Holding

The award of the Land Acquisition Officer must be modified to reflect the agreement: compensation at Rs 14,250 per gunta for two‑thirds of the land, 30 % solatium with interest, and the interest provision on compensation is set aside.

Summary

The Supreme Court examined a dispute where Karnataka Electricity Board (KEB) entered into a written agreement with landowners to acquire 21 acres 14 guntas for a power station, agreeing to pay Rs 14,250 per gunta for two‑thirds of the land and to pay solatium fixed by the Land Acquisition Officer (LAO). The LAO issued an award granting compensation for only half the area, imposed interest on the compensation, and questioned the Board’s liability for solatium and the requirement to sign Form‑D. The Board challenged the award before the Karnataka High Court, which upheld it; the matter was appealed to the Supreme Court. The Court held that the LAO was bound by the written agreement and must award compensation at the agreed rate for the two‑thirds area, grant the statutory 30 % solatium with interest, but could not award interest on the compensation absent an agreement. Accordingly, the award was modified, the interest provision on compensation was set aside, and the appeals were allowed.

Issues considered

Whether the award of the Land Acquisition Officer must conform to the written agreement between the acquiring authority and the landowners.
Whether solatium under Section 23(2) of the Land Acquisition Act is payable despite the acquisition not being compulsory.
Whether interest on the compensation amount is payable under Section 23(1)(a) in the absence of an agreement.
Whether the acquiring authority is required to sign Form‑D under Rule 108 of the Rules framed under the Act.
Whether compensation should be calculated for two‑thirds of the schedule property as per the agreement rather than for one‑half.

Legislation cited

Land Acquisition Act, 1894s. 11(2), s. 2(1), s. 23(1)(a), s. 23(2), s. 4(1), s. 5A, s. 6

Subjects

Land acquisitionCompensationSolatiumInterestWritten agreementForm‑DKarnataka Electricity BoardSection 23Statutory authority

Judgment

A KARNATAKA ELECTRICITY BOARD
V.

THE STATE OF KARNATAKA AND ORS. ..
FEBRUARY 19, 2002

B [M.B. SHAH, B.N. AGRAWAL AND ARIJIT PASAYAT, JJ.]

land Acquisition Act, 1894: Sections 2(1 /), 4(/j, 5A, 6 and 23 (2).

land Acquisition-Agreement between Electricity Board and claimant-
c landowners-Provision for consideration of land and solatium-Award passed
by land Acquisition officer not on the basis of Agreement between the parties
Award passed by Land Acquisition Officer modified.

Under an agreement, entered between the Appellant-Board and
respondent-landowners, the Board agreed to pay consideration@ Rs. 14, 250
D per gunta only for 2/3rd of the schedule property and the claimants agreed
to hand over the entire schedule property to the Board. The Board also agreed
to pay to the claimants solatium amount to be fixed by the Land Acquisition
officer. By its award dated 27.7.1998, which was not on the basis of agreement
produced before it, the Land Acquisition Officer granted compensation @
E Rs. 14,250 per gunta in respect of one half area of the schedule property. It
also directed the appellants to pay solatium as well as interest on the said
amount@ 9% per annum for the first year and@ 15% per annum for the
subsequent years from the date of issue of Notification under Section 4(1 ).
The Appellant-Board filed a writ petition before the Karnataka High Court

F
which was dismissed by a Single Judge holding that (i) there was not much
difference between the amount awarded by the Land Acquisition Officer and
..
the amount payable under the agreement; (ii) the award was strictly in
accordance with the Land Acquisition Act. The appeals were also dismissed
by the Division Bench of the High Court on the ground that as the appellant
was not willing to sign and submit Form-D and had raised certain objections
G with regard to the payment of solatium, the Land Acquisition Officer was
justified in passing the award in accordance with law. Hence these appeals.
0
Allowing the appeals and modifying the award, the Court

