Provisions of Land Acquisition Act, 1894 relating to solatium, interest will apply to acquisitions under National Highways Act, Supreme Court

The provisions of Land Acquisition Act, 1894 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, 1956 (NH Act). Consequently, Section 3J of the National Highways Act is to that extent, unconstitutional..The judgment was delivered by a Bench of Justices Rohinton Nariman and Surya Kant in a batch of appeals filed by the Central government against a judgment of Punjab & Haryana High Court..The Punjab & Haryana High Court had held that non-grant of solatium and interest to lands acquired under the National Highways Act, which is available if lands are acquired under the Land Acquisition Act, is bad in law, and consequently Section 3J of the National Highways Act, 1956 is violative of Article 14 of the Constitution..Provision .National Highways Act, 1956, as originally enacted, did not provide for the acquisition of land. Thus, till the National Highways Laws (Amendment) Act, 1997, all acquisitions for the purpose of National Highways were made under the Land Acquisition Act, and the owners were given, in addition to market value, solatium as well as interest under the provisions of that Act..In 1997, amendments were made to the NH Act. By which Section 3J was inserted. It reads:.“Land Acquisition Act 1 of 1894 not to apply – Nothing in the Land Acquisition Act, 1894 shall apply to an acquisition under this Act.”.Facts.The appeal in Union of India & Anr. v. Tarsem Singh & Ors was taken as the lead appeal to consider the law in this regard..In this case, a notification dated December 24, 2004, was issued under Section 3A of the National Highways Act, 1956 (NH Act), intending to acquire land belonging to the Respondents for the purpose of four-laning National Highway No.1-A.On July 11, 2005, the said lands were declared to have vested in the State pursuant to Section 3D(2) of the said Act. On October 5, 2006, the competent authority under the Act passed an Award in which compensation was calculated at Rs. 4,219 per marla or Rs. 6.75 lakhs per acre..As this award was disputed by the Respondents, an Arbitrator was appointed under the Act, who then arrived at a figure of Rs.1.5 lakhs per marla as compensation..Since no solatium or interest is provided by the NH Act, such solatium and interest were not awarded by the Arbitrator. Meanwhile, a Section 3 application filed under the Arbitration Act by the Union of India was dismissed on the ground that it was hopelessly time-barred..On appeal to the Division Bench of the High Court, it was found on facts that as the amount of compensation awarded was not challenged in certain cases, the National Highways Authority of India being “State” under Article 12 of the Constitution cannot be permitted to pick and choose between persons similarly situated, as a result of which the appeal against valuation at the rate of 1.5 lakhs per marla was rejected..However, the Court deleted the grant of severance and 18 percent interest if the awarded amount is not paid within six months, following an earlier Division Bench judgment of the same Court. The Court then went on to state that despite the fact that no appeal has been filed against the Single Judge’s judgment by the owners, yet compensation for acquired land being in the nature of beneficial legislation, they would be bound by an earlier Division Bench judgment which requires the National Highway Authority to pay solatium. Therefore, the High Court directed payment of solatium at the rate of 30%, as laid down in the said judgment..This was challenged in Supreme Court.Arguments.Senior Advocate Shyam Divan, appearing on behalf of the Union of India and NHAI, submitted that the National Highways Act is a complete Code which expressly excluded the application of the provisions of the Land Acquisition Act..That being the case, it is clear that absent discrimination or manifest arbitrariness, the non-award of solatium and interest that is awardable under the Land Acquisition Act would not fall foul of Article 14 of the Constitution of India..It is not possible to choose between one Acquisition Act and another, as the National Highways Act alone would apply when land is acquired for the purpose of National Highways. Therefore, all the judgments that are cited by the Punjab and Haryana High Court in M/s Golden Iron and Steel Forging vs. Union of India 2011 (4) RCR (Civil) 375, would, therefore, not apply..Divan also referred to and relied upon Article 31-C of the Constitution to argue that if at all there was an infraction of Article 14, the Amendment Act of 1997 to the National Highways Act, 1956, enacting Sections 3A to 3J, being in furtherance of the Directive Principle contained in Article 39(b), would be shielded from attack on the ground that Article 14 of the Constitution has been violated..Senior Advocate Amit Sibal along with Neeraj Kumar Jain pointed out that the object sought to be achieved by the 1997 Amendment Act to the National Highways Act, 1956 was far removed from the Directive Principle contained in Article 39(b). It, therefore, does not have the protection of Article 31-C of the Constitution of India..They argued that the main object of the Amendment Act was the speedy implementation of Highway projects, which could only be achieved by expediting the process of land acquisition. This being the case, excluding solatium and interest that is awardable under the Land Acquisition Act results in a discrimination between persons who are similarly situate so far as lands are acquired by the Union of India from them for the purpose of national highways as opposed to other public purposes, having no rational relation to the object of the 1997 amendment..They also submitted that “solatium” is awarded because of the compulsory nature of the acquisition, which is present whether the land is acquired for the National Highways or for any other public purpose. They, therefore, argued that solatium and interest are integral parts of compensation that is awardable to persons