The Right to Fair Compensation in India: A Constitutional and Judicial Analysis

Introduction

The right to property, once a fundamental right under the Indian Constitution, has undergone significant transformation. Despite its reclassification as a constitutional right under Article 300-A, the judiciary has consistently upheld that deprivation of property by the State must be for a public purpose and accompanied by fair and just compensation. This article examines the evolution and contemporary understanding of the right to fair compensation in India, drawing upon constitutional provisions, landmark statutes, and judicial pronouncements. It underscores that fair compensation is not merely a statutory grant but an intrinsic element of the rule of law and a necessary corollary to the State's power of eminent domain.

Evolution of the Right to Fair Compensation

Pre-1978: The Era of Article 31

Prior to the 44th Amendment Act, 1978, the right to property was a fundamental right under Article 19(1)(f) and Article 31. Article 31(2) explicitly mandated that property could be acquired for a public purpose only under the authority of a law which provided for compensation. The Supreme Court, in early cases, interpreted "compensation" to mean a "just equivalent" or the market value of the property. In State Of West Bengal v. Bela Banerjee And Others (1954 AIR SC 170, Supreme Court Of India, 1953), the Court invalidated a provision that capped compensation at the market value as of a fixed historic date, holding that compensation must be a "just equivalent" of what the owner has been deprived of at or about the time of acquisition. This principle was further elaborated in Rustom Cavasjee Cooper v. Union Of India (1970 SCC 1 248, Supreme Court Of India, 1970), where the Court struck down the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1969, partly on the grounds that the principles for determining compensation were not relevant to a "just equivalent" and could lead to inadequate recompense. The Court also found the Act violative of Article 14 for hostile discrimination in selecting banks for nationalization without a rational nexus to the Act's objectives.

Post-1978: Article 300-A and the Continuing Right to Compensation

The 44th Amendment Act, 1978, deleted Articles 19(1)(f) and 31, and inserted Article 300-A, which states: "No person shall be deprived of his property save by authority of law." While Article 300-A does not explicitly mention "compensation," the Supreme Court has consistently interpreted it to include this right. In K.T Plantation Private Limited And Another v. State Of Karnataka (2011 SCC 9 1, Supreme Court Of India, 2011), the Court affirmed that while the constitutional obligation to pay compensation primarily depends on the statute, Article 300-A does not prohibit just compensation. It recognized that the requirement of public purpose is invariably the rule for depriving a person of property, and compensation is a necessary corollary.

More recently, the Supreme Court in Vidya Devi v. State Of Himachal Pradesh And Others (2020 SCC 2 569, Supreme Court Of India, 2020) reiterated that the right to property under Article 300-A is not only a constitutional right but also a human right. The Court condemned the unlawful expropriation of land without due process and mandated compensation, rejecting the State's plea of adverse possession. This sentiment was strongly echoed in KOLKATA MUNICIPAL CORPORATION v. BIMAL KUMAR SHAH (Supreme Court Of India, 2024), where the Court explicitly stated that "A person's right to hold and enjoy property is an integral part to the constitutional right under Article 300A. Deprivation or extinguishment of that right is permissible only upon restitution, be it in the form of monetary compensation, rehabilitation or other similar means. Compensation has always been considered to be an integral part of the process of acquisition... a fair and reasonable compensation is the sine qua non for any acquisition process." This principle was reiterated in M/S ULTRA TECH CEMENT LIMITED v. MAST RAM (Supreme Court Of India, 2024) and BERNARD FRANCIS JOSEPH VAZ v. GOVERNMENT OF KARNATAKA (Supreme Court Of India, 2025), identifying the "right of restitution or fair compensation" as a sub-right under Article 300-A. The Himachal Pradesh High Court in NATHU RAM AND OTHERS v. STATE OF HP AND OTHERS (Himachal Pradesh High Court, 2023) and LABDHU RAM v. STATE OF HP AND ORS (Himachal Pradesh High Court, 2023) also held that the obligation to pay compensation is in-built in Article 300-A.

Statutory Framework for Fair Compensation

The Land Acquisition Act, 1894

The Land Acquisition Act, 1894 (LAA 1894) was the primary legislation governing land acquisition for over a century. It provided for compensation based on market value (Section 23) and an additional sum as solatium for the compulsory nature of acquisition (Section 23(2)). The Supreme Court in Balammal And Others. Etc. v. State Of Madras And Others. Etc. (1968 AIR SC 1425, Supreme Court Of India, 1968) held that denying the statutory solatium arbitrarily would violate Article 14 of the Constitution. Procedural fairness under the 1894 Act, such as the right to be heard under Section 5-A, was also emphasized as crucial. In Union Of India And Others v. Shiv Raj And Others (2014 SCC 6 564, Supreme Court Of India, 2014), the Court reaffirmed that failure to adhere to natural justice principles in Section 5-A inquiries vitiates the acquisition.

The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLARR Act, 2013)

The RFCTLARR Act, 2013, replaced the LAA 1894 with the stated objectives of ensuring a humane, participative, informed, and transparent process for land acquisition, and providing just and fair compensation and rehabilitation to affected families. This Act significantly enhanced compensation, mandating market value determination as per Section 26, a solatium of 100% of the compensation amount (Section 30), and other rehabilitation and resettlement benefits.

A critical provision, Section 24(2) of the RFCTLARR Act, 2013, deals with the lapsing of acquisition proceedings initiated under the LAA 1894. It states that where an award under Section 11 of the LAA 1894 was made five years or more prior to the commencement of the 2013 Act, but physical possession of the land has not been taken or compensation has not been paid, the said proceedings shall be deemed to have lapsed. The interpretation of "compensation has not been paid" has been a subject of extensive judicial scrutiny.

