Supreme Court of India

UNION OF INDIA AND ORS.versusDHANWANTI DEVI AND ORS.

Citation: 1996 INSC 911
Decided: 21 August 1996
Disposal: Appeal(s) allowed
Bench: K RAMASWAMY

Holding

The Jammu & Kashmir Requisition and Acquisition of Immovable Property Act, 1968 does not provide for solatium or interest, and such awards cannot be granted under the Act.

Summary

The Union of India appealed against an award of solatium and interest granted by an arbitrator under Section 8 of the Jammu & Kashmir Requisition and Acquisition of Immovable Property Act, 1968, where the respondents' lands had been acquired for defence purposes. The Supreme Court examined whether the 1968 Act, like the Central Requisition and Acquisition Act of 1952, expressly or by necessary implication provides for solatium or interest as part of compensation. The Court held that the Act contains no provision for such awards and that the legislative omission was deliberate, so equity must yield to the statute. Consequently, the award of solatium and interest was set aside, with the compensation determined by the arbitrator upheld. The Court also found no violation of Articles 14 or 31 of the Constitution nor any unjust enrichment of the State.

Issues considered

Whether the Jammu & Kashmir Requisition and Acquisition of Immovable Property Act, 1968 confers a right to solatium and interest on landowners whose property is acquired under the Act.
Whether the omission of solatium and interest in the Act violates the constitutional guarantees of equality (Art 14) or the right to property (Art 31) as applicable to Jammu & Kashmir.
Whether the State is unjustly enriched by the statutory omission of solatium and interest.

Legislation cited

Constitution of Indias. 14, s. 141, s. 31
Jammu & Kashmir (Requisition and Acquisition of Immovable Property) Act, 1968s. 7, s. 8
Land Acquisition Act, 1894s. 23(1-A), s. 23(2), s. 28, s. 34
Requisition and Acquisition of Immovable Property Act, 1952s. 7, s. 8

Subjects

land acquisitionsolatiuminterestcompensationeminent domainJammu & KashmirArticle 14unjust enrichmentstatutory interpretationequitySection 8

Judgment

A UNION OF INDIA AND ORS.
v.
DHANWANTI DEVI AND ORS. ,....

AUGUST 21, 1996

B [K. RAMASWAMY, S. SAGHIR AHMAD
AND G.B. PATTANAIK, JJ.]

Land Laws:

Jammu & Kashmir (Requisition and Acquisition of Immovable proper-
c ty) Act, 1968: Sections 7 and 8.

Acquisition of land-'--Solatiwn and interest-No express provision in
Act for payment of-Held: Owner not entitled to solatium and interest as
omission by Legislature was deliberate---Owner not entitled to interest in
D equity if stalltte under which land was acquired expressed contrary inten-
tion--Ratio decidendi in Hori Kishan Klwsla's case not in conflict with "
Satinder Singh's case-Nor did the fonner have the effect of ovemtling the
latter-Land Acquisition Act, 1894, Ss.23( 1-A) & 2, 28 and 34-Requisition
and Acquisition of Immovable property Act, 1952, Ss. 7 and 8.

E Acquisition of property-Solatiwn and interest-No express provision
in the Act for payment of-Held : neither violative of Article 14 nor even
violative of A1ticle 31 as applicable to Jammu & Kashmir--Legislative omis-
sion to pay solatiwn and interest did not amount to unjust elllichment of
State--{]njust enrichment-Concept of-explained.
F Acquisition of Land-Compensation-Determination of-Principles
laid down.

Constillltion of India, 1950: A11icle 141-Precedent--Constitution of-
Held : essence i11 a decision was its ratio which was bindi11g a11d not eve1y
G observatio11 found therein-Eve1y judgme11t must be read as applicable to
p01ticular facts proved-'--A precede11t by long recognitio11 malltred into rule of
stare decisis.

The n~spondents' lands were acquired for public purposes, viz.,
defence, by publication of notification under Section 7 of the Jammu &
H Kashmir (Requisition and Acquisition or Immovable Property) Act, 1968.
32
U.O.L v. DHANWANTI DEVI 33

Feeling dissatisfied with the compensation paid in respect of the said lands A
the respondents-landowners sought reference under Section 8 of the Act
to the Arbitrator who enhanced the compensation and also awarded
solatium and interest. The appeal filed by the appellants in the High Court
challenging the award of solatium and interest was dismissed. Being
aggrieved the appellants preferred the present appeal.
B
On behalf of the appellants it was contended that the Act did not
confer power upon the arbitrator or the court to award solatium and
interest.

· On behalf of the respondents it was contended that the Act was a C
measure of appropriation of private property of citizens though for a public
purpose; that unless the statute specifically and expressely excluded pay-
ment of solatium and interest the respondents were entitled to the same;
that denial thereof would amount to unjust enrichment by the State; that
in the Sta~e of Jammu & Kashmir right to property was still a fundamental
right; hence deprivation of property without payment of solatium and D
-- interest violated respondents' fundamental right to property thereby of·
fending Artiele 14 of the Constitution; that a landowner was entitled to
solatium and interest under Land Acquisition Act, 1894 and denial thereof
under the Act was violative of Article 14 of the Constitution; that payment
of solatium and interest was part of the compensation; and that Hari Kishan E
Khosla's case was in conflict with the ratio decidendi in Satinder Singh 's case.

