Karnataka HC Approves ₹42,582-Per-Acre Dry-Land Rate, With Land Losers’ 2.5-Year Interest Waiver Conditional On KNNL Paying Within Four Months

The petitioner, Karnataka Neeravari Nigam (KNNL), the beneficiary of the land acquisition, challenged the First Appellate Court’s judgment and award dated 31 May 2017 in LAC Appeal No. 631 of 2016.

The parties did not dispute that KNNL had not been arrayed before that court.

During the writ proceedings, the matter was referred to mediation, and the parties filed a memorandum of settlement providing, among other terms, for compensation at ₹42,582 per acre for dry land, subject to specified statutory benefits and agreed limitations on interest.

The claimants also raised concern about tax deduction at source on the compensation.

Section 89 of the Code of Civil Procedure, 1908, read with Order XXIII Rule 3 CPC, provides the basis for recording a settlement reached through mediation and treating it as a lawful compromise.

The Court also relied on its order dated 20 August 2025 in W.P. No. 102884 of 2025, which it described as holding that compensation for compulsory acquisition of land is not subject to deduction of tax at source under the applicable provisions of the Income Tax Act.

The Court accepted the mediation agreement after noting that the dispute was principally between the acquisition beneficiary and the land losers, that the State had consented in principle, and that the authorized Land Acquisition Officer had signed the agreement; it therefore dispensed with the Deputy Commissioner’s signature and accepted the mediation report.

Addressing the claimants’ TDS concern, the Court applied its earlier ruling on compensation for compulsory acquisition and directed that payments under the agreement be made without TDS.

It then gave the settlement binding effect under Section 89 and Order XXIII Rule 3 CPC.

The agreement was declared a lawful settlement and made operative in substitution of any award, judgment, or decree of the Reference Court and/or Appellate Court.

The concerned courts were directed to draw up a decree in its terms within 60 days of receiving a certified copy of the order, and payments under the agreement were directed to be made without TDS.