SC says payment of solatium, interest must for land taken to build highways

Apex court ruling could spell further trouble for NHAI whose land acquisition costs have been on the rise

The Supreme Court (SC) has ruled that landowners must be given solatium and interest apart from compensation awarded to them, when their land is acquired for construction of highways.

A two-judge Bench of Justice Rohinton Fali Nariman and Justice Surya Kant ruled that Section 3J of the National Highways Act was violative of Article 14 of the Constitution

of India. The section says that no provision of the Land Acquisition Act, 1894, shall apply to an acquisition under the National Highways Act.

The judgment was passed on a bunch of petitions filed by the central government challenging an order of the Punjab and Haryana High Court, which had held “that the non-grant of solatium and interest to lands acquired under the National Highways Act, which is available if lands are acquired under the Land Acquisition Act” was bad in law.

Solatium is compensation paid to the landowner if the land, being bought by the state, will fetch a better price in the open market, while interest at the rate of 15 per cent per annum is paid if the compensation is not paid within a year. 

The case relates back to 2005, when the National Highways Authority of India (NHAI) acquired some lands for four-laning of Jalandhar-Pathankot as well as the Pathankot-Jammu section of National Highway 1-A. In 2006, the compensation for these lands was awarded to the landowners, who disputed the compensation being given to them. Subsequently, the arbitrator arrived at a revised compensation to the landowners. However, since the law did not provide for any solatium or interest, the same was not provided by the arbitrator.

The SC judgment could spell further trouble for the NHAI whose land acquisition costs have been on the rise since 2012-13. Over the past few years, NHAI’s construction costs have increased significantly, led by a 30 per cent compound annual growth rate in average land acquisition cost. The expenditure on land nearly doubled to Rs 32,143 crore in 2017-18 from Rs 17,824 crore in 2016-17, according to the latest NHAI data.

“The rise in land acquisition and civil construction costs, investment (EPC and HAM projects) are turning financially unviable/unsustainable, necessitating reforms,” said SBI Caps in a report.