Allowing the appeal, this Court
...
HELD : 1.1. The act of taking possession of immovable properties
generally implies an agreement to pay interest on its consideration for F
deferred payment. In a court of equity when the seller parts with possession
of immovable property, the purchaser becomes it owner while the seller
receives money as consideration in lieu of the property. The seller therefore,
is entitled to claim interest in place of his retaining possession of the
property from the date the purchaser takes posession of the property till G
date of payment. On this premise, claim for interest is sought against the
State whe'! it exercises its power of eminent domain and acquires the
property of a citizen for public purpose. This principle was extended in
equity to recompensate the owner for deprivation of his possession and
enjoyment thereof in accordance with law. It was, therefore, held in equity
th?t the owner is entitled to interest on the principal amount of award from H
34 SUPREME COURT REPORTS (1996] SUPP. 5 S.C.R.

A the date of taking possession unless the statute under which the land was
acquired expresses its contrary intention. It is on this premise that the right
to receive interest takes the place of right to retain possession and its
enjoyment. It is equally settled law that equity operates where statute does
not occupy the field. Conversely, when the statute occupies the field the
equity yields place to the statute. [44-B-E]
B
1.2. The question, therefore, is whether the Jammu & Kashmir (Req-
uisition and Acquisition of Immovable property) Act, 1968 expresses any
intention to exclude payment or interest and solatium in respect of the
property acquired thereunder. Land Acquisition Act, 1894 provides for
C payment of interest under Section 34 by the Land Acquisition Officer and
by the Court under Section 28. Similarly, Section 23(2) provides for :iiay-
ment of solatium, in addition to compensation, in consideration of compul-
sory acquisition. The State Legislature was aware of the above provisions
and principles of determination of the compensation under the Acquisition
Act. Yet, the Legislature departed from those principles; instead, it set
D down under the Act its own prindples to determine the compensation. The
Act did not expressly provide for payment of interest and solatium as
components of compensation under the Act. (46-C-D]

1.3. The Requisition and Acquisition of Immovable Property Act,
1952 equally does not provide for payment of solatium and interest. The Act
E
was passed in the year 1968 while the Central Act was passed in 1952. It
would, therefore, be reasonable to conclude that the State Legislature was
cognizant to the express provisions for payment of interest and solatium
available in the Acquisition Act. The Act omitted similar provisions for
payment of imterest and solatium as part or component of compensation,
F obviously to fall in line with the Central Act of 1952. [46-E-F]

1.4. It wouh! be seen that Sub-Section 23(2) of the Acquisition Act
expressly states that solatium is "in addition" to the compensation as con-
sideration for compulsory nature of acquisition. The Act omitted to pay
solatium and interest, in addition to compensation. The omission by the
G legislature is deliberate. Therefore, the respondents are not entitled to
solatium and interest.

The Act is neither violative of Article 14 nor even article 31 of the
constitution as applicable to the State of Jammu & Kashmir.
H (48-F-H; 49-A; CJ
U.O.I. v. DHANWANTI DEVI 35

Union of India v. Hari Kishan Khosla, [1993] Supp. 2 SCC 149; Union A
of India v. District Judge, Udhampur & Ors., JT (1994) 3 SC 629 and Prem
Nath Kapur & Anr. v. National Fertilizers Corporation of India Ltd. & Ors.,
[1996] 2 sec 71, relied on •
• ••
Prabhu Dayal&. Ors. v. Union of India, [1995] Supp. 4 SCC 221;
National Insurance Co. Ltd. Calcutta v. Life Insurance C01poration of India,
B
[1963] Supp. 2 SCR 971 and Satinder Singh & Ors. v. Amaro Singh & Ors.,
[1961] 3 sec 676, held inapplicable.

R.B. Lal Narsingh Das v. Secy. of State for India, AIR (1925) PC 91;
Raghubans Narain Singh v. 1he Uttar Pradesh Govemment through Collector C
of Bljn01; [1967] 1 SCR 489; Prithvi Raj Taneja v. State of Madhya Pradesh
& Ors., [1977] 2 SCR 633; Jogbider Singh & Ors. v. State of Punjab & Anr.,
[1985] 1 SCR 682; Binning/tan City C01poration v. West Midland Baptis
(Tmst) Association (Inc01porated) (1969) 3 All ER 172, Commissioner of
Sales Tax J & K Ors. v. Pine Chemicals Ltd. & Ors., [1995] 1 SCC 58; D
.~·
Yanamadala Co- operative Labour Contract Society Ltd. v. Assistant Director
of Mines & Geology, Guntur, AIR (1984) AP 271; Periyar & Pareekanni
Rubbers Ltd. v. State of Kera/a, [1991) 4 SCC 195; Nagpur Improvement
Tmst & Anr. v. Vithal Rao & Ors., [1973) 1 SCC 500; P.C. Goswami v.
Collector of D01rang, [1982] 1 SCC 439 and State of Kera/a & Ors. v. T.M.
Peter & Ors., [1980] 3 sec 554, referred to. E

2.1. The public money is credited to the Consolidated Fund which is
expended in accordance with the Appropriation Bill passed by the Parlia-
ment or the State Legislature in accordance with the provisions of the
Constitution. The amount collected would be expended for the purposes of F
appropriation and for implementation of the Directive Principles of the
State policy and the law made by the appropriate legislature or the
executive policy in furtherance thereof. Therefore, the non-payment of
solatium and interest does not independently get into the coffers of the
public exchequer nor doe~ the State enrich itself. The public money is G
expended only for public purpose. The concept of unjust enrichment by the
State is alien to and in derogation of the constitutional scheme and public
policy. The general prindple is that one should not be permitted to
unjustly enrich himself a~ the expense of other. Unjust enrichment of a
person occurs when he has and retains money or benefits which in justice
and equity belongs to another. Three elements must .he established in order H
36 SUPREME COURT REPORTS [1996) SUPP. 5 S.C.R.

