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The Hon’ble Apex Court on 19th September 2019, in its landmark judgment has struck down Section 3J of the NH Act1 upholding the view taken by the Hon’ble Punjab and Haryana High Court in M/s Golden Iron2 holding that the statutory benefits of solatium and interest permissible under the LA Act3 would also be granted to the beneficiaries under the NH Act.
This article is an attempt to critically examine the abovementioned judgment from the point of view of National Highway Authority of India being the burden bearer of the financial implications arising out of the judgment. Before proceeding with the arguments and critical evaluation of such arguments, it becomes imperative to brief the case for the reader. For ease of understanding, the author has used IRAC method for such analysis as below:
Whether Section 3J of the NH Act, whereby the application of Land Acquisition Act, 1894 has been excluded for acquisitions under NH Act, is discriminatory in nature and thus violative of Article 14 of the Constitution of India?
RELEVANT PROVISIONS RELATING TO NATIONAL HIGHWAYS ACT, 1956
Section 3G. Determination of amount payable as compensation. - (1) Where any land is acquired under this Act, there shall be paid an amount which shall be determined by an order of the competent authority.
(2) Where the right of user or any right in the nature of an easement on, any land is acquired under this Act, there shall be paid an amount to the owner and any other person whose right of enjoyment in that land has been affected in any manner whatsoever by reason of such acquisition an amount calculated at ten per cent of the amount determined under sub-section (1), for that land.
(5) If the amount determined by the competent authority under sub-section (1) or sub-section (2) is not acceptable to either of the parties, the amount shall, on an application by either of the parties, be determined by the arbitrator to be appointed by the Central Government.
(7) The competent authority or the arbitrator while determining the amount under sub-section (1) or sub-section (5), as the case may be, shall take into consideration—
(a) the market value of the land on the date of publication of the notification under section 3A;
(b) the damage, if any, sustained by the person interested at the time of taking possession of the land, by reason of the severing of such land from other land;
(c) the damage, if any, sustained by the person interested at the time of taking possession of the land, by reason of the acquisition injuriously affecting his other immovable property in any manner, or his earnings;
1 National Highways Act, 1956
2M/s Golden Iron and Steel Forging Vs. Union of India [2011 (4) RCR (Civil) 375]
3Land Acquisition Act, 1894
4IRAC stands for – Issue, Rule, Application & Conclusion which is a common methodology for legal analysis of a case law
(d) if, in consequences of the acquisition of the land, the person interested is compelled to change his residence or place of business, the reasonable expenses, if any, incidental to such change.]
Section 3H. Deposit and payment of amount.-(5) Where the amount determined under section 3G by the arbitrator is in excess of the amount determined by the competent authority, the arbitrator may award interest at nine per cent. per annum on such excess amount from the date of taking possession under section 3D till the date of the actual deposit thereof.
Section 3J. Land Acquisition Act 1 of 1894 not to apply.—Nothing in the Land Acquisition Act, 1894 shall apply to an acquisition under this Act.
RELEVANT PROVISIONS RELATING TO LAND ACQUISITION ACT, 1894
Section 23. Matters to be considered in determining compensation.— (1-A) In addition to the market value of the land as above provided, the Court shall in every case award an amount calculated at the rate of twelve per centum per annum on such market value for the period commencing on and from the date of the publication of the notification under Section 4, sub-section (1), in respect of such land to the date of the award of the Collector or the date of taking possession of land, whichever is earlier.
Explanation.- In computing the period referred to in this sub-section, any period or periods during which the proceedings for the acquisition of land were held up on account of any stay or injunction by order of the Court shall be excluded.
(2) In addition to the market-value of the land, as above provided, the Court shall in every case award a sum of [thirty per centum] on such market value, in consideration of the compulsory nature of acquisition.
Section 28. Collector may be directed to pay interest on excess compensation.-
If the sum which, in the opinion of the Court, the Collector ought to have awarded as compensation is in excess of the sum which the Collector did award as compensation, the award of the Court may direct that the Collector shall pay interest on such excess at the rate of [nine per centum] per annum from the date on which he took possession of the land to the date of payment of such excess into Court:
[Provided that the award of the Court may also direct that where such excess or any part thereof is paid into Court after the date of expiry of a period of one year from the date on which possession is taken, interest at the rate of fifteen per centum per annum shall be payable from the date of expiry of the said period of one year on the amount of such excess or part thereof which has not been paid into Court before the date of such expiry.]
The Arguments raised by the Appellants and the application of the ‘Rule’ to such arguments by the Hon’ble Court was as follows:
1. ARGUMENT: No fundamental right violated as solatium and interest that are granted are mere statutory rights which can be awarded if the statute so enjoins, and equally need not be awarded where a separate special statute expressly excludes them.
