Statutory Interest at 15% is Mandatory on Shortfall of Compensation Beyond One Year From Possession

The respondent-claimants’ lands in Village Detroj, Ahmedabad, were acquired for the Narmada Canal project. An award under Section 11 of the Land Acquisition Act, 1894, was passed on March 19, 1996

The Reference Court subsequently enhanced the compensation on November 3, 1999

Although the State deposited a portion of the compensation on July 30, 2003, there remained a shortfall of ₹1,74,384/-

The Executing Court allowed the application, directing the State to pay the principal shortfall plus 15% interest for 6,728 days (the delay period) under Section 28 of the Act

The State challenged this order, alleging it amounted to "interest upon interest" and was contrary to settled law

1. Whether the Reference Court erred in granting 15% interest on the delayed payment of the remaining compensation amount for the period between July 31, 2003, and December 31, 2021

2. Whether the award of interest under Section 28 of the Land Acquisition Act constitutes impermissible "interest upon interest"

The Court primarily applied Section 28 of the Land Acquisition Act, 1894, which mandates interest on excess compensation at 9% p.a. for the first year from taking possession and 15% p.a. thereafter until the excess is paid into Court

The Court further relied on Section 34 of the Act regarding interest on unpaid compensation

Precedentially, the Court followed Gurpreet Singh v. Union of India (2006) 8 SCC 458 regarding the calculation of interest

Union of India v. Budh Singh (1995) 6 SCC 233, which established that the Act is a self-contained code and Courts cannot award interest outside the statutory rates and manner prescribed by Sections 28 and 34

The Court examined the statutory framework of Sections 28 and 34, noting that these are the exclusive provisions governing the State's liability for interest in land acquisition cases

Under the proviso to Section 28, once a period of one year has expired from the date of possession, any unpaid excess compensation must attract interest at the statutory rate of 15% p.a. until deposited

The Court found that the Executing Court did not grant "interest upon interest" but correctly applied the statutory rate to the principal shortfall that remained unpaid for 6,728 days

Equity has no role in altering these fixed statutory rates

The Court affirmed the direction to the State (Petitioner No. 2) to pay the total sum of ₹4,72,066/-, comprising the principal shortfall of ₹1,25,385/- and ₹3,46,681/- as interest at 15% for the delayed period. Rule discharged