The arbitrator called it developing land because there were pucca pillars nearby. Section 3G(7) required four findings and he made none of them
A Gaya landowner's compensation under the National Highways Act has been sent back for reassessment. The Division Bench holds a 2018 notification shifting arbitral powers to the Divisional Commissioner cannot reach back into pending proceedings.
Compensation for land acquired at Gaya for a national highway must be reassessed within three months, along with solatium, interest and interest on solatium calculated under the Land Acquisition Act, 1894. A Division Bench of the Patna High Court comprising Justices Bibek Chaudhuri and Rana Vikram Singh held that the Additional Collector, acting as arbitrator, had recorded none of the four findings Section 3G(7) of the National Highways Act, 1956 requires, and had never considered solatium or interest at all. The Bench also held that a Central Government notification of June 2018 moving the arbitral function to Divisional Commissioners operates prospectively and could not be used to pull a pending case away from the officer already seized of it.
One plot, two officers, and a letter
The land in question is Khesra No. 3243, acquired by a notification dated 4 March 2014. The dispute over what it was worth went to the Additional Collector, Gaya, exercising the arbitral function under Section 3G(5) of the National Highways Act. By an order of 4 August 2018 he held the land to be developing land.
In between, on 21 June 2018, the Ministry of Road Transport and Highways issued a notification under Section 3G(5) appointing a list of officers — Divisional Commissioners — to act as arbitrators within their respective jurisdictions, directing that sub-sections (6) and (7) of Section 3G be taken into consideration while passing awards. An earlier notification of 10 October 2017 had held the field.
On 21 December 2018 the Deputy General Manager (Technical) of the Bihar State Road Development Corporation wrote to the Arbitrator-cum-Additional Collector directing him to recall his award and transmit the record to the Divisional Commissioner, Gaya. The landowners challenged that letter by writ petition. A Single Judge quashed it on 16 January 2024 and made further directions besides. The Corporation's Letters Patent Appeal followed.
An administrative notification does not reach backwards
The first question the Bench framed was whether the Additional Collector's order ceased to operate because of the later notification authorising the Divisional Commissioner to act as arbitrator.
On a careful reading of its language, the Bench found that the 21 June 2018 notification had not been published in supersession of the notification of 10 October 2017. An administrative notification operates prospectively, and there was no retrospective operation here. The proceedings already pending before the Additional Collector therefore had to be adjudicated by him and nobody else; the Divisional Commissioner was empowered from the date the notification issued and not before.
It followed that the order of 4 August 2018 could not be held illegal, invalid or inoperative in the teeth of the later notification. The Single Judge's quashing of the Corporation's letter directing the Additional Collector to recall his own award was affirmed, and the Bench found no reason to interfere with that part of the order.
The four things Section 3G(7) requires
The Corporation's last submission was that the Additional Collector had not determined compensation under Section 3G(1) or (5) at all, and that in declaring the land to be developing land he had not taken into account the essential requirements of Section 3G(7).
That provision tells the competent authority or the arbitrator what must be considered while determining the amount: the market value of the land on the date of publication of the notification under Section 3A; any damage sustained at the time of taking possession by reason of the acquired land being severed from other land; any damage sustained at the time of taking possession by reason of the acquisition injuriously affecting the person's other immovable property or his earnings; and, where the acquisition compels a change of residence or place of business, the reasonable expenses incidental to that change.
The Bench went through the 4 August 2018 order against that list and found nothing. It contained no adjudication on the market value as on the date of the Section 3A notification, none on severance, none on injurious affection or loss of earnings, and none on removal expenses. What it said was that because there were pucca pillars and constructions in the vicinity of the acquired land, the land in question was developing land. The order did not speak about the amount of compensation at all, or about how it differed from the figure fixed by the competent authority.
