A.S. Krishnamurthi vs Revenue Divisional Officer, … on 3 January, 1970

Madras High Court
A.S. Krishnamurthi vs Revenue Divisional Officer, … on 3 January, 1970
Equivalent citations: AIR 1971 Mad 236
Author: R Rao
Bench: R Rao, Ramanujam


Ramaprasada Rao, J.

1. (3-12-1969): For setting up the Industrial Estate, Guindy, certain plots of land on the outskirts of the City but in Alandur Village were acquired by issuing a notification dated October 12, 1960 under Sec. 4(1) of the Land Acquisition Act. The appellant owns a build-up bungalow and the extent of the land owned by him and in a portion of which the superstructure is built is 14 centers or 2 grounds and 1080 sq. ft. approximately. This is comprised in S. No. 32/2. The appellant in the court below claimed that the property acquired should be evaluated on the rental basis, and even so in this Court he maintains that on such basis he would be entitled to a compensation of Rs. 25,884-21, as against Rs. 18,498-69 awarded by the Land Acquisition Officer and confirmed by the Court on reference under Section 18 of the Act.

2. Two alternative contentions, however, have been urged by the learned counsel for the appellant. According to the memo of valuation which rests upon the rental basis system, learned counsel would say that he would be entitled to a sum of Rs. 25, 884-21. Pressing however the alternative argument that even if the property were to be valued differently, namely, as land and the building thereon, the value of Rs. 1100/- per ground adopted by the Court below is inadequate.

3. As regards the first contention, we do not agree that this property should be evaluated on the rental basis because on or before the date of acquisition, the property was not let out and was occupied by the owner and it would be very difficult to find in the absence of evidence the market rent for the premises in question, when at the required time the property was not actually let out. As adoption of a monthly rental value on the basis of the prevailing rents after the date of notification would not be safe or proper, we refrain from accepting the argument of the learned counsel for the appellant that the property should be evaluated on the rental basis system.

4. There is however considerable force in the argument of Mr. V. V. Raghavan, learned counsel for the appellant, that the land has been valued at a considerably low price. The lie of the land is just on the outskirts of the City. It is admitted that a road only separates this property from the rest of the City. In fact, it formed part of a colony knows as Ganapathi Nagar colony which consisted of plots acquired and 14 other plots on the other side of the side of the road were acquired for the very same public purpose, but under a notification dated October 15, 1958. The cases which were the subject-matter of the said acquisition proceedings ultimately ended by a decision of this Court in Appeals Nos. 600 and 601 of 1961. in which a Division Bench of this Court was of the view that the market value of the land on the other side of the road would be Rs. 2,000/- per ground on October 15, 1958. Basing his claim on the value so fixed by this Court in the appeals referred to above learned counsel would say that the value as fixed by the court below is inadequate and low.

5. We have seen Ex. B-6, the topographical sketch filed in these proceedings and we have no reasons to doubt that the property acquired is situated similarly and has almost all the privileges which the other four plots which were the subject-matter of Appeal Nos. 600 and 601 of 1961 were enjoying, thus considered there seems to be no reason at all to differentiate this plot of land from the plots therein referred to. But the learned Government Pleader referred to the data sales and relied upon a sale deed Ex. B-2 February 14, 1958. This relates to a plot of land in Savari Street in Alandur Municipality. This is in the heart of Alandur Municipality and is no where near the City or its limits. We are unable to accept the contention of he learned Government Pleader, which found favour with the Court below, that Ex. B-2 is and ought to be the sole guide for evaluation of the acquired land. On the other hand, we are bound to notice the value given by this Court to the plots of land just opposite to the plot acquired and which at one time formed part of Ganapathi Nagar. Mr. V. V. Raghavan would say that the price of the land in this appeal ought to be more than that given to the plots in Appeal Nos. 600 and 601 of 1961. The argument is based on the passage of time as between 1958 to 1960. We have already noticed that the notification under Section 4(1) in the earlier appeals was in 1958 and that in the instant case was in 1960. It should however be noticed that the other plots accidentally but fortunately came within the City limits; but the plots now acquired are branded as properties outside the City limits. Taking this into consideration and the other circumstances as location and environment, we grant a compensation of Rs. 2000/- per ground for the acquired land. The appellant would be entitled to the 15 per cent solatium on the excess compensation awarded by this Judgment.