A to sustain a claim based on unjust·enrichment, the benefit conferred upon
the defendant by the plaintiff; ap11reciation of knowledge by the defendant
of the benefit; and the acceptance or retention by the defendant of the
benefit under such circumstances as to make it inequitable for the defen-
dant to retain the benefit without payment of its value. These principles
specifically absent in the case of omission by tht: statute, are made by the
B competent Legislature to award interest or solatium, in addition to com-
pensation. So,, it cannot be characterised as unjust enrichment where such
action does not involve violation of law or is not opposed to public policy
either directly or indirectly when the statute prescribes the principle for
payment of compensation and omits as its policy to provide for the
C payment of interest and solatium as component of compensation. It is the
legislative public policy to provide for acquisition of the private property
for a public purpose. The State pays compensation for the acquired land
in accordance with the principle laid down in the statute. It would, there-
fore, be illogical to contend that by legislative omission to pay solatium
and interest the State enriches its1elf unjustly at the expense of the private
D
person. [49-D .. H; 50-A-C]

Union of India v. Hari Kishan Khosla, [1993] Supp. 2 SCC 149, relied
on.

E 2.2. In determining compensation in respect of the acquired proper-
ty, which is th1e subject matter of prior requisition and was in possession
of the Government, the principle for determination of compensation is as
per the bi-latieral agreement between the owner and the Government.
Wh.!re it was not effectuated and no agreement was reached, the arbitrator
F is empowered to determine the compensation ,which the requisitioned
property would have fetched in open market, if it had remained in the same
condition as it was at the time of its requisition but the prevailing price
should be as on the date of acquisition. Had it been sold in the open market
to a willing purchaser by a willing vendor, the ·price offered by a willing
purchaser in the open market would be the yardstick. The arbitrator,
G therefore, is kept in the arm-chair of a willing purchaser and should
consider the circumstances attending the requisitioned property. Had it
remained with the owner in the same condition as it was at the time of its
rec1uisition an«I if it were to be sold on the d'ate of acc1uisition on that
condition, the Jlrice a willing purchaser would offer would be just and fair
H compensation under _the Act. [45-G-H; 46-A-C]
U.0.I. v. DHANWANTI DEVI 37

3.1. It is not everything said by a Judge while giving judgment that A
constitutes a precedent. The only thing in a Judge's decision binding a
party is the principle upon which the case is decided and for this reason

. .. it is important to analyse a decision and isolate from it the ratio decidendi .
According to the well settled theory of precedents, every decision contains
three basic postulates (1) findings of material facts, direct and inferential. B
i An inferential finding or facts is the inference which the Judge draws from

the direct, or perceptible facts; (ii) statements of the principles or law
applicable to the legal problems disclosed by the facts; and (iii) judgment
based on the combined effect of the above. A decision is only an authority
for what it actually decides. What is of the essence in a decision is its ratio
and not every observation made therein nor what logically follows from the C
"l;arious observations made in the judgment. Every judgment must be read
as applicable to the particular facts proved, or assumed to be proved, since
the generaJity of the expressions which may be found there is not intended
to be the particular facts of the case in which such expressions are to be
found. It would, therefore, be not profitable to extract a sentence here and D
there from the judgment and to build upon it because the essence of the
decision is its ratio and not every observation found therein. The enuncia-
tion of the reason or principle on which a question before a court has been
decided is alone binding between the parties to it, hut it is the abstract
ratio decidendi, ascertained on a consideration of the judgment in relation
to the subject matter of the decision, which alone has the force of law and E
which, when it is clear what it was, is binding. It is only the principle laid
down in the judgment that is binding under Article 141 of the Constitution.
A deliberate judicial decision arrived at after hearing an argument on a
question which arises in the case or is put in issue may constitute a
precedent, no matter for what reason, and the precedent by long recogni- p
tion may mature into rule of stare decisis. It is the rule deductible from the
application of law to the facts and circumstances of the case which con-
stitutes its ratio decidendi. [42-A-G]

3.2. Therefore, in order to understand and appreciate the binding G
force of a decision it is always necessary to.see what were the facts in the
case in which the decision was given and what was the point which had to
be decided. No judgment can be read as if it is a statute. A word or a clause
or a sentence in the judgment cannot be regarded as a full exposition of
law. Law cannot afford to be static and therefore, Judges are to employ an
intelligent technique in the use of precedents. Viewed in this light it cannot H
38 SUPREME COURT REPORTS (1996) SUPP. 5 S.C.R.

A be said that Hari Kishan Khosla's case is in conflict with Satinder Singh's
case. Therefol'"e, Hari Kishan Khosla's case cannot be held to be per
incwiam nor has it the effect of overruling the ratio decidenti of Satinder
Singh's case. [42-G-H; 43-A; F; H]

Union of India v. Hmi Kishan Klwsla, [1993] Supp. 2 SCC 149 and
B Satinder Singh & Ors. v. Amrao Singh & Ors., [1961] 3 SCC 676, referred
to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 11359 of
1996.

C From the Judgment and Order dated 29.9.92 of the Jammu &
Kashmir High Court in C.I.M.A. No. 72 of 1988.

A.S. Nambiar, (Wasim Qadri) for Ms. Sushma Suri for the Appel-
lants.

D D.D. Thakur E.C. Agarwala and Atul Sharma for the Respondent
No. 1.

C.S. Vaidyanathan, R.P. Singh, Sivram, Suman Kapoor and Ms.
Meenakshi Arora, for the Respondents.
E The Judgment of the Court was delivered by

K. RAMASWAMY, J. Application for impleadment allowed.

Leave granted.

