1994 (7) TMI 344 - SC - Central Excise

Supreme Court clarifies non-joinder impact on agreement validity & Collector's jurisdiction

The Supreme Court held that the non-joinder of the Indian Bank as a party to the agreement did not render the agreement void nor the jurisdiction of the ... Statutory agreement for fixation of compensation under Section 16(1) - proviso to Section 16(1) - four year limitation from date of the agreement - non-joinder of mortgagee and validity of award - collector's power to make award in terms of an agreement - evidentiary value of the agreement in a civil reference under Section 18Non-joinder of mortgagee and validity of award - statutory agreement for fixation of compensation under Section 16(1) - Whether an agreement under Section 16(1) is rendered void or the Collector is precluded from making an award under Section 16(1) by reason of non-joinder of a mortgagee interested in the compensation. - HELD THAT: - The Court held that Section 16(1) is an enabling provision permitting the Collector and the person(s) interested to agree the amount of compensation so as to expedite award and avoid litigation. The expression 'all the persons interested' in that context must be read to permit an agreement entered into by the contracting person or persons; absence of other persons having an interest (here, a mortgagee by deposit of title deeds) as parties to the agreement does not render the agreement void or the Collector's jurisdiction to make an award illegal. The agreement and any award thereunder bind the contracting parties; non-parties may not be bound but the non-joinder does not ipso facto invalidate the award. A party can waive mandatory procedure, and a mortgagee's statutory interest under the Transfer of Property Act does not nullify the Collector's power to act on an agreement executed by the owner. The High Court's finding that no award could have been made for want of joinder of the bank was therefore erroneous and was set aside. [Paras 4]Non-joinder of the mortgagee did not render the agreement under Section 16(1) void nor make the Collector's award under that agreement illegal; the High Court's contrary finding was set aside.Proviso to Section 16(1) - four year limitation from date of the agreement - collector's power to make award in terms of an agreement - Whether the four year period in the proviso to Section 16(1) is to be reckoned from the date of the agreement or from the date of publication of the Section 3(1) notification, and the consequence of expiry of that period for the Collector's power to make an award under Section 16(1). - HELD THAT: - After reviewing the object and scheme of Section 16 read with Section 16(2), and considering legislative amendments and precedent concerning timely completion of acquisition proceedings, the Court construed the words 'from such date' in the proviso as referable to the date of the agreement. Reading the proviso harmoniously with the main provision and its purpose to prevent undue delay, the Court held that once four years from the date of the agreement have elapsed the Collector ceases to have the power to make an award under Section 16(1) in terms of that agreement. The agreement itself remains valid as a contract but becomes unenforceable for obtaining an award under Section 16(1) after the prescribed period has expired; the limitation operates on the Collector's power to make the award, not on the continued existence of the contractual undertaking. [Paras 5, 7]The four year limitation in the proviso to Section 16(1) runs from the date of the agreement; on expiry of that period the Collector no longer has power to make an award under Section 16(1) in terms of the agreement.Evidentiary value of the agreement in a civil reference under Section 18 - collector's power to make award in terms of an agreement - Whether the civil court, in determining market value under a reference, is precluded from considering the agreement relied upon by the Collector and what evidentiary role the agreement may play. - HELD THAT: - The Court clarified that the High Court's observation that the civil court shall not be bound by the terms of the agreement cannot preclude the Collector or the civil court from treating the agreement as evidence. Although the Collector lost power to make an award under Section 16(1) after expiry of the four year period, the agreement may still be relied upon as a piece of evidence showing what the parties considered to be the market value with reference to the date of publication of the preliminary notification. The civil court is to determine the market value according to law and assess the evidentiary weight of the agreement accordingly. [Paras 7]The civil court is not precluded from receiving or weighing the agreement as evidence; the Collector and court may rely upon the agreement's evidentiary value when determining market value under the reference.Final Conclusion: The appeals are dismissed. The non-joinder of the mortgagee did not invalidate the agreement or the award made under Section 16(1) as between the contracting parties, but the proviso's four year limitation runs from the date of the agreement and, on its expiry, the Collector ceases to have power to make an award in terms of that agreement; the reference under Section 18 to the civil court is to proceed expeditiously to determine market value, and the agreement may be admitted and weighed as evidence by the Collector and the court. Parties shall bear their respective costs. Issues Involved:1. Validity of the award made u/s 16 of the Kerala Land Acquisition Act, 1961.2. Interpretation of the phrase 'all persons interested agree' in Section 16(1).3. Calculation of the four-year period in the proviso to Section 16(1).Summary:1. Validity of the Award Made u/s 16 of the Kerala Land Acquisition Act, 1961:The High Court found that the property under acquisition was hypothecated by equitable mortgage to Indian Bank, which as mortgagee was entitled to claim an interest in compensation payable to the mortgagor. Since the bank was not a party to the contract, no award u/s 16 of the Act could have been made. The High Court also found that by operation of the proviso to sub-section (1) of Section 16, since four years had elapsed from the date of the agreement, the award based on the agreement became void. However, the Supreme Court held that the non-joinder of the Indian Bank as a party to the agreement does not render the agreement void nor unenforceable, nor does it render the jurisdiction of the Collector to make the award u/s 16(1) illegal or void.2. Interpretation of the Phrase 'All Persons Interested Agree' in Section 16(1):The Supreme Court considered whether the phrase 'all persons interested agree' required that each and every party having an interest in the compensation should necessarily be a party to the agreement. The Court held that the object of Section 16 is to determine market value expeditiously and award compensation in terms of the agreement to avoid needless delay. Therefore, 'all persons' must be interpreted to mean not only in a plural but also singular, which would include any one, if more than one person is interested in the compensation, to mutually enter into an agreement with the Collector. The agreement will bind the contracting parties alone and the award made u/s 16(1) may not thereby bind others.3. Calculation of the Four-Year Period in the Proviso to Section 16(1):The crucial question was whether the period of four years envisaged in the proviso to Section 16(1) should be reckoned from the date when the agreement was executed or from the date of the publication of the notification u/s 3(1) after the agreement was executed. The Supreme Court held that 'such date' referred to in the proviso must be referable to the date of the agreement. Thus, after the expiry of four years from the date of the agreement, the Collector ceased to have power to pass the award u/s 16(1). The agreement remains valid but becomes unenforceable after the period prescribed under the statute.Conclusion:The Supreme Court dismissed the appeals and directed the civil court to expeditiously determine the market value according to law. The observation of the High Court that the civil court shall not be bound by the terms of the agreement in determining the compensation cannot prevent the Land Acquisition Collector from relying upon the agreement as evidence of the market value of the acquired property. The appeals were dismissed with parties bearing their respective costs.