Landowners Under National Highways Act Entitled To 15% Interest On Enhanced Compensation; Denial Is Discriminatory: Punjab & Haryana HC

"Failure of the learned Arbitrator to extend identical treatment to similarly situated landowners, despite reliance on the very same awards, results in an arbitrary and discriminatory outcome and such an action strikes at the very root of Constitution of India", Punjab and Haryana High Court, in a significant judgment, has held that landowners whose property is acquired under the National Highways Act, 1956, are entitled to statutory interest at the rates of 9% and 15% as prescribed under the RFCTLARR Act, 2013.

A bench of Justice Harkesh Manuja observed that interest is an integral facet of "just compensation" and restitution, and denying parity with those covered under the 2013 Act would amount to a violation of Article 14 of the Constitution. The Court emphasized that the beneficial regime of the 2013 Act must prevail over the restrictive interest provisions found in Section 3H(5) of the National Highways Act.

The petitioners' land in Village Tibber, Gurdaspur, was acquired for the development of the Delhi-Amritsar-Katra National Highway under the National Highways Act, 1956. While the Arbitrator enhanced the market value of the land to Rs. 15,00,000 per acre, it restricted the interest to 9% on the enhanced amount from the date of filing the application. The landowners moved the High Court seeking the higher interest rates of 9% for the first year and 15% thereafter, as provided under Section 72 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLARR Act).

The primary question before the court was whether landowners under the National Highways Act, 1956, are entitled to the higher interest benefits of 9% and 15% per annum as provided under Sections 72 and 80 of the RFCTLARR Act, 2013. The court was also called upon to determine whether a writ petition under Article 226 was maintainable against an arbitral award when the remedy under Section 34 of the Arbitration and Conciliation Act, 1996, was available.

Applicability Of 2013 Act To National Highway Acquisitions

The Court began by examining the interplay between Section 105 of the 2013 Act and the National Highways Act. It noted that while Section 105(1) initially exempted certain enactments, sub-section (3) allowed the Central Government to extend beneficial provisions. The Court referred to the 2015 "Removal of Difficulties Order," which made Schedules I, II, and III of the 2013 Act applicable to highway acquisitions to ensure landowners are not deprived of fair compensation.

Interest Is An Integral Facet Of Just Compensation

The Court relied heavily on the Supreme Court's landmark ruling in Union of India v. Tarsem Singh (2019) to reiterate that solatium and interest must be paid under the 2013 Act even for highway acquisitions. Justice Manuja observed that just compensation is not confined merely to the principal amount and solatium but necessarily includes interest for delayed payment. The Court noted that the delay in payment causes injury to the land loser, which must be compensated to ensure the restitution is complete and fair.

"The just compensation would not only include the compensation which has been determined, but also solatium and interest payable thereof on the delay in making payment."

Denial Of Parity Violates Article 14 Equality Mandate

The Bench found it "manifestly erroneous" that the Arbitrator had denied the 15% interest rate despite relying on earlier awards for the same village where such interest was granted. The Court held that a citizen cannot be discriminated against based on which statute their land is acquired under. If landowners under the 2013 Act receive higher interest, denying the same to those under the NH Act creates an "intelligible differentia" that lacks a constitutional basis, thereby offending the mandate of Article 14.

Writ Jurisdiction vs Section 34 Of The Arbitration Act

Addressing the maintainability of the writ petition, the Court noted the limitations of Section 34 of the Arbitration and Conciliation Act, 1996. Citing Project Director, NHAI v. M. Hakeem, the Court observed that a Section 34 court can only set aside an award and cannot modify it. In this case, since the petitioners only sought a modification of the interest rate and not a total setting aside, a writ was more efficacious. Relegating the parties to Section 34 would result in the award being set aside and the matter remanded, causing further delay and hardship.

"Parliament very clearly intended that no power of modification of an award exists in section 34 of the Arbitration Act, 1996."

Distinction Between Statutory And Consensual Arbitration

The Court made a vital distinction between consensual arbitration and statutory arbitration under the National Highways Act. In highway cases, the Arbitrator is an official appointed by the Central Government, such as a Collector or Commissioner, rather than a mutually chosen neutral third party. The Court held that because these arbitrators are government officials, the High Court is justified in exercising broader supervisory scrutiny under Article 226 to ensure fairness and parity for the aggrieved landowners.

"A writ court exercising jurisdiction under Articles 226/227 of the Constitution of India may be justified in exercising a broader supervisory scrutiny to ensure justice, fairness, parity to the aggrieved landowner."

Final Directions And Modification Of Award

The Court concluded that the landowners were entitled to interest on the enhanced compensation at 9% for the first year and 15% thereafter from the date of possession, as per Section 72 of the 2013 Act. Furthermore, the Court held that the petitioners are also entitled to interest on the original compensation amount determined by the Competent Authority (CALA) in terms of Section 80 of the 2013 Act. The impugned arbitral award was modified accordingly to avoid further litigation and remand.

The Punjab and Haryana High Court has reinforced that interest is a statutory right that cannot be diluted by adopting a restrictive interpretation of the National Highways Act. By allowing a writ petition to modify an arbitral award's interest component, the Court has prioritized "just compensation" and Article 14 parity over procedural technicalities. The ruling ensures that all landowners, regardless of the acquiring statute, are treated equally regarding the financial consequences of delayed compensation.

Date of Decision: 23 April 2026