HELD: I. There was a written agreement between the parties, which
H 1118
I
tr-

KARNA TAKA ELECTRICITY BOARD v. STATE 1119
was produced before the Land Acquisition Officer end he was bound to pess A
award in accordance with the agreement. Grouting of interest, solatium and
additional amount would depend upon contract between the parties.
(1123-G-H)
State of Gujarat and Ors. v. Daya Shamji Bhai and Ors., [1995) 5 SCC
746; Ishwarlal Premchand Shah and Ors. v. State o/Gujarat and Ors., (1996) 4 B
SCC 174 and Abdul Aziz Abdul Razak and Anr. v. Municipal Corpn. o/Greater
Bombay and Anr., (1996) 8 SCC 126, referred to.
2. Solatium amount is required to be fixed under Section 23(2) of the
Land Acquisition Act@30%. After agreeing to pay the solatium, It was totally
unreasonable on the part of the officers of the Appellant-Board to contend C
that they were not bound to pay the solatium as there was no compulsory
acquisition. Secondly, the Land Acquisition Officer also took an unjustified
stand that appellant should sign the Form of agreement as prescribed under
the rules even though the agreement signed by both the parties was produced
before him imd at the request of parties, the land acquisition proceedings were
initiated. Form-D prescribed under Rule 108 of the Rules framed by the State D
Government under the Land Acquisition Act only contemplates the signatures
of the land owners i.e. claimants and that of an officer authorised under Article
299 of the Constitution of India on behalf of and under the direction of the
Governor of Karnataka. It also prescribes indemnity bond which is required
to be executed by the claimants. It nowhere provides that the person for whose E
benefit the property is acquired, should sign the said form. Thirdly, the
claimants took unjustified stand that they were entitled to recover interest
on the amount as provided under Section 23(1(a). [1123-C-FJ
3. The difference in the compensation awarded by the Land Acquisition
Officer and the agreement is not much. However, as the appellant had agreed F
to pay consideration amount for 2/3rd area of the schedule property, it was
not open to the Land Acquisition Officer to award compensation for one half
area of the schedule property. Further, as the appellant had agreed to pay to
the claimants solatium amount to be fixed by the Land Acquisition Officer,
therefore, award granting solatmm cannot be said to be, in any way, illegal
or erroneous. However, as there is no specific agreement on payment of G
interest in the facts of the present case, the award passed by the Land
Acquisition Officer granting the same cannot be justified. [ 1124-8-C)
4. The award passed by the Land Acquisition Officer is modified
accordingly. Thi! claim~nts shall be paid compensation at the agreed rate of
Rs. 14,250 per gunta for 2/3rd urea of the schedule property. They would H
1120 SUPREME COURT REPORTS (2002] I S.C.R.

A also be entitled to get 30% of solatium with i~terest thereon. However, the
award directing that the appellant shall pay interest on the amount of
compensation is set aside. (1124-D-E)

Sunder v. Union of India, (2001) 7 SCC 211, referred to.

B CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1327-
1335 of 2002.

From the Judgment and Order dated I 0.1.2001 of the Karnataka High
Court in W.A. Nos. 66027-35 of 2000 (LA)

C Altaf Ahmed, Additional Solicitor General, S.K. Kulkarni, M. Gireesh
Kumar and Ankur Kulkarni for Vijay Kumar for the Appellant.

Ashok Kumar Sharma, Kamal Pundir, Mohan V. Katarki and N. Ganapathy
(NP) for the Respondents.

D The Judgment of the Court was delivered by

SHAH, J. Leave granted. ..
Question involved in these appeals is-whether award passed by the
Land Acquisition Officer (hereinafter referred to as "LAO") is in conformity
E with the agreement between the parties. As such, there is not much difference
between the two but for one or the other reason parties including the LAO
have taken unjustified stand. Hence this litigation.

Appellant Karnataka Electricity Board challenged the order dated
F 26.7.2000 passed by the learned Single Judge rejecting its Writ Petition No.
4804 of 1999, before the Division Bench of the High Court of Karnataka at
Bangalore by filing Writ Appeal Nos.. 6027-35 of 2000 (LA). Those appeals
were dismissed by the impugned judgment and order dated I 0.1.200 I. Hence
these appeals.

