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Is Interest Under Section 28 Compoundable? Answers in MIDC Land Acquisition Dispute
The has delivered a significant clarification on the calculation of interest payable under , ruling that the interest must be computed as only on the and cannot be compounded by adding unpaid interest to the principal.
Justice Rohit W. Joshi, presiding over a bench at the Nagpur seat, was hearing a filed by the challenging orders passed by the Executing Court in a land acquisition dispute. The court also examined the correctness of calculation reports prepared by the Registrar (Judicial) and the submissions of both parties.
A Long-Standing Acquisition and Enhanced Compensation
The controversy traces back to the acquisition of 4.19 hectares of land in Amravati under the . The Land Acquisition Officer initially awarded compensation of ₹7,27,447, comprising ₹1,24,574 for land and ₹6,02,903 for standing trees. Dissatisfied, the land owner, Mohan Shriram Nimdeokar, sought a reference, leading to enhancement by the Reference Court and subsequently by the High Court in appeals. The final enhanced compensation stood at ₹11,95,557.
MIDC deposited ₹17,03,351 on and a further ₹38,78,787 on . Despite these deposits, the land owner filed claiming arrears, leading the Executing Court to issue against MIDC officials. MIDC challenged those orders, arguing that the entire compensation had been paid.
Errors in Calculating Interest
The High Court directed the Registrar (Judicial) to compute the due amount. The initial report dated calculated a balance payable of ₹10,32,769 as on , but the court found a fundamental flaw: interest after the first deposit was computed on the outstanding balance, which included unpaid interest up to that date, effectively the interest.
The court noted that both MIDC and the land owner had committed the same error in their respective calculations. The land owner's objection claimed ₹22,39,851 as payable as on , while MIDC's own calculation similarly compounded the interest.
, Not Compound – The Legal Principle
Examining Section 28 of the Land Acquisition Act, the court observed that the provision mandates interest at 9% per annum for the first year after possession and 15% per annum thereafter on the excess amount of compensation . It emphasised that the section does not permit of interest.
"The provision does not speak of
the interest on the additional amount of compensation. However, in the present case, MIDC and respondent both have compounded the interest which is not permissible under Section 28,"
Justice Joshi observed.
The court also addressed the reliance placed by the land owner on the case of . While accepting the ratio that interest under Section 28 is payable on the including and the 12% interest component, the court distinguished the actual calculations in that case, noting that they had inadvertently compounded the unpaid interest.
"With respect, it will not be possible to agree with the manner in which the calculations are made in the said case since inadvertently unpaid amount of interest is added to the
for the purpose of calculation of interest,"
the judgment stated, clarifying that the ratio does not endorse
.
Remanded for Fresh Calculation
The High Court partly allowed MIDC’s , quashing the Executing Court’s orders dated (rejecting MIDC’s application for dismissal of execution), and the subsequent arrest warrant orders of and . The matter was remitted to the Executing Court to calculate the amount payable as on , with a clear direction that interest under Section 28 must be computed only on the enhanced compensation of ₹11,95,557.
The parties were directed to appear before the Executing Court on , with a deadline for fresh decision by .
Key Observations
"Interest under Section 28 of the L.A. Act at the rate of 9% for the first year and 15% thereafter will have to be calculated only on the of ₹11,95,557/- only."
"The provision does not speak of the interest on the additional amount of compensation. However, in the present case, MIDC and respondent both have compounded the interest which is not permissible under Section 28."
"In land acquisition cases, the is often not deposited or paid by a single transfer or under single transaction...When further interest is calculated on the balance amount, the unpaid interest as on the date of first deposit gets compounded. Section 28 of the Act does not speak about of interest."
The ruling serves as an important reminder to acquiring bodies and land owners that the statutory interest under Section 28 is , and any attempt to calculate by rolling over unpaid interest into the principal is legally impermissible.
