Acquire First, Pay Never: The Rule of Law Crisis in National Highway Land Acquisitions

This article examines systemic failures in national highway land acquisition, focusing on delayed compensation, constitutional protections, judicial interventions and administrative accountability.

Introduction: A system built to take, not to compensate

India’s national highway network is one of the most ambitious infrastructure projects in the world. Behind the gleaming asphalt and the ribbon-cutting ceremonies, however, lies a quieter and less celebrated story, one of farmers, smallholders, and landowners whose properties have been taken by the State without the payment of a single rupee, sometimes for years, and who must then navigate a labyrinthine legal system simply to receive what the law already guarantees them.

The National Highways Act, 1956 (NH Act) creates a unique and deeply asymmetric acquisition framework. Land vests in the Central Government the moment a final declaration is made, before compensation is assessed, before it is awarded, and certainly before it is paid. The State gets the land; the landowner gets a case number and a journey that may take a decade or more. This article examines that journey, the legal architecture that enables it, the judicial milestones that have tried to correct it, and the systemic failure of the officials entrusted with making it work.

The acquisition process under the NH Act: A primer

The NH Act provides a streamlined but constitutionally fraught framework for compulsory acquisition of land. The key stages are as follows:

The Central Government publishes a notification under Section 3-A declaring its intention to acquire land for the construction or expansion of a national highway. This is the first formal step in the process and is analogous to the preliminary notification under other acquisition laws.

Then the Act mandates that objections must be invited and heard under Sections 3-B and 3-C. Any person interested in the land has the right to file objections. The Competent Authority for Land Acquisition (CALA) typically a State Administrative Officer of the rank of Additional District Magistrate (ADM) or Sub-Divisional Magistrate (SDM) hears these objections and forwards a report to the Central Government.

If the Central Government is satisfied that the land ought to be acquired, it issues a notification under Section 3-D declaring that the land shall vest in the Central Government absolutely and free from all encumbrances. At this moment the land passes to the State without the payment of compensation. The landowner has, at this point, lost their property but received nothing in return.

Section 3-E(1) provides that once land has vested under Section 3-D and the CALA has paid the compensation determined under Section 3-G, possession may be taken, but the provision does not require that payment to be fair, adequate, or even reasonable. If the CALA values an acre at Rs 1 and pays that Rs 1, possession can still be taken lawfully. The law, as written, does not prevent this.

It is the operating strategy that the State through its CALAs has employed with predictable regularity. The CALA passes a minimalist award, often stripped of the statutory components and an amount is deposited with the landowner. Construction begins. Once the construction has commenced the landowner has no practical leverage left. He cannot stop the project. He cannot recover his land. All he can do is chase his rights through courts and arbitration rooms, year after year, while the completed highway stands as a monument to his dispossession.

After vesting, the CALA must issue a public notice under Section 3-G(3) calling for claims from all persons interested in the land. After hearing these claims, the CALA passes an award under Section 3-G(1). Section 3-G(7) specifies the factors to be considered in assessing the award: 1) the market value of the land, 2) the damage sustained by reason of severance of land, 3) the damage sustained by reason of the injurious affection of other property held by the claimant, and 4) the reasonable expenses incidental to the compelled change of residence or place of business. Notably, the Act, in its original form, made no provision for solatium, interest on delayed payment, or any penalty for protracted non-payment.

If any person interested in the land is dissatisfied with the award of the CALA, or if the CALA is of the opinion that the award is inadequate, the matter can be referred to an arbitrator appointed by the Central Government under Section 3-G(5). This is a mandatory statutory arbitration, not consensual arbitration. The arbitrator so appointed has invariably been a senior government official typically an officer of the Indian Administrative Service who is often the administrative superior of the very CALA whose award is under challenge.

The system in its bare form is to acquire first, construct immediately, compensate later, a model that is convenient to deny landowners their due.

