Land Acquisition Compensation in India: The LARR Act, the National Highways Act and the Railways Act

When the State takes a person’s land, the Constitution and the statute promise something in return. Land acquisition compensation in India is easy to state as a principle and hard to realise in practice, because the promise is not one promise but three. A farmer whose field lies under a new expressway, a family whose plot is swallowed by a railway line, and a landowner whose ground is taken for a general public purpose are all giving up the same thing — but for most of a century they were paid on different scales, by different officers, with different rights of appeal.

Much of that disparity has now been cured. What has not been unified is the map: the forum, the procedure and the scope of challenge still turn entirely on which statute did the taking. This guide is that map. It is the anchor of our land acquisition cluster; each linked article drills into one region of it.

What Land Acquisition Compensation in India is Actually Made Of?

Under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013 — the LARR or RFCTLARR Act — compensation is assembled, not simply assessed.

The foundation is market value under section 26. The Collector takes the higher of two figures: the value specified under the Indian Stamp Act 1899 for the registration of sale deeds in the area (the guideline value, called the jantri in Gujarat and the ready reckoner elsewhere), or the average sale price for similar land in the nearest village or vicinity. Explanation 1 to section 26 confines the comparison to the immediately preceding three years. Explanation 2 then does something quietly generous: for computing that average, “one-half of the total number of sale deeds or the agreements to sell in which the highest sale price has been mentioned shall be taken into account”. The bottom half of the market is discarded.

That base is then multiplied under section 26(2) by the factor in the First Schedule — 1.00 in urban areas, and between 1.00 and 2.00 in rural areas depending on distance from an urban centre, as notified by the appropriate Government. The multiplier exists to correct the historic under-recording of agricultural land values.

To the multiplied market value are added, in order: the value of things attached to the land under section 29 — trees, standing crops, wells, structures; solatium under section 30(1), “an amount equivalent to one hundred per cent. of the compensation amount”, in recognition of the compulsory nature of the taking; and the additional amount under section 30(3), twelve per cent per annum on the market value, running from the publication of the social impact assessment notification under section 4(2) to the date of the award or of taking possession, whichever is earlier.

Two traps deserve naming, because they are the ones we see most often.

First, the twelve per cent under section 30(3) runs from the social impact assessment notification under section 4(2). A different twelve per cent, under section 69(2), runs from the preliminary notification under section 11 and is awarded by the Authority on a reference. They are not the same entitlement and should not be pleaded as one.

Second, interest under sections 72 and 80 is nine per cent per annum, rising to fifteen per cent per annum for any period beyond one year. Both sections carry the same rate and the same proviso; there is no nine-per-cent section and a separate fifteen-per-cent section.

The practical consequence is that the “offer” in an award is often a fraction of the entitlement. The anatomy of each head is unpacked in the compensation architecture article in this cluster.

How Market Value of Acquired Land is Determined

Everything above rests on the market value of acquired land, and its determination is an evidentiary contest rather than an arithmetical one.

The governing framework remains Chimanlal Hargovinddas v. Special Land Acquisition Officer, Poona, (1988) 3 SCC 751, where the Supreme Court held that a reference is not an appeal against the award, that the award is “an offer” and nothing more, that the reference is an original proceeding in which the claimant occupies the position of a plaintiff, and that comparable sale instances are the primary method. The judgment also set out the deduction for development when small-plot instances are used to value a large block.

Three further rules recur. The guideline register is not evidence of market value on its own: in Jawajee Nagnatham v. Revenue Divisional Officer, Adilabad, (1994) 4 SCC 595, the Court held that the Basic Valuation Register, having no statutory foundation, cannot found a determination under section 23. Where several genuine exemplars exist, the highest bona fide instance is to be taken rather than an average — Mehrawal Khewaji Trust v. State of Punjab, (2012) 5 SCC 432. And the deduction for development has two distinct components, the land surrendered for roads and amenities and the cost of the works themselves, with indicative ranges rather than a fixed percentage: Lal Chand v. Union of India, (2009) 15 SCC 769.

The 2013 Act does not displace this case law; it channels it. Section 26(1)(b) is a statutory version of the comparable-sales method, and the courts have continued to police its use. In Madhya Pradesh Road Development Corporation v. Vincent Daniel, 2025 INSC 408, and again in Project Director, NHAI v. Alfa Remidis Ltd, 2026 INSC 480, the Supreme Court held that an “average sale price” cannot be constructed from a single sale deed. One instance is an anecdote, not an average.

