The Supreme Court has held that where compensation for land acquired under the National Highways Act, 1956 was determined by the competent authority before January 1, 2015, solatium, interest and interest on solatium must be calculated under the Land Acquisition Act, 1894, and not under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.
The bench of Justice J.B. Pardiwala and Justice K. Vinod Chandran clarified that the relevant date is the date on which the competent authority makes the initial determination of compensation under Section 3G(1) of the National Highways Act. A subsequent arbitral award does not alter the statutory regime governing these additional benefits.
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The bench directed that the compensation determined through arbitration be supplemented with solatium, interest and interest on solatium in accordance with the 1894 Act.
The principal question before the Supreme Court was whether solatium, interest and interest on solatium in respect of land acquired under the National Highways Act should be computed under the 1894 Act or the more beneficial provisions of the 2013 Act.
Senior Advocate Harin P. Raval, appearing for the landowner, relied on the Supreme Court’s decision in Union of India v. Tarsem Singh, referred to in the judgment as Tarsem Singh-II.
It was argued that the Supreme Court had previously rejected any distinction between landowners whose properties were acquired on December 31, 2014 and those whose lands were acquired on January 1, 2015. On that basis, the appellant claimed entitlement to the complete compensation benefits available under the 2013 Act.
The landowner alternatively submitted that the arbitral determination was made after January 1, 2015 and, therefore, the 2013 Act should govern the calculation of the benefits.
Senior Advocate Ankur Mittal, representing the National Highways Authority of India, did not dispute the landowner’s entitlement to solatium, interest on compensation and interest on solatium. The dispute was confined to the rate and statutory framework under which those amounts had to be calculated.
NHAI contended that the 2013 Act was extended to acquisitions under the National Highways Act only with effect from January 1, 2015. Since the competent authority had determined compensation on July 11, 2014, the additional benefits were required to be calculated under the 1894 Act.
The Supreme Court examined the amendments introduced into the National Highways Act in 1997. The amendments inserted Sections 3A to 3J and created a separate mechanism for acquiring land for national highway projects.
Section 3J excluded the application of the Land Acquisition Act, 1894 to acquisitions conducted under the National Highways Act.
In Union of India v. Tarsem Singh, referred to as Tarsem Singh-I, the Supreme Court declared Section 3J unconstitutional for violating Article 14 of the Constitution. The provision had deprived landowners whose properties were acquired for national highways of solatium and interest that were available under the general land-acquisition law.
The Court explained in the present case that the earlier ruling established the entitlement of national-highway landowners to solatium and interest. It did not, however, decide that every acquisition predating January 1, 2015 must receive those benefits at the rates prescribed under the 2013 Act.
“Tarsem Singh-II does not lay down as a proposition that solatium and interest before 01.01.2015 would also have to be computed based on the provisions under the Act of 2013,” the Court observed.
The Court said that entitlement to solatium and interest for acquisitions made on or before January 1, 2015 was beyond dispute. The applicable statute would nevertheless depend upon whether the relevant award was made before or after that date.
The Court examined Section 105 of the 2013 Act, which originally excluded the enactments listed in its Fourth Schedule from the legislation’s operation. The National Highways Act is one of the statutes included in that Schedule.
The law gave the Central Government one year to extend the beneficial provisions relating to compensation, rehabilitation and resettlement to acquisitions made under the scheduled enactments.
An ordinance subsequently made the provisions contained in the First, Second and Third Schedules to the 2013 Act applicable to those enactments with effect from January 1, 2015.
The Supreme Court held that only from that date could landowners whose properties were acquired under the National Highways Act claim the statutory benefits at the rates prescribed under the 2013 Act.
Accordingly, where the competent authority passed the award before January 1, 2015, solatium and interest would be governed by the 1894 Act. Where the award was passed on or after January 1, 2015, the benefits would be calculated under the 2013 Act.
The Court rejected the contention that the date of the arbitrator’s decision should determine which law applies.
Under the National Highways Act, the competent authority initially determines compensation under Section 3G(1). If either party is dissatisfied with that amount, the dispute may be referred under Section 3G(5) to an arbitrator appointed by the Central Government.
The Supreme Court held that the competent authority’s determination under Section 3G(1) is comparable to an award made by the Collector under Section 11 of the 1894 Act. The arbitrator’s subsequent determination is comparable to a civil court’s decision on a reference made under Section 18 of the 1894 Act.
Therefore, it is the competent authority’s initial determination—and not the later arbitral decision—that constitutes the relevant award for deciding whether the 1894 Act or the 2013 Act applies.
The Court also referred to the Constitution Bench judgment in Indore Development Authority v. Manoharlal, which held that where no award had been made as of the commencement of the 2013 Act, compensation would have to be determined under the new legislation.
Applying the same principle to highway acquisitions, the Court said that if the competent authority had not determined compensation before January 1, 2015, the 2013 Act would apply. If compensation had already been determined before that date, the additional benefits would continue to be governed by the 1894 Act.
In the present case, the acquisition notification under Section 3A of the National Highways Act was published in the Official Gazette on June 7, 2011. It was subsequently published in an English newspaper and a Hindi newspaper on July 1, 2011.
After objections were considered, the declaration of acquisition under Section 3D(1) was published on January 20, 2012. Notices were later issued to the landowners for determining compensation.
The competent authority for NH-7 and the Sub-Divisional Officer, Jabalpur, determined total compensation of ₹3.47 crore. The appellant received ₹49.17 lakh on October 13, 2014 but disputed the quantum, following which the matter went before an arbitrator.
The arbitral determination was subsequently challenged under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, eventually bringing the dispute before the Supreme Court.
Since the competent authority had determined compensation on July 11, 2014—before the January 1, 2015 cut-off—the Court held that the 1894 Act governed the calculation of solatium, interest and interest on solatium.
The appellant also relied on a Ministry of Road Transport and Highways notification stating that compensation would be payable under the First Schedule to the 2013 Act in cases where awards had not been announced under Section 3G by December 31, 2014.
The notification also covered cases where awards had been announced but compensation had not been paid for the majority of the “land holdings” under acquisition by that date.
The landowner contended that the majority of landowners had not received compensation by December 31, 2014.
The Supreme Court, however, emphasised that the notification used the expression “land holdings” and not “landowners.”
NHAI stated that 3.080 hectares had been acquired and compensation for 1.700 hectares had already been paid during 2014. The Court therefore concluded that the notification did not assist the appellant.
The Supreme Court allowed the appeal to the limited extent of granting solatium, interest and interest on solatium on the compensation determined through arbitration.
It directed that these benefits be computed under the Land Acquisition Act, 1894.
The matter was remanded to the competent authority to calculate the amounts and arrange their disbursal by the government to the appellant.
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