Case: R.V.M. Neeladri Rao &amp; Anr Vs. Board Of Revenue, Hyderabad &amp; Ors

limited either to 20 times that net annual income or the net income multiplied by the number of years of unexpired portion of the period of lease "whichever is less". If the unexpired portion is 26 years, as in the present case, the compensation could not be more than what it would be in the case of a perpetual lease. Section 20(2) does not say that the amount of compensation must be arrived at only by multiplying the net income by the number of years of the unexpired portion of the lease. As observed by the High Court it only envisages that this should be taken into account along with the value of the right. We find no repugnancy between Rule 1(ii) and Section 20(2) of the Act.The next question on which a good deal of stress has been laid relates to the deduction made on account of the cesses. It has been submitted that owing to Section 3(b) of the Act the estate vested in the Government and after such vesting there would be no land-holder and therefore there was none to whom cesses were to be paid. So the lessees even if originally liable to pay the cess ceased to be so liable after the vesting of the estate in the Government by virtue of Section 3(f) which provides that the relationship of a land-holder and a ryot shall, as between them, be extinguished. It is pointed out that by virtue of the provisions of Section 16(1) of the Act the land-holder or the ryot who became entitled to the ryotwari patta would be liable to pay to the Government such assessment as might be lawfully imposed on the land and these cesses were collected from the ryots by the Government. Therefore the appellants were under no liability to pay the cess after the notified date.10. Now in the patta, dated June 22, 1887, there was a provision that the lessees would pay the local cess and other cesses payable by the ryots in accordance with the rules framed by the Government previously and to be framed in the future. The High Court was right in saying that cess could not be excluded from the calculation of the net income because it had to be paid by the lessees along with the rent reserved under the lease. This is substantiated by the definition of "rent" in Section 3(ii) of the Madras Estates Land Act which under Section 2(1) of the Act becomes incorporated in it. The High Court referred also to numerous sections in the Act for the purpose of which rent includes any local tax, cess etc. and it was observed that the word "rent" was of a comprehensive nature and there was no warrant for restricting its content. Under Rule 2 it was the average net income which had to be taken into consideration. If the word "rent" is to be taken in a comprehensive sense as including taxes and cesses then the net income could only be arrived at by taking into account the cesses payable by the lessee. In our judgment cesses had to be deducted from the annual gross income in arriving at the net annual income which could form the basis of compensation.11. Lastly it has been contended that the appellants are entitled to interest on the amount of unpaid rents in the hands of the Government for the period 1950 to 1961 as under Section 55 of the Act after the notified date the land-holder is not entitled to collect any rent which accrued due to him from any ryot before and is outstanding on that date. It is the manager appointed under Section 6 who alone would be entitled to collect the said amounts together with interest. The amounts were collected but no payment was made to the appellants. On the language of Section 55 as well as under the general principles of law, it submitted, the appellants should have been held to be entitled to the payment of interest on the amounts withheld by the Government. Section 55(1) clearly provides that it is the duty of the manager appointed under Section 6 to collect not only the rent but also any interest payable thereon together with any cost which might have been decreed and he has to pay the same to the land-holder. It would appear that on the analogy of the provision an obligation existed on the part of the Government to pay interest to the land-holders in case the amounts collected were not paid as and when collected. In National Insurance Co. Ltd., Calcutta v. Life Insurance Corporation of India, the appellant carried on life insurance business in addition to other insurance business. On the passing of the Life Insurance Corporation Act, 1956, which was intended to nationalise all Life Insurance business, "its controlled business" stood vested in the Life Insurance Corporation of India from the appointed date but the company was entitled to compensation. The Life Insurance Corporation had been referred awarded certain amount as compensation out of which a set-off was to be allowed on a sum which was specified. It was held that the company was entitled to interest on the balance at 4% per annum. Reference was made in this case to a number of English and Indian decisions in which the rule has been laid down that though under the statute there is no provision for payment of interest it should, nevertheless, be awarded, the principle being that if the owner of an immovable property loses possession of it he is entitled to claim interest in place of the right to retain possession. It may be mentioned that even under the Interest Act, 1839, the power to award interest on equitable grounds was expressly saved by the proviso to 5%. In our opinion this position has not been seriously controverted on behalf of the respondents that the appellants should have been held entitled to interest at the rate of 6% per annum.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]This contention does not appear to have been raised in this form either before the learned single judge or before the division bench of the High Court nor has it been clearly stated in the statement of case of the appellants. It can be disposed of on the short ground that since it had not been raised before the High Court it is not open to the appellants to agitate it for the first time before this Court. At any rate, there seems to be little force in the submission which has been made. It cannot be disputed that the appellants were entitled to the amount collected by the Government under Act XXX of 1947 because even after the notification of the estate under Section 3 of the Act the provisions of that Act including Section 3(4) relating to reduction of rents and the land-holder continued to remain applicable. Under Section 16 every person whether land-holder or a ryot who became entitled to ryotwari patta was liable to pay to the Government such assessment as might be lawfully imposed on the land. That assessment had to be made by way of a ryotwari settlement under Section 22. Till the settlement was made the rent payable under Act XXX of 1947, was to constitute the land revenue payable to the Government from the notified date under Section 23 of the Act. But the assessment as settled under Section 22 was a matter between