The Karnataka High Court has clarified that landowners are entitled to interest at 9% per annum on package compensation awarded under the Karnataka Industrial Areas Development Act, 1966, from the date of physical possession, regardless of whether the compensation was agreed upon. This ruling reinforces the principle that delay in payment, even in consensual settlements, cannot deprive land losers of statutory interest.
Background & Facts
The Dispute
The appellants in both appeals are landowners of Sy.No.87/3 and Sy.No.87/4 in Kothanur Village, Uttarahalli Hobli, Bangalore South Taluk. The land was proposed for acquisition by the Karnataka Industrial Areas Development Board (KIADB) for the construction of Bangalore Metro Rail Corporation Limited’s (BMRCL) Reach 6 Depot. The acquisition was initiated under Section 28 of the Karnataka Industrial Areas Development Act, 1966 (KIAD Act), which permits acquisition for industrial development.
Key Facts
- The Preliminary Notification under Section 28(1) of the KIAD Act was issued on 22.09.2015.
- The appellants challenged the notification by filing W.P.No.26244/2017.
- On 21.11.2017, the High Court passed an interim order directing KIADB to deposit the entire compensation amount before the Court.
- The Final Notification under Section 28(4) of the KIAD Act was issued on 22.02.2018.
- Despite the interim order, KIADB issued a General Award on 11.09.2018 fixing nominal compensation.
- Physical possession of the land was taken over by KIADB on 21.04.2018.
- BMRCL transferred the package compensation amount of Rs.43,38,32,248/- to KIADB on 28.07.2018 under Section 29(2) of the KIAD Act.
- On 28.08.2018, KIADB issued a notice requiring appellants to accept or reject the package compensation by 05.09.2018.
- On 05.09.2018, the package compensation was deemed agreed upon by the landowners.
- Despite agreement and transfer of funds, KIADB did not disburse the package compensation to the appellants.
- On 07.02.2022, the High Court directed KIADB to make a reference under Sections 30 and 31 of the KIAD Act and to withdraw the amount previously deposited under the interim order.
- Writ Petition No.11878/2023 was filed by appellants seeking substitution of the General Award with the package compensation. It was allowed by order dated 19.06.2023.
- A prior order by the Assistant Commissioner dated 26.05.2017, claiming the land as B-Kharab (Government land), was set aside by the High Court on 07.02.2022 in W.P.No.24533/2017.
Procedural History
- 22.09.2015: Preliminary Notification issued under Section 28(1) of KIAD Act.
- 21.11.2017: High Court ordered KIADB to deposit compensation amount.
- 22.02.2018: Final Notification issued.
- 21.04.2018: Physical possession of land taken by KIADB.
- 28.07.2018: BMRCL transferred Rs.43,38,32,248/- as package compensation to KIADB.
- 28.08.2018: KIADB issued notice for acceptance/rejection of package compensation.
- 05.09.2018: Package compensation deemed accepted.
- 11.09.2018: General Award issued with nominal compensation.
- 07.02.2022: High Court directed KIADB to make reference under Sections 30 and 31 of KIAD Act and withdraw deposited amount.
- 19.06.2023: W.P.No.11878/2023 allowed; General Award set aside in favor of package compensation.
- 21.12.2023: Judgment and Award passed in LAC No.126/2022 by II Additional City Civil and Sessions Judge, Bangalore (CCH No.17) - dismissed interest claim.
- 19.03.2025: Judgment and Award passed in LAC No.67/2022 - same dismissal of interest.
- 03.03.2026: MFA No.8679/2024 and MFA No.5171/2025 heard and reserved.
- 09.04.2026: Judgment pronounced.
Relief Sought
The appellants sought interest at 9% per annum on the package compensation from the date of possession (21.04.2018) until the date of actual deposit, and directed payment of the full package compensation within a stipulated time.
The Legal Issue
The central question was whether interest under Section 30 of the KIAD Act is payable on package compensation awarded under Section 29(2) when the compensation amount has been agreed upon but not deposited promptly, and whether the absence of a formal award negates the right to interest.
