Rizwan Ullah Shah Vs The Collector/DC, Karak

Judgment Sheet

(Judicial Department)

RFA No.01-B/2021

Sayed Rizrvan Ullah Shah, etc.

v.

The Collector / Deputy Commissioner, Karak, etc.

JUDGMENT

For appellant(s): Mr. Abdullah Khattak Advocate F-or respondent(s): Mr. Muhammad Asshar Khan Ahmadzai. A.A.G.

Date of hearing: 29.07.2025

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MUHAMMAD TARro AFRIDI. J.- Through the instant Regular First Appeal filed under Section 54 of the Land 4 Acquisition Act, 1894 r/w Section 96 of the code of civil Procedure, 1908, the appellants have called into question the legality and validity of the judgment and decree dated 28.11.2020, passed by the learned Senior civil Judge-I (Judicial) / Referee Judge, Karak, whereby the reference application seeking enhancement of compensation was dismissed.

2.The brief facts of the case are that the landed property, as specified in the headnote of the reference application, situated within the limits of Mauza Karak, Tehsil and District Karak, measuring 149 Kanals and 14 Marlas, was acquired for the construction of a Joint Judicial complex. The acquisition proceedings were initiated through the issuance of a Notificatiorr under Section 4 of the Land Acquisition Act, 1894, on 20.10.2012, which was duly published in the official Gaz.ette.

3.The Collector Land Acquisition, through Award v No.452 IIDCILAA dated 17 .10.2016, assessed compensation at the rate of Rs. 8,21,118.56 per Kanal for Barani land measuring 103 Kanals and 04 Marlas, and at the rate of Rs. 8,30,894.30 per Kanal for Ghair Mumkin / Banjar Qadeem land measuring 46 Kanals and 10 Marlas, together with 15% compulsory acquisition charges as provided under the law.

4.Aggrieved by the Award, the landowners filed a reference application under Section l8 of the Land Acquisition Act before the learned Referee Court, seeking enhancement of compensation. The respondents contested the reference, and after recording of evidence and hearing of arguments, the leamed Senior Civil Judge-I (Judicial) / Referee Judge, Karak, vide judgment and decree dated 28.11 .2020, dismissed the reference petition.

5.Feeling dissatisfied with the said judgment and decree, 4 the landowners / appellants have invoked the appellate jurisdiction of this Court through the instant Regular First Appeal.

6.Arguments of the learned counsel for the parties heard. Record perused.

7.At the very outset, it is observed that the learned Referee Court erred in not appointing a local commission in the present case to obtain firsthand information regarding the location, nature, and prevailing market value of the acquired land. Such omission deprived the court of an essential aid in recording just and proper findings on the question of compensation. Under Order XXVI, Rule 9 of the Code of Civil Procedure, 1908, the Court is empowered to appoint a local commission in any suit where a local investigation is necessary for elucidating the matters in dispute, or for ascertaining the market value of property, mesne profits, or damages. Additionally, Section 75

of the Code of Civil Procedure not only empowers but obliges v the Court, where circumstances so demand, to issue commissions for various purposes, including the conduct of local investigations, in order to arrive at a just and proper determination of the matter in dispute.

8.The appointment of a local commission in land acquisition matters has been consistently recognized by the superior courts as an essential aid in adjudicating fair compensation where the parties seek enhancement of the award. The apex Court has held that the appointment of a local commissioner is indispensable for determining the true market value and potential of the acquired land, particularly where disputes exist regarding the adequacy of the compensation assessed by the Collector. Such appointments have, in fact, 4 become inevitable in cases involving enhancement of compensation, as the commission's firsthand assessment provides an independent and reliable basis for valuation. The leamed Referee Judge is vested with ample jurisdiction to appoint a local commission to evaluate the land in light of its present characteristics, future potential, and prevailing market rates. The consistent judicial approach, therefore, underscores that the omission to appoint a local commission deprives the Court of a crucial tool for ensuring a fair and just determination of compensation.

9.In the impugned Award No. 4521 dated 17.10.2016, it is specifically recorded in the headnote under the caption "Allocation of Funds" as follows:

"This office demanded Its. 16,69,68,398/- as cost of land from the acquiring department vide letter No. 1326/DCILAA dated 26.03.2016. Accordingly, funds to the tune of Rs. 16,69,68,000/- were placed at the disposal of this office. The funds werc deposited in the Revenue Deposit, AC-I, G- ll2l5, vide Challan No. 103 dated 30.06.2015."

