2013 (6) TMI 23 - SC - Indian Laws

Supreme Court allows appeal, deems writ petition maintainable for money recovery, orders interest payment.

GODAVARI SUGAR MILLS LTD. Versus STATE OF MAHARASHTRA & ORS.

GODAVARI SUGAR MILLS LTD. Versus STATE OF MAHARASHTRA & ORS. - TMI Issues Involved:1. Maintainability of the writ petition for recovery of money.2. Justification of awarding interest at the rate of 3% per annum on the compensation payable under Section 25 of the Maharashtra Agricultural Lands (Ceiling on Holdings) Act, 1961.Issue-wise Detailed Analysis:Re: Issue No. (i) - Maintainability of the writ petition for recovery of money:The appellant filed a writ petition for a declaration that the compensation amount, including interest, was unjust and arbitrary, and sought a mandamus to pay the compensation with interest at 9% per annum from the date of surrender of possession to the date of actual payment. The appellant argued that the writ petition did not relate to a simple money claim but required adjudication on allegations of arbitrariness and discrimination by the state government and its officers in their statutory functions. Therefore, the writ petition was of a public law character and maintainable.The High Court dismissed the writ petition at the admission stage, relying on the decision in *Suganmal v. State of MP* - AIR 1965 SC 1740, which held that a writ petition for payment of interest should be considered a writ petition filed to enforce a money claim and thus not maintainable. However, this decision was distinguished in subsequent cases like *UP Pollution Control Board vs. Kanoria Industrial Ltd* - 2001 (2) SCC 549 and *ABL International Ltd vs. Export Credit Guarantee Corporation of India Ltd.* - 2004 (3) SCC 553, which clarified that a writ petition could be entertained to enforce statutory functions of the State or its officers.The Supreme Court held that the reliance on *Suganmal* was misplaced, as the writ petition filed by the appellant was maintainable due to its public law character and the involvement of public law functions by the state government and its officers.Re: Issue No. (ii) - Justification of awarding interest at the rate of 3% per annum:The appellant contended that the compensation amount became due when possession of the lands was taken and, as it was unjustly withheld, they were entitled to interest at a reasonable rate of 9% per annum. They cited two decisions of the Bombay High Court in *Krishna Kumar* and *Shree Changdeo Sugar Mills*, where interest was awarded at 9% per annum in similar matters. The respondents argued that Section 26 of the Act indicated that the rate of interest should be only 3% per annum.The Supreme Court noted that the decisions of the Bombay High Court in *Krishna Kumar* and *Shree Changdeo Sugar Mills* were not sound as they ignored Section 26 of the Act, which specified the interest rate. The Court referred to the general principle that compensation should be paid at the time of taking possession, and interest should be awarded on delayed payment unless a statute specifies otherwise.Section 26 of the Act provides that the compensation amount may be payable in transferable bonds carrying interest at 3% per annum, either in annual installments over 20 years or at the end of 20 years. The Court held that whether the payment is made by transferable bonds or cash, the rate of interest can only be 3% per annum for 20 years from the date of taking possession.For the period beyond 20 years, the Court stated that Section 26 is silent about the rate of interest, and general equitable principles would apply. The Court deemed that interest at the rate of 6% per annum beyond 20 years would be appropriate.Conclusion:The Supreme Court allowed the appeal in part and directed the respondents to pay interest on the compensation amount from the date of taking possession to the date of payment at the rate of 3% per annum for the first twenty years and 6% per annum thereafter until 31.3.2005. The interest already paid was to be deducted from the balance due, which was to be paid within three months from the date of the judgment.