Date of Section 3G(1) Determination—not the Arbitral Award—Governs the Compensation Regime for National Highway Acquisitions

1. Introduction

The case concerned the compensation regime applicable to land acquired under the National Highways Act, 1956 (“NH Act”). The appellant accepted the compensation paid by the National Highways Authority of India (“NHAI”) under protest and challenged its quantum through arbitration.

The central question was whether solatium, interest and interest on solatium should be calculated under the Land Acquisition Act, 1894 (“1894 Act”) or under the more beneficial Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (“2013 Act”).

The Court had to identify the legally relevant “award”: the initial determination by the Competent Authority under Section 3G(1) of the NH Act or the later arbitral determination under Section 3G(5).

2. Material Facts

• The Section 3A acquisition notification was published on 7 June 2011.
• The declaration under Section 3D(1) was published on 20 January 2012.
• The Competent Authority determined compensation on 11 July 2014.
• The appellant received approximately ₹49.17 lakh on 13 October 2014 but disputed the quantum.
• The dispute was referred to an arbitrator, whose determination was later challenged under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996.
• The appellant claimed the benefits and rates available under the 2013 Act because the arbitral determination occurred after 1 January 2015.

The judgment contains apparent inconsistencies in recording certain dates: paragraph 18 mentions “11.07.2024” although the remaining judgment consistently treats the Competent Authority’s determination as dated 11 July 2014. It also records different dates for the arbitral order. These discrepancies did not affect the ratio because the Court treated 11 July 2014 as the controlling date.

3. Issues Before the Court

1. Whether pre-1 January 2015 acquisitions under the NH Act are entitled to solatium, interest and interest on solatium.
2. Whether those benefits must be calculated under the 1894 Act or the 2013 Act.
3. Whether the relevant date is the Competent Authority’s determination under Section 3G(1) or the later arbitral award under Section 3G(5).
4. Whether the Ministry’s notification concerning non-payment for a majority of acquired land holdings brought the appellant within the 2013 Act.

4. Summary of the Judgment

The Supreme Court held that landowners whose properties were acquired under the NH Act before 1 January 2015 are not disentitled to solatium, interest and interest on solatium. However, the statute governing the calculation of those benefits depends upon the date of the initial compensation determination under Section 3G(1).

If the Competent Authority determined compensation before 1 January 2015, the benefits are calculated under the 1894 Act. If that determination was made on or after 1 January 2015, the 2013 Act applies.

The subsequent arbitral determination does not constitute the initial “award” for this purpose. Arbitration under Section 3G(5) is analogous to a reference to the civil court under Section 18 of the 1894 Act.

Since the Competent Authority made its determination on 11 July 2014, the appellant was entitled to solatium, interest and interest on solatium only at the rates available under the 1894 Act. The appeal was allowed to that limited extent, and the matter was remanded to the Competent Authority for computation and disbursal.

5. Analysis

5.1 Statutory Background

The 1997 amendments to the NH Act introduced Sections 3A to 3J. Section 3J excluded the application of the 1894 Act to highway acquisitions. Unlike the 1894 Act, the NH Act provided no equivalent statutory solatium and contained a less beneficial interest structure.

The 2013 Act came into force on 1 January 2014, but Section 105 initially excluded enactments listed in the Fourth Schedule, including the NH Act. Ordinance 9 of 2014 extended the compensation, rehabilitation and resettlement benefits of the 2013 Act to those enactments with effect from 1 January 2015.

5.2 Precedents Cited

Union of India & Another v. Tarsem Singh & Others, (2019) 9 SCC 304 — “Tarsem Singh-I”

This decision declared Section 3J of the NH Act unconstitutional as violative of Article 14. It held that landowners whose land was compulsorily acquired for national highways could not be arbitrarily denied solatium and interest when similarly situated landowners under other acquisition laws received those benefits.

The present Court emphasized that Tarsem Singh-I removed the complete denial of these benefits during the period between the 1997 amendment and the extension of the 2013 Act to highway acquisitions. It did not hold that the rates under the 2013 Act retrospectively governed every earlier award.

Union of India & Another v. Tarsem Singh & Others, 2025 SCC OnLine SC 235 — “Tarsem Singh-II”

In this case, the NHAI sought prospective application of Tarsem Singh-I. The Court refused, reasoning that prospective application would perpetuate hostile discrimination—for example, between land acquired on 31 December 2014 and land acquired on 1 January 2015.

The appellant relied on this reasoning to claim the full benefits of the 2013 Act. The Supreme Court rejected that interpretation. It distinguished between:

• entitlement to solatium and interest, which extends to pre-2015 acquisitions; and
• the rate or statutory basis of calculation, which depends on when the initial award was made.

Thus, Tarsem Singh-II prevents total denial of benefits but does not retrospectively substitute the 2013 Act’s rates for those under the 1894 Act.

National Highways Authority of India v. Tarsem Singh & Others, 2026 SCC OnLine SC 481 — “Tarsem Singh-III”

NHAI relied on this decision concerning acquisition proceedings that had attained finality. The Court observed that Tarsem Singh-III did not decide which enactment governs the rate of benefits where proceedings remained alive. The present controversy was therefore treated as res integra.

