ARESH @ ASHOK J. MEHTA (D) BY PROP. LRS.versusSPL. TAHSILDAR, BALGAUM KARNATAKA & ANR.

                          [2013) 2 S.C.R. 280

A       ARESH @ ASHOK J. MEHTA (D) BY PROP. LRS.
                                    v.
        SPL. TAHSILDAR, BALGAUM KARNATAKA & ANR.
                (Civil Appeal No. 5517 of 2005)
                          MARCH 11, 2013.
B
              [G.S. SINGHVI AND SUDHANSU JYOTI
                      MUKHOPADHAYA, JJ.]

         Karnataka Land Reforms Act, 1961:
c
        ss. 44 and 51 - Vesting of land in State Government -
  Interest on the amount payable - Held: In view of the specific
  clarification made by Circular dated 24.11.1986 and decision
  of the Court, appel/antis entitled to interest w.e.f. 1.3.1974@
  5 ~% till the total amount was paid to him - Substantive
0
  provision of 'mode of calculation' as prescribed u/s 51 has
  been clarified by Circular dated 24.11.1986 - The example
  cited in the circular is merely an illustration - If the illustration
  is in conflic with the clarification of the substantive law!
E provision or if the illustration is vague, the clarification will
  prevail over the illustration - Government of Karnataka Rev.
  Dep. (Land Reforms) Circular No. ND 171 LWM 86 dated
  24.11.1986.

       In terms of s.44 of the Karnataka Land Reforms Act,
F 1961 as amended by Act No. 1 of 1974, the land
  belonging to the appellant and held or in possession of
  the tenant stood transferred and vested in the State
  Government w.e.f. 1.3.1974. As regards the interest on the
  principal amount of compensation to be paid to the
G appellant, the Division Bench of the High Court, ultimately,
  held that the appellant was entitled to interest @ SY.%
  w.e.f. 1.3.1984.

        In the instant appeal filed by the claimants, the

H                                  280
                                                                    281

..
      ARESH @ ASHOK J. MEHTA (D) BY PROP. LRS. v. SPL. TAHSILDAR,
                        BALGAUM KARNATAKA

     questions for consideration before the Court were: (i)               A
     whether with respect to the delayed payment of the
     principal amount, the appellant is entitled for any interest
     towards the amount paid in cash and thereby the Circular
     dated 24.11.1986, contrary to such extent is liable to be
     set aside"; and (ii) "whether the appellant is entitled for          B
     payment of interest as per Circular No. ND 171 LWM 86
     dated 24.11.1986 or as a matter of general rule."

         Allowing the appeal, the Court

          HELD: 1.1. The amount payable to the land-owner/                C
     landlord for the extinguishment of their rights is to be
     paid in the manner prescribed u/s 51 of the Karnataka
     Land Reforms Act, 1961. Substantive provision of 'mode
     of calculation' as prescribed u/s 51 has been clarified by
     Circular dated 24.11.1986. There is no ambiguity in the              D
     clarification made by circular dated 24.11.1986, but the
     example cited therein is not only confusing but also
     contradictory to the main clarification. The example cited
     in the circular is merely an illustration. If the illustration
     is in conflict with the clarification of the substantive law/        E
     provision or if the illustration is vague, the clarification
     will prevail over the illustration. In such case, a person
     who is entitled to the interest as per the clarification
     cannot be deprived of or denied his right relying on the
     illustration. [para 15, 20 and 21] [293-D; 296-F-H; 297-A]           F

          1.2. As per Circular dated 24.11.1986, the entire
     amount of compensation payable to the ex-landlords
     along with interest is to be calculated taking 1.3.1974 as
     the cut off date upto 1.3.1984. But if the amount is paid            G
     earlier then upto the date of payment. Out of the total
     amount two thousand rupees is to be paid in cash and
     the rest through National Savings Certificates. If the
     amount is not paid on or before 1.3.1984, provisions have
     been made to pay further interest @ 5 Y.% on the entire
                                                                          H
                                                                  -
    282       SUPREME COURT REPORTS            (2013] 2 S.C.R.