10.A perusal of the entire record does not reveal how many of the landowners received compensation under protest and how many accepted it without objection. Furthermore, it is not discemible from the record as to what portion of the allocated amount has actuatly been disbursed and how much still remains unpaid.

11.Rule 77 of the Khyber Pakhtunkhwa Land Acquisition Rules, 2020, lays down the requirements following the notification under Section 5 of the Land Acquisition Act, 1894. In particular, Rule 17(e) provides that the Commissioner shall ensure that the Collector has placed funds equivalent to the estimated cost assessed by him under clause (d) at the disposal of the Land Acquisition Collector, and that such funds are x deposited in the Treasury under the head Revenue Deposit as security for payment of compensation. Further, Rule 31 of the said Rules requires the Collector to issue a certificate confirming that the requisite funds have been deposited in the Treasury in accordance with law.

12.Section 3l of the Land Acquisition Act, 1894, imposes a substantive statutory obligation that any unpaid amount of compensation must be deposited with the Referee Court at the time of forwarding the reference. The learned Referee Court failed to ensure compliance with this mandatory requirement, which not only contravenes the express provisions of law but also prejudiced the vested rights of the appellants. It is imperative that no reference be entertained without deposit of the unpaid amount of compensation, and in pending matters the Referee Courts are duty-bound to issue directions for transfer and deposit of such funds in Court for further proceedings in accordance with law.

13.After deposit of the amount of compensation in the Referee Court, the said amount is to be dealt with as per the

provisions of Section 32 of the Act which is reproduced for ready reference:

Investment of money deposited in respect of lands belonging to persons, incompetent to alienate.-

(1)If any money shall be deposited in Court under sub- section (2) of the last preceding section and it appears that the land in respect whereof the same was awarded belonged to any person who had no power to alienate the same, the Court shall-

(a)order the money to be invested in the purchase of other lands to be held under the like title and conditions of ownership as the land in respect of which such money shall have becn deposited was held, or

(b)if such purchase cannot be effected forthwith, then in such Government or other approved securities as the court shall think fit;

and shall direct the payment of the interest or other proceeds arising from such investment to the person or persons who ? would for the time being have been entitled to the possession of the said land, and such moneys shall remain so deposited and invcsted until the same be applied-

(i)in the purchase of such other lands as aforesaid; or

(ii)in payment to any person or persons becoming absolutely entitled thereto.

(2)In all cases of moneys deposited to which this section applies the Court shall order the costs of the following matters, including therein all reasonable charges and expenses incident thereto, to be paid by the Collector, namely:-

(a)the costs of such investments as aforesaid;

(b)the costs of the orders for the payment of the interest or other proceeds, of the securities upon which such moncys are for thc timc bcing invested, and for the payrnent out of Court of thc principal of such moneys, and of all proceedings relating thereto, except such as may be occasioned by litigation between adverse claimants.

14.The amount of compensation which does not fall within v the ambit of the above-referred provisions is to be dealt with in accordance with Section 33 of the Land Acquisition Act, 1894.

33.Investment money deposited in other cases. When any money shall have been deposited in Court under this Act for any cause other than that mentioned in the last preceding section, the Court may, on the application of any party interested or claiming an interest in such money, order the same to be invested in such Government or other approved securities as it may think proper, and may direct the interest or other proceeds of any such investment to be accumulated and paid in such manner as it may consider will give the parties interested therein the same benefit therefrom as they might have had from the land in respect whereof such money shall have been dcposited or as ncar thereto as may bc.

15.The strict compliance with the above-referred provisions of the Act is necessary in view of the amendments made to Sections 28 and 34 of the Khyber Pakhtunkhwa Land 4 Acquisition Act, 1894. Under Section 28 of the Act, as amended, the Collector is required to deposit the amount of compensation in Court as determined therein, and such deposit precludes the landowners from claiming interest thereon. For ease of reference and better understanding, the amended Section 28 is reproduced below:

Section. 28: Collector may be directed to pay interest on excess compensation.-If the sum, which, in the opinion of the Court, thc collector ought to have awarded as compensation is in excess of the sum which the Collector did award as compensation, the award of the Court may direct that the Collector shall deposit with the court such amount as determined by it.

In Section2S, for the words "pay interest on such excess amount at the rate of six per centum per annum from the date on which he took possession of the land to the date of payment of such excess into Court," the words "deposit with the Court such amount as determined by it" shall be substituted.