Arguments Presented
For the Appellant
The appellants contended that the principle laid down in Akkayamma v. Deputy Commissioner and reaffirmed in MFA No.7804/2023 (18.09.2025) is directly applicable. They argued that even where compensation is by agreement under Section 29(2), the obligation to pay arises immediately upon agreement, and delay in payment entitles landowners to interest at 9% per annum from the date of possession. They relied on the interpretation of Section 30, which incorporates the provisions of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, including Section 34 on interest.
For the Respondent
KIADB and the State contended that Section 29(2) contemplates a consensual settlement, and once compensation is agreed upon, no further interest is payable. They argued that the payment of package compensation is a contractual obligation, not a statutory award, and that interest is only applicable where compensation is determined by the Deputy Commissioner under Section 29(3). They further claimed that delay was due to pending litigation and not due to any fault of KIADB.
The Court's Analysis
The Court examined the statutory framework under the KIAD Act, particularly Sections 29 and 30. It noted that Section 29(2) provides for payment of compensation as per agreement, but does not extinguish the statutory obligation to pay promptly. Section 30 explicitly incorporates the provisions of the 2013 Land Acquisition Act, including Section 34, which mandates interest on delayed payment of compensation.
"The fact that the compensation was arrived at by agreement does not absolve the authority from the obligation to pay it without undue delay. The landowner’s right to interest arises from the moment possession is taken, not from the date of a formal award."
The Court distinguished the respondents’ argument that interest is only payable on awards under Section 29(3). It held that Section 29(2) is not a contractual exemption from statutory interest; rather, it is a mechanism for expedited payment. The Court emphasized that the 2013 Act’s intent - to ensure fair and timely compensation - applies equally to agreements under the KIAD Act.
The Court further relied on its own judgment in Akkayamma and the subsequent MFA No.7804/2023, where it had held that even in cases of deemed consent, interest accrues from the date of possession. The Court rejected the contention that litigation delays justified non-payment, stating that such delays cannot be attributed to landowners and must not be borne by them.
The Court also noted that the package compensation amount had been received by KIADB from BMRCL as early as 28.07.2018, and the agreement was finalized by 05.09.2018. The failure to disburse the amount for over five years constituted an unjust enrichment of the State and its agencies.
The Verdict
The appeals are allowed. The judgments and awards dated 21.12.2023 and 19.03.2025 are modified to award interest at the rate of 9% per annum on the package compensation from 21.04.2018 until the date of actual deposit. The KIADB shall deposit the full package compensation amount within two months from the date of receipt of this judgment. Any amounts already received by the appellants shall be deducted from the principal, and the balance, with interest, shall be paid. If no prior payment has been made, the appellants shall receive the full package compensation with interest.
What This Means For Similar Cases
Interest Is Mandatory Even on Agreed Compensation
- Practitioners must now argue that Section 30 of the KIAD Act incorporates Section 34 of the 2013 Land Acquisition Act, making interest payable from the date of possession regardless of whether compensation is by agreement.
- Any claim that "consent" negates interest is legally untenable after this judgment.
Possession Triggers Interest Accrual
- The date of physical possession, not the date of award or agreement, is the starting point for interest calculation.
- This aligns with the Supreme Court’s jurisprudence in Punjab v. Baldev Singh and Manohar Lal v. State of Haryana on the principle that possession without payment is unjust.
KIADB and Similar Agencies Must Act Promptly
- Government agencies cannot delay disbursement citing litigation or administrative backlog.
- Landowners may now claim interest for delays exceeding 6 - 12 months even in consensual settlements.
- Legal notices should now explicitly demand interest from the date of possession, citing this judgment.
Documentation Is Critical
- Maintain records of possession date, agreement date, and payment transfer dates.
- If compensation is agreed upon, insist on immediate deposit and issue formal demand letters if delayed.
Precedent Binding Across Karnataka
- This judgment binds all subordinate courts and tribunals in Karnataka dealing with KIAD Act acquisitions.
- Future cases involving BMRCL, KIADB, or other agencies under the KIAD Act must apply this ruling.
No Discretion to Deny Interest
- The Court has removed any judicial discretion to deny interest on package compensation.
- The 9% rate is now the statutory minimum for all delayed payments under the KIAD Act.