F This appeal by special leave arises from the judgment and order
dated September 29, 1992 passed by the High Court of Jammu & Kashmir
in CIMA NO. 72 of 1988.

The only question that arises for decision in this appeal is : whether
G the respondents are entitled to solatium and interest under the Jammu &
Kashmir Requisition and Acquisition of Immovable Property Act, 1968
(hereinafter referred to as the "Act")?

The facts in nutshell are that land admeasuring 399 Kanals and 4
marlas situated in Villages Rampur, Talwal and Goverdhan Pain was
H acquired for public purposes, viz., defence, by publication of notification
U.O.I. v. DHANWANTIDEVI[KRAMASWAMY,J.] 39
"'""
under Section 7 of the Act on October 16, 1986. The Deputy Commis- A
sioner, Rajouri in his award dated November 3, 1986 awarded compensa-
tion @ Rs. 21,000 in respect of lands situated in villages Rampur and
.... Talwal and Rs. 10,000 per kanal in respect of land situated in village
;.
Goverdhan Pain with 10% escalation on account of passage of time. The
compensation was accordingly paid but feeling dissatisfied therewith, the
B
claimants~landowners sought reference under Section 8 of the Act to the
arbitrator who by his award dated March 8, 1987 enhanced the compensa-
tion to Rs. 60,000 per kanal in respect of lands in villages Rampur and
Talwal and Rs. 40,000 per kanal in respect of land in village Goverdhan
Pain; he also awarded 15% solatium and 4% interest per annum on the
enhanced compensation. When the appellants questioned the same by c
filing an appeal in the High Court, it by impugned judgment and order
dated September 29, 1992 confirmed the same and dismissed the appeal
.... holding that no discrimination could be made between the owners whose
lands are acquired under the Land Acquisition Act, 1894 and owners
_,... whose lands are acquired under the Act and hence the arbitrator was
D
justified in awarding solatium and interest to the land-owner-respondents.
Hence this appeal by special leave.

The admitted position is that prior to the acquisition properties were
under requisition under Section 3 of the Act. Shri Nambiar, learned senior
counsel for the appellant contended that the Act did not confer power E
upon the arbitrator or the court to award solatium and interest. The
controversy is no longer res integra as a two-Judge Bench of this Court in

.. Union of India & Anr. v. Dist1ict Judge, Udhampur & Ors., JT (1994) 3 SC .
629 had held that the claimants are not entitled to solatium and interest
under the Act. The ratio in Union of India v. Hari Krishna Khosla, (1993) F
Supp. (2) SCC 149 was applied wherein the Requisition and Acquisition
.....
of Immovable Property Act, 1952 (for short, the "Central Act" similarly did
not provide for payment of solatium and interest. Thus, it is contended , a
three-judge Bench of this Court had held that the arbitrator and the court
have no power to award solatium and interest on the enhanced compensa-
tion under the Act. G

On the other hand, argument of Shri Vaidyanathan, learned senior
...- counsel for the second respondent, adopted by Shri Thakur, learned senior
counsel for the first respondent, is that the Act is a measure of appropria-
tion of the private property of citizens though for public purpose. When H
40 SUPREME COURT REPORTS [1996) SUPP. 5 S.C.R.

A the owner is deprived of his possession and enjoyment of his property
payment of solatium and interest for compulsory acquisition is integral to
the compulsory acquisition. In equity, the owner is entitled to restitution
for dispossession and enjoyment with interest in lieu thereof. This Court
had held in Satinder Singh & Ors. v. Amrao Singh & Ors., (1961] 3 SCC 676
B that from the date of dispossession till the date of receipt of compensation
it is an implied agreement to pay interest on the value of the property. The
right to receive interest is in place of right to retain possession. Unless the
statute specifically and expressly excludes payment of interest and solatium
the land-holder is entitled to the interest on the amount quantified towards
compensation and solatium; denial thereof would amount to unjust enrich-
c ment by the State depriving the land-holder or his land as well as right to
receive compensation for the intervening period. The denial also is ar-
bitrary and most unjust. In the State of Jammu & Kashmir, the right to
property is still a fundamental right; hence, deprivation of the property
without payment of solatium and interest violates an individual's fundamen-
D tal right to property and therefore, it would be arbitrary offending Article
14 of the Constitution. When an acquisition under Land Acquisition Act,
1894 is resorted to, the claimant-owner is entitled to solatium under Section
23 (2), interest under Sections 34 and 28 and additional amount under
Section 23 (1-A). The denial of payment of solatium and interest, therefore,
is discriminatory violating Article 14 of the Constitution. The very concept
E
of market value is a price which is agreed upon by a willing purchaser as
consideration for purchase of the property from a willing seller. Compul-
sory purchase is a hypothetical sale. Based on the above premises, it is
contended, a purchaser on taking possession of the property has to pay the
entire consideration forthwith but the quantification of compensation
F under the Act like the Land Acquisition Act, 1894 (for short, the "Acquisi-
tion Act") takes place at hierarchical stages. Until quantification is done,
the claimant-owners is entitled to interest for the interregnum between the
date of taking possession and the date of determination and deposit of the
compensation so determined. Applying the above principles, this Court
G repeatedly has helcl that payment of solatium and interest is an integral
part of the compensation. In support thereof, Shri Vaidyanathan placed
reliance on the ratio decidendi in R.B. Lala Narsingh Das v. Secy. of State
for India, AIR 1925 PC 91 at 92, Raghubans Narain Singh v. The Uttar
Pradesh Govemment through Collector of Bijnor, (1967) 1 SCR 489 at 497,
H Plithvi Raj Taneja v. State of Madhya Pradesh & Ors., (1977) 2 SCR 633 at
U.O.I. v.DHANWANTIDEVI[KRAMASWAMY,J.] 41

