Solatium under highway acquisition turns on award date, not proceedings, holds Supreme Court

A Bench of Justices J.B. Pardiwala and K. Vinod Chandran held that solatium and interest for NH Act acquisitions follow the 1894 Act if the Competent Authority’s award predates 1 January 2015.

The Supreme Court has settled how solatium, interest and interest on solatium must be computed for land acquired under the National Highways Act, 1956. Deciding an appeal by landowner Manav Bhanot against the National Highway Authority of India, a Bench of Justices J.B. Pardiwala and K. Vinod Chandran held that the entitlement depends on when the “award” is passed, not on when acquisition proceedings began. Where the Competent Authority determined compensation before 1 January 2015 — the date the 2013 Act was made applicable to NH Act acquisitions — benefits are computed under the Land Acquisition Act, 1894. The Court allowed the appeal only to the extent of directing that the Arbitration Award carry solatium and interest under the 1894 Act, and remanded the matter for computation and disbursal.

How the dispute reached the Court

The only question was whether solatium, interest and interest on solatium for an acquisition under the NH Act should be computed under the Act of 1894 or the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.

For the appellant, Senior Counsel Harin P. Raval relied on Union of India v. Tarsem Singh (Tarsem Singh II) and Paragraph 19 of that decision, arguing there could be no differentiation on solatium and interest between a landowner whose land was acquired on 31 December 2014 and one acquired on 1 January 2015, the date the Ordinance brought the 2013 Act into effect for NH Act acquisitions. The landowner claimed the full benefits of the 2013 Act.

For NHAI, Senior Counsel Ankur Mittal accepted that a landowner is entitled to solatium, interest on compensation and interest on solatium, but disputed the rate. He submitted that the 2013 Act applied to NH Act acquisitions only from 1 January 2015, while the award in this case was passed on 11 July 2014 by the Competent Authority, so the 1894 Act must govern. He relied on National Highways Authority of India v. Tarsem Singh (Tarsem Singh III).

The appellant added a fallback: the Arbitrator’s award was passed on 17 May 2017, after 1 January 2015, so the 2013 Act should apply even on NHAI’s own logic.

The statutory history the Court traced

The Court recalled the 1997 amendment to the NH Act by Act 16 of 1997, which inserted Sections 3A to 3J. Section 3J made the 1894 Act inapplicable to NH Act acquisitions. In Tarsem Singh I, Section 3J was held violative of Article 14 and declared unconstitutional, so that solatium and interest remained payable across the period.

The Bench explained that under Section 105 of the 2013 Act, the enactments listed in the Fourth Schedule — which include the NH Act — were kept outside the Act for one year, with benefits to be extended by notification thereafter. By Ordinance 9 of 2014, sub-section (3) of Section 105 was amended to apply the compensation provisions to Fourth Schedule enactments with effect from 1 January 2015. That position was extended by Ordinance 5 of 2015 and later notification.

The Court read Tarsem Singh II as confirming only that solatium and interest cannot be denied to acquisitions in the 1997–2014 gap. It does not lay down that pre-2015 benefits must be computed under the 2013 Act. The Court said the issue here was res integra, since Tarsem Singh III concerned proceedings that had attained finality.

The date of the award is decisive

The Court held that the deciding factor is which enactment was in force when the “award” was passed. Under the NH Act, the determination by the Competent Authority under Section 3G(1) is akin to the award under Section 11 of the 1894 Act; the Arbitrator’s determination of a dispute under Section 3G(5) corresponds to a reference under Section 18 of the 1894 Act.

Relying on Section 24(1)(a) of the 2013 Act and the Constitution Bench in Indore Development Authority v. Manoharlal, the Bench noted that where no award was made as on 1 January 2014, compensation is determined under the 2013 Act. For the NH Act, the one-year hiatus shifted the operative date to 1 January 2015.

The Court framed the test plainly: if the Competent Authority determined compensation before 1 January 2015, solatium and interest are payable under the 1894 Act; if after, under the 2013 Act — even where acquisition proceedings had commenced earlier.

Applying the test to the facts

The Section 3A notification was published in the Official Gazette on 7 June 2011 and in newspapers on 1 July 2011. The Section 3D(1) declaration was published on 20 January 2012, and notice for determination of compensation issued on 1 September 2012. The Competent Authority, NH7 and Sub-Divisional Officer, Jabalpur, determined a total compensation of Rs. 3,47,38,287, with the award passed on 11 July 2014. The appellant received Rs. 49,17,000 on 13 October 2014, disputed the quantum, and the Arbitrator passed an order challenged under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996.

Because the Competent Authority’s determination — treated as the award — was passed on 11 July 2014, before the Ordinance made the 2013 Act applicable to the NH Act, the Court held solatium and interest must be computed under the 1894 Act.

The appellant pointed to a Ministry of Road, Transport and Highways notification, clause 4.6(c), covering cases where awards under Section 3G had not been announced by 31 December 2014, or where compensation had not been paid for a majority of the land holdings by that date. The Court observed that the notification refers to the majority of “land holdings” and not “landowners.” NHAI recorded that of 3.080 hectares acquired, compensation for 1.700 hectares was paid in 2014 itself. The notification therefore did not assist the appellant.

Order

The Court allowed the appeal only to the extent of directing that the compensation determined by the Arbitration Award carry solatium, interest and interest on solatium as provided under the 1894 Act. The matter was remanded to the Competent Authority for computation and disbursal by the Government to the appellant. Pending applications were disposed of.