A principal amount from 1.3.1984 till the date of purchase
   of the National Savings Certificates; that means the
   authorities are required to either invest the amount in
  National Savings Certificates or pay interest till the
  amount is invested. [para 19] [296-C-E]
B
        1.3. In view of the specific clarification made by
  Circular dated 24.11.1986 and decision of this Court in
  Satinder Singh, the appellant is entitled to interest w.e.f.
  1.3.1974@5 V.% till the total amount was paid to him. The
C respondent cannot deny the interest on the amount of
  compensation to which the appellant is entitled as a
  matter of general rule, and in the light of the clarification
  made by Circular dated 24.11.1986. The orders passed by
  the Single Judge and the Division Bench of the High
  Court are set aside. The respondents are directed to pay
D the appellant interest@ 5 V.% per annum w.e.f. 1.3.1974.
  [para 23-24] [299-G-H; 300-A-B]

          Satinder Singh vs. Umrao Singh 1961 SCR 676     =AIR
    1961 SC 908 - relied on
E
                         Case Law Reference:
          1961 SCR 676            relied on            para 22
      CIVIL APPELLATE JURISDICTION : Civil Appeal No.
F 5517 of 2005.

        From the Judgment & Order dated 06.08.1999 of the High
    Court of Karnataka at Bangalore in W.A. No. 8110of1996.

      Kiran Suri, S.J. Amith, Nakibur Rahman Barbhuiya for the
G Appellants.

       V.N. Raghupathy, Anant Narayana M.G. for the
    Respondents.

          The Judgment of the Court was delivered by
H
  ARESH @ ASHOK J. MEHTA (D) BY PROP. LRS. v. SPL. TAHSILDAR,   283
                    BALGAUM KARNATAKA

      SUDHANSU JYOTI MUKHOPADHAYA, J. 1. This                         A
appeal has been preferred by the appellant-landlord against the
judgment & order dated 6th August, 1999 passed by the
Division Bench of the High Court of Karnataka in Writ Appeal
No. 8110/1996 whereby the Division Bench rejected the prayer
for interest on amount of compensation w.e.f. 1st March, 1974         B
and thereby affirmed the order passed by the learned Single
Judge but held that the appellant-landlord is entitled for interest
w.e.f. 1st March, 1984.

     2. The appellant was the owner of the land bearing R.S.
No. 16/1, measuring 7 acres 21 guntas in village-Examba,              C
Taluka Chikodi, Karnataka. The land in question was vested
with the State for grant in favour of the tenant w.e.f. 1st March,
1974 under Section 44 of the Karnataka Land Reforms Act,
1961 as amended by Act No.1 of 1974 (hereinafter referred
to as the 'Act').                                                     D

      3. The Tehsildar, Chikodi under Section 48A(7) and
 Section 53 heard the appellant-landlord and the tenant and
 determined the quantum of amount payable at Rs. 17,244/-
 vide order dated 28.2.1983. It was held that a sum of Rs. E
 2,000/- is to be paid as first instalment within 30 days from the
 date of the receipt of the order and the balance in 19 equated
 annual instalments with int~rest @ SY.% as indicated therein.
 The compensation amount was paid to the appellant in
between the years 1983-1985 but without any interest. In this F
background, the appellant moved in the Court of Special
Tehsildar, Chikodi with an application that his 1/3rd share in the
house and weH situated in RS No. 16/1 of Examba village
vested with the State therefore he claimed interest on the
compensation amount @ 5Y.% per annum w.e.f. 1st March, G
1974 till the payment of the entire amount. The details of amount
of compensation, the amount of interest acquired on the
compensation amount, the amount paid to the appellant and
the amount as was due to him on 25th May, 1988 were shown
in the representation. The appellant claimed a sum of Rs. H
                                                      .,
    284     SUPREME COURT REPORTS               [2013) 2 S.C.R.


A 19,116.37. The Special Tehsildar, Chikodi vide letter dated
  7th June, 1988 rejected his prayer and informed that as per
  Circular No. RD 171 :LRM-86 dated 24.11.1986 interest has
  to be paid on the amount paid through the National Savings
  Certificate and, therefore, no interest is payable on the amount
B received in cash.

        4. The order of rejection was challenged by the appellant,
  by filing a writ petition no. 18591/88 before the Karnataka High
  Court; a prayer was made to direct the respondents to pay ';
  interest for delayed payment w.e.f. 1.3.1974. The Circular
C dated 24.11.1986, was also challenged by the appellant, as the
  same was referred to reject his claim. The learned Single
  Judge by his judgment held that no interest is payable towards
  the amount paid in cash. It was further held that interest @5
  Y,% is payable, if the compensation amount is paid through
D National savings certificates. On challenge, the Division Bench
  of the High Court upheld the order passed by learned Single
  Judge but held that in the facts and circumstances of the case
  the appellant is entitled for interest w.e.f. 1st March, 1984.

