Interest on land acquisition compensation, including solatium under s. 23(2), upheld as payable under s. 34.

The dominant issue was whether interest under s. 34 of the Land Acquisition Act, 1894 is payable on solatium awarded under s. 23(2), or only on the market value component. The SC held that "amount awarded"/"compensation" in s. 34 denotes the aggregate compensation computed under s. 23, including all its sub-sections, and the proviso to s. 34 indicates that the legislature did not contemplate splitting components for interest computation. Since delayed payment of the aggregate sum attracts interest until payment, solatium must also carry interest. The reference was answered by holding that interest is payable on the total compensation including solatium.

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Issues Involved:
1. Is the State liable to pay interest on the solatium amount envisaged u/s 23(2) of the Land Acquisition Act, 1894Rs.
2. Should the solatium be included in or excluded from the sum on which interest is liable to be paidRs.

Summary:

Issue 1: Is the State liable to pay interest on the solatium amount envisaged u/s 23(2) of the Land Acquisition Act, 1894Rs.
The Supreme Court examined whether the State is liable to pay interest on the solatium amount under Section 23(2) of the Land Acquisition Act, 1894. The term "solatium" is used to describe the additional amount awarded in consideration of the compulsory nature of the acquisition. The Court noted conflicting decisions from various benches regarding this issue. The three Judge Bench in Union of India vs. Shri Ram Mehar and ors. held that solatium cannot form part of the market value of the land and thus, interest is not payable on it. Conversely, in Periyar & Pareekanni Rubbers Ltd. vs. State of Kerala, it was held that interest on solatium is payable to compensate the landowner for the loss of use of the land from the date of possession until payment.

Issue 2: Should the solatium be included in or excluded from the sum on which interest is liable to be paidRs.
The Court analyzed whether solatium should be included in the sum on which interest is payable under Sections 28 and 34 of the Act. Section 34 mandates the Collector to pay interest on the awarded amount at specified rates if there is a delay in disbursement. Section 28 similarly empowers the court to direct the Collector to pay interest on the excess sum awarded by the court. The Court observed that the term "compensation" in these sections includes the market value of the land and the solatium. It was concluded that the legislature intended for the aggregate amount under Section 23, which includes solatium, to be paid promptly, and any delay should attract interest on the entire sum, including solatium.

The Court referred to various High Court decisions that supported the view that solatium forms an integral part of the compensation and thus, interest is payable on it. The Court concluded that the person entitled to the compensation awarded is also entitled to get interest on the aggregate amount, including solatium.

Conclusion:
The Supreme Court held that the State is liable to pay interest on the solatium amount envisaged u/s 23(2) of the Land Acquisition Act, 1894. The interest should be calculated on the aggregate amount, including solatium, as per Sections 28 and 34 of the Act. The reference was answered accordingly.

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