JUDGMENT

K.T.Thomas, J.

(1) THE question referred to this Bench of five Judges is a simple one. Is the State liable to pay interest on the amount envisaged under Section 23(2) of the LAND ACQUISITION ACT , 1894 (for short the Act) ? The sum contemplated in the aforesaid subsection can conveniently be called "solatium" as that expression has been used plentifully in almost all land acquisition proceedings in India. The reference of the aforesaid question to this larger Bench was necessitated on account of a seeming conflict as between the decision of a three Judge Bench of this Court in Union of India v. Shri Ram Mehar and Ors.1 on the one hand and a few later decisions of co-equal Benches of this Court on the other hand.

(2) THE power of granting interest on the sums involved in land acquisition proceedings is endowed in two provisions of the Act. Section 34 enjoins on the Collector to pay interest at two tier rates. For the first stage, from the date of taking possession until disbursement of the awarded amount the rate is 9% per annum. If such disbursement is delayed beyond one year the rate of interest would escalate to 15% per annum from the date of expiry of the said period of one year. Section 28 of the Act contains the same postulates and it is supplementary to the above provision. It empowers the court to direct the Collector to pay interest at the above two tier rates on the excess sum awarded by the court. The real question is whether in calculating the interest, as mentioned in the said provisions, the amount of solatium envisaged in Section 23(2) of the __________________________ 1. 1973(1) SCC 109. Act should be included in or excluded from the sum on which interest is liable to be paid.

(3) IN Union of India v. Shri Ram Mehar and Ors. (supra) the three Judge Bench considered the scope of the expression "market value" in Section 4(3) of the Land Acquisition Amendment and Validation) Act, 1967. By the said Amendment Act certain changes were effected in the principal Act. Section 4(3) of the Amendment Act provided that simple interest shall be paid at the rate of 6% per annum "on the market value of such land as determined under Section 23 of the principal Act" from the date of expiry of three years to the date of notification under Section 4(1) of the principal Act. Learned Judges held that solatium cannot form part of the market value of the land. It was also held that "market value" is only one of the components to be reckoned in the determination of the amount of compensation. The following observations made by the Bench is highlighted to be the ratio of the decision:

"IF market value and compensation were intended by the legislature to have the same meaning it is difficult to comprehend why the word compensation in Section 28 and 34 and not market value was used. The key to the meaning of the word compensation is to be found in Section 23(1) and that consists (a) of the market value of the land and (b) the sum of 15% on such market value which is stated to be the consideration for the compulsory nature of the acquisition. Market value is therefore only one of the components in the determination of the amount of compensation. If the Legislature has used the word market value in Section 4(3) of the Amending Act of 1967 it must be held that it was done deliberately and what was intended was that interest should be payable on