E      5. Learned counsel for the appellant contended that the
  examples cited in Circular dated 24.11.1986 is illegal and
  contrary to the provisions of the Act and the clarification given
  therein. She secondly contended that the tenanted lands having
  vested with the State w.e.f. 1st March, 1974, the owners of the
F land cannot be deprived of the interest on compensation
  amount for which they are entitled from the date the principal
  amount become due. She thirdly contended that once the
  amount of compensation payable is determined in respect of
  the delayed payment then the land owner is also entitled to the
G interest amount even if the principal amount is paid in cash. It
  was also contended that when Circular dated 24.11.1986 itself
  makes it clear for investment of the amount which shall carry
  interest @ 5%%, there is no bar as such either under the
  Act or the Rules to deprive the land-owner from the interest in
  ca,se the amount is paid in cash. Therefore, according to the
H
  ARESH @ASHOK J. MEHTA (D) BY PROP. LRS. v. SPL. TAHSILDAR,   285
    BALGAUM KARNATAKA [SUDHANSU JYOTI MUKHOPADHAYA, J.]

learned counsel the appellant is entitled for payment of interest A
towards the amount paid in cash in respect of delayed payment
of the principal amount by allowing the appeal.

     6. On the other hand, it was contended by learned counsel
for the respondent that in the absence of any provision for
                                                                       8
payment of interest for the compensation paid in cash, the
learned High Court has rightly rejected such prayer.

    7. The question that arises for our consideration in this
case is:-
                                                                       c
      "Whether with respect to the delayed payment of the
     principal amount, the appellant is entitled for any interest
     towards the amount paid in cash and thereby the Circular
     dated 24.11.1986, contrary to such extend is liable to be
     set aside?                                                   D

       8. Heard learned counsel for the parties and carefully
  examined the impugned order passed by the learned Single
  Judge and the Division Bench of the High Court. For
. determination of the issue, it is necessary to notice the relevant
  provisions of the Act in so far as determining the mode of           E
  payment of Principal amount, interest, etc.

     9. The Karnataka Land Reforms Act, 1961 was enacted
for conferment of ownership on tenants, ceiling on land holdings
and for certain other matters. Chapter Ill of the Act deals with F
the conferment of ownership on tenants. Under Section 44, all
.lands held by or in the possession of tenants immediately prior
to the date of commencement of the (Amendment) Act stand
transferred and vests in the State Government with effect from
1st March, 1974, i.e. the date of commencement of the G
(Amendment) Act No.1 of 1974. All rights, title and interest
vesting in the owners of such lands and other persons
interested in such land ceases with effect from 1st March, 1974
and vests absolutely with the State Government free from all
encumbrances. Under clause (b) of sub section (2) of Section
                                                                       H
    286        SUPREME COURT REPORTS               [2013) 2 S.C.R.


A 44 amounts in respect of such lands which become due on or
  after the date of vesting is payable to the State Government
  and not to the land owner, landlord or any other person. The
  State Government takes possession of such lands forthwith.
  Under clause (g) of sub section (2) of Section 44 permanent
B tenants, protected tenants and other tenants holding such lands
  are entitled for rights and privileges which is accrued to them
  in such lands before the date of vesting against the landlord
  as apparent from Section 44 and quoted hereunder:-

          "44. Vesting of lands in the State Government.-(1)
c         All lands held by or in the possession of tenants
          (including tenants against whom a decree or order for
          eviction or a certificate for resumption is made or issued)
          immediately prior to the date of commencement of the
          Amendment Act, other than lands held by them under
D         leases permitted under Section 5, shall, with effect on and
          from the said date, stand transferred to and vest in the
          State Government.

          (2) Notwithstanding anything in any decree or order of or
E         certificate issued by any Court or authority directing or
          specifying the lands which may be resumed or in any
          contract, grant or other instrument or in any other law for
          the time being in force, with effect on and from the date
          of vesting and save as otherwise expressly provided in
F         this Act, the following consequences shall ensue,
          namely:-

          (a) all rights, title and interest vesting in the owners of
          such lands and other persons interested in such lands
          shall cease and be vested absolutely in the State
G         Government free from all encumbrances;

          (b) [x x x x x] amounts in respect of such lands which
          become due on or after the date of vesting shall be
          payable to the State Government and not to the land
H         owner, landlord or any other person and any payment
ARESH @ASHOK J. MEHTA (D) BY PROP. LRS. v. SPL. TAHSILDAR,   287
  BALGAUM KARNATAKA[SUDHANSU JYOTI MUKHOPADHAYA, J.]

