Unusable remainder of building after highway acquisition warrants full compensation and 100% solatium, Kerala High Court rules

The appeals arose from acquisition of land and structures for widening National Highway 66 in Kasaragod under the National Highways Act, 1956.

The landowners challenged the compensation awarded by the Special Deputy Collector/Competent Authority for Land Acquisition under Section 3G(5) of the National Highways Act.

The Arbitrator and District Collector found, on the basis of PWD inspection reports, that acquisition of a portion of the buildings had destroyed access, rendered the remaining structures unstable and unusable, and substantially impaired their utility.

Compensation for the entire affected building was accordingly directed to be determined and paid.

NHAI challenged the awards under Section 34 of the Arbitration and Conciliation Act, 1996, contending that the portions of the buildings which had not been physically acquired could not attract compensation or solatium, and that such loss could, at most, be treated as damage.

The District Court dismissed the challenges and upheld compensation, including 100% solatium under Section 30 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (“2013 Act”).

NHAI preferred the present appeals under Section 37 of the Arbitration and Conciliation Act, 1996.

Whether a portion of a building or structure which is not physically acquired, but is rendered unsafe, unusable or without effective access because of the acquisition, can be treated as part of the compensable property for determining compensation?

Whether compensation payable for such affected or remaining structure attracts solatium under Section 30 of the 2013 Act?

Whether the High Court, in an appeal under Section 37 of the Arbitration and Conciliation Act, 1996, could interfere with the Arbitrator’s and District Court’s concurrent findings based on expert PWD reports?

The Court applied Section 3G(5) of the National Highways Act, 1956, concerning determination of compensation by arbitration; Sections 26–30 of the 2013 Act, under which compensation includes the market value of land, the value of assets attached to the land, damages caused by the acquisition’s injurious effect on other property or land, and 100% solatium on the compensation amount; and Section 3(p) of the 2013 Act, which defines “land” broadly to include things attached to the earth or permanently fastened to anything attached to the earth.

Relying on R.B. Dealers Pvt. Ltd. v. Metro Railway, Kolkata, 2019 (20) SCC 658, the Court held that solatium is calculated on the compensation determined under Sections 26–29, including the value of assets attached to the land, but excluding the additional 12% amount payable under Section 30(3).

The Court further applied the restricted scope of review under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996: an award based on a possible, reasonable and evidence-supported view cannot be substituted merely because another view is possible.

The Court relied, inter alia, on MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163, UHL Power Co. Ltd. v. State of H.P., (2022) 4 SCC 116, Somdatt Builders–NCC–NEC (JV) v. NHAI, 2025 SCC OnLine SC 170, and C & C Constructions Ltd. v. IRCON International Ltd., (2025) 4 SCC 234.

The Court held that the statutory scheme does not confine compensation to the physically severed portion of a structure.

Section 27 requires determination of compensation for all assets attached to the land, while Section 28 expressly covers damage caused by the acquisition’s injurious effect on the owner’s other property or land.

The PWD reports and joint inspection materials established that acquisition would demolish the existing accesses, break the building’s connection with the National Highway, and render the remaining structure unstable, unsafe and unusable.

Consequently, the remaining structure fell within the compensable consequences of the acquisition, notwithstanding that it had not been physically acquired.

Once the value of the affected structure was included in the compensation determination under Sections 27–29 of the 2013 Act, 100% solatium under Section 30 was payable on that compensation amount.

The Court distinguished Asiamma v. Chief Engineer (LA), observing that it did not decide the specific question of solatium for a structure rendered completely unusable by partial acquisition.

It found that the Arbitrator’s conclusions were based on expert reports and evidentiary material, had been affirmed by the District Court, and were neither perverse, arbitrary nor unsupported by evidence.

The limited jurisdiction under Section 37 therefore did not permit reappreciation or substitution of those findings.

A structure or portion of a building not physically acquired may nevertheless be included in the compensation assessment where the acquisition renders it unsafe, unusable or substantially deprived of access and utility.

Compensation for that affected structure is also eligible for 100% solatium under Section 30 of the 2013 Act.

Finding no perversity, arbitrariness, violation of natural justice or other ground warranting interference under Sections 34 or 37 of the Arbitration and Conciliation Act, the Court dismissed Arbitration Appeal Nos. 3, 4 and 6 of 2026 and upheld the awards and District Court orders, without costs.