G In Writ Petition No. 4804 of 1999, appellant challenged the award
dated 27. 7.1998 passed by the LAO granting compensation@ Rs. 14.250 per
gunta as agreed between the parties and also directing the appellant to pay
solatium as well as interest on the said amount @ 9% per annum for the first
year and @ 15% per annum for the subsequent years from the date of issue
of notification under Section 4(1 ). The LAO also directed that compensation
H amount should be 50% of the total value as directed by the Member Secretary.
KARNA TAKA ELECTRICITY BOARD v. STATE [SHAH, J.] 1121
Urban Development Authority, Cauvery as the land was undeveloped area, A
despite the agreement that compensation was to be paid for 2/3rd land and
I/3rd was to be deducted on the ground that it was undeveloped. The writ
petition was disposed of by the learned Single Judge by holding that there
was not much difference between the amount awarded by the LAO and the
amount payable under the Agreement. The Court also held that award was B
strictly in accordance with the Land Acquisition Act. The appeals were also
dismissed by the Division Bench of the High Court on the ground that as the
appellant was not willing to sign and submit form-D and had raised certain
objections with regard to the payment of solatium, the LAO was justified in
passing the award in accordance with law. The court observed that appellant
even though a statutory body resiled from the agreement and committed its C
breach.

For dealing with the contentions raised in these appeals, we would
narrate the facts in brief. Admittedly, an agreement dated 2nd February, 1995
was entered into between the appellant and respondent Nos. 2 to 6 (claimants)
for acquisition of 21 acres 14 guntas of land belonging to the claimants, D
situated in R.S. No. 222 and 226. Haveri Town for the purpose of establishing
a 220 K. V. capacity electricity power station. The said agreement inter alia
provides that-
(a) appellant was looking for land in Haveri town for the use of
Karnataka Electricity Board (hereinafter referred to as 'KEB') E
and to install power station for public purpose;
(b) appellant and claimants negotiated for the purpose of acquisition
of land and consideration was fixed by mutual discussion at Rs.
14,250 (rupees fourteen thousand two hundred and fifty only) per
gun ta; F
(c) it was expressly made clear that the claimants have agreed to
receive consideration @ Rs. 14,250 per gunta only for the 2/3rd
area of the scheduled property and hand over the entire scheduled
property to K.E.B.
(d) claimants have agreed voluntary to accept the considerations as it G
was a profitable consideration per gunta ·and it was fair market
value of the property;
(e) appellant and claimants have agreed to apply to the Land
Acquisition Officer. Haveri to acquire the land and to pay the
compensation to the claimants and also to hand over the land to H
1122 SUPREME COURT REPORTS [2002) I S.C.R.

A K.E.B. in the manner prescribed under the Land Acquisition Act,
1894.

In pursuance to the aforesaid agreement, parties inter alia covenanted
as under : (As per the agreement, !st Party is claimants and 2nd Party is
K.E.B.) :-
B
1. that the first party agreed that the market value of the property of
the schedule property is Rs. 14,250 per gunta and it shall not
exceed at any cost more than Rs. 14,250 per gunas;

2. that the first party has agreed to receive consideration at a rate of
Rs. 14,250 per gunta only for the 2/3rd area of the schedule
c property and to hand over the entire schedule property to the
second party;
3.
4. that the first party agreed that he will receive the agreed
D consideration amount through land acquisition officer in the
manner prescribed by law and also agree to hand over the
possession of the property immediately on execution of this
agreement. Second party may enter into the schedule property to
install the power station according to their requirements or utilise
the said property in any manner as it deems fit:
E
Similarly, K.E.B. agreed as under-

I.

2. that the second party shall pay consideration amount at Rs. 14,250
F per gunta of only 2/3rd area of the schedule property and to take
possession of the entire schedule property;
3. that the second party shall bear all the incidental expenditure
required to acquire the schedule land;
4. that the second party agreed to pay to the first party solatium
G amount to be fixed by the land acquisition officer.