In Pune Municipal Corporation And Another v. Harakchand Misirimal Solanki And Others (2014 SCC 3 183, Supreme Court Of India, 2014), the Supreme Court held that for compensation to be considered "paid," it must be actually paid to the landowners or deposited in court as per Section 31 of the LAA 1894. Mere deposit in the government treasury was deemed insufficient. This view was initially affirmed but later referred to a larger bench. The Constitution Bench in Indore Development Authority v. Manoharlal And Others (2020 SCC ONLINE SC 316, Supreme Court Of India, 2020) clarified the position, holding that proceedings would lapse under Section 24(2) if the State had failed to take possession *and* failed to pay compensation. It also held that depositing compensation in the treasury would amount to payment in certain circumstances, effectively overruling Pune Municipal Corporation on this specific aspect. However, the core principle remains that non-fulfillment of conditions under Section 24(2) leads to lapsing. Cases like Govt. Of Nct Of Delhi And Ors. v. Jagjit Singh And Ors. (2015 SCC ONLINE SC 177, Supreme Court Of India, 2015), Bharat Kumar v. State Of Haryana And Another (2014 SCC 6 586, Supreme Court Of India, 2014), Sushila Bai And Others v. State Of M.P. And Others (Madhya Pradesh High Court, 2017), and Anil Kumar Gupta v. Government Of National Capital Territory Of Delhi And Ors (Delhi High Court, 2017) further illustrate the application of Section 24(2).

Judicial Interpretation of "Fair Compensation"

Meaning and Components

Fair compensation typically includes market value, solatium, interest for delay, and potentially other benefits to ensure restitution. The Supreme Court in Savitri Devi v. State Of Uttar Pradesh And Others (2015 SCC 7 21, Supreme Court Of India, 2015) upheld a High Court decision that, despite procedural illegalities in acquisition (dispensing with Section 5-A inquiry), balanced equities by mandating a 64.7% increase in compensation and allotment of 10% developed abadi plots. This demonstrates a pragmatic approach to ensure substantive justice and fair recompense even when acquisitions are not entirely quashed due to developmental activities already undertaken.

Fair Compensation as a Sine Qua Non and Constitutional Imperative

The judiciary has consistently emphasized that fair compensation is indispensable. The Andhra Pradesh High Court in Land Acquisition Officer-Cum-Revenue Divisional Officer And Others Etc. / v. Mekala Pandu And Others Etc. (Andhra Pradesh High Court, 2004) held that a 'no compensation' clause in respect of resumed land is unconstitutional, infringing Articles 14 and 31-A, and potentially Article 21 if deprivation of property leads to deprivation of livelihood. The court invoked the doctrine of "unconstitutional conditions." As noted earlier, the Supreme Court in KOLKATA MUNICIPAL CORPORATION (2024), ULTRA TECH CEMENT LIMITED (2024), and BERNARD FRANCIS JOSEPH VAZ (2025) has unequivocally declared fair and reasonable compensation as a "sine qua non" for any acquisition process under Article 300-A.

Procedural Fairness and Due Process

The right to fair compensation is intrinsically linked to procedural fairness. In Vidya Devi (2020), the Supreme Court stressed that the State must follow due process for land acquisition. Deprivation of property without adhering to statutory procedures under the Land Acquisition Act, 1894, was held unlawful. Similarly, in Shiv Raj (2014), violations of natural justice under Section 5-A of the LAA 1894 led to the quashing of proceedings. The Allahabad High Court in Jagat Narain Singh v. Collector/District Magistrate, Varanasi And Others (Allahabad High Court, 2009) also highlighted that procedures laid down for deprivation of property must be scrupulously complied with, emphasizing property as a constitutional and human right.

Special Considerations and Challenges

Delayed Compensation and Laches

The State cannot evade its responsibility to pay compensation by citing delay and laches on the part of the landowner, especially when the State's own actions have compounded the injustice. The Supreme Court in Jagdish Prasad Shukla v. The State Of Madhya Pradesh (Madhya Pradesh High Court, 2023), citing Sukh Dutt Ratra v. State of Himachal (2022 (7) SCC 508), emphasized that the State's lackadaisical conduct in such matters is unacceptable.

Interaction with Specific State/Central Laws

The principles of fair compensation are generally applicable, but their precise contours may vary based on the specific statute governing the acquisition. For instance, in Ramegowda v. THE PROJECT DIRECTOR (Karnataka High Court, 2022), it was noted that the RFCTLARR Act, 2013, repeals only the LAA 1894 and not specialized acts like the National Highways Act, 1956, and compensation (including solatium and interest) would be governed by the specific act under which acquisition is made. Similarly, state-specific amendments or acts, if constitutionally valid, may modify the application of general principles, as seen in cases like State Of Tamilnadu v. Pradeep Kumar (Madras High Court, 2022) concerning the Tamil Nadu Acquisition for Harijan Welfare Schemes Act, 1978, and its interaction with Section 105-A of the RFCTLARR Act, 2013.

Conclusion

The right to fair compensation for acquired property, though evolving in its constitutional anchorage, remains a robustly protected right in India. Judicial interpretation has consistently fortified this right, transforming Article 300-A from a seemingly bare provision into a guarantee of just restitution. The RFCTLARR Act, 2013, further institutionalized principles of fairness, transparency, and enhanced compensation. The judiciary's vigilant oversight ensures that the State's power of eminent domain is exercised responsibly, balancing developmental imperatives with the individual's right to property and livelihood. Fair compensation is not merely a statutory obligation but a fundamental tenet of justice, equity, and good conscience, indispensable for maintaining the social contract between the citizen and the State.