   made in contravention of this clause not be va1id;              A
   (c) all arrears of land revenue, cesses, water rate or other
   dues remaining lawfully due on the date of vesting in
   respect of such lands shall after such date continue to
   be recoverable from the land-owner, landlord or other           B
   person by whom they were payable and may, without
   prejudice to any other mode of recovery, be realised by
   the deduction of the amount of such arrears from the
   amount payable to any person under this Chapter;

   (d) no such lands shall be liable to attachment in C
   execution of any decree or other process of any court and
   any attachment existing on the date of vesting and any
   order for attachment passed before such date in respect
   of such lands shall cease to be in force;
                                                             D
   (e) the State Government may, after removing any
   obstruction which may be offered, forthwith take
   possession of such lands:

   Provided that the State Government shall not dispossess
   any person of any land in respect of which it considers,        E
   after such enquiry as may be prescribed, that he is prima
   face entitled to be registered as an occupant under this
   Chapter;

   (f) the land-owners, landlord and every person interested       F
   in the land whose rights have vested in the State
   Government under clause (a), shall be entitled only to
   receive the amount from the State Government as
   provided in this Chapter;

   (g) permanent tenants, protected tenants and other G
   tenants holding such lands shall, as against the State
   Government, be entitled only to such rights or privileges
   and shall be subject to such conditions as are provided
   by or under this Act; and any other rights and privileges
                                                                   H
    288       SUPREME COURT REPORTS                [2013] 2 S.C.R.


A         which may have accrued to them in such lands before
          the date of vesting against the landlord or other person
          shall cease and determine and shall not be enforceable
          against the State Government."

        10. The tenants are registered as occupants of land on
B certain conditions under Section 45 and Section 46 states that
  if the tenant held land from one or more than one-landlord he
  (tenant) is entitled to choose particular land.

       11. Every land-owner, landlord and all other persons
C interested in the land are entitled for amount payable, for the
  extinguishment of their rights in the lands vested in the State
  Government determined with reference to the net annual
  income derivable from the land in accordance with Section 47,
  as quoted hereunder:
D
       "47. Amount payable.-(1) evel}' land-owner, landlord
       and all other persons interested in the land shall, for the
       extinguishment of their rights in the lands vesting in the
       State Government under sub~section (6) of section 15 or
       section 20 or section 44, be entitled to an amount
E
       determined with reference to the net annual inco.me
       derivable from the land or all the lands, as the case may
       be, in accordance with the following scale, namely:-

          (i) for the first sum of rupees five thousand or any portion
F         thereof of the net annual income from the land, fifteen
          times such sum or portion;

          (ii) for the next sum of rupees five thousand or any
          portion thereof of the net annual income from the land,
          twelve times such sum or portion;
G
          (iii) for the balance of the net annual income from the
          land, ten times such balance:

          Provided that,-
H
ARESH @ASHOK J. MEHTA (D) BY PROP. LRS. v. SPL. TAHSILDAR,   289
  BALGAUM KARNATAKA[SUDHANSU JYOTI MUKHOPADHAYA, J.]

   (i) if the tenant in respect of the land is a permanent         A
   tenant, the amount payable shall be six-times the
   difference between the rent and the land revenue payable
   for such land;

  (ii) if the tenant holds land from intermediaries the            B.
  amount shall be paid to the land-owner and the
  intermediaries in the same proportion in which the rent
  paid for the land by the tenant was being appropriated
  by them immediately before the date of vesting;

  (iii) if the land vesting in the State Government is D class     C
  land referred to in Part A of Schedule I or if the landlord
  is,-

  (1) a small holder;
                                                                   D
  (2) a minor;

  (3) a widow;

  (4) a woman who has never been married;

   (5) a person who is subject to [such physical or mental         E
   disability as may be prescribed] ; or

  (6) such soldier or seamen whose lands vest in the State
  Government under section 44, an amount equal to twenty
  times the net annual income from such land shall be              F
  payable.

  (2) For the purpose of sub-section (1), the net annual
  income from the land shall be deemed to be the amount
  payable as annual rent in respect of the land as specified       G
  in section 8. But where in a land assessed as wet land
  or dry land the landlord has raised fruit bearing trees, the
  annual income for purpose of sub-section (1) [shall,
  subject to such rules as may be prescribed, be
  determined] on the basis of assessment for garden land H
    290       SUPREME COURT REPORTS                 [2013] 2 S.C.R.