The agreement was signed by both the parties on 2nd February, 1995. •
On the basis of the said agreement and on the joint request of the parties, the
State Government issued the Notification under Section 4 of the Land
Acquisition Act on 08.9.1995. Enquiry under Section 5A of the Act was held
H and Section 6 Notification was issued on 26.9.1996. Before that appellant
KARNATAKAELECTRICITY BOARDv. STATE [SHAH, J.) 1123

was directed to deposit a sum of Rs. 57,62,402 by letter dated 3.5.1996 on A
the basis of agreed amount and hence on 4.7.1996 appellant deposited the
same by demand draft dated 29.6.1996.

In the present case, the dispute arises mainly because of unjustified
stand taken by the parties including the LAO in not passing an award on the
basis of the written agreement which was produced before him. Firstly, it was B
unjustified stand taken by the officers of the appellant that claimants were not
entitled to solatium. As quoted above, it was specifically mentioned in the
covenant that the appellant had agreed to pay to the claimants solatium amount
to be fixed by the LAO. Solatium amount is required to be fixed under
Section 23(2) of the Land Acquisition Act @ 30%. After agreeing to pay the C
solatium, it was totally unreasonable on the part of the officers of the appellant
to contend that they were not bound to pay the solatium as there was no
compulsory acquisition.

Secondly, the LAO also took an unjustified stand that appellant should
sign the Form of agreement as prescribed under the rules (as provided under D
sub-section (2) of Section 11 of the Land Acquisition Act), even though the
agreement signed by both the parties was produced before him and at the
request of parties, the land acquisition proceedings were initiated. The learned
Additional Solicitor General has produced before us the Form-D prescribed
under Rule 108 of the Rules framed by the State Government under the Land E
Acquisition Act. The said form only contemplates the signatures of the land
owners i.e. claimants and that of an officer authorised under Article 299 of
the Constitution of India on behalfof and under the direction of the Governor.
of Karnataka. The Form also prescribed indemnity bond which is required to
be executed by the claimants. This prescribed Form nowhere provides that
the person for whose benefit the property is acquired, should sign the said F
form. Thirdly, it is also to be stated that the claimants took unjustified stand
that they were entitled to recover interest on the amount as provided under
Section 23(J)(a).

In our view, the learned Additional Solicitor General rightly contended G
that undisputedly there was a written agreement between the parties, which
was produced before the LAO and the LAO was bound to pass award in
accordance with the agreement. Law on this subject is settled. Granting of
interest, solatium and additional amount would depend upon contract between
the parties. [Re: State of Gujarat and Ors. v. Daya Shamji Bhai and Ors.,
[1995] 5 SCC 746; lshwarlal Premchand Shah and Ors. v. State of Gujarat H
1124 SUPREME COURT REPORTS [2002] I S.C.R.

A and Ors., (1996] 4 SCC 174 and Abdul Azis Abdul Razak and Anr. v. Municipal
Corporation of Greater Bomaby and Anr., (1996] 8 SCC 126.

We also agree with the learned Single Judge that the difference in the
compensation awarded by the LAO and the agreement is not much. Further,
as the appellant had agreed to pay to the claimants solatium amount to be
B fixed by the LAO, therefore, award granting solatium cannot be said to be,
in any way, illegal or erroneous. However, as there is no specific agreement
on payment of interest in the facts of the present case the award passed by
the LAO granting the same cannot be justified. Further, as the appellant had
agreed to pay consideration amount at the rate of Rs. 14,250 per gunta for
C 2/3rd area of the schedule property, it was not open to the LAO to award
compensation for one half area of the schedule property.

In this view of the matter, award passed by the LAO requires to be
modified accordingly. It is ordered that the claimants shall be paid
compensation at the agreed rate of Rs. 14,250 per gunta for 2/3rd area of the
D schedule property and not 50% thereof. As directed by the LAO, claimant
also would be entitled to get 30% oi solatium and on the said amount of
solatium they would be entitled to have interest in view of the decision
rendered by the Constitution Bench of this Court in Sunder v. Union of India,
(200 l] 7 SCC 211. However, the award directing that the appellant shall pay
interest @ 9% per annum for the first year and @ 15% per annum for the
E subsequent years from the date of issue of notice under Section 4(1) of the
Land Acquisition Act on the amount of compensation is set aside.

The appeals stand allowed accordingly. There shall be no order as to
costs all-throughout.

F T.N.A. Appeals allowed.