart from the order being fair and just, the counsel for the Sardarani had himself suggested that such an order be made; therefore, counsel for the appellant could not raise any objection to the order in the present appeal. Counsel for the appellant further contended that if interest were awarded on the compensation amount his client was to receive, the entire interest on the compensation ordered for the lands in Dhirpur village would accrue to his client. The Court agreed that this proposition was correct and noted that the contention was not disputed by either the appellant or respondent 1. Consequently, the Court modified the decree of the High Court by directing that the compensation payable for the lands in Mathur, Saneta and Giddarpur be divided equally between the appellant and respondent 1, and that interest at four per cent per annum be payable on all items of compensation as determined by the High Court.

The Court observed that the High Court had prescribed an interest rate of four percent per annum on the compensation awarded. It further directed that interest accruing on the compensation for the lands situated in Dhirpur village must be paid to the Sardarani. Conversely, the interest relating to the compensation for the lands in the three other villages shall be divided equally between the appellant and respondent one. When disbursing the compensation amounts to each party, the Court instructed that any sums already withdrawn on their behalf should be taken into consideration and the outstanding claims adjusted accordingly. Regarding costs, the Court ordered that the appellant’s legal expenses arising from his three appeals be shared, with half payable by respondent one and the remaining half by respondent two. It further clarified that only a single set of hearing costs would be applicable to those three appeals. The remaining four appeals, according to the Court, shall each bear their own costs, to be shouldered by the respective parties. Finally, the Court granted relief in part for Civil Appeals numbered 396 to 398 of 1959 and Civil Appeal number 152 of 1960, while dismissing Civil Appeals numbered 419 to 421 of 1959.