Compensation for pipeline right-of-user must use RFCTLARR market valuation, equal solatium, and additional 40% compensation.

The Ministry of Petroleum and Natural Gas acquired the right of user over the respondent’s land under the Petroleum and Minerals Pipelines (Acquisition of Right of User in Land) Act, 1962 (“P&MP Act”) for laying the Barauni–Guwahati Gas Pipeline.

The notification was issued on 26 December 2018 and published on 31 December 2018.

Although notice had been issued by the competent authority on 9 August 2019, the landowner became aware of it only on 20 June 2020 and was unable to participate in the objection proceedings.

A dispute subsequently arose regarding whether compensation was to be calculated solely under Sections 10 and 11 of the P&MP Act or by applying the valuation methodology under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (“RFCTLARR Act”).

GAIL maintained that the acquisition was under the P&MP Act, but accepted that market value could be assessed using the methodology under the RFCTLARR Act, with 10% compensation and an additional 30% amount, making 40% in all.

The learned Single Judge directed determination of compensation under the RFCTLARR Act, including solatium and interest, prompting the intra-court appeal.

1. Whether compensation for acquisition of the right of user under the P&MP Act should be determined by applying the market-value methodology under the RFCTLARR Act, notwithstanding that the acquisition itself was undertaken under the P&MP Act?

2. Whether the landowner was entitled to solatium and the 12% interest contemplated under Section 30(3) of the RFCTLARR Act, in addition to the compensation payable under the P&MP Act?

3. Whether interest at 6% under Section 11(2) of the P&MP Act was payable for delay in depositing the compensation?

The Court applied Sections 10 and 11 of the P&MP Act, under which compensation for acquisition of the right of user includes compensation for damage to trees, crops, temporary severance, injury to property and earnings, with 6% interest payable on delayed deposit under Section 11(2).

Since the P&MP Act does not prescribe a detailed methodology for determining market value, the Court accepted use of the RFCTLARR Act, particularly its valuation principles, as reflected in the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Removal of Difficulties) Order, 2015.

The Court relied on State of Tamil Nadu v. GAIL India Ltd., (2016) 7 SCC 565, where the Supreme Court approved payment of 10% of market value together with an additional 30% amount for acquisition of the right of user, while clarifying that the additional 30% was based on GAIL’s concession and was not itself a statutory component under the P&MP Act.

The Court also considered R.B. Dealers (P) Ltd. v. Metro Railway, Kolkata, (2019) 20 SCC 658, which identified the market value, compensation for attached assets, 100% solatium and 12% interest under Section 30(3) of the RFCTLARR Act as distinct components of an award.

However, the Court held that the RFCTLARR Act’s 12% interest component was inapplicable to a P&MP Act acquisition because such acquisition does not involve a Social Impact Assessment notification.

The Court held that the distinction between acquisition of land and acquisition of the right to use land had to be maintained.

The governing acquisition statute remained the P&MP Act, and compensation therefore had to reflect the matters specified in Section 10, rather than treating the case as a complete acquisition of title under the RFCTLARR Act.

Nevertheless, because the P&MP Act did not prescribe a methodology for determining market value, the RFCTLARR Act methodology could properly be used for valuation purposes.

The Court found that the parties had effectively become agreed on this approach, particularly in light of GAIL’s consistent position that the market value would be assessed under the RFCTLARR framework and that the landowner would receive 10% compensation plus an additional 30%.

It rejected the landowner’s contention that the 12% interest under Section 30(3) of the RFCTLARR Act formed part of solatium, reasoning that the statutory trigger for that interest—the publication of a Social Impact Assessment notification—was absent in a P&MP Act proceeding.

The Court further noted that the agreed additional 30%, when added to the 10% compensation, provided a 40% component and was considered to exceed or cover the practical interest-related benefit claimed by the landowner.

The respondent-landowner was held entitled to: (i) the market value of the land assessed using the RFCTLARR Act methodology; (ii) an equal amount as solatium; (iii) an additional 40% component, representing 10% plus 30%, as applicable to acquisition of the right of user under the P&MP Act; and (iv) 6% interest under Section 11(2) of the P&MP Act from the date on which the compensation became payable until its actual deposit.

The 12% interest contemplated by Section 30(3) of the RFCTLARR Act was held not to apply.