The legal gap in the NH Act and its correction

The original exclusion of the 2013 Act

Initially the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLARR Act or 2013 Act) was not applicable to NH Act by virtue of its Section 105(1). The logic of this exclusion was highly questionable. It meant that a farmer whose land was acquired for a national highway received markedly inferior compensation compared to a farmer whose adjacent land was acquired for any other State purpose. The discrimination was stark and had no rational basis in constitutional law.

The Removal of Difficulties Order, 2015 and the clarificatory circular of 2016

The anomaly created by the Fourth Schedule exclusion was partially rectified by a Removal of Difficulties Order issued by the Central Government under Section 105(3), 2013 Act, effective from 1 September 2015. It extended the First, Second and Third Schedules of the 2013 Act, covering compensation, rehabilitation and resettlement, and infrastructure amenities to NH Act acquisitions. The Ministry of Road Transport and Highways (MoRTH) further clarified that First Schedule of the 2013 Act would apply to all NH Act acquisitions wherever awards were not announced before 31 December 2014, or announced but largely unpaid as of that date.¹

The 2017 comprehensive guidelines

The MoRTH later issued a set of Comprehensive Policy Guidelines on 28 December 2017, which gave the most detailed executive articulation of how the 2013 Act applies to NH Act acquisitions.² The guidelines provide a five-step computation: 1) determine the market value in accordance with Sections 26 to 28, 2013 Act; 2) apply the applicable multiplication factor; 3) calculate the value of attached assets (structures, trees, etc.); 4) add solatium at 100 per cent on the amount determined under steps 2) and 3); and 5) calculate the additional 12 per cent per annum amount on the market value from the date of Section 3-A notification until the date of the award or possession, whichever is earlier.

The judicial journey: Tarsem Singh I, II and the review

Tarsem Singh I (2019)

The most consequential judicial intervention in NH Act compensation law came in Union of India v. Tarsem Singh (1)³. The case arose out of a long-running controversy about whether landowners under the NH Act, during the interregnum between 1997 (when Section 3-J was inserted, expressly excluding the applicability of the Land Acquisition Act, 1894) and 2015 (when the 2013 Act was extended to NH Act acquisitions), were entitled to solatium and interest.

The court held that Section 3-J of the NH Act, to the extent that it excluded the payment of solatium and interest, was unconstitutional as violative of Article 14 of the Constitution. The court held that the provisions relating to solatium under Sections 23(1-A) and (2), and interest under the proviso to Section 28, Land Acquisition Act, 1894, would apply to all acquisitions under the NH Act made between 1997 and 2015. The right to solatium and interest, the court emphasised, was not a statutory grace it was a constitutional compulsion rooted in the guarantee of just compensation under Article 300-A.

Tarsem Singh II (2025)

Following Union of India v. Tarsem Singh (2)⁴, National Highways Authority of India (NHAI) filed an application seeking clarification that the judgment would operate only prospectively, so as to shield concluded cases from reopening. The court, in February 2025, rejected this plea outright, holding that the right to solatium and interest could not be made contingent on when the claim was raised and that the financial burden of compliance was not a valid ground for limiting a constitutional entitlement.

The review petition and its dismissal (2026)

NHAI then sought review of NHAI v. Tarsem Singh⁵ contending that its earlier estimate of liability at Rs 100 crores had been a clerical error constituting an error apparent on the face of the record and that the actual liability flowing from the judgments was approximately Rs 29,000 crores. The court dismissed the review petition, issuing limited clarifications to balance entitlement with the doctrine of finality. The court held, in terms that deserve to be quoted for posterity: “…There is no gainsaying that the constitutional guarantee of just compensation cannot be rendered contingent upon the magnitude of the financial burden.” The correction of a financial estimate, however dramatic, could not justify revisiting the substantive rights of thousands of dispossessed landowners. The court clarified that claims alive on or after 28 March 2008 (the date of the Punjab and Haryana High Court’s decision in Golden Iron and Steel Forging v. Union of India⁶) could seek solatium, interest, and interest on solatium, while claims concluded before that date with no pending challenge could not be reopened.

