The Himachal Pradesh High Court has held that landowners are entitled to interest on compensation for the period during which the authorities delayed depositing the awarded amount, observing that compensation cannot be withheld in the absence of a stay order by a competent court.

The Court ruled that administrative instructions directing the Competent Authority not to disburse compensation cannot justify the delay, and directed the authorities to pay interest at 7.5% per annum for the 367-day delay in depositing the compensation under the National Highways Act, 1956.

Justice Sandeep Sharma remarked that: “Since there was a delay in deposit of award amount for one year and during afore period, no stay order by any competent court of law was passed, petitioners ought to have been released amount of compensation alongwith interest for the period with effect from 15.2.2022 to 16.2.2023.”

The petitioners' land situated in Village Bhuppur-II, Tehsil Paonta Sahib, District Sirmaur, was acquired for the construction and four-laning of National Highway No. 72 Bye-pass Paonta Sahib-Ballupur. The Competent Authority for Land Acquisition passed Award No. 3/2022 on February 14, 2022, determining compensation of ₹3,78,76,160 for the petitioners.

However, the compensation amount was deposited with the Competent Authority only on February 16, 2023. Despite the deposit, the amount was withheld pursuant to instructions issued by the authorities pending arbitration proceedings challenging the award.

The petitioners subsequently received the compensation during the pendency of the writ petition but approached the High Court seeking interest for the 367-day delay in depositing the awarded amount.

The High Court observed that the compensation amount was deposited with the Competent Authority 367 days after the award was passed. It noted that the arbitration proceedings were initiated subsequently and that no stay had been granted when the compensation amount ought to have been deposited. The Arbitrator stayed the award only on July 23, 2024.

The Court rejected the authorities' contention that the petitioners' alleged delay in handing over possession justified denying interest. Referring to Section 3D(2) of the National Highways Act, 1956, it observed that the acquired land vests absolutely in the Central Government upon publication of the acquisition declaration.

The Court further held that the authorities could not issue administrative instructions directing the Competent Authority to withhold compensation after the award had been passed. It emphasised that Sections 3H(1) and 3H(2) cast a statutory obligation on the Central Government to deposit the compensation and on the Competent Authority to disburse it to the persons entitled.

Accordingly, the Court held that the petitioners were entitled to interest at 7.5% per annum for the period from February 14, 2022, to February 16, 2023.

Date of Decision: 08.10.2026