6. The appeal is allowed with proportionate costs.

(And Appeal No. 203 of 1964 along with Appeal No. 414 of 1964 coming on for hearing on Thursday the 18th day of December, 1969, Appeal No. 203/64 having been posted for being spoken to on this day on the letter of the Advocate dated 9-12-1969, the Court delivered the following judgment.)

Ramaprasada Rao, J.

7-8. A. S. No. 414 of 1964 is an appeal directed against the order of the learned Subordinate Judge of Tiruchirapalli, who,. in an interlocutory application before him, in a Land Acquisition case which was originally referred to Court under Section 18 of the Act, allowed interest on the excess compensation granted, but in accordance with Section 28 of the Act. When the reference was disposed of in the first instance, the Court in tits judgment fixed the compensation in the instant case at the rate of four annas per square foot with solatium etc. He granted three months time for deposit of the excess. In the decree which followed, no interest was provided. The claimant (respondent) filed an application under Section 141 and 152 of the Code of Civil Procedure read with Section 53 of the Land Acquisition Act. The respondent’s case was that by a clerical error the provision regarding interest was omitted in the decree and that s he was entitled to interest on the excess compensation from the date of taking possession to date of deposit, the Court may correct the error and grant the same bringing it in conformity with the judgment. The argument on behalf of the State was that the use of the word ‘etc.’ has no significance and the Court by not expressly providing for interest, should be deemed to have refused it. The lower Court did not accept the contention of the State and granted relief and ultimately awarded interest. As against this, this appeal has been preferred. Before us the argument of the learned Government Pleader was that the grant of interest being in the discretion of Court, the Judgment of the lower Court is wrong. Mr. K. S. Desikan, learned counsel for the respondent, contending contra, sustained the legality and propriety of the order of the Court below. Mr. V. V. Raghavan, at whose instance A. S. No. 203 of 1964 was set for being spoken to, urged that interest is not part of the compensation awarded in a land acquisition case and therefore it has to be granted independently whether claimed or not and without being subject to the payment of Court-fee in accordance with the Madras Court-Fees Act. Incidentally we negatived such a claim for interest in A. S. No. 203 of 1964 since it was not claimed and no court-fee was paid for the relief. Many citations were made by the Bar.

9. We shall examine the scope and nature of the entitlement for interest on the amount awarded either by the Land Acquisition Officer or the Court, as the case may be, in the course of the application and implementation of ht machinery for compulsory acquisition as envisaged in the Land Acquisition Act (I of 1894) as amended in Madras. The Land Acquisition Act as any other similar enactment, brought into the anvil by legislative wisdom, projects the police power or according to American Jurisprudence, the power of eminent domain of the State. Acquisition or requisition is made for a public purpose or in an emergency. In either case, expropriation of property becomes necessary by force of public good. In such cases the owner is retrieved of his property by compulsion and is kept out of it in consideration of a substituted payment, which represents the real and fair market value of the property taken and the fair rent or income derived therefrom. In acquisition, it is a permanent divestiture of rights in property; whereas in requisition it would be a temporary phase. In both events the owner is deprived, wither for ever or for a period from enjoying his property. Such deprivation obviously is compensable, unless otherwise unequivocally stated by the Legislature whose plenary authority to fix the formula of compensation has certain broad advances and narrow outlets. We are not concerned in this appeal with such issues. As in acquisition or requisition, the rights over the properties in any proprietorship removed in the in the name of public purpose, it follows that the vendor should be paid willing price or compensation for such deprivation, thus has been evolved the salutary rule of justice, equity and good conscience about the payment of interest on the compentended as legitimate panacea for the who has lost the property permanently in acquisition or temporarily during requisition. As acquisition or requisition for a public purpose springs from the concept of a socialistic pattern of society, it cannot be a one-way traffic, and the person deprived had got to be recompensed as well towards the fair and real income from which he has been kept away. Such is the force of the conscience of Courts that notwithstanding the absence of a specific provision for interest, Courts are prompted to grant it, as for example in cases of a delayed payment of rent in requisition, in exercise of its equitable jurisdiction as the right to retain possession has been taken away. Under the Land Acquisition Act however there are specific provisions for the grant of interest under stated circumstances.