The Two-Tier Problem, and the 2015 Order that Cured It

The 2013 Act did not sweep away every acquisition statute. Instead, it extended the framework for land acquisition compensation under the 2013 Act to specified enactments through a separate statutory mechanism. Thirteen enactments were listed in its Fourth Schedule and, by section 105(1), placed outside the Act — “subject to sub-section (3)”. Two of those thirteen are the National Highways Act 1956 and the Railways Act 1989, under which a very large share of India’s compulsory acquisitions actually happen.

Section 105(3) obliged the Central Government to issue a notification within one year of commencement — that is, by 31 December 2014 — extending the compensation and rehabilitation provisions of the First, Second and Third Schedules to those thirteen Acts. No such notification was issued in time. An Ordinance was promulgated on 31 December 2014 to substitute section 105(3), and was twice re-promulgated; the replacement Bill went to a Joint Committee; and when the second Ordinance was about to lapse, the Government took a different route.

The RFCTLARR (Removal of Difficulties) Order 2015, S.O. 2368(E) dated 28 August 2015, was made under section 113(1) — the removal-of-difficulties power — rather than under section 105(3). Its operative clause provides that the Act’s provisions on determination of compensation in accordance with the First Schedule, on rehabilitation and resettlement in accordance with the Second Schedule, and on infrastructure amenities in accordance with the Third Schedule “shall apply to all cases of land acquisition under the enactments specified in the Fourth Schedule to the said Act”.

Two points about that Order are commonly stated wrongly, and both matter. It came into force on 1 September 2015, by its own clause 1(2); the date of 1 January 2015 belongs to the lapsed Ordinance, not to the Order. And it extended the three Schedules only. It did not, in terms, extend the body of the 2013 Act. That limitation is the subject of a separate article in this cluster, and of the live dispute discussed below.

The Tarsem Singh Line, and the March 2026 Cut-Off

Even before the 2015 Order, the disparity was constitutionally vulnerable. In Union of India v. Tarsem Singh, (2019) 9 SCC 304, decided on 19 September 2019, the Supreme Court held that solatium under section 23(2) and interest under section 23(1-A) and the proviso to section 28 of the Land Acquisition Act 1894 apply to acquisitions under the National Highways Act, and that section 3J of the 1956 Act — which excludes the 1894 Act — is “to this extent” violative of Article 14. The Court pointed to the Government’s own 2015 Order as an admission that parity was owed.

It is worth being precise about what the Court did. It did not strike down section 3J. Section 3J still stands on the statute book, in unamended form; it was held unconstitutional only so far as it denied solatium and interest.

The sequel matters more than the original for anyone advising today. NHAI applied to have the ruling made prospective only. That application was rejected on 4 February 2025 in Union of India v. Tarsem Singh, 2025 INSC 146 — the fiscal consequences of parity, the Court held, were no answer to Articles 14 and 300A. NHAI then sought review, and on 25 March 2026 the Court disposed of the review in NHAI v. Tarsem Singh, 2026 INSC 291, refusing to reopen the merits but issuing calibrated directions keyed to 28 March 2008: broadly, only claims pending on or after that date may have solatium and interest added; where a claim was raised late, interest runs from the date it was raised; concluded claims are not to be reopened; and sums already paid are not to be recovered.

An advice note written to the 2019 judgment alone is now materially incomplete.

Do the Schedules Travel, or the Whole Act? The Unresolved Question

Here the law is genuinely open, and an honest guide should say so rather than pick a side.

On one reading, the 2015 Order means exactly what it says. It extends three Schedules. The National Highways Act and the Railways Act remain self-contained codes for everything else — the notification, the objection procedure, the determination machinery, the forum. On this view the special Act’s own valuation section governs, supplemented by the First Schedule for the multiplier and solatium. The Kerala High Court took substantially this position in Sreeja v. Malabar Devaswom Board, 2026 LiveLaw (Ker) 289, holding that the 2015 notification imported the compensation and rehabilitation provisions but did not displace the National Highways Act’s procedural machinery, so that entitlement disputes continue to go to the civil court under section 3H(4) rather than to the LARR Authority.

On the competing reading, the distinction between Schedule and body cannot survive contact with the arithmetic. The First Schedule prescribes a multiplier applied to “market value” — but the First Schedule does not define market value. The definition sits in section 26, in the body. Extend the Schedule and you must import the section, or the Schedule does no work. The Supreme Court appears to have accepted as much. In NHAI v. P. Nagaraju @ Cheluvaiah, Civil Appeal No. 4671 of 2022, decided 11 July 2022, the Court held that “all aspects contained in Section 26 to 28 of RFCTLARR Act for determination of compensation will be applicable notwithstanding Section 3J and 3G(7)(a) of NH Act”. And in Alfa Remidis (2026) it set aside a section 3G(5) award as patently illegal precisely because it had ignored the section 26 methodology.

