Supreme Court Affirms Retrospective Application of Land Acquisition Benefits

The case involves a miscellaneous application filed by the National Highways Authority of India (NHAI) seeking clarification on the retrospective applicability of the Supreme Court's judgment in Union of India v. Tarsem Singh (2019) (Click to Download), and the NHAI sought to limit the application of the Tarsem Singh (supra) judgment prospectively, arguing that it should not apply to cases where land acquisition proceedings had already been completed and compensation had been finalized.

The Tarsem Singh judgment had established that landowners whose land was acquired under the National Highways Act, 1956 (NHAI Act) were entitled to "Solatium" and "Interest" on the compensation, similar to what was granted under the Land Acquisition Act, 1894 (1894 Act). This was because Section 3J of the NHAI Act had been deemed unconstitutional, as it denied these benefits

This application was tagged with several appeals filed by NHAI against various High Court orders that had granted relief to landowners based on the Tarsem Singh (supra) judgment.

These High Court orders had either granted "solatium" and "interest" to the landowners or directed the Competent Authority to consider the land owners' representations in the wake of the Tarsem Singh judgment.

The question, thus, was whether the Tarsem Singh judgment should be given prospective application from the date of judgment (19.09.2019) or retrospective effect, touching land acquisitions under the NHAI Act between 1997 to 2015.

Application to Operate Retroactively Upheld: The Supreme Court outright rejected the prayer for prospective operation of the Tarsem Singh judgment made by the NHAI. Such an operation of the judgment, it held, would undo its very purpose of removing discrimination against equally placed persons.

Section 3J Declared Unconstitutional: The Court reaffirmed that Section 3J of the NHAI Act, which denied solatium and interest was unconstitutional.

Parity Among Landowners: The Court emphasized that the Tarsem Singh judgment was intended to address the disparity between landowners whose lands were acquired between 1997 and 2015 under the NHAI Act, and those whose lands were acquired under the 1894 Act or post 2015 under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (2013 Act), who were eligible for "solatium" and "interest"

No New Classification: The court noted that it would be unjust to create an artificial classification among landowners based on the date of acquisition. The court pointed out that landowners do not have control over the date of acquisition.

No Reopening of Cases: Explaining further, the Court said that awarding "solatium" and "interest," as held in Tarsem Singh, does not amount to reopening cases or revisiting decisions that have already attained finality but merely confers compensatory benefits that are inherently embedded in expropriation legislation.

Doctrine of Immutability: The court observed that seeking a prospective application would violate the doctrine of immutability which protects the finality of judgments. The court stated that the NHAI was attempting to indirectly evade responsibility, which is prohibited

The Financial Burden Argument is Rejected: The contention of NHAI that retrospective application will result in financial burden was rejected by the court. This is a burden which, to put it aptly, has to be borne by the NHAI in the interest of equity. The court noted that eventually this would get passed on to commuters through the public-private partnership model.

Abandonment of Earlier Stand: The Court also rejected the contention that Sunita Mehra v. Union of India barred the grant of solatium/interest in closed cases and that the government had already conceded the issue of interest and could not resile from the same.

Dismissal of NHAI Application: The miscellaneous application filed by NHAI seeking clarification of the Tarsem Singh judgment was rejected by the court and, in the process, reaffirmed the law laid down in that judgment on the award of "solatium" and "interest" and the avoidance of unjust classification.

The Apex Court disposed of the connected appeals with a direction to the competent authority to work out the amount of "solatium" and "interest" in conformity with the judgment in Tarsem Singh. Further, the appeal which had assailed the rejection of Additional Market Value was rejected.

Coram: Justice Surya Kant and Justice Ujjal Bhuyan
Between: Karuppudayar vs State of Madras
Date of Judgment: 04-02-2025