Indore Development Authority v. Manoharlal and Others, (2020) 8 SCC 129

The Constitution Bench held that where no award under Section 11 of the 1894 Act had been made as of 1 January 2014, compensation had to be determined under the 2013 Act, although the acquisition proceedings themselves did not lapse.

This supported the principle that the date of the initial award—not the commencement of acquisition proceedings—determines the applicable compensation regime. The Court adapted that principle to NH Act acquisitions, subject to the one-year statutory hiatus under Section 105. Accordingly, the corresponding cut-off became 1 January 2015.

5.3 Legal Reasoning

A. The initial Section 3G(1) determination is the relevant award

The Court compared the three statutory schemes. An award under Section 11 of the 1894 Act corresponds to the Competent Authority’s determination under Section 3G(1) of the NH Act. By contrast, an arbitrator’s determination under Section 3G(5) corresponds to a civil court’s adjudication upon a reference under Section 18 of the 1894 Act.

A later arbitral enhancement therefore does not change the law governing the original compensation award.

B. The 2013 Act became applicable to NH Act acquisitions from 1 January 2015

Although the 2013 Act generally commenced on 1 January 2014, the NH Act was included in the Fourth Schedule. Section 105 and the subsequent Ordinance postponed application of the beneficial compensation provisions to highway acquisitions until 1 January 2015.

The Court interpreted this interval as permitting Competent Authorities to complete pending initial determinations under the pre-existing regime. Where no such determination was made before 1 January 2015, the 2013 Act necessarily applied.

C. Entitlement and computation are distinct

Striking down Section 3J established that pre-2015 landowners could not be denied solatium and interest altogether. It did not erase the temporal operation of the 2013 Act. Constitutional equality required access to these heads of compensation, but not retrospective use of a statutory rate that had not yet become applicable to the NH Act.

D. The special Ministry notification did not assist the appellant

The notification provided for payment under the First Schedule to the 2013 Act where no Section 3G award had been announced by 31 December 2014, or where compensation had not been paid for a majority of the acquired “land holdings”.

The Court distinguished “land holdings” from “landowners”. Of 3.080 hectares acquired, compensation for 1.700 hectares had been paid in 2014. Since compensation had been paid for the majority of the acquired area, the notification did not bring the case under the 2013 Act.

6. Rule Laid Down

For acquisitions under the National Highways Act, 1956:

1. Solatium, interest and interest on solatium cannot be denied merely because the acquisition occurred before 1 January 2015.
2. The applicable compensation statute is determined by the date of the Competent Authority’s initial determination under Section 3G(1).
3. A determination made before 1 January 2015 attracts the rates and benefits under the 1894 Act.
4. A determination made on or after 1 January 2015 attracts the beneficial compensation provisions of the 2013 Act.
5. A later arbitral award under Section 3G(5) does not shift the case from the 1894 Act to the 2013 Act.

7. Complex Concepts Simplified

Solatium

An additional amount paid because the owner is compelled to surrender the land rather than selling it voluntarily.

Interest on compensation

Interest paid for the period during which the landowner is kept out of the compensation amount after losing the land or possession.

Interest on solatium

Interest calculated on the solatium component because solatium forms part of the compensation legally payable.

Res integra

A legal issue not previously settled by a binding judicial decision.

Hostile discrimination

An unequal legal treatment between similarly situated persons without a constitutionally valid justification.

Section 3G(1) determination

The first official assessment of compensation by the Competent Authority. For choosing the governing compensation law, this is treated as the equivalent of an award under the 1894 Act.

Section 3G(5) arbitration

A later adjudication when either party disputes the initial amount. It may alter the quantum but does not alter the statute applicable to the original determination.

8. Impact of the Judgment

• Clear temporal test: Courts and authorities must look to the date of the Section 3G(1) determination rather than the notification, possession date or arbitral award.
• Limits retrospective claims: Pending arbitration after 1 January 2015 does not automatically confer the higher benefits of the 2013 Act.
• Protects pre-2015 landowners: Such owners remain entitled to solatium and interest under the 1894 Act, notwithstanding Section 3J’s former exclusion.
• Separates entitlement from rate: The judgment harmonizes the equality principle in the Tarsem Singh line of cases with the prospective operation of the 2013 Act.
• Guides notification disputes: Expressions such as “majority of land holdings” must be assessed by the acquired land area, not merely by counting landowners.

9. Conclusion

The judgment establishes that the decisive event for selecting the compensation regime in an NH Act acquisition is the Competent Authority’s initial determination under Section 3G(1). A later arbitral award cannot attract the 2013 Act where that initial determination was made before 1 January 2015.

The decision preserves the constitutional right of pre-2015 landowners to solatium and interest while respecting the date from which Parliament extended the 2013 Act to highway acquisitions. The appellant was consequently awarded solatium, interest and interest on solatium under the 1894 Act, with computation and payment remitted to the Competent Authority.