The main legal point established in the judgment is that the person entitled to the compensation awarded is also entitled to get interest on the aggregate amount including solatium.

Judgment

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 S. 23 (2) of the Land Acquisition Act, 1894 (for short the Act) ? The sum contemplated in the aforesaid sub-section 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 (1973) 1 SCC 109 : on the one hand and a few later decisions of co-equal Benches of this Court on the other hand. (AIR 1973 SC 305)

( 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 state, 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 S. 23 (2) of the 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 (AIR 1973 SC 305) (supra) the three-Judge Bench considered the scope of the expression "market value" in S. 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 S. 23 of the principal Act" from the date of expiry of three years to the date of notification under S. 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 Ss. 28 and 34 and not market value was used. The key to the meaning of the word compensation is to be found in S. 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 compen-sation. If the Legislature has used the word market value in S. 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 the market value of the land and not on the amount of compensation otherwise there was no reason why the Parliament should not have employed the word compensation in the aforesaid provision of the Amending Act. "

( 4 ) THAT decision was followed by a two Judge Bench of this Court in Periyar and Pareekanni Rubbers Ltd. v. State of Kerala (1991) 1 SCC 195. Learned Judges (L. M. Sharma, J. , as he then was, and K. Ramaswamy, j.) in the concluding part of that decision said as follows : (AIR 1990 SC 2192)"therefore, we have no hesitation to hold that S. 25 (3) contemplates payment of interests on solatium to re-compensate the owner of th