The Tarsem Singh trilogy constitutes a remarkable judicial arc, from a complete denial of solatium and interest, to their constitutional recognition, to the State’s failed effort to limit their retroactive application, and finally to the Supreme Court’s resolute reaffirmation that the fiscal convenience of the acquiring authority is not a reason to shortchange the dispossessed.

The Nagaraju judgment

In NHAI v. P. Nagaraju⁷, the Supreme Court addressed the methodology for determining market value in NH Act acquisitions after the 2013 Act’s extension. The court held that Section 3-G(7) parameters were merely the baseline framework, and that after the 2013 Act was made applicable, the comprehensive provisions of Sections 26 to 28, 2013 Act would also govern the determination of market value and compensation. The CALA could not confine itself to the narrow parameters of Section 3-G(7) and ignore the more detailed and landowner-protective methodology mandated by the 2013 Act. This judgment has significant practical consequences. It means that the CALA is obligated to consider not only the narrow factors listed in Section 3-G(7) but also the broader principles of market value determination, including sale exemplars, the guideline value under the Stamp Act, 1899 and all other relevant evidence of value contemplated by the 2013 Act.

The compensation framework under the 2013 Act

Understanding what the law now requires the CALA to do, and why the gap between that requirement and actual practice is so devastating, demands a careful look at the provisions of the 2013 Act as applicable to NH Act acquisitions.

Market value under Section 26: The CALA must fix market value as on the date of Section 3-A notification, taking the highest of: 1) the Stamp Act circle rate, 2) the average of the top 50 per cent of comparable sale deeds from the preceding three years, or 3) the consented amount under Part II acquisitions. The CALA must take the highest of the applicable measures.

Determination of value of things attached to land under Section 27: Separate from the land value, the CALA must determine the value of structures, buildings, trees, plants, and other things attached to the land or standing thereon.

Parameters for determining market value under Section 28: This section sets out additional considerations for the purpose of determining market value, including 1) market value under Section 26 and the schedules, 2) damage done to the crops, 3) severance, 4) damage done to the other land while taking possession, 5) reasonable expenses for relocation, 6) diminution of profits, and 7) any other ground. Including factors of equity, justice, and the benefit to the affected families.

Solatium under Section 30(1): In addition to the market value and asset value, the CALA must award solatium equivalent to 100 per cent of the market value. Section 30(3) mandates the payment of an additional amount at 12 per cent per annum on the market value for the period from the date of Section 3-A notification to the date of the award or taking possession, whichever is earlier.

The First Schedule: The First Schedule sets out the components that must be included in every award: 1) market value of the land, 2) value of assets attached to the land, 3) 100 per cent solatium, 4) the 12 per cent additional amount, and 5) the multiplication factor applicable to the area.

The Punjab and Haryana High Court’s strike down of Section 3-G(5)

In Sohan Lal v. Union of India⁸, decided on 20 March 2025, the Punjab and Haryana High Court declared both Sections 3-J and 3-G, NH Act unconstitutional. On Section 3-G, the court found the mandatory arbitration mechanism to be fundamentally flawed. Arbitration, the court observed, is inherently a consensual process, it requires the agreement of both parties to submit their dispute to a private adjudicator. The NH Act imposed arbitration without consent, before an arbitrator appointed unilaterally by the Central Government, who was invariably a government official. The Amicus Curiae submitted before the court that the arbitration clause was not grounded in any contract between the parties and was therefore without legal foundation. The court agreed, finding that the mechanism created by Section 3-G was idly created and has no legal foundation in terms of real arbitration law.

The Supreme Court subsequently stayed this judgment on 30 May 2025, temporarily reviving the arbitral framework.⁹ The matter remains sub judice as vide order dated 23 July 2026 the court impressed upon the learned Attorney General to take up suitable amendments to the act. But the Punjab and Haryana High Court’s reasoning cannot be lightly dismissed it exposes the fundamental constitutional infirmity of a system where the adjudicator of compensation is appointed by, accountable to, and often administratively subordinate to the acquiring authority itself.

