Land Acquisition | Bombay High Court Directs Over Rs. 1.6 Crore Interest to Landowner As Compensation Not Deposited Before Taking Possession

The Bombay High Court recently held that landowners are entitled to interest on the compensation amount if the compensation is not paid or deposited before the acquiring body takes possession of the property.

A division bench of Justice BP Colabawalla and Justice MM Sathaye directed the Collector, Mumbai City, to pay interest to the tune of Rs. 1.6 Crores for acquisition of two properties in Bhendi Bazaar, Mumbai.

“…possession of the subject properties in both the above Writ Petitions was taken on 3rd February, 2020, and which is the relevant date to be considered as the date of taking possession as contemplated under Section 80 of the 2013 Act…the Petitioners would be entitled to interest @9% p.a. in the first year from the date of taking possession of the subject properties and @15% p.a. from the start of the second year till its actual payment. As mentioned earlier, the actual payment was done only on 20th October, 2022”, the court held.

The court directed the Collector to pay interest to the Petitioners at a rate of 9 percent per annum for the first year from the date of taking possession and 15 percent per annum from the start of the second year until the actual payment, which was made on October 20, 2022.

The court allowed two writ petitions seeking interest on the compensation awarded to the petitioners under section 80 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (the 2013 Act).

The dispute revolved around two properties, namely Rajkotwala Building and Rukaiya Mansion, located in Bhendi Bazaar, Mumbai. The petitioners owned a 25 percent undivided share in Rajkotwala Building and had full ownership of Rukaiya Mansion. These properties were acquired by the Saifee Burhani Upliftment Trust (Acquiring Body), the body undertaking redevelopment of the Bhendi Bazaar area. The compensation amount was determined in awards dated December 30, 2019. Possession of the properties was taken on February 3, 2020.

The Petitioners filed the present petitions seeking a direction to the Land Acquisition Officer (Collector and District Magistrate, Mumbai City) to release the compensation amount awarded to them and to pay interest on the awarded amount as provided by the 2013 Act. During arguments, the petitioners didn’t press the first prayer as they had already received the compensation by then. However, they sought interest on the compensation.

The petitioners argued that the Collector failed to deposit the compensation amount with the authority to which a reference under Section 64 of the 2013 Act can be made for disputing the award. They contended that this failure violated Section 77(2) of the Act, which mandates the deposit of compensation when there is a dispute over the title to receive compensation or apportionment of the compensation.

The petitioners invoked Section 80 of the 2013 Act, which provides for the payment of interest when compensation is not paid or deposited before taking possession of the land. They argued that as possession was taken in February 2020, but the compensation was paid in October 2022, they are entitled to interest.

The State argued that the petitioners delayed fulfilling the requisitions raised by the Collector for disbursing the compensation. It contended that the petitioners raised objections instead of promptly providing the necessary documents, such as heir-ship documents and proof of title.

The court said that the delay did not originate with the petitioners, as they had clarified their intention to challenge the awards as early as January 27, 2020. The requisition for heirship and title documents was raised by the Collector only on November 19, 2020, the court noted.

The court held that the situation fell squarely under Section 77(2) of the 2013 Act, as the Collector withheld the compensation due to lack of documents of title or heirship. Thus, the Collector should have deposited the compensation amount with the reference authority under Section 64, the court held.

The possession was taken on February 3, 2020, and the Acquiring Body deposited compensation amount with the Collector on January 6, 2022, before taking the possession. However, the Collector made payment of compensation to the petitioners only on October 20, 2022, more than two years later. The court found that the petitioners were entitled to interest under Section 80.

Thus, the petitioners were awarded an interest amount of Rs. 26,74,606 for Rajkotwala Building and Rs. 1,35,30,884 for Rukaiya Mansion.

The court granted 8 weeks to the Collector to payment the interest to the petitioners.

Advocates Mohd Nawaz Haindaday and Gazala P Shaikh represented the Petitioners.

AGP LT Satelkar and AGP Mansih Upadhyay represented the State.

Advocate Fatema Kachwalla i/b JSA represented the Acquiring Body.

Case no. – Writ Petition Nos. 2965 and 2966 of 2021

Case Title – Hatim Fidaali Rajkotwala and Anr. v. Land Acquisition Officer, The Collector and District Magistrate, Mumbai City and Anr.