Statutory interest on land acquisition compensation cannot be awarded beyond rates prescribed under Sections 28 and 34.

The State acquired lands in Village Detroj, Ahmedabad, for the Narmada Canal project under the Land Acquisition Act, 1894 ("the Act"). An award was passed on 19.03.1996 under Section 11.

Upon a reference by the claimants for enhancement, the Reference Court increased the compensation by ₹18/- via an award dated 03.11.1999.

The State deposited ₹2,34,361/- on 30.07.2003, which the claimants accepted without protest.

Years later, the claimants filed recovery applications alleging a shortfall in the calculation. The Reference Court found a shortfall of ₹86,823/- and ordered the State to pay interest at 15% per annum for a delay of 6728 days (from 31.07.2003 to 31.12.2021). The State challenged these orders through the present writ petitions.

1. Whether the Reference Court erred in granting 15% interest on the delayed payment of the compensation shortfall under the Land Acquisition Act.

2. Whether the calculation of interest amounted to "interest upon interest" in violation of settled legal principles.

Section 28 of the Land Acquisition Act, 1894, which empowers the Court to award 9% interest per annum on excess compensation for the first year and 15% per annum thereafter until the date of payment into Court.

Section 34, which covers interest on unpaid compensation from the date of taking possession.

The Act is a self-contained code and Courts cannot award interest on equitable grounds or in any manner other than that prescribed by the statute, as established in Union of India v. Budh Singh (1995) 6 SCC 233 and State of Himachal Pradesh v. Dharam Das (1995) 5 SCC 683.

The Court examined the State’s contention that the claimants were not entitled to interest on interest as per Delhi Development Authority v. Mahender Singh.

The High Court observed that the dispute centered on a specific shortfall of ₹86,823/- that should have been deposited in 2003 but was not.

Applying the statutory mandate of Section 28, the Court reasoned that since the principal amount (the shortfall) remained unpaid for 6728 days beyond the initial year of acquisition, the statutory interest rate of 15% per annum was legally triggered.

The Court found that the Reference Court did not fundamentally err in its arithmetic or legal application, as the interest was calculated on the "remaining amount" of compensation rather than being a compound interest imposition.

The State (Respondent No. 2 in the lower court) was directed to pay the total sum of ₹3,01,018/-, consisting of the principal shortfall and the accrued statutory interest. Rule discharged.