16.On account of amendment in Section 28 by the Khyber v Pakhtunkhwa, the phrase of payment of interest on the excess amount @ Rs. 6Yo was deleted, but the Collector was held liable to deposit the excess amount before the Court as determined by the Referee Court. If the excess amount is deposited in accordance with the Khyber Pakhtunkhwa amendment then no interest shall be levied on the excess amount but in case of failure, the Land Acquisition Collector or the acquiring department to deposit the excess amount before the Referee Court, they may not be absolved from the payment of interest thereon. No doubt, the payment of amount of interest under Section 28 of the Land Acquisition Act, 1894 is discretionary and the Court may pass an order by exercising the discretion judiciously. Similarly, Section 34 of Land Acquisition Act, 1894 as amended by the Khyber Pakhtunkhwa provides that when the amount of compensation is not paid or deposited on or before taking possession of the land, the Collector shall pay the amount awarded with simple interest thereon @ 6% per annum from taking possession, until it shall have so paid or deposited. The language of Khyber Pakhtunkhwa amended Section 34 ofthe Act of 1894 provides in mandatory terms that the Collector shall pay the amount of compensation with interest which shall be calculated from the date of taking possession of the land by Collector until the excess amount is paid or deposited. The Collector is bound to pay 6Yo interest on the amount of compensation determined by the court which is in excess of the amount already deposited in the court. In the case in hand, the Collector is not bound to pay 6Yo interest on the amount of compensation already deposited in the court, however, 6Yo interest is to be paid by the Collector on the amount of compensation determined by the court in excess of the amount already deposited in the court. Wisdom in this regard is sought from the case law reported as 2023 SCMR 950

titled "Nawabzada Abdul Oadir Khan and others Vs. Land )'. Para 7 of the judgment supra is reproduced for ready reference;

7.Coming to the points raised by the Additional Advocate Generals for KP, we note that section 34 of the Land Acquisition Act, 1894 has never been repealed by the Khyber Pakhtunkhwa Provincial Assembly, and therefore have no qualms in arriving at the conclusion that the imposition of six-percent interest imposed by both thc Courts had been done in accordance with law. To that extent, thc Additional Advocate Generals, KP havc not been able to point out any illegality in the imposition of the six per cent interest by both the Courts below. Section 34 of the LAA, 1894, still holds the field and continues to do so. It is, however, important to clarify that unlike riba I interest that accrues out of a financial obligation between the parties, the word "interest" in section 34 ofthe LAA, 1894 is not interest stricto sensu. The interest awarded to landowners under section 34 is compensatory in nature that allows the Court to compensate the landowners for the f,rnancial loss landowners would suffer from the date of I acquisition till payment of compensation by the acquiring authority. Unlike a financial transaction, where parties are often assumed to be cqual in bargaining powcr and are deemed to be consenting to a transaction, an exercise of eminent domain cannot in any sense be construed as either a conscnting transaction between the parties involved (i.e. the State and the landowners) nor can it be assumed by any stretch of imagination that the state and the landowners are equal in terms of bargaining power. Eminent domain is, after all, a unilateral power of the government and no consent from the affected landowners is required under the law before the state can excrcise eminent domain under the LAA 1894. Even otherwisc, as held by this Court in the case of Sheikh Muhammad Ilyas Ahmcd v. Pakistan through Secretary, Ministry of Defenoe (I'}LD 2016 SC 64),thebenefit of section 34 is statutory in nature and such benefit cannot be withheld from the landowners on the ground that interest has been declared against the injunctions of Islam on the ground that interest has bccn declarcd against the injunctions of Islam.

17.The reference is received by the learned Referee Court without compliance with the above referred mandatory provisions due to which the payment of the compensation to the petitioners by the court is delayed and the said amount is not

invested in the government scheme by the Collector for benefit of the landowners. Wisdom in this regard is sought from the case law reported as 2022 SCMR 890 titled "Nasreen Zohra s.

th I)epartment. Lahore and others". Paragraphs 13 to 15 of the judgment are reproduced for ready reference;

13.There is nothing on the record to show that the Respondents have paid the outstanding compensation to the Petitioner. After the Award in question had been made, the Collector was bound to tender the paymcnt in question. If the Collector is prevented from doing so, he is, required to tender the same in Court in view of Scction 18 of the Act. Reliance in this regard is placed on our earlier judgment dated 07.07.2015, the relevant excerpt of which reads as follows:

"7.lt is clear from reading of the provisions of section 3l that on making of Award under section I I of the Act, the Collector is bound to tender the payment of compensation awarded by him to the person entitled thereto according to the Award. In case the Collector is prevented from tendering compensation awarded by him, the Collector is required to deposit the compensation in the Court to which Reference under scction 18 of the Act is made. I'he compliance of the provision of section 3l of the Act by the Collector is mandatory for the simplc reason that its non- compliance give rise to penal consequences and such pcnal consequences are those as are provided in section 34 of the Act i.c. interest prescribed therein will become payable."

