Is Interest On Solatium Payable From Date Of Land Acquisition Or Date Of 'Sunder' Judgment? Supreme Court Refers To 3-Judge Bench

The Supreme Court recently referred to a three judge bench the question of whether landowners whose land is acquired are entitled to interest on solatium from the date of land acquisition or only from the date when the judgment in Sunder v. Union of India was delivered (19.09.2001).

A bench of Justice Surya Kant and Justice Ujjal Bhuyan directed the matter to be placed before a three-judge bench after obtaining necessary orders from the Chief Justice of India.

“we find that the issue as to whether the expropriated land owners are entitled to interest on 'solatium' and 'additional amount' with effect from the date of acquisition of the land or only from the date a five-Judge Bench delivered the judgment in Sunder vs. Union of India, (2001) 7 SCC 211, as observed by another five-Judge Bench in Gurpreet Singh vs. Union of India, (2006) 8 SCC 457, requires consideration by a larger Bench”, the court stated.

Solatium is the term used for additional payment to the landowners over the market value in view of compulsory nature of the acquisition. Section 23(2) of the Land Acquisition Act, 1894 provides for payment of an additional 30 percent of the market value of the land.

Section 23(1A) of the Act provides for another additional payment of 12 percent per annum on market value from the date of the publication of the preliminary notification under section 4(1) to the date of the award of the Collector or the date of taking possession of the land, whichever is earlier.

Sunder v. Union of India

In Sunder v. Union of India, a five-judge bench examined whether the State was liable to pay interest on the solatium amount under Section 23(2) of the Land Acquisition Act. Section 34 mandates interest at 9 percent per annum from the date of possession until payment, escalating to 15 percent per annum if payment is delayed beyond one year. Section 28 similarly allows the court to direct the Collector to pay interest on the excess sum awarded by the court.

The court held that the term "compensation" in Section 28 includes solatium as part of the awarded sum, thereby entitling landowners to interest on solatium. This interpretation overruled the earlier stance taken in Union of India v. Shri Ram Mehar and subsequent cases which excluded solatium from the interest calculations.

Gurpreet Singh v. Union of India

In this case, the five-judge bench decided whether, in light of the decision in Sunder, an awardee or decree holder can claim interest on solatium during execution if it was not specifically granted by the decree.

The court highlighted that an execution court cannot go beyond the decree, and therefore, if the reference or appellate court has expressly or implicitly rejected the claim for interest on solatium, the execution court must also reject such a claim.

However, the court held that if the reference or appellate court's award does not address interest on solatium or if the claim was not made and rejected, and only interest on compensation is awarded, the execution court can apply the Sunder decision to include solatium in the compensation and direct interest on that amount to be deposited in execution.

Such interest on solatium can only be recovered in pending executions, not in closed ones, and the execution court can permit recovery from the date of the Sunder judgment (September 19, 2001), not for any earlier period, the court held. The court made this clarification under Articles 141 and 142 of the Constitution to prevent multiple litigations on this issue.

In the present case, the division bench has referred the issue of date from which interest on solatium is applicable to a three judge bench.

Case no. – Civil Appeal No. 4893/2023

Case Title – The Executive Engineer, Tamil Nadu Housing Board v. V. Saraswathiammal & Anr.

Citation : 2024 LiveLaw (SC )523