635, Joginder Singh & Ors. v. State of Punjab & Anr., (1985] 1 SCR 682 at A
684-85. Binninghan City C01poration v. West Midland Baptis (Tmst) As-
sociation (lncotporated), (1969) 3 All ER 172, Commissioner of Sales Tax,
J & Kand Ors. v. Pine Chemicals Ltd. & Ors., (1995] 1 SCC 58, Prabhu
Dayal & Ors. v. Union of India, (1995] Supp 4 SCC 221, Yanamadala
Co-operative Labour Contract Society Ltd. v. Assistant Director of Mines &
B
Geology, Guntur, AIR (1984) AP 271, Pe1iyar & Pareekanni Rubbers Ltd. v.
State of Kera/a, [1991] 4 SCC 195, Nagpur Improvement Tmst & Anr. v.
Vithal Rao & Ors. [1973] 1 SCC 500, P.C. Goswami v. Collector of Danwig
[1982] 1SCC439, State of Kera/a & Ors. v. T. M. Peter & Ors., [1980] 3 SCC
554. He further contended that in Union of India v. Hari Kishan Khosla,
[1993] Supp 2 SCC 149 a three-Judge Bench did not consider the ratio in c
Satinder Singh's case (supra) which is a decision of co-ordinate Bench of
three Judges. There is no ratio in Hari Kishan Khosla's case; it is only a
conclusion. A conclusion does not constitute precedent. If it is considered
to be ratio, it is inconsistent with the ratio in Satinder Singh 's case. The
ratio in Satinder Singh 's case does not have the effect of being over-ruled D
in Hari Kishan Khosla's case. It is per se per incuriam. If a co-ordinate
Belich disagrees with the view of an earlier co-ordinate Bench, the only
course open to the former is to refer the matter to the larger Bench.
Therefore, the decision in Hari Kishan Khosla's case requires reconsidera-
tion by a Constitution Bench. E
Having considered and given anxious consideration to therespective
contentions, the question arises; whether the respondents are entitled to
solatium and interest under the Act? It is not necessary to burden the
judgment with copious references made by Shri Vaidyanathan. Suffice it to
state that the State exercising the power of eminent domain.is empowered F
to acquire, for public purposes, the property of a citizen. The compensation
for the acquired property is determined according to the principles laid
down in the Act under which the property came to be acquired. It is true
that by process of compulsory acquisition, the owner is deprived of his
possession and enjoyment and in lieu thereof compensation be awarded as G
- per the principles laid down in the Act. The determination of the compen-
sation is done at hierarchical stages as per law.
0
Before adverting to and considering whether solatium and interest
would be payable under the Act, at the outset, we will dispose of the
objection raised by Shri Vaidyanathan that llari Kishan Khosla's case is not H
42 SUPREME COURT REPORTS (1996) SUPP. 5 S.C.R.

A a binding precedent nor does it ope~ate as ratio decidendi to be followed
as a precedent and per se per incwiam. It is not everything said by a Judge
while giving judgment that constitutes a precedent. The only thing in a
judge decision binding a party is the principle upon which the case is
decided and for this reason it is important to analyse a decision and isolate
from it the ratio decidendi. According to the well settled theory of prece-
B dents, every decision contains three basic postulates - (i) findings of
material facts direct and inferential. An inferential finding of facts is the
inference which the Judge draws from the direct, or perceptible facts; (ii)
statements of the principles of law applicable to the legal problems dis-
closed by the facts; and (iii) judgment based on the combined effect of the
c above. A decision is only an authority for what it actually decides. What is
of the essence is decision is its ratio and not every observation found
therein nor what logically follows from the various observations made in
the judgment. Every judgment must be read as applicable to the particular
facts provided, or assumed to be proved, since the generality of the
D expressions which may be found there is not intended to be exposition of
the whole law, but governed and qualified by the particular facts of the
case in which such expressions are to be found. It would, therefore, be not
profitable to extract a sentence here and there from the judgment and to
build upon it because the essence of the decision is its ratio and not every
observation found therein. The enunciation of the reason or principle on
E which a question before a court has been decided is alone binding as a
precedent. The concrete decision alone is binding between the parties to
it, but it is the abstract ratio decidendi, ascertained on a consideration of
the judgment in relation to the subject matter of the decision, which alone
has the force of law and which, when it is clear what it was, is binding. It
F is only the principle laid down in the judgment that is binding law under
article 141 of the Constitution. A deliberate judicial decision arrived at
after hearing an argument on a question which arises in the case or is put
in issue may constitute a precedent, no matter for .what reason, and the
precedent by long recognition may mature into rule of Stare decisis. It is
the rule deductible from the application of law to the facts and circumstari-
G ces of the case which constitutes its ratio decidendi.