A         which could have been levied having regard to the nature
          of the fruit bearing trees.

           (3) Where there are wells or other structures of a
          permanent nature on the land constructed by the landlord
          the value thereof calculated in the prescribed manner
B
          shall a/so be payable.

          (4) Notwithstanding anything in sub-sections (1) and (3),
          the aggregate amount payable according to the said sub-
          sections shall not exceed rupees two lakhs.]"
c
         12. Section 48 relates to constitution of Tribunals. Under
    Section 48A, on receipt of an application from a tenant for
    being registered as an occupant, the Tribunal is required to
    make an enquiry after publication of a public notice in the village
0   in which the land is situated calling upon the landlord and all
    other persons having an interest in the land. Under Section
    488, the Tahsildar is required to determine the amount payable
    on receipt of the orders passed under sub section (4) or sub
    section (5) of Section 48A by the Tribunal,
E         13. The Tahsildar while determining the amount under
    Section 488 is required to determine the encumbrances and
    the amount payable in terms of Section 50 of the Act; the mode
    of payment of the amount, which is relevant for the present
    case, is stipulated under Section 51 which reads as follows:
F
          "51. Mode of payment [of the amount].-[(1)] [Save as
          provided in Section 106] the (amount] payable to any
          person under Section 47 shall subject to the provisions
          of Section 50,-
G
          ((a) be paid in cash in a /umpsum if the amount payable
          does not exceed [two thousand rupees] and

          (b) if the amount payable exceeds [two thousand rupees],
          the amount up to [two thousand rupees} shall be paid in
H         cash and the balance shall be paid in [non-transferable
ARESH @ASHOK J. MEHTA (D) BY PROP. LRS. v. SPL. TAHSILDAR,   291
  BALGAUM KARNATAKA[SUDHANSU JYOTI MUKHOPADHAYA, J.]

   and non-negotiable] bonds carrying interest at the rate         A
   of [five and a half per cent] per annum and of guaranteed
   face value maturing within a specified period not
   exceeding twenty years:

   Provided that the amount payable under the bonds
                                                                   8
   issued under this clause may be paid in such number
   of instalments not exceeding twenty as may be
   prescribed.]              ·

   [Provided further that the amount payable shall, subject
   to such rules as may be prescribed, be paid, -                  C
   (i) in the case of a minor, [a person who has attained the
   age of sixty five years] a woman who has never been
   married, a small holder, a person subject to the
   prescribed physical or mental disability and subject to         D
   clause (ii), a widow,-

   (a) in a lumpsum where the amount payable does not
   exceed fifty thousand rupees,; and

   (b) where the amount payable exceeds fifty thousand             E
   rupees, the first fifty thousand rupees in a lumpsum and
   the balance in non-transferable and non-negotiable
   bonds carrying interest at the rate of five and half per cent
   per annum and of guaranteed face value maturing within
   a specified period not exceeding twenty years;                  F
   (ii) in .the case of a widow, if she so elects in writing, in
   the form of annuity during her life time, a sum determined
   in such manner as may be prescribed, which shall not
   be less than the net annual income referred to in sub-
   section (2) of section 72.                                      G
   Explanation:-For the purpose of this clause widow,
   minor and a person subject to physical or mental
   disability include, a woman who is a widow, a person who
   is a minor, a person subject to physical or mental              H
    292       SUPREME COURT REPORTS                [2013] 2 S.C.R.


A         disability respectively at the time when the amount
          payable is determined:

          Provided also that in relation to a small holder the second
          proviso shall have effect as if it was in force on and from
          the First day of March, 1974.]
B
          [(2) Notwithstanding anything in sub-section (1), on or
          after 1st March, 1984, the balance and interest thereon
          payable in accordance with clause (b) of sub-section (1)
          of the second proviso to the said sub-section shall, in lieu
c         of the bonds specified therein, be paid in the following
          manner, namely:-

          (a) the interest accrued at the rate of five and a half per
          cent per annum till 1st March, 1984 remaining unpaid
D         shall be paid in five consecutive annual, as far as may
          be, equal instalments commencing from 1st March, 1984
          in National Savings Certificates;

          (b) the whole or, as the case may be, part of the balance
          specified in sub-section (1), payable before 1st March,
E         1984 remaining unpaid shall be paid in five consecutive
          annual, as far as may be, equal instalments
          commencing from the said date in National Savings
          Certificates; and

F         (c) the whole or, as the case may be, part of the said
          balance payable on or after 1st March, 1984 shall be
          paid in ten consecutive annual, as far as may be equal
          instalments commencing from the said date in National
          Savings Certificates:
G         Provided that along with each of the instalments referred
          to in items (b) and (c), the interest thereon from 1st
          March, 1984 at the rate of five and a half per cent per
          annum upto the date of payment thereof shall also be
          paid in National Savings Certificates.]"
H
 ARESH @ASHOK J. MEHTA (D) BY PROP. LRS. v. SPL. TAHSILDAR,   293
   BALGAUM KARNATAKA [SUDHANSU JYOTI MUKHOPADHAYA, J.)

