Case: The Kerala State Housing Board Vs. M/S.Ramapriya Hotels(P)Ltd.

The two appeals arise from the same judgment, the first one by the Housing Board and the second by the State, respondents before the Kerala High Court in OP No. 704 of 1982 dated 26-7-1989. The respondent-company had entered into an agreement on 30-5-1977 agreeing that "first party (respondent-company) is satisfied of their own will that on a consideration of all relevant facts and circumstances and the prevailing conditions Rs 1100 (Rupees eleven hundred only) per cent including all improvements situated on this land will be a fair value and proper price for the property". "The first party will accept without protest on their behalf value-compensation at Rs 1100 (Rupees eleven hundred only) per cent inclusive of solatium and value for all structures and improvements on the property to be acquired and referred to in the schedule hereunder", "will not dispute the declaration of compensation awarded". "Entering into this agreement as it will be for his own benefit and he stands to gain by the implementation of the said agreement." The second party (Land Acquisition Collector) "is empowered to make an award" "at the rate of Rs II 00 (Rupees eleven hundred only) per cent inclusive of solatium and value for all structures and improvements in and upon the said land". Pursuant thereto notification under Section 3(1) of the Kerala Land Acquisition Act, 1961 (Act 21 of 1962 for short "the Act") was published in the State Gazette acquiring 2.69.11 hectares in Survey Nos. 1759 part and 1127 parts in Trivandrum for the housing scheme envisaged by the appellants. Possession of the land was taken on 1-2-1978 but since declaration under Section 6 was not published within two years from the date of publication of Section 3(1) notification, on 12-6-1979 fresh notification under Section 3(1) was published. The respondents questioned the notification by filing a writ petition on 10-8-1979 which was disposed of on 13-10-1980 upholding the fresh notification. A declaration under Section 6 was published on 18-1-1981 and a notice under Section 9(3) to make the award was served on the respondents pursuant to which the respondents laid claim at Rs 30,000 per cent for compensation. The District Collector made an award on 21-8- 1981 at Rs 1100 per cent and on 19-9-1981 the respondents filed an application under Section 20 for reference to the civil court. Since the reference was not made writ petition OP No. 704 of 1982, came to be filed on 26-1-1982 which as stated earlier was allowed by the High Court under the impugned judgment.2. The High Court found that the property under acquisition along with other properties, was hypothecated by equitable mortgage to Indian Bank, branch at Trivandrum, which as mortgagee was entitled to claim an interest in compensation payable to the mortgagor. Since the bank was not a party to the contract, no award under Section 16 of the Act could have been made. It also found that, by operation of the proviso to sub-section (1) of Section 16, since four years had elapsed from the date of the agreement, namely, 13-5- 1977, the award based on the agreement became void. However, to avoid delay since award had already been made, the High Court directed the Collector to refer the claim under Section 20 to the civil court without reference to the agreement which had become void.

Court's reasoning:
Accordingly we hold that though Indian Bank as a mortgagee was interested in the compensation by operation of Section 73(2) of the Transfer of Property Act to realise the amount due to it from the mortgagor from the compensation payable from hypothecated lands under compulsory acquisition, its non-joinder as a party to the agreement does not render the agreement void nor become unenforceable nor renders the jurisdiction of the Collector to make the award under Section 16(1) as illegal or void. May be, as stated earlier, neither the contract nor the award binds the non- party when it was entered into in an individual capacity by the contracting party. The finding of the High Court that no award could have been made in respect of respondent- company, therefore, is clearly erroneous and unsustainable. It is accordingly set aside. We are informed that the Indian Bank was paid of its debt and its request for reference under Section 18 was negatived by the Collector, which became final.It would, thus, be clear that Section 16(1) and its proviso should be read in the context of Section 16(2) and if so harmoniously read to give effect to the scheme of Section 16, "such date" must be referable to the date of the agreement and not to the date of the notification published under Section 3(1) of the Act. Thus considered, we are broadly in agreement with the High Court on this aspect and hold that after the expiry of four years from the date of the agreement, namely 13-5-1977, the Collector ceased to have power to pass the award under Section 16(1). It is to be seen that the agreement validly executed, does not become void after expiry of the period prescribed under the statute. It remains valid, but becomes unenforceable. Since the proviso prescribes a limitation on the exercise of the power by the Collector under Section 16(1) to make an award in terms of the contract, on its expiry he ceases to have power to make award in terms of the agreement. Since the High Court had not quashed the award with a view to avoid further delay, and directed the Collector to make a reference under Section 18 of the Act to the civil court, we are informed that such a reference was, in fact, made by the Collector and is pending. By interim orders this Court stayed further proceedings of the reference. Accordingly we dismiss the appeals and direct the civil court to expeditiously determine the market value according to law. However, it is made clear that the observation of the High Court in the judgment under appeals "that the civil court shall not be bound by the terms of the agreement Ex. P-1 in the matter of determining the compensation" cannot come in the way of the Land Acquisition Collector relying upon the agreement as a piece of evidence as to what the parties had thought to be the market value of the acquired property with reference to the date of publication of preliminary notification and the court deciding on its evidentiary value in the matter of determination of the market value of the acquired