APPLICATION: Relying of the definition of the term 'Solatium' as given by the 5 judge bench in Surender Vs. Union of India [(2001) 7 SCC 211], the Hon'ble Court went on to hold that the solatium that is paid to a landowner is on account of the fact that a landowner, who may not be willing to part with his land, has now to do so, and that too at a value fixed legislatively and not through negotiation, by which, arguably, such land owner would get the best price for the property to be sold. Thereby making 'solatium' as a part and parcel of compensation that is payable for compulsory acquisition of land.
2. ARGUMENT: It was argued that NH Act is self contained code providing for adequate compensation. Further, relying upon Article 31-C of the Constitution, it was argued that if at all there was an infraction of Article 14, since the amendment is in furtherance of the Directive Principle contained in Article 39(b), it would be shielded from attack on the ground that Article 14 of the Constitution has been violated.
APPLICATION: The Hon'ble Apex Court firstly observed that the object being the amendment of 1997 which was to speed up the object of acquisition for construction of National Highways. Secondly, it was also noted by the Hon'ble Court that both prior to the amendment of 1997 and after the coming into force of the LARR Act5 solatium and interest is payable to landowners whose property is compulsorily acquired for purposes of National Highways. Thereafter the Court relied on various judgments, a few of which are stated below, to reject the argument raised by the Appellants:
a. Assam Sillimanite Ltd. Vs Union of India [1991 Supp 3 SCR 273 at 290]- Wherein it has been held that in order that a law be shielded by Article 31-C, the said law must have a direct and rational nexus with the principles contained in Article 39(b). Relying on which the Court came to the conclusion that the object of the Amendment Act has no relationship whatsoever to the Directive Principle contained in Article 39(b), inasmuch as its limited object is to expedite the process of land acquisition by avoiding inordinate delays therein.
b. Minerva Mills Ltd. Vs. Union of India [1981 (1) SCR 206]- Wherein the Court has observed "…it is not every provision of a statute, which has been enacted with the dominant object of giving effect to a directive principle, that it entitled to protection, but only those provisions of the statute which are basically and essentially necessary for giving effect to the directive principle are protected under the amended Article 31-C" (at page 338-339)
c. The Court also relied on P. Vajravelu Mudaliar Vs. Special Deputy Collector for Land Acquisition [(1965) 1 SCR 614], wherein challenge made to the amended the Land Acquisition Act providing for acquisition of land for housing schemes by laying down principles for fixing compensation different from those prescribed in the principal act succeeded and the Court held that:
"…Out of adjacent lands of the same quality and value, one may be acquired for a housing scheme under the amending Act and the other for a hospital under the principal Act; out of two adjacent plots belonging to the same individual and of the same quality and value, one may be acquired under the principal Act and the other under the Amending Act. From whatever aspect the matter looked at, the alleged differences have no reasonable relation to the object sought to be
The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 201
achieved. … The object is to acquire lands for housing schemes at a low price. For achieving that object, any land falling in any of the said categories can be acquired under the amending Act. So too, for a public purpose any such land can be acquired under the principal Act. We, therefore, hold that discrimination is writ large on the amending Act and it cannot be sustained on the principle of reasonable classification. We, therefore, hold that the amending Act clearly infringes Article 14 of the Constitution and is void." (at page 634 & 635)
d.
…In other words can different principles of compensation be laid if the land is acquired for or by an Improvement Trust or Municipal Corporation or the Government? It seems to us that the answer is in the negative because as far as the owner is concerned it does not matter to him whether the land is acquired by one authority or the other.
30. It is equally immaterial whether it is one Acquisition Act or another Acquisition Act under which the land is acquired. If the existence of two Acts could enable the State to give one owner different treatment from another equally situated the owner who is discriminated against, can claim the protection of Article 14."
3. ARGUMENT: It was argued that if the Arbitral awards did not provide for solatium or interest and no Section 34 petition having been filed by the landowners therefore the Hon’ble High Court ought not to have allowed solatium and/or interest.
APPLICATION: The Court held that ordinarily the Court would have acceded to this plea, but given the fact that the Government itself was of the view that solatium and interest should be granted even in cases that arise between 1997 and 2015, in the interest of justice, the Court declined to interfere with such orders.
