S.3H National Highways Act Requiring Deposit Of Compensation Prior To Taking Possession Meant To Safeguard Land Owners: Allahabad High Court

The Allahabad High Court has held that Section 3-H(1) of the National Highways Act, 1956 requiring compensation to be deposited with the competent authority before taking possession of acquired land is meant for safeguarding the land owners.

It was held that the provision is not for the Government to delay payment of compensation and to pay the amount only when possession is taken.

Section 3-H(1) provides that for the declaration of acquisition made under Section 3-D of the Act, the Central Government must deposit the amount of compensation determined under Section 3-G with the competent authority before taking possession of the notified land.

The bench comprising Justice Manoj Kumar Gupta and Justice Manish Kumar Nigam held,

“Section 3-H(1), which mandates that the State Government will deposit the compensation amount before taking possession is not a provision enabling the Central Government to delay payment of the compensation amount and contend that the compensation would be paid as and when possession is taken. Rather the said provision is for the benefit of the tenure holders, whose lands had been acquired under the provisions of the Act. It is a safeguard against taking over of possession of the land without payment of compensation. The said provision cannot be interpreted to confer power on the Central Government to delay payment of compensation to the affected persons, who have been divested of their title.”

Factual Background

Petitioners land, located in District Bareilly, was notified for acquisition on 28.01.2022 under Section 3-A of the National Highways Act, 1956, with subsequent notification under Section 3-D dated 13.09.2022. Award was declared by the competent authority on 06.07.2023 amounting to Rs. 5,98,29,247 plus solatium and other benefits.

The competent authority requested the compensation from the Project Director on 17.07.2023 for payment to affected persons. However, the higher authorities did not authorise the Project Director to forward the amount requested due to which the petitioners were not compensated. Petitioners approached the High Court in writ jurisdiction for grant of compensation for their land.

High Court Verdict

The Court observed that Section 3-D(2) provides that once declaration under Section 3-D(1) for land acquisition is published, the land shall vest absolutely in the Central Government free from all encumbrances.

Further, it was observed that according to Section 3E provides that once compensation under the Act has been deposited with the competent authority, then the “competent authority may by notice in writing direct the owner as well as any other person who may be in possession of such land to surrender or deliver possession thereof to the competent authority or any person duly authorised by it in this behalf within sixty days of the service of the notice.”

Section 3E(2) empowers the competent authority to take the land by force if the owners refuse to handover the possession.

The Court observed that once land is notified under Section 3D for acquisition, the land vests in the Government free from all encumbrances. The Government is also vested with the power to enter and perform necessary actions for building, maintenance, etc. Resultantly, the real owner is divested of his title in the land, held the Court.

The Court held that actual physical possession can be taken only after compensation amount has been deposited with the competent authority.

The Court held that Section 3-H(1) requiring depositing of sum before taking possession is meant for the benefit of the tenure holders, and cannot be interpreted to delay payment of compensation until possession has been taken.

The Court relied on Rule 3 of the National Highways (Manner of Depositing the Amount by the Central Government; Making Requisite Funds Available to the Competent Authority for Acquisition of Land) Rules, 2019 which provides that any executing agency has to deposit the compensation determined under Section 3-G of the Act with the competent authority within 15 days from the date the demand is raised. Thereafter, the competent authority would disburse the amount to the land owner.

The Court observed that the executing agency (NHAI herein) was to deposit the compensation with the competent authority within 15 days as determined under Section 3-G of the Act which was not done.

Rejecting NHAI's submission pertaining to office memorandum dated 23.11.2023 directing no further creation of liabilities for land acquisition, it was held that the aforesaid memorandum was applicable only to new projects and not existing awards.

Allowing the writ petition, the Court directed NHAI to deposit the compensation with the competent authority who would then disburse the amount to the petitioners.

Case Title: Mohammad Shahid And 2 Others v. Union Of India And 4 Others [WRIT - C No. - 16025 of 2024]

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