A buyer who has paid purchase money and earnest money towards the purchase of land, which contract is frustrated by the acquisition of the land by the State, has a charge on the compensation amount for the amount of purchase money properly paid by him together with interest and earnest money with interest.

Headnote:
LAND ACQUISITION - APPORTIONMENT OF COMPENSATION - CONTRACT OF SALE FRUSTRATED BY ACQUISITION - INTEREST OF INTENDING VENDEE - CHARGE ON COMPENSATION - SOLATIUM UNDER SECTION 23(2) OF LAND ACQUISITION ACT, 1894.
Fact of the Case:

The facts of the case are that claimant No. 1 was the owner of S. No. 4 measuring 34 Acres 35 Gunthas situate at village Garkheda in Aurangabad. He executed an agreement of sale relating to 30 acres out of this land in favour of claimant No. 2. Under this agreement of sale, Rs. 10,000/- have been received by the vendor - claimant No. 1. Under the contract the price fixed was Rupees 4,000/- per acre totalling upto Rupees 1,20,000/- for the 30 acres agreed to be sold. The balance amount of Rs. 1,10,000/- was to be paid at the time of the execution of the sale - deed. Claimant No. 2 alleged that he has advanced a further sum of Rs. 14,000/- from time to time towards the purchase price of the land. However, no dates are specified either in the claim statement before the Civil Court when reference under Section 30 of the Land Acquisition Act came to be made. It is admitted that a third person named Gesudarey Khan had filed a Civil Suit against the vendor claimant No. 1 in respect of S. No. 4. The agreement. Ex. 57, recites that this was a suit without any substance whatsoever and was sure to be dismissed. An important term of the contract is that after the disposal of that Civil Suit the sale - deed was to be executed within four months. The agreement of sale also states that possession was temporarily being transferred to the purchaser - claimant No. 2 and at the time of the execution of the sale - deed he will have the final possession as the owner of the land. While the Civil Suit filed by the third person was pending, both the parties, it appears, were willing to perform their respective part of the contract. However, Government notified S. No. 4 for acquisition for what is known as Jayakwadi Project by its notification under Section 4 (1) of the Land Acquisition Act dated March 25, 1965. This was followed by another notification under Section 6 dated April 6, 1965. Urgency clause under Section 17 was applied and possession was taken by the State of Maharashtra on October 9, 1965. It may be noted that the Civil Suit filed by the third person came to be dismissed on November 3, 1965. In view of the terms of the agreement the sale deed was executable on payment of the balance of the amount on or before March 3, 1966. However, even before the Civil Suit came to be dismissed and even before the third of four months contemplated by the parties executing the sale - deed commenced, the State stepped in and acquired the land for a public purpose. All private ownership came to an end free from all encumbrances, if any, on the 9th of October 1965 when the State claimed and recovered possession under Section 17 of the Land Acquisition Act.
Finding of the Court:

The court held that claimant No. 2 is a person interested under Section 3 (b) of the Land Acquisition Act and was entitled to make an application under Section 9 for compensation. The court further held that claimant No. 2 had a charge on the compensation amount for the amount of purchase money properly paid by him together with interest and earnest money with interest. The court also held that claimant No. 2 was not entitled to claim solatium under Section 23(2) of the Land Acquisition Act.
Issues: 1. Whether claimant No. 2 is a person interested under Section 3 (b) of the Land Acquisition Act and was entitled to make an application under Section 9 for compensation? 2. Whether claimant No. 2 had a charge on the compensation amount for the amount of purchase money properly paid by him together with interest and earnest money with interest? 3. Whether claimant No. 2 was entitled to claim solatium under Section 23(2) of the Land Acquisition Act?
Ratio Decidendi: 1. A person who has an interest in the compensation payable for the acquisition of land is a person interested within the meaning of Section 3 (b) of the Land Acquisition Act and is entitled to make an application under Section 9 for compensation. 2. A buyer who has paid purchase money and earnest money towards the purchase of land, which contract is frustrated by the acquisition of the land by the State, has a charge on the compensation amount for the amount of purchase money properly paid by him together with interest and earnest money with interest. 3. A buyer who has a charge on the compensation amount for the amount of purchase money properly paid by him together with interest and earnest money with interest is not entitled to claim solatium under Section 23(2) of the Land Acquisition Act.
Final Decision: The court held that claimant No. 2 was entitled to recover from claimant No. 1 the sum of Rs. 9,675/- and claimant No. 1 was entitled to recover from claimant No. 2 the sum of Rs. 325.50/-. The court also held that the claim of claimant No. 2 for Rs. 14,000/- was to be decided by the trial court on merits.