The Court, after taking into account the ration of the above mentioned cases, held that the object of the NH Act i.e. the object of the 1997 Amendment was to speed up the process of acquiring lands for National Highways. The awarding of solatium and interest has nothing to do with achieving this object. Therefore, the Court declared that the provisions of the Land Acquisition Act relating to solatium and interest contained in Section 23(1A) and (2) and interest payable in terms of section 28 proviso will apply to acquisitions made under the National Highways Act. Consequently, the provision of Section 3J is, to this extent, violative of Article 14 of the Constitution of India and, therefore, declared to be unconstitutional.
1.CUT-OFF DATE
In order to understand the implications of the judgment, it is relevant reproduce the concluding para of the Golden Iron Case:-
"As we have upheld the legality of the proceedings for acquisition, the writ petitions are dismissed in respect thereof. But as the provisions of Section 3J and 3G are ultra vires of Article 14 of the Constitution of India, all acquisitions made under the National Highways Act, 1956 would necessarily have to grant solatium and interest, in terms to those contained in Section 23(2) and Section 28 of the Land Acquisition Act."
Golden Iron has been clarified by the Hon'ble Supreme Court in Sunita Mehra Vs. Union of India [(2016) SCC OnLine SC 1128]. In the said case the Ld. Solicitor General had pointed out that in the one of the paras of Golden Iron (reproduced below) it has been mentioned that landowners would 'henceforth' be held entitled to Solatium and Interest:
.".. We, therefore, strike down Section 3J and Section 3G of the Act as arbitrary, irrational and violative of Article 14 of the Constitution, in so far as they deny the payment of solatium and interest and hold the landowners, who are compulsorily divested of their property under the impugned statute would henceforth be entitled to solatium and interest as envisaged by the provisions of Section 23 and Section 28 of the Land Acquisition Act."
On pointing out such an apparent inconsistency in the judgment, the Ld. Court has held that the award of solatium and interest would be made effective only to the proceedings pending on the date of Golden Iron and concluded cases would not be reopened. It is noteworthy to mention here that Sunita Mehra has also been relied upon and referred in Tarsem Singh. However, despite reference to the cut-off date/ reopening of pending cases, no specific finding has been given in Tarsem Singh with regard to the fate of the cases where the compensation already stands deposited by NHAI.
It is to be understood that such a judgment cannot give any fresh cause of action to the landowners who have never challenged the compensation awarded on ground of non-grant of solatium and interest. The legality of concluded cases cannot be questioned under the guise of present judgment as it does not envisage or confer any such right to question the proceedings which have been concluded long back, or where in several rounds of litigation rights of the parties have been settled. Despite relying on Sunita Mehra, no such finding has been given by the Hon’ble Supreme Court, as a result of which it has opened the Pandora's box where landowners, who had never challenged the compensation awarded to them (meaning thereby they were satisfied with the amount of compensation granted to them) have filed number of writ petitions praying for grant of solatium and interest which has not been granted to them earlier.
In the recent judgment of the Hon'ble Supreme Court in Indore Development Authority Vs. Manoharlal & Others [SLP (C) No. 9036 of 2016, decided on 06.03.2020 by 5 Judge Bench], though the issue was with respect to the Section 24 of the LARR Act, 2013 , however the Hon'ble Apex Court has specifically held that:
"Section 24(2) of the LARR Act does not give rise to new cause of action to question the legality of concluded proceedings of land acquisition. Section 24 applies to a proceeding pending on the date of enforcement of the LARR Act, i.e., 1.1.2014. It does not revive stale and time-barred claims and does not reopen concluded proceedings nor allow landowners to question the legality of mode of taking possession to reopen proceedings or mode of deposit of compensation in the treasury instead of court to invalidate acquisition."
Further, it has been held time and again by the Hon'ble Supreme Court and the Hon'ble High Courts that a subsequent judgment, though it may be on an identical issue, will not give a new or fresh cause of action to any person, whether or not they are similarly
6 The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013
situated. It is trite law that the law only helps the vigilant. Any person, having slept over their rights due to which valuable rights have accrued to the other side, cannot later seek to raise claims. It is a well settled principle of law embodied in the maxim 'interest reipublicaeut sit finis litium', which means the interest of the State lies in that there should be a limitation to law suits. It is further a cardinal principle of law 'Vigilantibus non dormientibus jura subveniunt' which has been observed by Hon'ble Courts in catena of judgments that law helps the vigilant and not those who slept over their rights.
Thus, no specific finding with respect to the concluded cases, may result in opening the floodgates of en masse litigation in form of writ petitions by the landowners seeking grant of benefit of solatium and interest resulting in serious financial burden on the State exchequer.