the Government and the ryot and if, by virtue of the settlement, the Government was entitled to more amount than the rent which was payable under Act XXX of 1947, the appellants had no justification or right for claiming the excess amount. The right of the lessee as land-holder till terminated under Section 20 of the Act was only to receive the rents collected under Section 3(4) of Act XXX of 1947.Sub-section (2) of Section 20 provides that the person whose right has been terminated by the Government under the third proviso to sub-section (1) of the said section should be entitled to compensation from the Government which shall be determined by the Board of Revenue in such manner as may be prescribed having regard to the value of the right and the unexpired portion of the period for which the right was created. Rules have been framed in exercise of the power conferred by Section 67 read with Section 20(2) of theview of the High Court was that till the determination of the lease under the third proviso to Section 20(1) of the Act the rights which the appellants had acquired under the patta were preserved and if the Government had not undertaken to make these collections the tenants would have paid the landholder only the rents as reduced by Act XXX of 1947. The fact that the Government had made the collections did not confer higher rights upon the appellants. After referring to the provisions in Section 23 that the land revenue payable to the Government with effect from the notified date shall, until the ryotwari settlement effected in pursuance of Section 22 had been brought into force in the estate, be calculated in the manner set out in the section the question was examined by the High Court whether the rent that could be collected from the lease-hold land would fall within the connotation of the land revenue payable to the Government. Its considered opinion was that the rent payable to the land-holder fell outside the range of Section 22. Therefore only the rent as fixed under Act XXX of 1947, in the three preceding years could be taken into account. Its must be remembered that the settlement rates represent what is payable to the Government as revenue in respect of the land granted on patta by the Government in the ryotwari settlement. They do not represent what is due to persons like the appellants from their tenants. We consider that it is not possible to equate the rents payable by the tenants to the appellants with the land revenue payable to the Government. No exception could thus be taken to the manner and the measure of computingunexpired portion of the lease, in the present case, was nearly 26 years. It is submitted that Rule 1(ii) itself is contrary to the intendment of Section 20(2) of the Act. In this connection it is noteworthy that Section 20(2) of the Act simply says that the rules must be framed having regard to the value of the right and the unexpired portion the period for which the right was created. That did not, in any way, fetter the power of the rule making authority to frame Rule 1(ii) in the manner in which it has been done. Even where the lease creates a perpetual right the compensation payable has to be equal to 20 times the net annual income. Where it is created for a specified number of years it has to be limited either to 20 times that net annual income or the net income multiplied by the number of years of unexpired portion of the period of lease "whichever is less". If the unexpired portion is 26 years, as in the present case, the compensation could not be more than what it would be in the case of a perpetual lease. Section 20(2) does not say that the amount of compensation must be arrived at only by multiplying the net income by the number of years of the unexpired portion of the lease. As observed by the High Court it only envisages that this should be taken into account along with the value of the right. We find no repugnancy between Rule 1(ii) and Section 20(2) of the Act.Now in the patta, dated June 22, 1887, there was a provision that the lessees would pay the local cess and other cesses payable by the ryots in accordance with the rules framed by the Government previously and to be framed in the future. The High Court was right in saying that cess could not be excluded from the calculation of the net income because it had to be paid by the lessees along with the rent reserved under the lease. This is substantiated by the definition of "rent" in Section 3(ii) of the Madras Estates Land Act which under Section 2(1) of the Act becomes incorporated in it. The High Court referred also to numerous sections in the Act for the purpose of which rent includes any local tax, cess etc. and it was observed that the word "rent" was of a comprehensive nature and there was no warrant for restricting its content. Under Rule 2 it was the average net income which had to be taken into consideration. If the word "rent" is to be taken in a comprehensive sense as including taxes and cesses then the net income could only be arrived at by taking into account the cesses payable by the lessee. In our judgment cesses had to be deducted from the annual gross income in arriving at the net annual income which could form the basis of55(1) clearly provides that it is the duty of the manager appointed under Section 6 to collect not only the rent but also any interest payable thereon together with any cost which might have been decreed and he has to pay the same to theIt would appear that on the analogy of the provision an obligation existed on the part of the Government to pay interest to thein case the amounts collected were not paid as and when collected. In National Insurance Co. Ltd., Calcutta v. Life Insurance Corporation of India, the appellant carried on life insurance business in addition to other insurance business. On the passing of the Life Insurance Corporation Act, 1956, which was intended to nationalise all Life Insurance business, "its controlled business" stood vested in the Life Insurance Corporation of India from the appointed date but the company was entitled to compensation. The Life Insurance Corporation had been referred awarded certain amount as compensation out of which awas to be allowed on a sum which was specified. It was held that the company was entitled to interest on the balance at 4% per annum. Reference was made in this case to a number of English and Indian decisions in which the rule has been laid down that though under the statute there is no provision for payment of interest it should, nevertheless, be awarded, the principle being that if the owner of an immovable property loses possession of it he is entitled to claim interest in place of the right to retain possession. It may be mentioned that even under the Interest Act, 1839, the power to award interest on equitable grounds was expressly saved by the proviso to 5%. In our opinion this position has not been seriously controverted on behalf of the respondents that the appellants should have been held entitled to interest at the rate of 6% per annum.