The Gujarat High Court has refined the calculation of interest on excess compensation under Section 28 of the Land Acquisition Act, 1894, rejecting the earlier practice of basing it on the date of temporary possession and confirming the additional compensation awarded by the Reference Court.
Background & Facts
The Dispute
The appellant, The Group General Manager, ONGC, challenged the award of additional compensation, solatium and interest granted by the Reference Court in respect of lands acquired in Village Pansar, Taluka Kalol, District Gandhinagar. The lands were acquired for the public purpose of "Sarkam No. K-439 (KLEH) Works" of ONGC.
Key Facts
- 12.06.1997: Notification under Section 4 of the Land Acquisition Act, 1894, published.
- 20.03.1998: Declaration under Section 6 published.
- 27.02.1986: Date of temporary possession by the acquiring body.
- 02.05.2000: Special Land Acquisition Officer (SPLAO) award under Section 11 fixing compensation at Rs 13 per square metre.
- 10.05.2013: Common judgment and award by the Additional Senior Civil Judge, Kalol (Reference Case Nos. 282/2012-287/2012) fixing market value at Rs 343.80 per square metre and additional compensation of Rs 330.80 per square metre.
- 06.09.2000: Section 4 notification for adjoining Village Dhamasana, market value Rs 264.60 per square metre.
- 07.11.2017: Supreme Court judgment in SLP (C) Nos. 8133-8136 of 2017 confirming the market value of Rs 343.80 per square metre for lands in Village Pansar.
- 24.08.2026: Present judgment delivered by Justice J. C. Doshi.
Procedural History
- 10.05.2013: Reference Court awarded additional compensation and interest (interest calculated from 27.02.1986).
- 24.08.2026: ONGC filed First Appeals (Nos. 2172-2175 of 2014) under Section 54 of the Land Acquisition Act, 1894 read with Section 96 of the CPC, seeking reversal of the interest calculation and confirmation of compensation.
- 24.08.2026: High Court delivered judgment, partly allowing the appeals.
The Parties' Positions
- Appellant (ONGC): Contended that the Reference Court erred by relying on the award for Village Dhamasana, that the sale deed of Village Pansar (Exh. 22) should be preferred, and that interest under Section 28 must commence from the date of the SPLAO award or permanent possession, not from temporary possession.
- Respondents (Bhanuji Rupaji Vaghela & Anr.): Relied on the Supreme Court 2017 decision, argued that the market value of Rs 343.80 per square metre was correctly determined, and that the interest awarded by the Reference Court was proper.
Relief Sought
- ONGC sought: (i) reversal of the interest calculation dated from temporary possession; (ii) confirmation of the additional compensation of Rs 330.80 per square metre; (iii) validation of solatium and additional amount under Section 23; and (iv) direction that any rent already paid be adjusted against the award.
The Legal Issue
What is the correct date from which interest under Section 28 of the Land Acquisition Act, 1894 should accrue on excess compensation - the date of temporary possession (27.02.1986) as held by the Reference Court, or the date of the SPLAO award (02.05.2000) or the date of permanent possession as interpreted by the High Court?
Arguments Presented
For the Appellant
- Asserted that Section 28 refers to the date on which the Collector takes possession for permanent acquisition, not temporary occupation under Chapter VI.
- Submitted that the sale deed of Village Pansar (Exh. 22) demonstrated a market value already considered by the SPLAO, rendering the Reference Court’s reliance on Village Dhamasana inappropriate.
- Cited the principle of parity and the need for a uniform basis of valuation across adjoining villages.
For the Respondent
- Relied on the Supreme Court judgment of 07.11.2017, which upheld the market value of Rs 343.80 per square metre for Village Pansar.
- Argued that the Reference Court’s method of applying a 10 % per annum appreciation to the adjoining village’s award was consistent with established jurisprudence.
- Maintained that interest from the date of temporary possession was permissible under the scheme of the Act.
The Court's Analysis
The Court began by examining the statutory language of Section 28. It observed that the provision speaks of interest payable from “the date on which the Collector took possession of the land” for permanent acquisition under Part II/Chapter III. The Court distinguished this from temporary possession under Chapter VI, stating that the two regimes are “on a different footing.”
"The interest under Section 28 on the excess compensation determined by the Reference Court must run from the date of the SPLAO award (02.05.2000) or the actual date of taking permanent possession, whichever is earlier, at 9% for the first year and thereafter at 15% per annum till realisation."
The Court then turned to the method of market-value determination. It noted that the Reference Court had adopted the well-recognised approach of using the award for an adjoining village (Dhamasana) and applying a 10 % annual appreciation, a method endorsed by the Supreme Court in earlier cases. The Court found no material difference between the lands of Village Pansar and Village Dhamasana that would defeat the principle of parity. Moreover, the sale deed of Village Pansar had already been considered by the SPLAO, so it could not be used to overturn the Reference Court’s valuation.
Having affirmed the market value of Rs 343.80 per square metre, the Court confirmed the additional compensation of Rs 330.80 per square metre over the base rate of Rs 13 per square metre. It also upheld the statutory benefits under Section 23(2) (30 % solatium) and Section 23(1-A) (12 % per annum additional amount) as a matter of course once the market value was fixed.
Finally, the Court modified the interest award. It set aside the interest calculated from the temporary possession date (27.02.1986) and directed that interest accrue from the SPLAO award date (02.05.2000) at 9 % for the first year and 15 % thereafter, applying to the aggregate compensation, including solatium and the additional amount. The Court also ordered that any rent already paid be adjusted against the payable amount and directed the appellant to deposit the balance within eight weeks of the judgment.
The Verdict
The Gujarat High Court partly allowed the First Appeals. It confirmed the additional compensation of Rs 330.80 per square metre over the base rate, upheld the 30 % solatium and the 12 % per annum additional amount, and modified the interest under Section 28 to run from 02 May 2000 at 9 % for the first year and 15 % thereafter. The interest awarded from 27 February 1986 was set aside. The appellant must deposit the balance within eight weeks of the judgment, and any rent already paid shall be adjusted against the award.
What This Means For Similar Cases
Interest Must Follow Permanent Possession Rules
- Practitioners should calculate interest under Section 28 from the date of the SPLAO award or the date of permanent possession, not from temporary possession dates.
- The Court’s interpretation aligns with the plain language of the statute and the scheme distinguishing Chapters III and VI.
Parity Principle Governs Market-Value Determination
- When adjoining villages have comparable characteristics, courts may rely on the award of one village and apply a standard appreciation factor.
- Parties must be prepared to demonstrate material differences if they wish to contest such valuations.
Supreme Court Precedent Remains Controlling
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The 2017 Supreme Court decision confirming Rs 343.80 per square metre for Village Pansar is binding on lower courts.
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Counsel should cite this precedent to support market-value arguments and to challenge divergent lower-court findings.
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Actionable Takeaways:
- Verify the correct date of possession before pleading interest under Section 28.
- Gather robust documentary evidence of market value to rebut reliance on adjoining-village awards.
- Cite the 2017 Supreme Court judgment when arguing for consistency in compensation.