The judgment also records that NHAI's remedy against an arbitral order of this kind lies in a proceeding under Section 34 of the Arbitration and Conciliation Act, 1996 before the competent civil court, and that a writ court cannot ordinarily sit in judgment on the legality, validity and propriety of an arbitrator's order. That observation and the Bench's eventual decision to set the arbitral order aside sit in some tension, and the judgment does not reconcile them expressly. What it does make clear is why it would not leave the order standing: an award that determines nothing about market value, severance, injurious affection or removal expenses, and nothing about the statutory components of solatium and interest, determines nothing about compensation at all.
There is also an asymmetry in who was arguing what. It was the Corporation and the Authority — the acquiring side — that attacked the arbitral order for failing to comply with Section 3G(7), having first tried to have the arbitrator recall it administratively. The landowners' interest in that attack is not obvious until the next step, because the consequence of the order being set aside is a fresh determination that must now include the statutory additions the arbitrator never considered.
Which statute supplies solatium
The remaining question was whether, exercising jurisdiction under Articles 226 and 227, the High Court could itself determine the rate of interest payable on compensation in an acquisition under the National Highways Act, or whether a statutory provision governs the field.
The answer came through two recent Supreme Court decisions. In Union of India v. Tarsem Singh, landowners under the National Highways Act were held entitled to solatium and interest. NHAI later applied for a declaration that the ruling should apply only prospectively, so that completed acquisitions where compensation had attained finality would not be reopened. On 4 February 2025 that application was dismissed, the Court reaffirming the beneficial nature of granting solatium and interest and emphasising the need to avoid unjust classifications lacking intelligible differentia, and directing the competent authority to calculate solatium and interest in accordance with Tarsem Singh.
The computation question then came up directly in Manav Bhanot v. National Highway Authority of India: for an acquisition under the National Highways Act, are solatium, interest and interest on solatium computed under the Land Acquisition Act, 1894 or under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013?
The Supreme Court worked from Section 105 of the 2013 Act, under which that Act does not apply to the enactments listed in its Fourth Schedule, with the Central Government directed to notify that its compensation and rehabilitation provisions shall apply to those enactments. Section 105(3) as substituted by Ordinance 9 of 2014 provides that the provisions on determination of compensation in accordance with the First Schedule, rehabilitation and resettlement in accordance with the Second Schedule and infrastructure amenities in accordance with the Third Schedule shall apply to the Fourth Schedule enactments with effect from 1 January 2015. NHAI's contention was that for acquisitions before that date, solatium, interest and interest on solatium must be computed under the 1894 Act. The Supreme Court accepted it, directing that the compensation determined by the arbitral award be conferred with solatium, interest and interest on solatium as provided under the 1894 Act and remanding the matter for computation and disbursal.
The mechanics are worth following, because they explain why a 2014 acquisition is governed by a statute of 1894. The 2013 Act does not apply of its own force to the enactments in its Fourth Schedule, of which the National Highways Act is one. Its compensation and rehabilitation provisions reach those enactments only through a notification under Section 105(3), and that sub-section as substituted fixed the commencement of their application at 1 January 2015. For an acquisition notified before that date, the 2013 Act's First Schedule simply does not supply the figures — so the beneficial components recognised in Tarsem Singh have to come from the 1894 Act instead.
Khesra No. 3243 was acquired by a notification of 4 March 2014 — before 1 January 2015. Relying on Manav Bhanot, the Bench held the landowners entitled to solatium, interest and interest on solatium under the Land Acquisition Act, 1894.
That tied back to the defect in the arbitral order. The 1894 Act provisions on solatium, interest on solatium and interest had not been considered by the arbitrator at all. The Bench held the arbitral order and the appellate order that followed it to be bad in law and inoperative, and set them aside.
Order
The Bench maintained and affirmed the Single Judge's order insofar as it set aside the Corporation's letter of 21 December 2018, holding that the June 2018 gazette notification has prospective effect and is not applicable to pending cases.
The remaining part of the order of 16 January 2024 in the writ petition was set aside.
The competent authority was directed to reassess the amount of compensation for the acquisition of land in Khesra No. 3243, along with solatium, interest and interest on solatium on the compensation, as per the Land Acquisition Act, 1894, within three months from the date of communication of the order.
The appeal was disposed of with those observations and directions.