Supreme Court Refuses NHAI's Plea To Review Retrospective Application Of Solatium To NH Acquisitions, But Bars Reopening Settled Claims

The Supreme Court on Wednesday rejected a review petition filed by the National Highways Authority of India (NHAI) seeking to declare that the 2019 'Tarsem Singh' judgment, which held that solatium and interest will be applicable to the land acquisitions carried out under the National Highway Act, will apply only prospectively.

A bench comprising Chief Justice of India Surya Kant and Justice Ujjal Bhuyan refused to review the 2025 judgment which held that the 'Tarsem Singh' judgment will have retrospective application.

At the same time, the Court clarified that claims which had already attained finality prior to March 28, 2015 (the date on which the 2013 RFCTLARR Act was extended to NH acquisitions) cannot be reopened merely on the basis of the subsequent declaration of law.

NHAI's additional financial implications cannot be a ground to review

The Court held that the financial implications of the ruling, projected by NHAI at around ₹29,000 crore, cannot be a ground to dilute the constitutional guarantee of just compensation to landowners. The Court observed that the grant of solatium and interest flows from the requirement of fairness in compensation and cannot be made contingent upon the magnitude of financial burden on the acquiring authority.

"The grant of solatium and interest cannot be made contingent upon the magnitude of the financial burden. The constitutional guarantee of just compensation cannot be diluted on that basis. Mere projection of financial liability does not constitute a valid ground for review," the Court observed.

Clarification on settled claims

At the same time, the Court noted that certain aspects of the Tarsem Singh ruling required limited clarification to ensure consistency and certainty in its application. The Bench emphasised that while landowners are entitled to solatium and interest as a matter of law, the principle of finality of litigation must also be respected. It observed that landowners have pursued different remedies in various cases, including arbitration and court proceedings, and once such determinations have attained finality within the prescribed time, they cannot be reopened merely because of a subsequent judicial declaration.

Clarifying the scope of entitlement, the Court held that landowners whose proceedings relating to determination of compensation were pending as on March 28, 2015 before the competent authority or court would be entitled to claim solatium and interest in accordance with law. It further stated that in cases where enhanced compensation had been granted but the issue of solatium and interest had not been specifically claimed or adjudicated, landowners may seek such benefits, subject to applicable legal principles. However, interest on such components would be payable only from the date on which the claim for solatium or interest was raised.

Conversely, the Court made it clear that where compensation proceedings had concluded and attained finality prior to March 28, 2015, and no proceedings were pending, such claims cannot be reopened for the purpose of claiming solatium or interest. The Bench observed that endless reopening of settled claims would undermine certainty in litigation and disrupt the balance between the rights of landowners and the stability of legal determinations.

With these clarifications, the Supreme Court disposed of the review petition filed by NHAI. After the judgment was pronounced, the Solicitor General requested the bench to also clarify in the judgment that the interest will be as per Section 3H of the NH Act. However, CJI Surya Kant said that such a clarification will contradict the earlier judgments in Tarsem Singh-I and Tarsem Singh-II.

The review application sought recall of the Court's earlier order dated February 4, 2025, by which an application for clarification of the main judgment in Union of India v. Tarsem Singh (2019) had been dismissed. In that judgment, the Court had examined Section 3J of the National Highways Act, which excluded payment of solatium and interest to landowners, and declared the provision unconstitutional to that extent. The Court had held that landowners whose lands were acquired between 1997, when Section 3J was introduced, and 2015, when the regime under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 was extended to National Highways acquisitions, were entitled to the same benefits available under the Land Acquisition Act.

In the present proceedings, NHAI contended that the earlier financial estimates placed before the Court were based on a clerical error and that the actual liability would be approximately ₹29,000 crore. Rejecting the argument, the Court stated that even if the corrected estimate were accepted, it would not persuade the Court to revisit the merits of the earlier decision. It underscored that the constitutional requirement of just compensation cannot be compromised on fiscal considerations alone.

Background

To recap, in Tarsem Singh, a bench of Justices Rohinton Nariman and Kant declared Section 3J of the National Highways Act 1956, to the extent it excluded solatium and interest as per Land Acquisition Act 1894 to acquisitions done under the NH Act, to be unconstitutional. It was said that the provisions of the Land Acquisition Act relating to solatium and interest contained in Section 23(1A) and (2) and interest payable in terms of section 28 proviso will apply to acquisitions made under the National Highways Act.

Subsequent to this decision, NHAI moved the Court seeking clarification as to whether the 2019 ruling would apply prospectively, thereby precluding reopening of decisions where land acquisition proceedings had already completed and determination of compensation attained finality.

Insofar as NHAI proposed that the ruling must operate prospectively, the bench of Justices Kant and Bhuyan, in February 2025, held that any such clarification would effectively nullify the very relief that the Tarsem Singh ruling intended to provide.

"The broader purpose behind Tarsem Singh was to resolve and put quietus upon the quagmire created by Section 3(j) of the National Highway Act, which led to unequal treatment of similarly situated individuals. The impact of Section 3(j) was short-lived owing to the applicability of the 2013 Act upon the National Highway Act from 1 January 2015. As a result, two classes of landowners emerged devoid of any intelligible differentia - those whose lands were acquired by the NHAI between 1997-2015 and those whose lands were acquired otherwise...Both equity and equality demand that no such discrimination be permitted, as allowing it would be unjust."

The bench further said that when a provision is declared unconstitutional, and continued disparity strikes at the core of Article 14, it must be rectified, particularly when such disparity affects a selected group.

Rejecting a contention that the ruling in Tarsem Singh would open Pandora's box, the bench said, "it merely allows for the grant of solatium and interest which are inherently embedded as compensatory benefits under the expropriating legislation". Another contention raised by NHAI regarding financial burden of about Rs.100 crores did not persuade the Court.

"If this burden has been borne by NHAI in the case of 1000s of other landowners, it stands no reason that it should also be shared by the NHAI in this instance in order to eliminate discrimination...the financial burden of acquiring land cannot be justified in the light of constitutional mandate of Article 300A...since most national highways are being developed under the public-private partnership model, the financial burden will ultimately pass on to the relevant project proponent...even the project proponent would not have to bear the compensation cost out of pocket. It is the commuters who would bear the actual brunt of this cost. The burden will be transferred to the middle or upper middle class segment of society, particularly those who can afford private vehicles and operate commercial ventures."

Disposing of the appeals, the Court directed the competent authority to compute the amount of solatium and interest in accordance with the directions in Tarsem Singh. Thereafter, the NHAI filed the present review petition.

Case Title: NATIONAL HIGHWAYS AUTHORITY OF INDIA Versus TARSEM SINGH AND ORS., R.P.(C) No. 2528/2025 in MA 1773/2021 in C.A. No. 7064/2019