JUDGMENT - Deshmukh, J.

1. This appeal raises a question of some importance relating to the apportionment of compensation on compulsory acquisition of land between the intending vendor and the intending vendee whose contract has been frustrated by the act of acquisition by the State.

2.The facts of this litigation are not in dispute except for the amount which has flowed from the purchaser to the buyer. We will give appropriate direction in respect of that dispute in due course. The undisputed position is that claimant No. 1 Mohammad Akil Khan was the owner of S. No. 4 measuring 34 Acres 35 Gunthas situate at village Garkheda in Aurangabad. He executed an agreement of sale relating to 30 acres out of this land in favour of claimant No. 2 Premraj Jawanmal Surna, who is respondent No. 1 in the present appeal. Under this agreement of sale, Ex. 57, admittedly Rs. 10,000/- have been received by the vendor - claimant No. 1. Under the contract the price fixed was Rupees 4,000/- per acre totalling upto Rupees 1,20,000/- for the 30 acres agreed to be sold. The balance amount of Rs. 1,10,000/- was to be paid at the time of the execution of the sale - deed. It is the case of claimant No. 2 that he has advanced a further sum of Rs. 14,000/- from time to time towards the purchase price of the land. However, no dates are specified either in the claim statement before the Civil Court when reference under Section 30 of the Land Acquisition Act came to be made. As we have indicated above, specific directions will be given in due course regarding the alleged payment of Rs. 14,000/-. It is admitted that a third person named Gesudarey Khan had filed a Civil Suit against the vendor claimant No. 1 in respect of S. No. 4. The agreement. Ex. 57, recites that this was a suit without any substance whatsoever and was sure to be dismissed. An important term of the contract is that after the disposal of that Civil Suit the sale - deed was to be executed within four months. The agreement of sale also states that possession was temporarily being transferred to the purchaser - claimant No. 2 and at the time of the execution of the sale - deed he will have the final possession as the owner of the land.

3. While the Civil Suit filed by the third person was pending, both the parties, it appears, were willing to perform their respective part of the contract. However, Government notified S. No. 4 for acquisition for what is known as Jayakwadi Project by its notification under Section 4 (1) of the Land Acquisition Act dated March 25, 1965. This was followed by another notification under Section 6 dated April 6, 1965. Urgency clause under Section 17 was applied and possession was taken by the State of Maharashtra on October 9, 1965. It may be noted that the Civil Suit filed by the third person came to be dismissed on November 3, 1965. In view of the terms of the agreement the sale deed was executable on payment of the balance of the amount on or before March 3, 1966. However, even before the Civil Suit came to be dismissed and even before the third of four months contemplated by the parties executing the sale - deed commenced, the State stepped in and acquired the land for a public purpose. All private ownership came to an end free from all encumbrances, if any, on the 9th of October 1965 when the State claimed and recovered possession under Section 17 of the Land Acquisition Act.

4.When this happened and when the Collector issued notice under Section 9 of the Land Acquisition Act requiring the parties to put in their claims to compensation for all interests in the land acquired. Claimant No. 1 appeared and put in his claim for the entire compensation. He claimed amount at the rate of Rs. 4,000/- per acre and further added that he had not lost his title at all, though a contract of sale was executed in favour of claimant No. 2. He was still the owner of the land and as such entitled to the entire compensation that may be determined by the Land Acquisition Officer. In t

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