The tension is real and it is not academic: it decides which valuation rule an arbitrator must apply, and whether a landowner may reach the LARR Authority at all. The Punjab and Haryana High Court has gone further still, declaring sections 3G and 3J unconstitutional in Sohan Lal v. Union of India, 2025:PHHC:040091-DB, decided 20 March 2025 — but that decision is under challenge, the special leave petitions were heard on 23 July 2026, and arbitrations have been directed to continue subject to the outcome. Nothing in that line should be treated as settled.

Three Statutes, Three Forums

Unification of land acquisition compensation has not produced unification of the map. The forum for seeking enhancement still depends on the statute under which the land was acquired.

Three features of that table repay attention. The Railways Act’s sixty per cent under section 20F(9) is expressed as a sum “in consideration of the compulsory nature of the acquisition” — the same formula the 1894 Act used for its thirty per cent — but the word “solatium” does not appear in it, which is the root of a live argument about whether the sixty per cent and the First Schedule’s hundred per cent are cumulative or alternative. Chapter IVA runs from section 20A to section 20P and no further; references to sections 20A to 20W, which appear in a good deal of commentary, are simply wrong. And the National Highways arbitrator is appointed by the Central Government, which is in substance the acquiring interest — a structural feature the Supreme Court itself has commented on.

Challenging an Arbitral Award: What Changed in 2025

For the two arbitration routes, a challenge to a land acquisition compensation award lies under section 34 of the Arbitration and Conciliation Act 1996, and the grounds of challenge are narrow. Since the 2015 amendment, “public policy” has been confined to the fundamental policy of Indian law, basic notions of morality or justice, and fraud or corruption. Section 34(2A) adds patent illegality on the face of the award for domestic arbitrations, but its proviso bars interference merely for an erroneous application of law or a re-appreciation of the evidence: Ssangyong Engineering & Construction Co. Ltd v. NHAI, (2019) 15 SCC 131. The time limit is three months from receipt of the award, extendable by thirty days “but not thereafter”.

For years the settled position was that a section 34 court could set aside but never modify — NHAI v. M. Hakeem, (2021) 9 SCC 1. For a landowner that was a cruel rule: an award manifestly too low could be annulled, but the whole arbitration then had to be run again.

That position has been qualified. In Gayatri Balasamy v. ISG Novasoft Technologies Ltd, 2025 INSC 605, decided 30 April 2025, a Constitution Bench held by a majority of four to one that a limited power of modification exists: to sever the invalid part of an award from the valid; to correct clerical, computational or typographical errors and other manifest errors on the face of the record; to modify post-award interest under section 31(7)(b) where there are compelling reasons; and, for the Supreme Court alone, under Article 142, to be used sparingly. M. Hakeem survives for the proposition that section 34 is not an appeal on the merits, but it no longer states an absolute bar.

It should be said plainly that the decision was not unanimous and has been criticised. The dissent, and much of the commentary since, warns that a modification power invites exactly the merits review that the 1996 Act was designed to exclude, and that it sits awkwardly with the enforcement of Indian awards abroad. Whether it will in practice help land-losers, or simply lengthen litigation, is not yet known.

Lapse: The Section 24(2) Argument

One further route deserves a mention because it is so often misremembered. Section 24(2) of the 2013 Act provides that proceedings begun under the 1894 Act lapse in defined circumstances where the award is five years old or more. In Indore Development Authority v. Manoharlal, (2020) 8 SCC 129, a Constitution Bench held that “paid” in section 24(2) means tendered under section 31(1) of the 1894 Act, that the “or” is to be read as “nor”, and that lapse follows only where possession has not been taken and compensation has not been paid. Periods covered by interim orders are excluded. The decision overruled Pune Municipal Corporation v. Harakchand Misirimal Solanki, (2014) 3 SCC 183, on which a great many lapse claims had been built. Claims framed on the older understanding will not survive.

Frequently asked questions

How is land acquisition compensation calculated in India? Market value under section 26, multiplied by the First Schedule factor, plus the value of attached assets under section 29, plus one hundred per cent solatium under section 30(1), plus twelve per cent per annum additional amount under section 30(3), plus interest where payment is delayed.

Is solatium payable on a highway acquisition? Yes, following Tarsem Singh — but subject to the 28 March 2008 cut-off laid down on 25 March 2026. Check when the claim was raised.

Can I go to the LARR Authority against a highway award? That is disputed. The National Highways Act sends you to arbitration under section 3G(5), and the Kerala High Court has held the Order did not displace that machinery. Take advice on the position in your High Court.

Can a court increase an arbitrator’s award? Within the four narrow situations recognised in Gayatri Balasamy, and not otherwise. A general re-valuation is still not available under section 34.

