Interest on enhanced compensation, including solatium, runs from possession, not merely from Sunder’s judgment.

The petitioners challenged, under Article 227 of the Constitution, the Executing Court’s order dated 31 March 2023, whereby interest on solatium for the period preceding 19 September 2001 was denied.

The landowners’ acquired lands had been the subject of a Reference Court award dated 24 July 2006, which enhanced compensation and expressly awarded solatium at 30% under Section 23(2) of the Land Acquisition Act, 1894, together with interest on the enhanced compensation.

The acquisition notification under Section 4(1) was published on 29 June 1988, and the Reference Court awarded interest at 9% per annum for the first year after possession and 15% thereafter until payment.

During execution, the respondents calculated interest on solatium only from 19 September 2001, the date of the Supreme Court’s judgment in Sunder v. Union of India, and the Executing Court accepted that calculation.

The petitioners relied on Sunder, Gurpreet Singh v. Union of India, and particularly Land Acquisition Officer & Assistant Commissioner v. Shivappa Mallappa Jigalur, contending that interest was payable on solatium from the date of possession and not merely from 19 September 2001.

Whether the petitioners were entitled to interest on the enhanced amount of solatium for the period prior to 19 September 2001?

Whether the Executing Court acted beyond or contrary to the Reference Court’s decree by restricting interest on solatium to the period commencing from 19 September 2001?

The Court exercised supervisory jurisdiction under Article 227 of the Constitution to correct the Executing Court’s determination.

Section 23(2) of the Land Acquisition Act, 1894 requires payment of solatium at 30% of the market value in consideration of the compulsory nature of acquisition.

The principles in Sunder v. Union of India, 2001 (7) SCC 211, and Gurpreet Singh v. Union of India, 2006 (8) SCC 457, recognise the relationship between solatium and compensation for the purpose of interest, although the respondents relied on those decisions to contend that interest became payable only from 19 September 2001.

The controlling principle was derived from Land Acquisition Officer & Assistant Commissioner v. Shivappa Mallappa Jigalur, 2010 (12) SCC 387: where the civil court has awarded solatium and interest and that direction has attained finality, the appellate or reference proceedings are a continuation of the original proceedings, and interest on the enhanced solatium is payable even for the period preceding 19 September 2001.

The Reference Court had expressly awarded 30% solatium and interest on the enhanced compensation, with interest running according to the periods specified in its award.

Applying Shivappa Mallappa Jigalur, the High Court held that the Reference Court’s award could not be retrospectively restricted by treating 19 September 2001 as the commencement date for interest.

Since the State’s liability to pay solatium with interest had been incorporated into the award, and the enhancement of compensation necessarily increased the corresponding solatium and interest, the Executing Court was required to give effect to the decree as passed.

The Court distinguished its decision in HSIIDC v. Sunil Gupta, CR-1677-2024, because the findings of the Reference or Appellate Court in that case were materially different from those in the present matter.

Accordingly, the denial of pre-19 September 2001 interest was held inconsistent with the binding decree and the applicable Supreme Court precedent.

It held that the petitioners were entitled to interest on the enhanced compensation, including the enhanced solatium, from the date of possession of the acquired land, without restricting such interest to the period commencing on 19 September 2001.

The petitions were allowed in those terms, and any pending miscellaneous applications were disposed of.