The Bombay High Court has held that interest under Section 28 of the Land Acquisition Act, 1894 is required to be calculated only on the enhanced amount of compensation and that unpaid interest cannot be added to the enhanced compensation for calculating further interest

Justice Rohit W. Joshi was hearing a writ petition filed by the Maharashtra Industrial Development Corporation (MIDC) challenging orders passed by the Executing Court in proceedings concerning payment of enhanced compensation to the land owner. The land had been acquired under the Maharashtra Industrial Development Act, 1961. The compensation awarded by the Land Acquisition Officer was subsequently enhanced by the Reference Court and further by the High Court.

The Court considered the calculation reports prepared by the Registrar (Judicial). It noted that, in the report dated June 22, 2026, interest after January 13, 2013 was calculated on the balance amount outstanding after deducting the first deposit. This balance included the unpaid interest till January 13, 2013. The Court held that by calculating further interest on this amount, the unpaid interest was being compounded on the principal amount of enhanced compensation.

The Court observed that interest payable on the enhanced amount of compensation is simple interest and held that the calculation report dated June 22, 2026 was incorrect because interest outstanding as on January 13, 2013 was compounded for calculating interest payable thereafter. The Court also noted that the land owner had made a similar mistake in his calculations and that MIDC had committed the same mistake while calculating the amount payable.

The Court then referred to Section 28 of the Land Acquisition Act and observed that where the amount of compensation determined by the Land Acquisition Officer is enhanced, interest at 9% per annum is payable on the excess amount of compensation.

“The provision does not speak of compounding 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,” the Court observed.

The Court considered the reliance on Maharashtra State Electricity Board v. State of Maharashtra, observing that it disagreed with the manner in which the calculations were made in the case as the unpaid amount of interest was added inadvertently to the enhanced amount of compensation for the purpose of calculation of interest.

The Court, partly allowing the petition, remitted the matter to the Executing Court for determining the amount payable to the land owner as on December 5, 2019 and directed that interest under Section 28 be calculated on Rs.11,95,557/- only.

Case Title: Maharashtra Industrial Development Corporation v. Mohan Shriram Nimdeokar [Writ Petition No. 501 of 2025]

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