10. Before the provisions relating to interest in the Act are examine, the general scheme of the Act, in so far as it is relevant for purposes of this case, may be briefly noticed, Part II of the Act is captioned as “acquisition”. The Collector or the Land Acquisition Officer after due enquiry in the prescribed manner, makes an award whereby he grants the compensation to the person interested. Section 11 provides for such an enquiry and the award to be made shall inter alia contain the compensation which in his opinion shall be allowed for the land, in accordance with Sections 23 and 24 of the Act. The Collector shall thereafter take possession of the land unless under Section 17, such possession was taken before the passing of the award by invoking the urgency provisions. Section 34 which occurs in Part V regarding ‘payment’ of compensation says:–

“Payment of interest–When the amount of such compensation is not paid or deposited on or be fore taking possession of the land, the Collector shall pay the amount awarded with interest thereon at the rate of six per centum per annum from the time of so taking possession until it shall have been so paid or deposited.”

Part III relates to reference to Court and procedure thereon. At the instance of the aggrieved party, a reference to Court under Section 18 can be made. A valid reference has to be enquired into buy the Court as if it is a normal legal proceeding and thereafter the court shall pass its award which shall substitute the one already given by the Collector. Under Section 26 every award under this part shall be in writing signed by the Judge. What is an award and what are its contents? The decree of Court on a reference made to it under Section 18 of the Act is primarily the award though fictionally it is called a decree and the statement of the grounds of such an award a judgment. Such a statutory fiction, treating the award as a decree within the meaning of Section 2(2). C.P.C., has to be fully implemented and given effect to as if such a putative fact exists and there is no scope to boggle with one’s imagination. While interpreting such a deemed decree. This is so provided in Section 26(2) of the Act. The award shall specify the amount awarded as prescribed in Section 23, together with the grounds for awarding such amounts. This is treated as a judgment. This is contemplated in Section 26(1) and (2) of the Act. Section 27 thereto makes it incumbent upon the Court to state the costs payable by one party to the other, unless it, for valid reasons, fails to make a provision for the same. Thus costs awarded is made a part of the ‘award’. Section 28 which ex facie vests a discretion in Court, provides for the payment of interest at 4 per cent per annum (according to the Madras amendment), over the excess compensation awarded by Court for the delay in payment of the compensation. Section 28 reads:

“Collector may be directed to pay interest on excess compensation: If the sum which, in the opinion of the Court, the 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 pay interest on such excess 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 word “interest” here denotes the additional yardstick to measure compensation awardable. It is not ‘interest on money’ as is popularly understood. This also is to be part and parcel of the award. It is an integral part of compensation as it becomes merged in the award by force of statute or the impact of equity. Though Section 28 projects a discretion with the Court to award interest, it appears to be more or less mandatory, as it is now settled law to provide the same equitably as well, in lieu of the deprivation of the right to possession of the acquired property. The quality of the money paid under Section 28 is not strictly interest as understood in the law Merchant but additional compensation estimated and measured in terms of interest. We have already referred to Section 34 of the Act whereunder the Collector is bound to award interest under certain circumstances stated therein. We are not strictly concerned with such interest here.

11. We shall now refer to the judicial procedure closely connected with the subject, as to the scope, content and nature of such interest granted vis-a-vis the compensation awarded. In an early case reported in Rangaswami Chetty v. Collector of Coimbatore. (1910) 7 Mad LT 78 a Division Bench of our Court was of the view that the claimant in a land acquisition case is entitled to interest as of right, although apparently he did not press for it in the lower Court. The Privy Council in Narsingh Das v. Secy. of State for India in Council, 48 Mad LJ 386 = (AIR 1925 PC 91), while parting with the case, observed that the appellant was “entitled to interest”, which was omitted to be provided by the High Court. Though the above two precedents were noticed by the learned Judges in Subramania Aiyar v. Collector of Tanjore, 51 Mad LJ 309 = (AIR 1926 Mad 1019), they were not sure whether the Court is bound to award interest under Section 28 and felt that the matter was not free from doubt. After the latest pronouncement of the Supreme Court in Satinder Singh v. Umrao Singh, , National Insurance Co., Ltd. v. Life Insurance Corporation of India, and Raghubans Narain Singh v. Govt. of Uttar Pradesh, AIR 1967 SC 465, the position is crystal clear and in our view, interest which ought to be provided in the award or the deemed decree forms part of it and hence it is woven into the fabric of compensation awardable under the Act and thus integrated with it. The two age-old rules approved by the Supreme Court and propounded originally by either the House of Lords or the Privy Council can be reproduced thus:

(a) In a case where the State or the promoter, in an acquisition or requisition enters into possession without paying the just compensation, then interest is awarded on the general rule of equity which reads:

“The parties change characters, the property remains at law just where it was, the purchaser has the money in his pocket, and the seller still has the estate vested in him; but they exchange characters in a Court of Equity, the seller becomes the owner of the money and the purchaser becomes the owner of the estate.”

–Vide Birch v. Joy. (1852) 3 HLC 565.

(b) “But for all that, the owner is deprived of his property in this case as much as in the other, and the rule has long been accepted in the interpretation of statutes that they are not to be held to deprive individuals of property without compensation unless the intention to do so is made quite clear. The right to receive interest takes the place of the right to retain possession and is within rule.”

“It would thus be noticed that the claim for interest proceeds on the assumption that when the owner of immovable property loses possession of it he is entitled to claim interest in place of the right to retain possession.”–vide Inglewood Pulp and Paper Co., Ltd. v. New Brunswick Electric Power Commission. 1928 AC 492: (AIR 1928 PC 287).”

Thus the right to claim interest is an adjunct to the right to retain possession. Compensation is only the money equivalent of the total loss of the right to retain possession. The import of the word ‘compensation’ is something that makes good a lack or something that equalises or makes things equivalent. This being the popular meaning of the word, and the same having been understood in that light by established judicial precedents, interest which is also irretrievably a component of such an equaliser for the rights divested in compulsory acquisition, it has a nexus to the word ‘compensation’ and is only another phase of it. The Privy Council in 1928 AC 492 = (AIR 1928 PC 287), which stated the second of the rules as above, has made it explicit that right to interest springs from the right to retain possession, for which deprivation compensation is awardable under the Act.

12. In AIR 1967 SC 465 at p. 468 the following two questions arose for consideration:

“(1) Whether in the absence of a specific objection as to interest in the appellant’s cross-objections the High Court ought to have gone into that question, and

(2) Whether on a proper interpretation of Section 28 the Court has a discretion to grant interest at a rate less than 6 per cent.”

The Supreme Court held that the award of interest under Section 28 of the Act raised a question of interpretation of that section and was therefore a question of law, which can be raised even for the first time in the Court of last resort. Reliance was placed upon following the statement of law by Lord Watson in Connecticut Fire Insurance Co. v. Kavanagh, (1892) AC 473:

“When a question of law is raised for the first time in a Court of last resort upon the construction of a document or upon facts either admitted or proved beyond controversy, it is not only competent but expedient in the interest of justice to entertain the plea.”

But it should be noted, however, that the learned Judges of the Supreme Court were concerned with the main question provide a rate per cent of interest other than that provided in the Land Acquisition Act. Negativing it, their Lordships said that where the Court exercises its discretion under Section 28 and grants interest the interest has to be at the rate prescribed. Even such a discretion in Section 28 has now been held to be only in form, but in substance it is a mandate. But is was not necessary for them to consider the import and content of the word ‘interest’ in juxtaposition to the word ‘compensation’. This was done in the earlier Supreme Court cases cited above. Thus ‘interest’ is a species of compensation, the genus of which is the substitute for the right to retain possession, from which again emanates the right to claim compensation and the right to claim the statutory solatium, in the case of compulsory acquisition. In fact, this is what the Privy Council did in 48 Mad LJ 386 = (AIR 1925 PC 91). In fact, interest has been awarded by way of compensation in cases which arose under the Land Acquisition Act. The Privy Council did so in Vallabhdas Naranji v. Development Officer, Bandra. (1929) ILR 53 Bom 589 = (AIR 1929 PC 163). Cornish and Varadachariar, JJ. in Revenue Divisional Officer, Trichinopoly v. Venkatarama Ayyar. ILR 59 Mad 433 = (AIR 1936 Mad 199) quoting with approval the principle in (1928) AC 492 = (AIR 1928 PC 287), observed that the right to receive interest takes the place of the right to retain possession and that the right to award interest by way of compensation is well founded. They placed ‘interest’ on a par with compensation. A question arose in the Allahabad High Court whether interest paid in land acquisition proceedings is assessable income exigible to income-tax. After elaborately considering the English precedents, a Division Bench of the Allahabad High Court in Behari Lal Bhargava v. Commr. of Income-tax, C. P. and U. P., (1941) 9 ITR 9 at p. 23 = (AIR 1941 All 135 at p. 140) held:

