2001 (9) TMI 1121 - SC - Indian Laws

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 ... State liability to pay interest on the amount envisaged u/s 23(2) of the Land Acquisition Act, 1894 (the Act) - scope of the expression 'market value' in Section 4(3) - Whether in calculating the interest, as mentioned in the said provisions, the amount of solatium envisaged in Section 23(2) of the Act should be included in or excluded from the sum on which interest is liable to be paid - HELD THAT:- From the Constitutional perspective the word ’compensation’ for the property taken was understood as the just equivalent of the value of the property. But when compensation is regarded as a statutory obligation the afore-cited definitions need not detract the courts in fathoming the real import of it. The exercise can be done with the aid of the provisions in the statutes. So what the Court, in the context of land acquisition, has to decide is how the Act has designed the compensation vis-a-vis the liability to pay interest. No doubt what is intended under Section 23(2) is additional to the market value of the land and 'in consideration of the compulsory nature of the acquisition'. But it cannot be equated with any damage caused on account of 'any disinclination of the person to part with the land acquired.' It is the legal obligation of the Collector to pay 'the compensation awarded by him' to the party entitled thereto. We make it clear that the compensation awarded would include not only the total sum arrived at as per subsection (1) of Section 23 but the remaining sub-sections thereof as well. It is thus clear from Section 34 that the expression 'awarded amount' would mean the amount of compensation worked out in accordance with the provisions contained in Section 23, including all the sub-sections thereof. The proviso to Section 34 of the Act makes the position further clear. The proviso says that 'if such compensation' is not paid within one year from the date of taking possession of the land, interest shall stand escalated to 15% per annum from the date of expiry of the said period of one year 'on the amount of compensation or part thereof which has not been paid or deposited before the date of such expiry'. It is inconceivable that the solatium amount would attract only the escalated rate of interest from the expiry of one year and that there would be no interest on solatium during the preceding period. What the legislature intended was to make the aggregate amount under Section 23 of the Act to reach the hands of the person as and when the award is passed, at any rate as soon as he is deprived of the possession of his land. Any delay in making payment of the said sum should enable the party to have interest on the said sum until he receives the payment. Splitting up the compensation into different components for the purpose of payment of interest under Section 34 was not in the contemplation of the legislature when that section was framed or enacted. In our view the aforesaid statement of law is in accord with the sound principle of interpretation. Hence the person entitled to the compensation awarded is also entitled to get interest on the aggregate amount including solatium. The reference is answered accordingly. 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.