    14. Under Section 52, payment of the amount to the land-          A
owner/landlord shall be a full discharge of the liability for
payment of the amount and no further claims or payment of
amount shall lie against the State Government or any other
person.
                                                                      B
     15. From the aforesaid provisions, it is clear that the all
lands held by or in the possession of tenants prior to 1.3.1974
has been transferred and vested in the State Government with
effect from 1.3.1974. All rights, title and interest vesting in the
owners of such lands stand cease and is vested absolutely with        C
the State Government. The amount in respect of such lands
which becomes due on or after 1.3.1974 is only payable to the
State Government and not to the land-owners/landlords. The
land-owners/landlords are entitled to receive the amount only
from the State Government and not from any other person.
                                                                      D
     The amount payable to the land-owner/landlord for the
extinguishment of their rights is to be paid in the manner
prescribed under Section 51. The amount upto Rs. 2,000/- is
to be paid in cash and balance of the amount is payable in non-
transferable and non-negotiable bonds carrying interest @5            E
Y:.% per annum.

     Therefore, it is clear that no provision has been made in
the Act for payment of interest if any amount is paid in cash.
On the other hand, the State Government is entitled to earn
interest by establishment of separate fund under Section 53A          F
which is created out of the amount of premium collected from
the tenants or sub-tenants of land belonging to the institutio.ns
referred to in Section 106.

      16. The question that arises further is that whether the        G
appellant is entitled for payment of interest as per Circular No.
ND 171 LWM 86 dated 24.11.1986 or as a matter of general
rule.

                                                                      H
    294       SUPREME COURT REPORTS              [2013] 2 S.C.R.


A        17. Doubts were raised time and again by some of the
    Deputy Commissioners of the Districts about the mode of
    calculation and disbursement of amount. The same was made
    clear by the State Government by its Circular dated 24.11.1986
    which reads as follows:-
B
          "Circular No. ND 171 LWM 86 dt. 24th Nov. 1986.

                               CIRCULAR

                Doubts have been raised time and again by
c         some of the Deputy Commissioners of the Districts,
          about the mode of calculation and disbursement of
          amount in national savings certificates for the lands
          lost under the provisions of Karnataka Land Reforms
          Act, 1961. The field officers are hereby clarified once
D         again the method to be followed in commuting the
          amount and interest payable to the ex-land-lords.

          1. The entire amount due to the ex-land-lords shall
          be calculated taking 1.3.1974 as the cut of date for
          the purpose of calculating interest.
E
          2. On the total principal amount interest at the rate of
          5-1/2% shall be calculated till 1.3.1984. The principal
          amount means the entire amount due to the Ex-
          Landlords (1.3.1974 to 1.3.1984) and the subsequent
F         ten instalments also. The Principal amount so
          calculated will bear on interest at 5-1/2% per annum
          from 1.3.1974 to 1.3.1984. The amount so arrived
          both principal and interest shall be paid in National
          Savings Certificates.
G         3. Further the interest @ 5-1/2% shall be calculated
          on the entire principal amount from 1.3.1984 till the
          date of purchase of National savings certificates, and
          paid in cash at the time of handing over the national
          savings certificates.
H
ARESH @ASHOK J. MEHTA (0) BY PROP. LRS. v. SPL. TAHSILDAR,   295
  BALGAUM KARNATAKA [SUDHANSU JYOTI MUKHOPADHAYA, J.]

   4. The fraction amount of less than Rs.50.00 shall A
   also be paid in cash. The action on all these should
   be simultaneously taken-

   For Example:
                                                                   B
   Total amount                  1. Rs.3,000/·

   Determined:                   2. Rs.2,000/· paid in cash.
                                 3. Amount due is Rs.1,000/·
                                 (in 20 instalments from
                                 1.3.74 to 1.3.84)                 c
                                 Interest at 5-1/2% from
                                 1.3.1974 date Of vesting)
                                 till 1.3.84 550/-
                                 To be invested in N.S.            D
                                 Cash 550/-
                                 4.lnterest at 5-1/2% from
                                 1.3.84 till the date
                                 Of purchase of N.S. Co-           E
                                 cash
                                 5. Fraction, if any, below
                                 Rs. 50/- each.