The ground reality

Law on paper and law in practice are rarely the same. In the case of NH Act compensation proceedings, the gap between the two is not a matter of minor administrative inefficiency, it is, in many cases, a matter of deliberate evasion.

The closed-mind problem

The CALA is vested with enormous discretionary power in the determination of compensation. He hears claims, evaluates evidence, and passes awards that have the force of law. But in practice, in a significant number of cases, this power is not exercised with the neutrality of a quasi-judicial authority. It is exercised with a prior disposition, the outcome of informal consultations with the acquiring authority, which has every institutional interest in minimising the compensation payable. The result is that the landowner appears before an authority that has already decided what it will pay.

Where the CALA conducts the hearing with a closed mind, where the quantum has been effectively predetermined, the procedural hearing becomes a theatre as the forms are observed, but the substance of fair adjudication is absent. The award, when passed, reflects not the evidence before the CALA but the informal compact between the CALA and the authorities of whom he is, both formally and informally, a subordinate.

Procedural violations

The CALA often passes awards without following the mandatory procedures prescribed under the law. In one case which is sub judice that forms the factual backdrop for this article, the CALA passed an award that included only the value of structures on the land, providing nothing for the bare land itself, no solatium, and no interest. There was no notice under Section 3-G(3). When the landowner approached the court and a writ of mandamus was issued directing a hearing, the response was not compliance but retaliation as ceiling proceedings were initiated against the landowner under the ceiling law, in what appeared to be a deliberate attempt to find legal leverage to avoid paying compensation altogether.

This is the face of administrative impunity in land acquisition, an officer who fails to follow the elementary procedural requirements of the law he administers, and who, when judicially compelled to do so, reaches instead for coercive tools to discourage the claimant. The message sent is clear that if you fight for your statutory rights, we will make the fight more expensive than the rights are worth.

The economics of attrition

The State has a structural advantage in protracted litigation. It has panel counsels on a minimal fee, an inexhaustible capacity for adjournments, and only the marginal cost of interest to bear for delays. The landowner has the costs of legal representation, and the finite energy of a person watching their case file gather dust through postponement after postponement. The strategy of the acquiring authority is transparent. To make the fight costly enough that the poor capitulate, and drag out the rest long enough that inflation erodes the real value of the 12 per cent per annum interest by the time it is paid.

The Bombay High Court, in Shahadeo v. State of Maharashtra vide judgment dated 17 February 2026¹⁰ while remarking on the systemic failure of State administration in land acquisition matters, observed that aggrieved land owners are driven to litigation only because the authorities fail to perform their basic statutory obligations and that the court could not remain a silent spectator to repeated instances where public funds are squandered due to negligence, apathy or indifference of officials. The court noted that many affected landowners are illiterate, or otherwise unaware that they are entitled to compensation at all making them the most vulnerable targets of administrative inaction.

The biased arbitrator, an institutional design problem

When a landowner is dissatisfied with the CALA’s award, the only statutory remedy under Section 3-G(5), NH Act is an application to an arbitrator appointed by the Central Government. In practice, this arbitrator has consistently been a senior IAS officer typically a District Magistrate or a Commissioner, who is the administrative superior of the very CALA whose award is under challenge.

The conflict of interest embedded in this design is not a subtle one. The arbitrator was appointed by the same authority that directed the acquisition. The arbitrator’s career prospects depend on the goodwill of the same government whose financial interests are adverse to the landowner’s claim. The arbitrator presides over a proceeding in which the opposing party is represented by the government’s own Standing Counsel, briefed by the same administrative machinery that answers to the arbitrator’s own department.

The Punjab and Haryana High Court, in the case of Sohan Lal¹¹, was right to describe this as a dysfunctional remedy. The doctrine of nemo judex in causa sua no one shall be a Judge in their own cause is a foundational principle of natural justice. A dispute between the Central Government and a private landowner cannot fairly be resolved by an adjudicator who serves at the pleasure of the Central Government. This is not the kind of independence that Article 300-A’s guarantee of just compensation requires.

