Levy Of Additional Compensation Noble: Allahabad HC Upholds Levy Of Penal Interest On Unpaid Additional Compensation During Pending Litigation

The Allahabad High Court has upheld the levy of penal interest by the Yamuna Expressway Industrial Development Authority on additional compensation which was not paid by the petitioner during the pendency of litigation.

The Court held that “The interest acts as compensation for the period during which the petitioner was unjustly enriched by withholding the lawful dues owed to YEIDA. Interest on the additional compensation can be claimed by YEIDA as part of equitable restitution, given that the petitioner benefited from the interim relief granted during the litigation. The Principle of restitution is founded on the ideal of complete justice, entitling the successful party to compensation, including interest, for the period it was deprived of its lawful dues.”

The bench comprising Justice Mahesh Chandra Tripathi and Justice Anish Kumar Gupta said that the object behind imposing additional compensation is “very noble and laudable and it has a larger public purpose to achieve by not burdening the court with repeated proceedings.”

It was held that once the Government order which provided the levy of additional compensation and penal interest in case of default of payment had been upheld by the Supreme Court in Yamuna Expressway Industrial Development Authority etc. v. Shakuntala Education and Welfare Society & Ors, the petitioner could not challenge the levy of interest which was provided for the Government order.

Factual Background

The land was acquired by the State Government in District Gautam Budh Nagar for public purposes. Yamuna Expressway Industrial Development Authority (YEIDA) allotted land in favour of various persons/ companies/ societies. Petitioner is one such society which was allotted 50 acres of land on Yamuna Expressway, Gautam Budh Nagar. A lease for instituted for 90 years and eventually Galgotias University was constructed over the plot.

Large-scale acquisitions were made in the State and lands were handed over to New Okhla Industrial Development Authority (NOIDA) and Greater Noida Industrial Development Authority(GNIDA) for development. Farmers whose lands were acquired approached the High Court seeking additional compensation for their lands, which was granted in Gajraj v. State of U.P. at the rate of 64.7% and was later affirmed by the Supreme Court in Savitri Devi v. State of Uttar Pradesh.

Since the orders were passed only with respect to land under NOIDA and GNIDA, the farmers whose land fell under YEIDA also demanded similar treatment. In 2013, the Chaudhary Committee recommended that an additional amount of 64.7% be paid to the farmers as “no litigation incentive” by YEIDA and a proportional amount be recovered from the allottees. A Government Order was issued in 2014 directing YEIDA to make payments, which was approved in the 51^st Board meeting of YEIDA.

Consequently, YEIDA issued notices to allottees, including petitioners, demanding additional compensation at the rate of 600/sqm. It was stated that the entire additional compensation is to be paid in 4 installments else interest will be levied. The notices were challenged before the High Court and were quashed including the Government Order of 2014. However, the decision of the Allahabad High Court was overturned by the Supreme Court in appeals filed by YEIDA in Yamuna Expressway Industrial Development Authority etc. v. Shakuntla Education and Welfare Society & Ors.

Subsequently, YEIDA issued fresh notices to the petitioner including liability of interest due to default in payments while litigation was pending. These notices were again challenged before the High Court on grounds that 64.7% of compensation demanded from the allottees was in excess of what was actually paid by YEIDA and the levy of interest on additional compensation had no statutory force. It was also argued that YEIDA was being unjustly enriched by the demands being raised against the allotees.

High Court Verdict

In Yamuna Expressway Industrial Development Authority etc. v. Shakuntala Education and Welfare Society & Ors, the Supreme Court had upheld the policy decision of the State Government in the public interest as the acquisitions were never challenged, and due to the stay orders in various writ petitions, residential projects were being stalled.

The bench headed by Justice Tripathi held that once the Government Order and subsequent board meeting of YEIDA, imposing additional compensation as well as interest and penalty upon non-payment of additional compensation within the stipulated time, had been upheld by the Supreme Court, YEIDA was bound to enforce the policy.

“We also find that the petitioner's attempt to contest the additional compensation and the associated levy of interest through repeated litigation is to be seen in the light of these constitutional provisions. Moreover, once the Supreme Court had validated the Government Order in question as well as the Board Resolution in question, therefore, the duty is cast upon YEIDA to enforce the Government Order in question as well as Board Resolution in question in its entirety.”

The Court observed that though the first demand was raised in 2014 and the demand notice for the fourth instalment was issued in 2016, the petitioner challenged the notices only in 2018 when demand notices for additional compensation along with interest were issued to them.

The Court specifically observed that the petitioner's conduct did not reflect any bonafide intention of depositing the additional compensation as the first payment which was made was in 2023 pursuant to the interim order passed by the High Court.

Relying on the decision of the Supreme Court in South Eastern Coalfields Ltd. v. State of M.P., the Court held that the petitioner could not argue that the levy of interest was without any legal basis as the delay on payment of additional compensation was attributable to the petitioner itself.

“The rule in equity is that interest is payable even in the absence of any agreement or custom to that effect though subject, of course, to a contrary agreement,” held the Court.

The Court further rejected the argument of the petitioner that being an educational institution, it was not supposed to additional compensation. It was held that the Supreme Court, in the case of the petitioner, had already held that excluding educational institutions from the liability of additional compensation would create a disparity between the farmers who were entitled to additional compensation irrespective of who the allottee was.

The Court held that the petitioner could have challenged the interest part in prior proceedings, however, it chose not to do so. Applying Order 2 Rule 2 CPC, the Court held that there ought to have been unity of claims made by the petitioner and the petitioner cannot be permitted to split the claims and agitate them in separate proceedings, burdening YEIDA.

The Court held that the principle of res-judicata was applicable in this case as the petitioner had already challenged the demand of additional compensation which had been upheld by the Supreme Court. It held:

“While deciding the matter by the Supreme Court, not only G.O. in question and resolution in question but the demand notices were also under challenge and the matter had been heard and finally decided by the Supreme Court. In the instant case, the parties were the same. Hon'ble Supreme Court was competent to decide the issue, which it did with a reasoned order on merits after the contested hearing.”

The Court held that the petitioner had been unjustly enriched by withholding the amount which was lawfully due to YEIDA and accordingly, was liable to restitute YEIDA with compensation along with interest.

Accordingly, the writ petitions were dismissed.

Case Title: M/S Shakuntla Educational And Welfare Society vs. Yamuna Expressway Industrial Development Authority 2024 LiveLaw (AB) 464 [WRIT - C No. - 38069 of 2022]

Case citation: 2024 LiveLaw (AB) 464

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