2. BENEFIT OF INTEREST UNDER SECTION 23(1-A)
Another noteworthy aspect is that, as per Golden Iron, the landowners were held entitled to solatium and interest in terms of Section 23(2) and Section 28 only, whereas in Tarsem Singh the landowners have been held entitled to interest under Section 23(1-A) of 12% as well. Alternatively, it can be construed that before Tarsem Singh, the settled position was that the landowners were entitled to solatium @ 30% as per Section 23(2) and interest @ 9% (and thereafter @15%) as per Section 28. Subsequent to Tarsem Singh, it has been settled that, the landowners are entitled to interest @12% under 23(1-A), in addition to the benefit under Section 23(2) and 28 of LA Act. Concurrently, interest @ 9% has already been prescribed by Section 3-H(5) of NH Act, 1956.
Once an entitlement is settled, two most pertinent sets of landowners will pray, by way of filing a writ petition before the courts, for grant of benefits of solatium and interest, firstly those, who have not been granted solatium and interest under Section 23(2) and Section 28 and secondly, those landowners, who have already been granted solatium and interest, but not been granted interest as per Section 23(1-A). Similar situation, as has been discussed above will arise due to filing of a large number of cases even when Tarsem Singh includes a batch of appeals filed by the Union of India and not the landowners.
3. OBSERVATION WITH RESPECT TO NON-FILING OF PETITION U/SECTION 34 OF A&C ACT FOR SETTING ASIDE ARBITRAL AWARD BY LANDOWNERS
Let us now analyze the argument raised by the Appellant that if the Arbitral awards did not provide for solatium or interest and no Section 34 petition having been filed by the landowners, therefore, the Hon’ble High Court ought not to have allowed solatium and/or interest. While dealing with such an argument, the Court has observed:
"…Ordinarily, we would have acceded to this plea, but given the fact that the Government itself is of the view that solatium and interest should be granted even in cases that arise between 1997 and 2015, in the interest of justice we decline to interfere with such orders, given our discretionary jurisdiction under Article 136 of the Constitution of India."
What is to be noted here that where the Court declines to ‘interfere with such orders' and do not exercise its discretion under Article 136 of the Constitution of India, such an order does not have a precedential value because the Court has in essence declined to deal with such a question before it. Reliance in this regard is placed on P. Singaravelan Vs. District Collector, Tiruppur and DT [2019 SCC OnLine SC 1641] wherein the Hon'ble Apex Court has taken note of the judgment in case of Khoday Distilleries Vs. Sri Mahadeshwara Sahakara Sakkare Karkhane Ltd. [(2019) 4 SCC 376] and the case of Kunhayammed Vs. State of Kerela [(2000) 6 SCC 359] to uphold the proposition that:
".. An order refusing special leave to appeal may be a non-speaking order or a speaking one. In either case it does not attract the doctrine of merger. An order refusing special leave to appeal does not stand substituted in place of the order under challenge. All that it means is that the Court was not inclined to exercise its discretion so as to allow the appeal being filed."
Similarly, in the present case as well, it can be safely presumed that no question with respect to the cases where no petition under Section 34 has been decided had been decided by the Hon’ble Court as it simply refused to exercise its discretion under Article 136.
4. GRANT OF BENEFIT OF 10% UNDER SECTION 3-G(2) OF NH ACT
Despite the above stated aspects, one of the positive aspects of the judgment is that it clarified the grant of 10% of the total amount awarded as damages for right of user/ easementary rights under Section 3-G(2) of the NH Act. It is noteworthy to mention here that certain Arbitrators appointed by Central Government have been invariably granting 10% amount under Section 3-G(2) in all the cases, with or without a specific pleading and with or without specific proof by the landowner. In this regard the Court has observed as follows:
"Section 3G(2) makes it clear that rights of user and rights in the nature of easement being valuable property rights, compensation must be payable thereof. It is obvious that there is no double payment to the owner on this score as the owner and/or any other person has to prove that a right in the nature of an easement has also been taken away. Obviously, the right of user being subsumed in acquisition of ownership, the owner cannot get a double benefit on this score. The right of user is, therefore, referable only to persons other than the owner, who may have tenancy rights, and other rights of license on land which is acquired under the National Highways Act.
….Under both the Land Acquisition Act and the National Highways Act, such claims have to be proved in accordance with law, the difference being that under the Land Acquisition Act actuals are payable, whereas under the National Highways Act, a fixed amount of 10% of the amount determined by the competent authority is payable. It is, therefore, wholly incorrect to state that extra amounts are payable to the owner under the National Highways Act, which are not so payable under the Land Acquisition Act. ..."
Thus, the Arbitral awards granting compensation under Section 3-G(2) without any proof thereto can be challenged on the basis of this ratio of this judgment.
Authored By: Adv. Raghujeet S. Madan & Adv. Sonia Madan
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