“………….. it follows that interest awarded under Section 28 of the Land Acquisition Act is in the nature of compensation for the loss of the late owner’s right to retain possession of the property acquired. In other words, it is damages assessed in terms of interest for loss of possession of property upto the date of receipt of its consideration.”

Our conclusion is that interest, though named as such, truly constitutes a part of the compensation discerned for which is attributable to the fact that the claimant has been kept out of his property for a length of time, namely, from date of taking possession to the date of deposit of the amount.

13. But the learned counsel for the claimant strenuously contended that interest is not part of compensation and that it should be granted whether claimed or not and whether court-fee on such a claims is paid or not. In Suryanarayana Rao v. Revenue Divisional Officer, Guntur, (FB), the learned Judges relied on the dicta of Bhagwati, J., in Anandilal v. Addl. Special Land Acquisition Officer, and differed from the ratio of its Court in Dodla Malliah v. State of Andhra Pradesh, . In a Division Bench consisting of Satyanarayana Raju and Venkatesam, JJ., observed;

“The appellants also claim 15 per cent statutory solatium besides the compensation amount. It was laid down in Brahmanandam v. Secretary of State, AIR 1930 Mad 45, that where a person being dissatisfied with the amount of compensation awarded to him under Section 18, Land Acquisition Act, wants to appeal, insisting in case of his success that not only the excess market value but also 15 per cent, of the same should be decreed in his favour, he must pay court-fees not only on the excess market value, but also on 15 per cent thereon. It is also needless to point out that since the appellants are claiming interest on that amount, they are bound to pay court-fee on that amount as well.”

As a matter of fact, in AIR 1930 Mad 45 = 57 Mad LJ 357 it was held that solatium granted by an independent provision of the Land Acquisition Act forms part of compensation, and is therefore to be treated as part of the amount awarded by Court. But the Full Bench in (FB) considered the later part of the above excerpt as obiter and observed that they were not called upon to decide in that case whether solatium is part of compensation or not. With the utmost respect to the learned Judges who decided the Full Bench case, we are unable to be persuaded to hold a similar view. If according to our High Court, solatium is indeed part of compensation and stems out of it, then it reasonably follows that interest, though provided in Section 28 of the Act, which is yet again an advantage which slopes down from such compensation. Is also an integral part of it. As already discussed in full, such interest is awarded in lieu of the deprivation of the right to retain possession of the acquired property and in this view, interest gets impregnated with compensation. In fact, Gajendragadkar, J., in categorically says:

“It would thus be noticed that the claim for interest proceeds on the assumption that when the owner of immovable property loses possession of it, he is entitled to claim interest in place of right to retain possession.”

The underlining is ours. Compensation under Section 23 also springs from such a right, which is lost due to compulsory acquisition. Both are in the same plane and similarly placed. Again the learned Judges of the Andhra Pradesh High Court in deciding (FB) as also the Division Bench who decided did not consider the import of Section 28 of the Act which makes the interest granted as part of the award. This apart, if once it is irrefutable that the right to receive interest is in substitution of the right to retain possession, then we are unable, with respect, to agree with Bhagwati, J., in , when he concludes that interest claimed on the amount of compensation does not form part of compensation, for, in our view, compensation also is paid in lieu of possession being taken by compulsory acquisition. Title in the acquired land passes to the Government not by any overt act of parties, but because of the statutory prescription in Section 16 which provides:

“When the Collector has made an award under Section 11, he may take possession of the land, which shall thereupon vest absolutely in the Government free from all encumbrances”.