        The above guidelines shall be followed                     F
 · scrupulously in all cases. x x x x x x x x
                                           Sd/· S. Ashok
                      Under Secretary to Govt. Rev. Dept.
                                         (Land Reforms) G
  No. RS.KLR.HP.86-87·                Belgeum Dt. 27.12.1986

      Copy forwarded to all the Tehsildars and Spl.
  Tehsildar, Land Reforms, in Belgaum Distt. for
                                                                   H
    296       SUPREME COURT REPORTS                    [2013] 2 S.C.R.


A         information and further necessary action.
                                                              Sd/-
                                         for Spl. Dy. Commissioner
                                                        Belgaum."
        18. The aforesaid clarification made by the State
B Government makes it clear that the entire amount due to the
  ex-landlords shall be calculated taking 1.3.1974 as the cut off
  date for the purpose of calculating interest. However, we find
  that the example given therein is confusing which does not make
  it clear whether amount Rs.3000/- shown therein includes the
C interest w.e.f. 1.3.1974 apart from the principal amount to which
  the ex-landlords are entitled.

           19. As per Circular dated 24.11.1986, as noticed above,
    the entire amount of compensation payable to the ex-landlords
    along with interest is to be calculated taking 1.3.1974 as the
0
    cut off date upto 1.3.1984. But if the amount is paid earlier then
    upto the date of payment. Out of the aforesaid total amount
    two thousand rupees is to be paid in cash and the rest through
    National Savings Certificates. If the amount is not paid on or
    before 1.3.1984, provisions have been made to pay further
E   interest @ 5 Yzo/o on the entire principal amount from 1.3.1984
    till the date of purchase of the National Savings Certificates;
    that means the authorities are required to either invest the
    amount in National Savings Certificates or pay interest till the
    amount is invested.
F
         20. There is no ambiguity in the clarification made by
    circular dated 24.11.1986, but the example cited therein is not
    only confusing but also contradictory to the main clarification.
        21. Substantive provision of 'mode of calculation' as
G prescribed under Section 51 has been clarified by Circular
  dated 24.11.1986. The example cited in the circular is merely
  an illustration. If the illustration is conflicting with the clarification
  of the substantive law/provision or if the illustration is vague, the
  clarification will prevail over the illustration. In such case, a
H person who is entitled for the interest as per the clarification
  ARESH @ASHOK J. MEHTA (D) BY PROP. LRS. v. SPL. TAHSILDAR,   297
    BALGAUM KARNATAKA[SUDHANSU JYOTI MUKHOPADHAYA, J.]


aforesaid cannot be deprived of or'denied his right relying on       A
the illustration.

      22. The question of payment of interest on compensation
amount on acquisition of land fell for consideration before a
larger bench of four judges of this Court in the case of Satinder
                                                                     8
Singh vs. Umrao Singh reported in AIR 1961 SC 908. That
was a case of property which was acquired under the East
Punjab Requisition of Immovable Property (Temporary Powers)
Act (48 of 1948). The Act was replaced by Punjab
Requisitioning and Acquisition of Immovable Property Act (11         C
of 1953). Under 1948 Act, compensation was to be paid in
accordance with provisions of that Act. In the said case, the
party claimed the interest on the amount of compensation. The
argument was that the amount of compensation awarded
should carry a reasonable interest from the date of acquisition
as the claimants lost possession of their property. The said         D
argument earlier was rejected by the High Court principally on
the ground that relevant Act of 1948 makes no provision for
 payment of interest and omission to make such a provision
 amounts in law to an intention not to award interest in regard
to compensation amount determined under it. This Court               E
 noticed the contention raised on behalf of the landlords and
 held as follows:-

           "17. What then is the contention raised by the
     claimants? They contend that their immovable property has       F
     been acquired by the State and the State has taken
     possession of it. Thus they have been deprived of the right
     to receive the income from the property and there is a time
     lag between the taking of the possession by the State and
     the payment of compensation by it to the claimants. During      G
     this period they have been deprived of the income of the
     property and they haV°e-not been able to receive interest
     from the amount of compensation. Stated broadly the act
     of taking possession of immovable property generally
     implies an agreement to pay interest on the value of the
                                                                     H
    298        SUPREME COURT REPORTS                 [2013] 2 S.C.R.


