Compensation Will Have To Be Paid If Money Belonging To Citizen Is Retained By State Entities: Karnataka High Court

The Karnataka High Court has said that money belonging to a citizen is his property, and if that is retained by the State entities it amounts to temporary acquisition of property for which as a matter of rule compensation has to be paid to the citizen.

A division bench of Justice Krishna S Dixit and Justice Ramachandra D Huddar said “Money belonging to a citizen is his property. If that is retained by the State entities falling under Article 12, that amounts to temporary acquisition of property for which as a matter of rule compensation has to be paid going by Article 300A jurisprudence as developed by the Apex Court, precedent by precedent.”

The observation was made while partly allowing the appeal filed by the state government and setting aside the order of the single judge bench directing the government to grant alternate land to the respondent Ramiah Reddy. Further even after the government issued an endorsement dated 01.01.2016 stating that the 25% amount in deposit would be refunded to the respondent without interest, it was still not paid.

The subject land was notified for public auction by Notification dated 16.05.2005. This land accrued to the State by way of forfeiture by orders dated 22.09.2004 and 16.05.2005 since its owner had bought the same in violation of prohibitory sections 79A & 79B of the Karnataka Land Reforms Act, 1961.

The orders were challenged by the land owner before the Karnataka Appellate Tribunal, Bengaluru. The public auction was held on 27.05.2005 and the Writ Petitioner who happens to be the Respondent herein being the highest bidder remitted 25% of the bid amount on 28.05.2005, undertaking to pay the remainder in the specified timeline. Nothing was done in the matter presumably because the landowner's appeals were pending.

The said appeals were allowed on 11.06.2013 and the Appellate Tribunal set aside the forfeiture orders. As a result, the land was restored to its original owner. Following this, the appellants herein had issued an endorsement dated 01.01.2016 telling that the 25% amount in deposit would be refunded to the writ petitioner that too without interest, thereby rejecting his claim for the grant of alternate land. Therefore, the subject writ petition was moved by him which was favoured.

The bench on going through the record noted that the doctrine of frustration of contract is enacted inter alia in Sec.56 of the Indian Contract Act, 1872, which employs the word 'impossible'. The super meaning 'impossibility' in the performance of a contract has to be construed in its practical and not literal sense.

Then it said “If the land sought to be auctioned by the State as its owner, ceased to avail because of the Tribunal's order that has voided its forfeiture. Thus it is a case in which this doctrine becomes invocable, subject to certain conditions. That being the position, it remains ununderstandable as to how the learned Single Judge could grant relief in question to the respondent, in the absence of right to allotment of alternate land was demonstrated in law such as the Government Grants Act, 1895 or the like.”

It added “A host of factors enter the fray whilst granting land as an alternative to the one sought to be auctioned. Therefore, a Writ Court cannot readily grant relief of the kind.”

Observing that the appellants happen to be State entities under Article 12 of the Constitution of India and therefore they have to conduct tall & scrupulous whilst dealing with the citizens like the respondent, the Court stated that they could not have hastily notified the land for public auction when challenge to forfeiture was undertaken by the land owner in the appeals mentioned above, which later eventually came to be allowed by the Tribunal.

At least, the factum of challenge ought to have been mentioned in the Auction Notification itself so that the intending participants therein would have made a rational decision to bid or not. The respondent was made to participate in the auction, being kept in darkness, the Court observed.

Noting that the highest bid of Rs.3,05,00,000 of the respondent was accepted and in furtherance he deposited 25% of the same i.e., Rs.76,25,000/- way back on 28.05.2005 ie., exactly 19 years ago, the court said “Despite endorsement dated 01.01.2016 this amount was not refunded to him, remains as a mystery wrapped in enigma. This culpable act of the appellants, whether one calls it a 'tort' or any other 'actionable wrong', cannot go with impugnity.”

Following which the court said “It needs no research to know that the property prices have been sky-rocketing and at the same time the value of money is depleting. What the amount in deposit made way back in 2006 or later in 2019 could have bought, cannot buy it now, hardly needs to be stated. Further, retention of respondent's amount even otherwise is unjustifiable. Accepting a contra argument virtually amounts to placing premium on unconscionability.”

Accordingly, it allowed the appeal in part and directed the state government to return 25% of the bid amount i.e, Rs. 76,25,000, with interest at the rate of 10% per annum reckoned from 28.05.2005.

The appellants were further directed to pay to the respondent interest at a rate of 10% per annum in the amount of Rs.2,28,75,000, only for the period between 25.11.2019 and 10.06.2024 within six weeks. Failing which, additional interest at the rate of 4% on what is prescribed above, shall be payable and that amount after payment to the respondent be recovered from the erring officials of the Department.

It also directed the appellants to pay jointly a cost of Rs.1,00,000 to the respondent within six weeks, failing which, an additional sum of Rs.500/- becomes payable per day.

Appearance: HCGP G S Aruna for Appellants

Senior Advocate K.N.Phaneendra for Advocate Yadupathi G for Respondent.

Citation No: 2024 LiveLaw (Kar) 239

Case Title: The State of Karnataka & ANR AND Ramiah Reddy

Case No: WRIT APPEAL NO. 1640 OF 2016

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