Supreme Court says my way or no highway

By Rachika Sahay and Meghna Mishra, HSA Advocates

Measuring over 5.8 million kilometres, the Indian road network encompasses the length and breadth of the country and includes national highways, expressways, state highways, district roads and village roads. It is one of the largest road networks in the world. The private sector has played a decisive role in creating this network, which presently enables around 65% of all goods to be transported and an estimated 90% of passenger traffic.

Rachika Sahay
HSA Advocates

National highways are critical to the economic progress of the country. According to a press release on behalf of the Ministry of Road Transport and Highways (ministry), as at 31 December 2019 India has 132,500 kilometres of national highways. With a view to achieving the objective of completing the development of 200,000 kilometrs of national highways by 2022, the government has proactively taken a number of major policy decisions.

These aim to promote the participation of private investment and operation. Not only has the government allowed 100% foreign direct investment in the road sector through the automatic route, but it has also periodically issued notifications to prevent obstacles and facilitate work. These have included the notification in July 2019 that the ministry proposed to expedite acquisition of land for road projects by enabling the determination of compensation for such acquisition in accordance with the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (New Land Acquisition Act), extending the measures undertaken by the government to expedite highway projects and reinforcing the role of the private sector in the expansion of the road network.

Meghna Mishra
HSA Advocates

Despite these forward-looking amendments, issues such as environmental clearances and the underestimation of total project cost by the ministry have continued to plague this sector. One of the most problematic obstructions has been the undue delay in land acquisition primarily caused by disputes over the amount to be paid as compensation to the landowner. These disputes have led to refusals by landowners to hand over possession of the respective sites. In such circumstances, the judiciary has had to rule in a number of related cases to resolve these issues.

The recent decision of the Supreme Court in Union of India v Tarsem Singh (2019) dealt with the payment of compensation. It also adjudicated on the constitutional validity of section 3J of the National Highways Act, 1956 (National Highways Act), to the extent it excluded payment of compensation and interest from the provisions of section 30 of the New Land Acquisition Act, in respect of land acquired under the National Highways Act. It should be noted that section 3J of the National Highways Act specifically provides that the New Land Acquisition Act shall not apply to land acquisition undertaken under the National Highways Act. The Supreme Court observed that the compensation paid to a landowner is in consideration of the fact that the landowner might not be willing to part with his land. Further, the value for the land is fixed legislatively and, therefore, the landowner is not even allowed the freedom to negotiate the value of the land to secure the best price for the property to be compulsorily acquired. Thus, compensation is the amount paid in consideration of the compulsory nature of acquisition.

The court held that there was no valid reason to differentiate between sets of landowners whose lands were being acquired for the purpose of national highways on one hand and landowners whose lands were acquired for other public purposes on the other, as this would be in violation of article 14 of the constitution. This article guarantees to every person the right of equality before the law or the equal protection of laws. The Supreme Court held that compensation and interest payable in accordance with section 30 of the New Land Acquisition Act is payable in the case of acquisitions made under the provisions of the National Highways Act. Significantly, the Supreme Court declared that section 3J of the National Highways Act is unconstitutional, to the extent that it is in violation of article 14 of the constitution.

From the determination of the amounts of compensation that have not been mutually agreed to delayed payments, landowners have suffered greatly in the past few years due to policy paralysis and ambiguity. Further, bearing in mind that the acquisition of land for national highways is considered to be an essential policy, the non-payment of compensation has been a harsh fact of life for landowners. For the reasons set out above, this contentious issue has been finally put to rest and there will be respite for the sector overall.

Rachika Sahay is a partner and Meghna Mishra is an associate at HSA Advocates.

HSA Advocates
81/1, Adchini, Sri Aurobindo Marg
New Delhi – 110 017
Construction House 5/F Walchand Hirachand Marg, Ballard Estate
Mumbai – 400 001
Contact details
Tel: +91 11 6638 7000 Fax: +91 11 6638 7099
Tel: +91 22 4340 0400 Fax: +91 22 4340 0444