Therefore, in order to understand and apprtlciate the binding force
of a decision it is always necessary to see what were the facts in the case
in which the decision was given and what was the point which had to be
H decided. No judgment can be read as if it is a statute. A word or a clause
U.0.I. v.DHANWA!ITJDEVI[KRAMASWAMY,J.] 43

or a sentence in the judgment cannot be regarded a a full exposition of A
law. Law cannot afford to be static and therefore, Judges are to employ an
intelligent technique in the use of precedents. It would, therefore, be
necessary to see whether Hali Kisha11 Khos/a's case would form a binding
precedent. Therein, admittedly the question that had arisen and was
decided by the Bench of three Judges was whether solatium and interest B
are payable to an owner whose land was acquired under the provisions of
the Central Act? On consideration of the facts, the relevant provisions in
the Central Act and the pervious precedents bearing on the topic the Court
had held that solatium and interest are not a part of compensation. It is a
facet of the principle in the statute. The Central Act omitted to provide
for paymellt ·of solatium and interest since preceding the acquisition the C
property was under requisition during which period compensation was paid
to the owner. The position obtained and enjoyed by the Government during
the period of requisition continued after acquisition. The same principle
was applied without further elaboration on entitlement to payment of
interest of an owner. It is true that the decisions relied on by Shri D
Vaidyanathan on the principle of payment of interest as part of compen-
sation in respect of land acquired were brought to the attention of this
Court for discussion. What would be its purport would be considered a
little later. Suffice it to say for the present that the finding that so la tium
and interest are not payable for the lands acquired under the Central Act E
as part of compensation is a binding precedent. Obviously, therefore, this
Court followed the ratio therein in Distlict Judge, Udhampur case (supra).
The contention, therefore, that Hari Kishan Khosla's case cannot be treated
as a binding precedent since therein there is no ratio but a conclusion
without discussion, is not tenable and devoid of force. In that view, it is not
·necessary to discuss in extenso the effect of the decisions cited by Shri F
Vaidyanathan. Equally, the contention of Shri Vaidyanathan that the ratio
in Hali Kishan Khos/a's case is in conflict with the ratio in Satinder Singh's
case which was neither distinguished nor overruled and that the decision•
of a co-ordinate Bench cannot have the effect of overruling decision of
another co-ordinate Bench, canriot be given countenance. The effect of the G
ratio in Satinder Singh 's case will be considered a little later; suffice it to
state that there is no conflict in the ratio of these two cases if the facts in
Satinder Singh 's case are closely analysed and the principle laid down
therein is understood in its proper perspective. Therefore, Hali Kishan
Khosla's case cannot be held to be per inculiam nor has it the effect of H
44 SUPREME COURT REPORTS (1996) SUPP. 5 S.C.R.

A overrulin!~ the ratio decidendi of Satinder Singh's case.

Taking the question of entitlement to interest as a first question, as
vehemently argued by Vaidyanathan, broadly speaking. the act of taking
possession of immovable properties generally implies an agreement to pay
interest on its consideration for deferred payment. In a court of equity,
B when the seller parts with possession of immovable property, the purchaser
becomes its owner while the seller receives money as consideration in lieu
of the property. The seller, therefore, is entitled to claim interest in place
of his retaining possession of the property from the date the purchaser
takes possession of the property till date of payment. On this premise,
c claim for interest is sought against the State when it exercises its power of
eminent domain and acquires the property of a citizen for public purpose.
This principle was extended! in equity to recompensate the owner for
deprivation of his possession and enjoyment thereof in accordance with
law. It was, therefore, held in equity that the owner is entitled to .interest
D on the principal amount of award from the date of taking possession unless
the statute under which the land was acquire express its contrary intention.
It is on this premise that the right to receive interest takes the place of
right to retain possession and its enjoyment. It is equally settled law that
equity operates where statute: does not occupy the field. Conversely, when
the statute occupies the field the equity yields place to the statute.
E
The question, therefore, is whether the Act expresses any intention
to exclude payment of interest and solatium in respect of the property
acquired thereunder? It is not in dispute that the property was initially
under requisition whereund.er possession thereof was taken from the
F respondents. During the period of requisition the respondents received
compensation. The quantum thereof was sought to be put in issue but since
that question was neither relevant nor in issue in the courts, we desist from
going into that aspect. Under section 7(1) of the Act, where property is
subject to requisition, if the Government is of the opinion that it is
necessary to acquire the property for a public purpose, it is empowered to
G acquire such property by making publication to that effect in the State
Gazette. Proceeding thereto, a prior notice of show cause should be given
to the oWner-claimants as to why the property should not be acquired; their
objections, if any, should be considered after giving an opportunity and
before deciding the same. Such an order in substance is like a declaration
H under Section 6 of the Acquisition Act after enquiry under Section 5-A.
U.O.L v. DHANWANTIDEVI[KRAMASWAMY,J.] 45

By operation of sub-section (2), the property vests in the Government from· A
the date of publication in the Gazette, absolutely free from all encumbran-
ces and the previous period of requisition of such property comes to a~
end. Sub-section (3) enumerates the circumstances in which the property
cannot be acquired. Section 8 prescribes principles on which compensation
shall be determined and given to the owner, in the manner and in accord-
B
ance with the principles set out therein. Clause (a) thereof gives right to
fix compensation by an agreement between the Government and the owner
indicating thus: "Where the compensation can be fixed by agreement, it
shall be given in accordance with such agreement". Clause (b) gives alter-
native mode to the Government and provides that in the absence of such
an agreement reached between the owner and the Government, "the c
Government shall appoint as arbitrator, a person, who is a District Judge
or Additional District Judge". Clause (c) provided assistance to the ar-
bitrator in the form of a person to be nominated by the Government who
has expert knowledge as to the nature of the property acquired, to assist
the arbitrator as assessor in determining compensation. The principle of D
determination of compensation found in Clause ( d) is "fair amount of
compensation". Under Clause (e), the arbitrator shall, after hearing the
disputes, obviously wherein Government is party, make an award determin-
ing the amount of compensation which appears to him to be "just" and
specify the person or persons to whom such compensation shall be paid.
In making the award, the arbitrator shall have regard to the circumstances E
of each case and the provisions of sub-sections (2) and (3) so far as they
are applicable. Sub-Section (2) deals with payment of compensation for the
property requisitioned. Sub-section (3) contemplates compensation pay-
able for , the. property acquired under Section 7. It envisages that the
compensation payable "shall, in the absence of an agreement, be the price F
which the requisitioned property would have fatched in open market, if it
had remained in the same condition as it was at the time of its requisition
and been sold on the date of acquisition".

