2019 (5) TMI 2041 - SC - Indian Laws

Appeal dismissed; earlier finding upheld that interest on arrears under Clause (xii) was wrongly treated as per annum

The SC dismissed the appeal, upholding the HC's finding that the demand for interest on arrears under Clause (xii) of the lease deed was improperly ... Calculation of interest on arrears of rent payable under Clause (xii) of the Lease Deed - High Court observed that the State cannot travel beyond the terms and conditions of the Lease Deed and issue a demand for payment of interest under Clause (xii) by calculating the same on a yearly basis - HELD THAT:- It is relevant to refer to Section 7D and Section 7E of the BLR Act. The Agreement dated 01.08.1984 and the Lease Deed dated 01.8.1985 was entered into pursuant to the abovementioned provisions of the BLR Act. Clause (xii) of the Lease Deed pertains to lands which have been developed by the Respondent by establishing industries and other civic amenities whereas Clause (xv) relates to lands which were being used for commercial purposes. The Respondent was making money from the use of lands that were covered under Clause (xv) for which reason the “jama” was also fixed for the lands falling under Clause (xv) for five years at a time. Interest being calculated on a yearly basis as per Clause (xv) is clearly due to the lands being used for commercial purposes wherefrom the Respondent was getting returns. The exclusion of the words “per annum” in Clause (xii) was intentional and the Appellant cannot be permitted to read those words into Clause (xii) for the purpose of issuing a demand of additional amount towards interest. A plain reading of the Lease Deed as a whole would make it clear that the payment of interest on rent chargeable under Clause (xii) is essentially different from that under Clause (xv). The principle of Expressio Unius Est Exclusio Alterius is squarely applicable to the facts of this case. It is agreed with the finding of the High Court that the District Collector, Jamshedpur was not right in issuing a demand for payment of Rs. 5.97 Crores towards interest on the arrears of rent for the lands covered under Clause (xii) of the Lease Deed. However, the conclusion of the High Court that the demand does not fall within the sweep of the Public Demands Act is not correct. Being aware of the earlier decision of the High Court on this point, an error was committed by the High Court in taking a completely different view. If the High Court was not in agreement with the earlier decision, the only course open to it was to refer the matter to a larger Bench. That apart, in Clause (xx) of the Lease Deed, the Respondent and the Appellant agreed that recoveries of arrears of rent may be affected under the Public Demands Act. It is not open to the Respondent to contend that the demand made for payment of interest under the Lease Deed as not a public demand in view of Clause (xx) of the Lease Deed. The judgment of the High Court is upheld though the conclusion of the High Court that the demand is not a public demand under the Public Demands Act is not approved. The amount of Rupees One Crore deposited by the respondent in the High Court on 28.03.1996 pursuant to the interim order shall be returned to the respondent. Appeal dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether interest on arrears of rent payable under Clause (xii) of the Lease Deed could be calculated 'per annum' despite the omission of the words 'per annum' in that clause. 2. Whether a demand for interest made under Clause (xii) of the Lease Deed constitutes a 'public demand' within the meaning of Section 3(6) and Item No. 7 of Schedule I of the Bihar and Orissa Public Demands Recovery Act, 1914. 3. Whether the High Court was entitled to take a view contrary to an earlier Division Bench decision without referring the question to a larger Bench, and the consequences of any such divergence for the legality of the demand and remedy of the respondent. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Interpretation of Clause (xii): whether interest can be calculated 'per annum' despite omission of those words Legal framework: Principles of contract interpretation require reading the deed as a whole to ascertain the parties' intention; effect to be given to every word so far as possible; Expressio Unius Est Exclusio Alterius applies when wording in one clause is expressly used and omitted in another. Precedent treatment: The Court applied established authorities on contractual interpretation emphasizing harmony among clauses and the need to give ordinary meaning to words used in context; the High Court's reliance on those precedents was upheld. Interpretation and reasoning: Clauses (xii) and (xv) cover different categories of land and different uses - clause (xii) relates to lands developed for industrial and civic purposes where rent was fixed at a historical lump sum rate; clause (xv) deals with commercial/market-type lands where returns were earned and 'jama' fixed for five-year periods and expressly included 'per annum' for interest. The deliberate inclusion of 'per annum' in clause (xv) and its exclusion from clause (xii) must be given effect to; words should not be read into a clause unless ambiguity persists that cannot otherwise be resolved. The nature of lands in clause (xii) made periodic (annual) interest calculation inappropriate and inconsistent with the contractual scheme. Ratio vs. Obiter: Ratio - The omission of the phrase 'per annum' in clause (xii) was intentional and, on contract interpretation principles (including Expressio Unius), precluded reading 'per annum' into that clause to demand annual interest. Obiter - Observations on the commercial rationale distinguishing the two categories of land reinforce but do not separately decide the interpretive rule. Conclusion: The demand for interest calculated on a 'per annum' basis under Clause (xii) was not legally tenable; the District Collector's demand for Rs. 5.97 Crores on that basis was invalid insofar as it relied on reading 'per annum' into Clause (xii). Issue 2 - Whether the demand is a 'public demand' under the Public Demands Act Legal framework: Section 3(6) defines 'public demand' to include arrears mentioned in Schedule I and 'includes any interest which may, by law, be chargeable thereon upto the date on which a certificate is signed'; Item No. 7 of Schedule I covers demands payable to the Collector by a person holding any interest in land where such demand is a condition of the use and enjoyment of that land. Precedent treatment: The Court noted earlier Division Bench authority of the same High Court treating similar demands as public demands; the present High Court decision rejected that view but did so without reference to a larger Bench. Interpretation and reasoning: Clause (xx) of the Lease Deed expressly permitted recoveries of arrears of rent under the Public Demands Act. Item No. 7 of Schedule I plainly covers demands payable to the Collector by persons holding interests in land, and interest on rent payable for lands falls within that provision when such demand is a condition of use and enjoyment. Sections 7D/7E of the BLR Act did not themselves create or negate the character of a public demand; the contractual agreement to permit recovery under the Public Demands Act and the statutory sweep of Item No. 7 render the demand recoverable by certificate proceedings if otherwise due. Ratio vs. Obiter: Ratio - The demand for interest on rent under the Lease Deed is capable of being a 'public demand' under Section 3(6) read with Item No. 7 of Schedule I; clause (xx) precludes the lessee from denying availability of the Public Demands Act as a recovery mechanism. Obiter - Detailed discussion of the BLR Act provisions (7D/7E) is explanatory of context but not necessary to the statutory construction of 'public demand.' Conclusion: The High Court's conclusion that the demand was not a public demand was erroneous; the demand is within the sweep of the Public Demands Act as it relates to arrears of rent/interest recoverable from a person holding an interest in land and the Lease Deed expressly contemplated recovery under that Act. Issue 3 - Duty to follow earlier Division Bench and procedural consequence of divergent view Legal framework: Judicial discipline requires a Division Bench to follow a previous Division Bench decision of the same court; where a Bench disagrees, the correct course is to refer the matter to a larger Bench. Precedent treatment: The Court reproached the High Court for taking a view contrary to an earlier Division Bench without referring the question to a larger Bench; this procedural error undermined the High Court's stance on the public demand issue. Interpretation and reasoning: The High Court was aware of the prior decision treating the same demand as a public demand; instead of following it or referring for a larger Bench, it adopted a conflicting view. Given the Lease Deed's Clause (xx) and the statutory definition, the divergent conclusion could not be sustained. However, the Court accepted the correctness of the High Court's contractual interpretation on Clause (xii) and thus sustained the ultimate relief granted by the High Court on that ground. Ratio vs. Obiter: Ratio - A Division Bench should not depart from an earlier Division Bench decision of the same court without appropriate reference; failure to do so is an error. Obiter - The rebuke as to judicial discipline is ancillary to the substantive determinations. Conclusion: The High Court erred in law in holding the demand not to be a public demand and in failing to follow/seek a larger Bench where it disagreed with an earlier Division Bench; notwithstanding that error, the Court upheld the High Court's decision on contractual interpretation (invalidity of 'per annum' demand under Clause (xii)). Ancillary conclusions and disposal The Court upheld the High Court's decision that the Certificate Officer's demand for annual interest under Clause (xii) was illegal, but reversed the High Court on the characterization of the demand as a 'public demand.' The amount deposited pursuant to the High Court's interim order is to be returned to the depositor. The appeal is dismissed on merits.