The accountability deficit

Here lies the deepest structural problem in NH Act compensation proceedings, there is effectively no mechanism for holding the CALA individually accountable for procedural violations, biased conduct, or the deliberate under-assessment. A CALA who skips the mandatory Section 3-G(3) notice, omits First Schedule components, or hears claims with a pre-formed outcome faces no consequence beyond a court-ordered mandamus to do what should have been done from the start. At most the government bears delayed interest but the officer bears nothing. This sits oddly against Indian Courts’ broader public-trust doctrine, under which public power exercised without accountability is treated as a breach of that trust, and not a mere administrative shortcoming.

The constitutional guarantee of just compensation under Article 300-A is hollow if the officers entrusted with determining that compensation face no personal consequences for rendering awards that are patently unlawful. The landowner bears the full cost of judicial remediation, the fees, the time, and the uncertainty while the officer who caused the need for remediation walks away unaffected.

What needs to change: A proposal for administrative accountability

The following reforms are necessary to give the constitutional guarantee of just compensation its real content.

First, independent CALA appointments: The CALA should not be a State officer who simultaneously answers to the State administrative hierarchy and to the acquiring authority. The officer must be genuinely independent of both. This requires either a dedicated cadre of compensation officers insulated from departmental pressure, or the creation of a quasi-judicial tribunal.

Second, mandatory reasoning in awards: Every award under Section 3-G(1) must record its evidence, valuation methodology, and component-wise breakup of compensation. Unreasoned awards, or those omitting mandatory components, should be voidable at the landowner’s election without having to first go through arbitration.

Third, personal accountability for procedural violations: Service conduct rules should treat a CALA’s failure to issue the mandatory Section 3-G(3) notice or consider First Schedule components as specified misconduct, with personal costs where bad faith or collusion is found. There should be a deterrent for all the officers sitting with a closed mind in the hearing.

Fourth, replacement of Section 3-G(5) with access to civil courts: The Punjab and Haryana High Court’s invalidation of Section 3-G(5) should be welcomed. Parliament should replace it with access to a Reference Court, a judicially independent forum better suited to address disputes than a government-appointed arbitrator.

Fifth, time-bound completion of proceedings with automatic interest escalation: There should be a statutory mandate that the CALA must pass an award within a specified period of Section 3-D notification, and that any delay beyond that period automatically attracts escalated interest at a rate sufficient to deter deliberate delay. The current interest rates are insufficient to overcome the economic incentives for the acquiring authority to drag proceedings out.

Sixth, awareness mechanisms for landowners: Many affected landowners particularly in rural areas are unaware of their rights. The CALA’s public notice under Section 3-G(3) must be given real public notice: publication in local newspapers, pasting at the site of acquisition, and, where feasible, direct communication to recorded landowners. The notice should also include the heads of compensation the land owners are entitled to. The right to compensation is meaningless if the persons entitled to it do not know they are entitled to it.

Conclusion: Just compensation as a right, not a mercy

The Tarsem Singh trilogy established that the constitutional guarantee of just compensation cannot be conditioned on the State’s financial burden. But courts can enforce this only when landowners have the resources and knowledge to invoke their jurisdiction. For most of those whose land is acquired, this right remains theoretical as they have no access to legal representation.

The CALA is not, in law, an agent of the acquiring authority. He is a quasi-judicial authority entrusted with the determination of a constitutional right. He should act accordingly. Compensation is not a favour that the CALA confers upon the landowner at his discretion. It is what the Constitution owes the person whose property the State has taken.

Until there are real consequences for officers who treat their statutory obligations as optional, who conduct hearings with pre-formed conclusions, who pass awards stripped of their mandatory components, and who use the coercive instruments of the State to discourage claimants from exercising their rights, the guarantee of just compensation will remain what it has always been for too many landowners: a promise honoured only by those who are willing to spend years fighting for it, and broken for all those who are not.

The State builds highways so that the nation may move forward. The landowners who make those highways possible deserve, at the very minimum, a legal system that moves forward with them not one that asks them to stand still while the highway is built over what used to be their land.