It would thus be seen that in determining compensation in respect
of the acquired property, which is the subject matter of prior requisition G
and was in possession of the Government, the principle for determination
of compensation is as per the bi-lateral agreement between the owner and
1
the Government. Where it was not effectuated and no agreement was
reached, the arbitrator is empowered to determine the compensation which
the requisitioned property would have fetched in open market, if it had H
46 SUPREME COURT REPORTS [1996) SUPP. 5 S.C.R.

A remain_ed in the same condition as it was at the time of its requisition but
the prevailing price should be as on the date of acquisition. Had it been
sold in the open market to a willing purchaser by a willing vendor, the price
offered by a willing purchaser in the open market would be the yardstick.
The arbitrator, therefore, is kept in the arm-chair of a willing purchaser
and should consider the circumstances attending the requisitioned proper-
B ty. Had it remained with the owner in the same condition as it was at the
time of its requisition and if it were to be sold on the date of acquisition
in that condition, the price a willing purchaser would offer would be just
and fair compensatio~ under the Act. The Acquisition Act provides for
payment of interest under Sectiion 34 by the Land Acquisition Office and
c by the Court under Section 28. Similarly, Section 23(2) provides for pay-
ment of solatium, in addition to compensation, in consideration of compul-
sory acquisition. The presµmptive evidence furnishes that the Jammu &
Kashmir Legislature was aware of the above provisions and principles of
determination of the compensation under the Acquisition Act. Yet, the
D Legislature departed from thos1~ principles; instead, it set down under the
Act its own principles to determine the compensation. The Act did not
expressly provide for payment of interest and solatium as components of
compensation under the Act.

The question, therefore, emerges: whether it is necessary for the
E State Legislature to expressly specify that interest or solatium shall not be
payable for the lands or property acquired under Section 7(1) of the Act.
Sub silentio is eloquent. It would further be seen that Section 8 of the
Central Act equally does not provide for payment of solatium and interest.
The Act was passed in the year 1968 while the Central Act was passed in
1952. It would, therefore, be reasonable to conclude that the State Legis-
F
lature was cognizant to the express provisions for payment of interest and
solatium available in the Acquisition Act. the Act omitted similar
provisions for payment of interest and solatium as part or component of
compensation, obviously to fall in line with the Central Act.

G In Satinder Singh's case (supra), East Punjab Acquisition and Req-
uisitien of Immovable Property (Temporary) Powers Act, 1948 did not
provide for any principle on which the compensation in respect of the
property acquired thereunder was to be determined, Section 5(e) of that
Act makes Section 23(1) of the Land Acquisition Act, 1894 specifically
H applicable for determination of compensation. Contentio.n raised therein
U.O.I. v.DHANWANTIDEVI[K.RAMASWAMY,J.) 47

was that Sections 23 (2), 28 and 34 by necessary implication stood excluded. A
Considering the said contention, the general principle of law as regards the
right to interest on the compensation of immovable property was discussed
and it was held that when possession of immovable property is taken from
an owner, there is a general implied agreement to pay interest on the value
of the property. On this premises, the claim for interest was made against
B
the State. Accordingly, it was held that Sections 28 and 34 providing for
payment of interest and Section 23(2) for payment of solatium, were not
excluded. The ratio, therefore, must be understood in the light of the facts
found therein. Thus considered, we find that the ratio in Harikishan
Klwsla's case and in Satinder Singh's case are not in mutual conflict nor
the former has the effect of overruling the latter. The difficulty arises in C
understanding the ratio in proper perspective.

In National Insurance Co. Ltd., Calcutta v. Life Insurance C01poration
of India, (1963] Supp. (2) SCR 971 the business of insurance carried on by
the appellant was nationalised under Life Insurance Corporation Act, 1956 D
and stood vested in the Life Insurance Corporation of India on and from
Septe~ber 1, 1956, the appointed day. The dispute between the parties
related to the compensation payable to the appellant-Corporation on such
vesting and one of the issues was whether interest was payable one such
compensation. There was no express provision for payment of interest as
the life insurance business vested in the Life Insurance Corporation. The E
Tribunal had held that it had no jurisdiction to award interest since there
was no express provision in the Act. It was conceded during the hearing
in this Court that the Corporation agreed to pay interest awardable but the
dispute was about the rate of interest, the amount on which it is payable
and the date from which it should be given. Considering the contentions F
in that background, this Court had held that the property remained just
where it was. The purchaser has the money in his pocket and the seller has
the estate vested in him but the character changes in a court of equity; the
seller becomes the owner of the money and the purchaser becomes the
owner of the estate. On entering possession, the purchaser becomes en-
titled to the rent but if he has not paid the price, interest in equity is G
payable by him on the purchase price which belongs to the seller. On this
principle, this Court referred with approval the ratio in Satinder Singh 's
case. In this background, it would be that there is no dispute as regards
the principle of law on the right to receive interest on the value of the
property from the date of taking possession by the purchaser from the H
48 SUPREME COURT REPORTS [1996) SUPP. 5 S.C.R.

