The case was referred to the apex court under Article 133(1)(A) of the Indian Constitution. Since the construction of the dam was a common law duty, it held that a common man should not go without any compensation if the government has done its duty heedlessly.

 The Court referred to the case of “Calveley v Chief Constable of Merseyside Police” and “Dunlop v Woollahra Municipal Council”, where it held malice as an essential element for the tort of malice. Therefore, the expressions ‘misbehaviour’, ‘misfeasance’ and ‘unlawfulness’ would apply in some cases where the State or its officers would be liable only if they had breached the duty of care with malice or bad faith. 

The Court held that thus, flawed planning in the construction of the dam may be negligence, but it cannot be malice, misfeasance or unlawfulness.  The loss suffered by the petitioner was due to the negligence of the public servants and their failure to discharge public duty. 

The Hon’ble Court held the State liable not only for its negligent acts but also for mistakes and faulty planning. Therefore, it was held that Section 120 of the Limitation Act applied and thus the case was not barred by time. It was also held that the cause of action arose when the actual loss was suffered and not when the negligence occurred.

 In this case, the case was not barred by time because the limitation arose from the day when the Government refused to compensate the amount and did not inform the petitioner of the same.  

The Supreme Court set aside the orders passed by both the Courts and held that in addition to Rs. 1,58,735, the petitioner should be paid interest at the rate of 6% per annum from the date of decree till December 1982, at the rate of 9% per annum from 1982 till December 1992 and at the rate of 12% per annum till January 1993.