Financial Burden Cannot Trump Constitutional Rights: Supreme Court Rejects NHAI’s Plea to Deny Landowners Fair Compensation

“What Cannot Be Done Directly, Cannot Be Done Indirectly” – Supreme Court Slams NHAI’s Attempt to Reopen Settled Law. Supreme Court of India, in a landmark judgment dismissed the National Highways Authority of India’s (NHAI) plea to restrict solatium and interest to future land acquisitions, ensuring that landowners whose lands were taken between 1997 and 2015 are granted the same compensation benefits as others.

Justice Surya Kant, writing for the Bench, made a scathing remark on NHAI’s arguments, stating, “Financial hardship cannot be an excuse to deny constitutionally valid compensation. The State cannot escape liability by selectively invoking economic concerns while benefiting from land acquired at unfair rates.”

The Court made it unequivocally clear that the Tarsem Singh (2019) ruling, which struck down Section 3J of the National Highways Act, 1956, as unconstitutional, must apply retrospectively, ensuring that no landowner is denied rightful compensation based on an arbitrary cut-off date.

A Legal Battle Rooted in Inequality – The Fight for Parity in Land Compensation

For decades, landowners whose properties were acquired for highway construction projects under the National Highways Act, 1956, were deprived of solatium and interest, benefits that were otherwise granted under the Land Acquisition Act, 1894. This was due to Section 3J, which specifically excluded the application of the Land Acquisition Act to National Highway acquisitions.

This disparity led to a series of legal challenges, culminating in the Supreme Court’s 2019 ruling in Union of India v. Tarsem Singh, where the Court declared that Section 3J was unconstitutional, as it violated Article 14 (Right to Equality) by treating similarly placed landowners differently.

With this ruling, landowners who had previously been denied solatium and interest were finally entitled to the benefits. However, NHAI soon returned to court, arguing that the 2019 ruling should only apply prospectively, meaning that landowners whose lands were taken between 1997 and 2015 should still be denied fair compensation.

The Supreme Court saw through this attempt to re-litigate a settled issue and firmly rejected it.

“A Judgment That Restores Equality Cannot Be Made Prospective” – Supreme Court on Retrospective Application

The Supreme Court dismissed NHAI’s central contention that Tarsem Singh (2019) should only apply to future acquisitions. Justice Surya Kant questioned the logic of creating two classes of landowners based solely on the date of acquisition, remarking: "If a landowner whose land was acquired on 31.12.2014 is denied solatium and interest, but another landowner whose land was taken the very next day—on 01.01.2015—is entitled to full compensation, it is nothing but arbitrary discrimination. The Constitution does not permit such artificial classifications."

The Court emphasized that when a law is declared unconstitutional, it is void from the very beginning, and therefore, any compensation disparities created by such a law must be corrected retrospectively.

“Settled Cases Are Not Being Reopened—Only Compensation Is Being Corrected” – Supreme Court Rejects NHAI’s Immutability Argument

NHAI argued that applying Tarsem Singh retrospectively would require reopening past land acquisition cases, violating the doctrine of immutability, which states that judgments that have attained finality should not be disturbed.

The Supreme Court dismissed this argument outright, making a crucial distinction between reopening cases and correcting compensation: "The restoration of solatium and interest does not reopen settled cases, nor does it question the legality of past acquisitions. It merely ensures that landowners receive what they were lawfully entitled to all along. The doctrine of immutability cannot be misused to perpetuate unconstitutional discrimination."

The Court further warned that allowing NHAI’s argument would legitimize an unjust classification, where some landowners receive fair compensation while others are left without recourse simply because of the date on which their land was taken.

“Economic Constraints Cannot Override Constitutional Mandates” – Supreme Court Rejects ₹92.18 Crore Financial Burden Argument

One of NHAI’s primary arguments was that retrospective application of Tarsem Singh would impose an additional financial burden of ₹92.18 crores on the public exchequer. The Supreme Court did not entertain this plea, stating: "The burden of fair compensation cannot be selectively applied. If the government has already compensated thousands of landowners under the revised scheme, it must do so for all. Compensation under Article 300A is not a charity—it is a constitutional obligation."

The Court also pointed out that most highway projects are developed under the Public-Private Partnership (PPP) model, meaning that:

The financial burden is ultimately passed on to private project proponents and not entirely borne by the government.

Even these private players recover costs through toll collections, meaning that the real financial impact is on highway users, not the State directly.

This, the Court noted, undermined NHAI’s claims of financial hardship.

“The Court Will Not Permit Strategic Litigation Tactics” – Supreme Court Slams NHAI for Misusing Miscellaneous Applications

The Supreme Court expressed its strong disapproval of NHAI’s repeated attempts to dilute the impact of Tarsem Singh through procedural means. Justice Surya Kant made a significant observation:

"What cannot be done directly should also not be done indirectly. Filing a miscellaneous application to limit a judgment’s impact is nothing but a backdoor attempt to seek a review of settled law. This Court cannot permit such strategic litigation tactics."

The Court warned against the misuse of procedural devices, stating that allowing such “clarification” applications to succeed would encourage government agencies to indefinitely delay compliance with judicial decisions.

Supreme Court’s Final Verdict – “No More Delays, Pay the Landowners” With this judgment, the Supreme Court has: Dismissed NHAI’s plea for a prospective application of Tarsem Singh. Affirmed that solatium and interest must be paid retrospectively for all acquisitions between 1997 and 2015. Directed the Competent Authority to immediately recalculate compensation for affected landowners. The Court left no room for further ambiguity, declaring that landowners who were unfairly denied their rightful dues must be compensated without any further delay.

A Victory for Landowners, A Warning for Government Agencies

This ruling marks a significant victory for thousands of landowners who had been deprived of fair compensation for over two decades. By upholding the retrospective application of solatium and interest, the Supreme Court has ensured that arbitrary distinctions based on acquisition dates do not stand in the way of justice.

The judgment also serves as a strong warning against the misuse of procedural devices to dilute the effect of judicial decisions. The Supreme Court has sent a clear message:

"The rights of landowners under Article 300A cannot be sacrificed at the altar of financial expediency or procedural maneuvering. The government cannot pick and choose whom to compensate fairly."

With this ruling, the fight for fair land acquisition compensation in India takes a decisive step forward, reaffirming that constitutional rights are not subject to the convenience of the State.

Date of decision: 04/02/2025