My award is old and nothing has happened. Has the acquisition lapsed? Only if neither possession was taken nor compensation tendered, after Indore Development Authority. If either happened, there is no lapse.

Does the multiplier apply to my land? Only if it is rural, and then only at the factor the appropriate Government has notified for that distance band. Urban land carries a factor of one.

Can landowners challenge the compensation awarded for acquired land? Yes. The remedy depends on the acquisition statute. Under the RFCTLARR Act, a reference may be made to the Authority under section 64. Under the National Highways Act and the Railways Act, enhancement is generally pursued through the respective arbitration mechanisms.

Glossary

Solatium — a statutory sum added to compensation purely because the taking is compulsory, not because of any proved loss. Jantri / guideline value / ready reckoner — the value fixed by the State for stamp duty purposes. Multiplier — the First Schedule factor by which market value is multiplied, up to two in rural areas. Competent Authority — the officer who determines compensation under the National Highways Act or Chapter IVA of the Railways Act. The Authority — the Land Acquisition, Rehabilitation and Resettlement Authority constituted under the 2013 Act. Severance — the depreciation of the land an owner retains because part of the holding has been taken.

Read next

• The Removal of Difficulties Order 2015: What It Extended, and What It Did Not — the instrument on which the whole parity argument rests.
• Partial Land Acquisition and the Severed Residue — when a landowner can insist the whole be taken, and when only compensation is available.
• Jantri versus Market Value: How Compensation Is Really Determined — the evidentiary contest beneath every other head.
• The Reference: Challenging a Collector’s Award in Court — the forum, the limitation and the burden.

Sources

• Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013 — sections 4(2), 11, 23, 24(2), 26 (with Explanations 1 and 2), 27, 28, 29, 30(1) and 30(3), 64, 69(2), 72, 80, 105 and 113, and the First, Second, Third and Fourth Schedules
• National Highways Act 1956 — sections 3A to 3J, in particular 3G(5), 3G(6), 3G(7), 3H(4), 3H(5) and 3J
• Railways Act 1989 — Chapter IVA, sections 20A to 20P, in particular 20F(8), 20F(9), 20G, 20H(5) and 20N
• Land Acquisition Act 1894 — sections 11, 18, 23(1), 23(1-A), 23(2), 28 and 31(1)
• Arbitration and Conciliation Act 1996 — sections 31(5), 31(7)(b), 34, 34(2A) and 34(3)
• RFCTLARR (Removal of Difficulties) Order 2015, S.O. 2368(E) dated 28 August 2015, in force 1 September 2015 (text reproduced at paragraph 38 of Tarsem Singh)
• Chimanlal Hargovinddas v. Special Land Acquisition Officer, Poona, (1988) 3 SCC 751
• Jawajee Nagnatham v. Revenue Divisional Officer, Adilabad, (1994) 4 SCC 595
• Lal Chand v. Union of India, (2009) 15 SCC 769
• Mehrawal Khewaji Trust v. State of Punjab, (2012) 5 SCC 432
• Ssangyong Engineering & Construction Co. Ltd v. NHAI, (2019) 15 SCC 131
• Union of India v. Tarsem Singh, (2019) 9 SCC 304 (Civil Appeal No. 7064 of 2019, decided 19 September 2019)
• Indore Development Authority v. Manoharlal, (2020) 8 SCC 129, overruling Pune Municipal Corporation v. Harakchand Misirimal Solanki, (2014) 3 SCC 183
• NHAI v. M. Hakeem, (2021) 9 SCC 1
• NHAI v. P. Nagaraju @ Cheluvaiah, Civil Appeal No. 4671 of 2022, decided 11 July 2022
• Union of India v. Tarsem Singh, 2025 INSC 146 (Miscellaneous Application No. 1773 of 2021, decided 4 February 2025)
• Madhya Pradesh Road Development Corporation v. Vincent Daniel, 2025 INSC 408
• Gayatri Balasamy v. ISG Novasoft Technologies Ltd, 2025 INSC 605 (Constitution Bench, decided 30 April 2025)
• Sohan Lal v. Union of India, 2025:PHHC:040091-DB (Punjab and Haryana High Court, decided 20 March 2025) — under challenge before the Supreme Court
• NHAI v. Tarsem Singh, 2026 INSC 291 (Review Petition (C) No. 2528 of 2025, decided 25 March 2026)
• Project Director, NHAI v. Alfa Remidis Ltd, 2026 INSC 480 (decided 12 May 2026)
• Sreeja v. Malabar Devaswom Board, 2026 LiveLaw (Ker) 289 (Kerala High Court)