Again in both and (FB) the question whether solatium granted in acquisition proceedings forms part of compensation or not was left open. Our High Court has taken the view nearly 30 to 40 years ago, that solatium and interest granted in acquisition proceedings are part of compensation. Interest being yet another spark from the fire of compensation, we are bound to hold that interest is part of compensation awarded by the Court in proceedings under Section 18 of the Act.

14. The further questions are whether such interest should be granted whether claimed by the interested person or not; and whether even if claimed this Court is bound to grant it notwithstanding the non-payment of Court-fee thereon in accordance with law. According to the Supreme Court in AIR 1967 SC 465 the grant of interest under Section 28 of the Act raises a question of law and it can be considered by the High Court even when the referred Court has not granted the same. In that case the Supreme Court reviewed the question and granted interest although the High Court did not provide for it. In all the cases including the one before the Andhra Pradesh High Court in the Full Bench case, a claim for interest was however made. Rights vested in individuals whether statutory, equitable or otherwise have to be agitated so as to obtain relief. Suo motu Courts are not expected to take cognizance of such rights in appeal, unless they are moved for the purpose. In our view, no provision for interest under Section 28 of the Act at the High Court level can be made in an appeal under Section 54 of the Land Acquisition Act unless such interest is asked for and claimed specifically in the memorandum of appeal.

15. Even when such a claim is made, is the Court powerless to grant it if the necessary court-fee under the Court-Fees Act is not paid? The poser, in our view, has to be answered in the affirmative. An appeal shall lie in any proceeding under the Act to the High Court from the award or part of the award of the referred Court. A further appeal against the decree of the High Court is provided to the Supreme Court. Such appeals are subject to the provisions of the Code of Civil Procedure. We have already expressed that such awards are deemed to be decrees within the meaning of Section 2(2) of the Code. Section 51 of the Madras Court-Fees and Suits Valuation Act, 1955, runs as follows:

“The fee payable under this Act on a memorandum of appeal against an order relating to compensation under any Act for the time being in force for the acquisition of property for public purposes shall be computed on the difference between the amount awarded and the amount claimed by the appellant.”

Thus Court-fee is payable between the amount claimed and the amount awarded. If the appellant in a land acquisition appeal intends to claim interest on the excess compensation, he should ask for it and pay court-fee thereon. Further, as interest forms part of compensation, the payment of Court-fees as prescribed is absolutely necessary. A litigant cannot escape the burden of Court-fee by omitting to ask for a relief, to which he might ultimately be entitled to. This would be evasion and ought not to be encouraged. Explanation (3) to Section 52 of the Court-fees Act, which applies to the generality of appeals filed against decrees and judgments of Courts also lends support to the view that the claim for interest being part of compensation and compensation being the subject-matter of the appeal, shall suffer court-fee as prescribed, and in the same manner as the main claim for compensation. Ananthakrishna Aiyar, J., in AIR 1930 Mad 45 = 57 Mad LJ 357 held:

“An appellant whose lands were acquired under the Land Acquisition Act but who, being dissatisfied with the amount of compensation awarded to him by the Court on a reference made to it under S. 18 of the Act, appeals to the High Court, is bound to include in the valuation of his appeal the amount of 15 per cent of the excess market value and pay court-fee thereon.”

In land acquisition cases, solatium is a creature of statute; even so in those cases interest is the panacea granted by law and tempered by equity. Both the subjects are to be equally treated and thus understood, both claims ought to be included in the valuation of the appeal and court-fee has to be paid on each of the counts.

16. In A. S. No. 414 of 1964 the further question is whether the order of the Court below is wrong. In our view it is not. The learned Subordinate Judge rightly held that the award of interest was accidentally omitted in the decree and that such a decree has to be corrected. The use of the word ‘etc’ is not without significance. There has been an omission which has been relieved by the lower court exercising jurisdiction under Section 152, C.P.C. This is not a case where Section 34, C.P.C. applies. We are inclined to agree with the learned Subordinate Judge. As interest is part of compensation, it cannot be rightly whittled down on technical grounds. The appeal is dismissed. There will be no order as to costs.

17. In the view expressed by us in the main appeal, no further orders are necessary in A. S. No. 203 of 1964, which has been heard by us in Court with the appeal for convenience.

18. Order accordingly

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