whose lands have been compulsorily expropriated..Judgment.Objects and Reasons.The Court at the outset noted that the National Highways Act, 1956, as originally enacted, did not provide for the acquisition of land. Thus, till the National Highways Laws (Amendment) Act, 1997, all acquisitions for the purpose of National Highways were made under the Land Acquisition Act, and the owners were given, in addition to market value, solatium as well as interest under the provisions of that Act..It proceeded to analyse the objects and reasons for the amendment which was to reduce the delay and speedy implementation of highway projects. Thus, the amended National Highways Act did away with any “award” by way of an offer to the landowner. Post the notification under Section 3A, objections are to be heard by the competent authority, whose order is then made final. The moment the authority disallows the objections, a report is submitted to the Central Government, and on receipt of such report, the Central Government, by a declaration, states that the land should be acquired for the purpose mentioned in Section 3A..One other important difference between the Amendment Act and the Land Acquisition Act is that determination of compensation is to be made by the competent authority under the Amendment Act which, if not accepted by either party, is then to be determined by an Arbitrator to be appointed by the Central Government. Such arbitrator’s Award is then subject to challenge under the Arbitration and Conciliation Act, 1996. Thus, delays in references made to District Judges and appeals therefrom to the High Court and Supreme Court have been obviated..The Court also proceeded to discuss the scope of the term “solatium”..Placing reliance on Sunder vs Union of India [(2001) 7 SCC 211], the Court held 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 to do now, and that too at a value fixed legislatively and not through negotiation. Once this is understood in its correct perspective, it is clear that “solatium” is part and parcel of compensation that is payable for compulsory acquisition of land, the Court stated..The Court also observed that the Land Acquisition Act, 1894 has now been repealed and The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 has come into force in its place..By a notification dated 28th August 2015 issued under Section 105 read with Section 113 of the 2013 Act, it is provided that the 2013 Act compensation provisions will apply to acquisitions that take place under the National Highways Act..The effect of it is that both before the 1997 Amendment Act and after the coming into force of the 2013 Act, solatium and interest is payable to landowners whose property is compulsorily acquired for purposes of National Highways. It is only those landowners whose land was acquired between 1997 and 2015 who don’t get the benefit of solatium and interest..The Court then proceeded to address the two important issues..Article 39(b) and Article 31-C.Article 39(b) which forms part of Directive Principles of State Policy provides that,.“The State shall, in particular, direct its policy towards securing – xxx xxx xxx (b) that the ownership and control of the material resources of the community are so distributed as best to subserve the common good;”.Article 31-C protects laws which are enacted towards securing principles laid down in Directive Principles of State, from challenges based on violation of Articles 14 and 19..The Court made it clear that on examination of the Objects and Reasons which led to the 1997 amendment of the National Highways Act, there is no mention of any object relating to the distribution of the material resources of the community provided in Article 39(b)..“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.” .The object of the Amendment Act was not to acquire land for the purpose of national highways as, pre-amendment, the Land Acquisition Act provided for this. The object of the Amendment Act was fulfilled by providing a scheme different from that contained in the Land Acquisition Act, making it clear that the stage of offer of an amount by way of compensation is removed altogether; vesting takes place as soon as the Section 3D notification is issued; and most importantly, the tardy Court process is replaced by arbitration. These objects have no direct and rational nexus with the Directive Principle contained in Article 39(b), the Court ruled..Even if the Amendment Act, 1997 be regarded as an Act to carry out the purposes of Article 39(b), the object of the Amendment Act is not served by removing solatium and interest from compensation to be awarded. Thus, the grant of compensation without solatium and interest is not basically and essentially necessary to carry out the object of the Amendment Act, 1997, the Court held..Article 14 – Discrimination.The Court then considered the most important issue – whether Section 3J violates Article 14?.The object of the 1997 Amendment was to speed up the process of acquiring lands for National Highways. Awarding of solatium and interest has nothing to do with achieving this object, as it is nobody’s case that land acquisition for the purpose of national highways slows down as a result of the award of solatium and interest..Thus, the Court held that a classification made between different sets of landowners whose lands happen to be acquired for the purpose of National Highways and landowners whose lands are acquired for other public purposes has no rational relation to the object sought to be achieved by the Amendment Act, i.e. speedy acquisition of lands for the purpose of National Highways. On this ground alone, the Amendment Act falls foul of Article 14, the Supreme Court concluded..In this regard, the Court held that the judgments in P. Vajravelu Mudaliar vs Special Deputy Collector for Land Acquisition (1965) 1 SCR 614 and Nagpur Improvement Trust vs Vithal Rao (1973) 1 SCC 500 clinches the case in favour of the respondents..The Court, therefore, 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..[Read Judgment]