Land Acquisition | Co-sharer Dispute Cannot Justify Withholding Compensation: Punjab & Haryana High Court Affirms Landowners’ Right to Interest for Delay in Payment

“Where compensation is not deposited in Court despite dispute, liability for statutory interest is automatic.” - In a firm reiteration of the Collector's statutory duty under the Land Acquisition Act, 1894, the Punjab and Haryana High Court held that the non-payment of compensation due to a co-sharer dispute does not absolve the acquiring authority from paying interest under Section 34. The Court upheld the concurrent decrees in favour of landowners and modified only the penal interest clause, terming 18% interest after default period as excessive, replacing it with 6% interest on the interest component till realisation.

The judgment, delivered by Justice Deepak Gupta is a significant pronouncement on statutory liability, delayed compensation, and duty of the Collector to act promptly even in the face of apportionment disputes.

“Deposit in Court Is Mandatory Where Apportionment Is Disputed”

The Court strongly rejected the State’s argument that the compensation amount was rightfully withheld due to an ongoing partition dispute among co-sharers. Citing Sections 30 and 31 of the Land Acquisition Act, the Court emphasised:

“The Collector is mandatorily required to deposit the amount of compensation in the Court to which a reference under Section 18 would be submitted… Retention by the Collector without such deposit cannot be excused.”

Justice Gupta noted that no reference under Section 30 was made, nor was any deposit under Section 31(2) effected by the Collector despite clear dispute over entitlement among co-sharers. The Collector simply retained the amount, which, the Court held, squarely triggered the interest liability under Section 34.

“Lack of Notice Under Section 12 Also Weighs Against the State”

The Court further held that there was no pleading or evidence to show that the notice of award under Section 12(2) was ever served on the landowners. This failure further undermined the Collector’s defence that the landowners delayed seeking compensation.

“There is neither any pleading of the defendant-appellant nor any evidence to show that the appellant had served notice upon the plaintiffs after pronouncement of the award.”

Thus, the delay in payment cannot be attributed to the landowners. On the contrary, it was the Collector’s statutory omissions that led to the delay.

“Right to Interest Not Defeated by Writ or Representation Proceedings”

The Collector also sought to argue that the landowners had filed a writ petition challenging the acquisition, and that a representation to the High-Powered Committee was decided only in 2008, implying that payment was delayed due to those proceedings.

However, the Court found this argument to be not only irrelevant but also raised for the first time on appeal. It held:

“Even if such contention is considered, it did not stop the Land Acquisition Collector from depositing the amount before the Court as required under Section 31.”

Thus, any parallel litigation or internal dispute resolution processes did not absolve the acquiring authority of its legal obligations under the Act.

“Statutory Interest Scheme Clear: 9% for First Year, 15% Thereafter”

The High Court reaffirmed the statutory scheme under Section 34 of the Land Acquisition Act:

• 9% interest per annum from date of award or possession for one year

• 15% per annum thereafter if payment is still not made

In the present case, the award was dated 21.12.2004 and the payment was made only on 04.08.2009 — a delay of nearly five years.

Yet, the Trial Court and First Appellate Court awarded only 9% throughout, and the landowners did not appeal for enhanced interest. As such, the High Court held:

“The findings of the courts below awarding interest @ 9% per annum on the compensation amount from the date of award till the date of payment are upheld.”

“Trial Court’s 18% Penal Clause Post-Decree Modified as Excessive”

The Trial Court had directed that if the interest was not paid within two months, the State would be liable to pay interest @ 18% per annum thereafter. While the Collector failed to comply within the stipulated two months, the High Court found 18% to be excessive in the absence of statutory or contractual justification.

Instead, it adopted a moderated approach, holding:

“Defendant-appellant shall pay interest @ 6% per annum on the interest component from the date of payment of compensation i.e. 04.08.2009 till actual realization of the said interest component.”

This modification strikes a balance between ensuring compensation for delay and avoiding punitive or disproportionate financial burden on the State exchequer.

A Measured Judgment Reinforcing Collector’s Accountability

The High Court's ruling is a textbook affirmation of the mandatory obligations under the Land Acquisition Act, particularly in the context of apportionment disputes. It sends a clear signal that:

• Statutory interest cannot be denied simply because co-sharers are disputing entitlement

• Depositing the compensation in court is not optional, but mandatory

• Post-award inaction by the Collector attracts automatic interest liability

“The Collector cannot retain compensation indefinitely citing internal disputes. The law provides a mechanism — Section 30 and Section 31 — and failure to follow it will have consequences.”

The judgment is likely to guide future conduct of acquiring authorities and reiterates that compensation for acquisition must be prompt, transparent, and procedurally sound, or else interest liability will follow as a matter of law.

Date of Decision: 02 September 2025