A         property and it is on this principle that a claim for interest
          is made against the State. This question has been
          considered on several occasions and the general principle
          on which the contention is raised by the claimants has been
          upheld. In Swift & Co. And Board of Trade (1925) AC520
B         at p.532 it has been held by the House of Lords that "on
          a contract for the sale and purchase of land it is the
          practice of the Court of Chancery to require the purchaser
          to pay interest on his purchase money from the date when
          he took, or might safely have taken, possession of the
c         land". This principle has been recognised ever since the
          decision in Birch v. Joy (1852) 3 H L C 565. In his speech
          Viscount Cave, L.C., added that "this practice rests upon
          the view that the act of taking possession is an implied
          agreement to pay interest", and he points out that the said
          rule has been extended to cases of compulsory purchase
D
          under the Lands Clauses Consolidation Act, 1845. In this
          connection distinction is drawn between acquisition or
          sales of land and requisition of goods by the State. In
          regard to cases falling under the latter category this rule
          would not apply.
E
               18. In Inglewood Pulp and Paper Co. Ltd. And New
          Brunswick Electric Power Commission, 1928 AC 492(AIR
          1928 P C 287) it was held by the Privy Council that "upon
          the expropriation of land under statutory power, whether for
F         the purpose of private gain or of good to the public at large,
          the owner is entitled to interest upon the principal sum
          awarded from the date when possession was taken,
          unless the statute clearly shows a contrary intention".
          Dealing with the argument that the expropriation with which
G         the Privy Council was concerned was not effected for
          private gain, but for the good of the public at large, it
          observed "but for all that, the owner is deprived of his
          property in this case as much as in the other, and the rule,
          has long been accepted in the interpretation of statutes that
          they are not to be held to deprive individuals of property
H


                                                                           r
     ARESH @ ASHOK J. MEHTA (D} BY PROP. LRS. v. SPL. TAHSILDAR,   299
       BALGAUM KARNATAKA [SUDHANSU JYOTI MUKHOPADHAYA, J.)

            without compensation unless the intention to do so is A
            made quite clear. The right to receive the interest takes
            the place of the right to retain possession and is within the
            rule". It would thus be noticed that the claim for interest
            proceeds on the assumption that when the owner of
            immovable Pr"f.lerly loses possession of it he is entitled B
            to claim interest in place of right to retain possession. The
            question which we have to consider is whether the
            application of this rule is intended to be excluded by the
            Act of 1948, and as we have already observed, the mere
            fact that Section 5(3) of the Act makes Section 23(1) of C
            the Land Acquisition Act of 1894 applicable we cannot
            .reasonably infer that the Act intends to exclude the
            application ofthis general rule in the matter of the payment
             of interest. That is the view which the Punjab High Court
             has taken in Surjan Singh v. East Punjab Government
             (AIR 1961 SC 908) and we think rightly.
                                                                          0

                  19........ When a claim for payment of interest is
            made by a person whose immovable property has been
            acquired compulsorily he is not making claim for damages
            properly or technically so called; he is basing his claim on E
            the general rule that if he is deprived of his land he should
            be put in possession of compensation immediately; if not,
            in lieu of possession taken by compulsory acquisition
            interest should be paid to him on the said amount of
            compensation. In our opinion, therefore, the fact that F
            Section 5(1) deals with compensation both for requisition
            and acquisition cannot serve to exclude the application of
            the general rule to which we have just referred."

          23. In view of the specific clarification made vide Circular
    dated 24th November, 1986 and decision of this Court in G
    Satinder Singh (Supra), we hold that the appellant is entitled
    for interest w.e.f. 1.3.1974 @ 5 %% till the total amount was
I   paid to him. The respondent cannot deny the interest on the
    amount of compensation to which the appellant is entitled as a
                                                                         H



      ,..
    300      SUPREME COURT REPORTS                 [2013] 2 S.C.R.


A   matter of general rule, and in the light of the clarification made
    by Circular dated 24.11.1986.

         24. The orders passed by the Single Judge and the
    Division Bench of the Kamataka High Court are, accordingly,
    set aside. The respondents are directed to pay the appellant
B   interest @ 5 %% per annum w.e.f. 1.3.1974 as ordered above
    within three months. The appeal is allowed with aforesaid
    observation and direction, but there shall be no order as to
    costs.

C   R.P.                                            Appeal allowed.