A seller when the purchase price was not paid. The question whether the land
holder would be entitled to interest when the Act omitted payment thereof
did not arise therein since the Life Insuran_ce Corporation had agreed to
pay~ interest on the value of the life insurance business of the appellant
therein which vested in the Life Insurance Corporation. Therefore, the
ratio in this case is also of little assistance to the facts in this case. The
B facts in Prabhu Dayal & Ors. v. Union of India, [1995] Supp. 4 221 were
that the property of the appellants was acquired under the Central Act but
the appellants received that compensation under protest. The arbitrator
was not appointed for a long period by the Government as enjoined under
Section 8 of that Act to determine the market value. In Harbans Singh
C Shanni Devi v. Union of India, Civil Appeal Nos. 470-71 of 1985 decided
on February 11, 1985 which was followed in Harkishan Khosla's case,
solatium and interest were awarded to the claimants. The question which
arose for decision in thes1~ cases was as to the !aches on the part of the
Union of India in appointing an arbitrator to determine compensation and
D whether the owner was disentitled to interest and solatium. This Court
applied the principle of equity and directed payment of solatium and
interest to recompensate loss of enjoyment of the money payable towards
compensation. The ratio, therefore, is of no avail to the appellants.

All the decisions cited by Mr. Vaidyanathan in support of his con-
E tention on solatium were considered in H01ikishan Khosla's case. His
repeated attempts failed to persuade us to have that decision referred to
a larger Bench of five Judges. We are unable to persuade ourselves to
doubt the correctness of the judgment in Harikishan Khosla's case. All the
decisions cited by the counsel were considered in extenso by the Bench in
F Hari /(Jishna Khosla's case. We are, therefore, of the opinion that it is not
necessary to re-examine all the decisions once over. We are in respectful
agreement with the ratio in H01ikishan Klwsla's case. It would be seen that
sub-section (2) of Section 23 of the Acquisition Act expressly states that
solatium is "in addition" to the compensation as consideration for compul-
sory nature of acquisition. This distinction was pointed out in catena of
G decisions including the one referred by a Bench of three Judges in Prem
Nath Kapur & Anr. v. Nati'onal Fertilizers Corporation of India Ltd. & Ors.
[1996] 2 sec 71. For parity of reasons, without further discussion it was
held that interest also was not payable. We, therefore, respectfully agree
with the ratio in Harikishan Klwsla's case that the Act omitted to pay
H solatium and interest, in addition to compensation. The omission by the
U.0.I. v. DHANWANTI DEVI [K RAMASWAMY,J.] 49

legislature, as stated earlier, is deliberate. In Dist1ict Judges, Udhampur's A
case a Bench of two Judges of this Court had held that the claimant is not
entitled to solatium and interest. Accordingly; we hold that the respondents
are not entitled to, so latium and interest.

It is then contended by Mr. Vaidyanathan that citizens in Jammu &
B
Kashmir have fundamental right to property under the J & K Constitution.
The State Act was not incorporated in Schedule IX of the Constitution.
The omission to pay solatium and interest is unconstitutional, arbitrary
offending article 14 of the Constitution. The similar contention raised in
Halikishan Khosla 's case was considered and rejected. It was held that it ·
is not violative of Article 14. We are in respectful agreement with the same. c
The Act is not violative of even Article 31 of the Constitution as applicable
to Jammu & Kashmir.

The contention that the denial of solatium and interest in respect of
the property acquired under the Act would be an unjust enrichment of the D
State, is devoid of substance. The public money is credited to the Con-
solidated Fund which is expended in accordance with the Appropriation
Bill passed by the Parliament or the State Legislature in accordance with
the provisions of the Constitution. The amount collected would be ex-
pended for the purposes of appropriation and for implementation of the
Directive Principles of the State policy and the law made by the ap- E
propriate legislature or the executive policy in furtherance thereof. There-
fore, the non-payment of solatium and interest does not independently get
into the coffers of the public ..:xchequer nor does the State enrich itself.
The public money is expended only for public purpose. The concept of
unjust enrichment by the State is alien to and in derogation of the constitu- F
tional scheme and public policy. The general principle is that one should
not be permitted to unjustly enrich himself at the expense of other. Unjust
enrichment of a person occurs when he has and retains money or benefits
which in justice and equity belong to another. Three elements must be
established in order to sustain a claim based on unjust enrichment, the
benefit conferred upon the defendant by the plaintiff; appreciation of
G
knowledge by the defendant of the benefit; and the acceptance or retention
by the defendant of the benefit under such circum~tances as to make it ·
inequitable for the defendant to retain the benefit without payment of its
value. These principle specifically absent in the case of omission by a
statute, are made by the competent Legislature to award interest or H
50 SUPREME COURT REPORTS (1996] SUPP. 5 S.C.R.

A solatium, in addition to compensation. So, it cannot be to characterised as
unjust enrichment where such action does not involve violation of law or
is not opposed to public policy either directly or indirectly when the statute
prescribes the principle for payment of compensation .and omits as its
policy to provide for the payment of interest and solatium as component
of compensation. It is the legislative public policy to provide for acquisition
B of the private property for a public purpose. The State pays compensation
for the acquired land in accordance with the principle laid down in the
statute. It would, therefore, be illogical to contended that by legislative
omission to pay solatium and interest the State enriches itself unjustly at
the expense of the private person. The contention, therefore, is unsus-
c tainable in law.

Accordingly, we hold that the High Court and the arbitrator com-
mitted manifest grave error of law in awarding solatium and interest on the
compensation determined under Section 8 of the Act.

D The appeal is accordingly aHowed. The award of solatium and inter-
est on the compensation awarded stands set aside. The compensation
stands upheld, but in the circumstances, without costs.

v.s.s. Appeal allowed.

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