In case the Collector does not makc the payment, the Petitioners become entitled to interest as provided in section 34 of the Act. 'Ihc payment of such interest is mandatory in nature and its payment could not have bccn denied to the Petitioncr. Reliance in this regard is placed on the case of Sheikh Muhammad Ilyas Ahmed and others v. Pakistan through Secretary Ministry of Defence, Islamabad and others (Pt.D 2016 SC 64) in which this Court held as followed:

"3. A bare reading of above referred provision of the Act of 1894 reveals that awarding of such interest is statutory in nature, which cannot be withheld. Thus,

the appellants are fully entitled for grant of compound w interest at the rate ofeight percent per annum from the date of taking possession of acquired land till the date of payment of its compensation, but for no valid reasons, such relief has escapcd the sight of the two Courts below. " (emphasis supplicd)

14.It is an admitted fact that a notification was issued on 21.0L 1980 pursuant to which, the first Award dated 02.10.1980 was issued. Possession was also admittedly with the Respondents. As such, the conditions of Section 34 of the Act became applicable. We, therefore, find that from 02.10.1980 tilt 26.08.1998, the I'>etitioner was entitled to compensation at Rs.20,0001- per acre with interest at the rate of 8% per annum since the amount of compensation stood determined which was required to be paid/deposited on taking over posscssion i.e., on 21.01.1980. 'fhis was admittedly not done. Since another Award dated 26.08.1998 was issued with respect to the land of the Petitioner, therefore, the compound interest at the rate of \Yo of the total amount of payable compensation, is required to be paid from 26.08.1998 till such time that actual payment of compensation is made. ? 15. I'he argument of the learned AAG that compound interest is not payable after the original compensation has been deposited has substance. We find that the compound interest would continue to accrue till such time that the entire compensation is paid in its entirely. Once the original amount has been deposited, the matter goes out of the penal consequcnccs of section 34 of the Act. I-Iowever, it would be unfair, unjust and contrary to thc policy of the law to put a landowner at an unfair disadvantage for recovery of the accrued arnount of compensation and give an unfair advantage to the acquiring department which can delay paymcnt of accrued compound interest indefinitely. This woulcl lead to an absurd situation and could not be the intent of the law. We, therefore, hold that in that event, simple interest would be payable on the amount that has accrued by way of compound interest till such time that the accrued and outstanding compound interest is paid to the person who is entitled to receive compensation for his/trer acquired land.

18.The same view was upheld by the august Supreme Court of Pakistan in the case reported as 2023 SCMR 493 titled q Au

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GM. Lahore Vs. Mazhar Siddique and others". Para 10 of v the judgment is reproduced for ready reference;

10.Now moving to the next question, the relevant starting date for the payment of compound interest on compensation amount, in terms of section 34 of Land Acquisition Act, is the date of taking possession of the acquircd land till the date of payment by the Collector where normal statutory procedure has been observed. In this regard, refcrence may be made to the case of "sheikh Muhammad Ilyas Ahmed and others v. Pakistan through Secretary Ministry of f)efence, Islamabad and others" (PLD 2016 SC 64). I-Iowcver, in "Syeda Nasreen Zohra v. Government of the Punjab" (2022 SCMR 890) it was hcld, "We find that the compound interest would continue to accrue till such time that the entire compensation is paid in its entirely. Once the original amount has been deposited, the matter goes out of the penal consequences of section 34 of thc Act".

19.In light of the foregoing discussion, it is held that the findings recorded by the leamed Referee Court warrant interference in the exercise of appellate jurisdiction. Consequently, the instant appeal is allowed, the impugned judgment and decree dated 28.11 .2020 of the learned Referee Court are set aside, and the case is remanded to the learned District Judge, Karak, with a direction to either entertain, hear, and decide the reference application himself or entrust the same to an Additional District Judge, Karak, for disposal in accordance with law. The Referee Court I trial court shall appoint a local commission for the aforesaid purpose ffid, thereafter, decide the reference strictly on merits, without being influenced by any observation or finding contained in this judgment.

Announced -Sd- 29.07 .2025 Judge (Ghafoor Zaman) -Sd-

JUDGE

Judge

(S.B.) Hon'ble Mr. Justice Muhammad 1'ariq Afridi