Interest Once Added to Compensation Becomes Part of the Award, Cannot Be Segregated for Further Interest Calculation: Jharkhand High Court Directs Reassessment Under Land Acquisition Act
Safiya Malik
The Jharkhand High Court has modified an order passed by the Civil Judge (Senior Division)-II, Dhanbad, in an execution proceeding related to land acquisition compensation. The court directed that the interest at the rate of 15 percent per annum from May 1, 2013, to January 31, 2023, be calculated on the total awarded sum of ₹2,75,896.66, rather than on a segregated amount. The court referred to Supreme Court judgments in Sunder v. Union of India and Hyder Consulting (UK) Ltd. v. Governor, State of Orissa to support its conclusion that compensation components cannot be split for the purpose of interest calculation.
The petitioner, an 84-year-old resident of Dhanbad, filed a civil miscellaneous petition under Article 227 of the Constitution of India, challenging the order dated May 18, 2023, passed in Land Acquisition Execution Case No. 01/2020 by the Civil Judge (Senior Division)-II, Dhanbad. The case arose from land acquired by Bharat Coking Coal Limited (BCCL) under Khata No. 33, Plot No. 291/3, with an area of 0.64 acres, through Land Acquisition Case No. 76/1983-84. The petitioner was awarded compensation under Award No. 18.
Dissatisfied with the compensation, the petitioner sought enhancement under Section 18 of the Land Acquisition Act, 1894, leading to a judgment dated April 30, 2013, in Land Acquisition Reference Case No. 3/1996, which fixed compensation at ₹625 per decimal. The petitioner later filed an execution case, seeking a total claim of ₹6,03,661.78, including principal and interest.
The petitioner contended that BCCL’s calculation did not include interest at 15 percent per annum from May 1, 2013, to January 31, 2023, on the total sum of ₹2,75,896.66. Instead, the calculation was made on a lesser principal amount of ₹81,146.26. The petitioner argued that once interest is included in the awarded sum, it must be considered part of the principal for further interest calculations.
The High Court examined the legal position concerning interest calculation on compensation awards, referring to various Supreme Court rulings. The court recorded: "In the case of Hyder Consulting (UK) Limited v. Governor, State of Orissa, the Hon’ble Supreme Court held that once interest is included in the sum for which an award is made, it cannot be segregated. The entire amount, including interest, must be treated as a single component for further calculation."
The court further referred to Sunder v. Union of India, stating: "Splitting up the compensation into different components for the purpose of payment of interest under Section 34 was not in the contemplation of the legislature when that section was framed or enacted."
The court examined the calculation made by BCCL and noted that the dispute primarily concerned the application of interest for the period from May 1, 2013, to January 31, 2023. The petitioner contended that the total sum of ₹2,75,896.66 should have been considered for interest calculation, whereas the executing court had applied interest only on ₹81,146.26.
The court stated that the compensation was modified as follows under the reference award: "That the Award already made in favor of the applicant is hereby set aside and the applicant is entitled to get compensation at the rate of ₹625 per decimal for the acquired land. The applicant is also entitled to solatium at 30 percent over the excess amount determined by this court as per the provision contained under Section 23(2) of the Land Acquisition Act. The applicant shall also be entitled to interest at 9 percent per annum for one year from the date of delivery of possession and thereafter at 15 percent per annum till the date of realization."
The court noted that up to April 30, 2013, there was no dispute regarding the amount calculated at ₹2,75,896.66. However, the issue arose regarding the application of interest for the subsequent period.
Based on its findings, the High Court modified the order dated May 18, 2023, and directed the executing court to:
- Recalculate the interest at 15 percent per annum from May 1, 2013, to January 31, 2023, on the total sum of ₹2,75,896.66.
- Ensure that the revised calculation aligns with the principles laid down in Sunder v. Union of India and Hyder Consulting (UK) Ltd. v. Governor, State of Orissa.
- Pass further appropriate orders in the light of the modified calculation.
The High Court allowed the petition in part and disposed of it accordingly. Pending interlocutory applications, if any, were also disposed of.
Case Title: Awadh Kishore Sahay v. The State of Jharkhand & Ors.
Case Number: C.M.P. No. 793 of 2023
Bench: Justice Sanjay Kumar Dwivedi
[Read/Download order]
