Arbitral Award Can't Be Set Aside Merely Due To Incorrect Application Of Law Or Misinterpretation Of Evidence: Allahabad High Court

Brief Facts:

The matter pertained to the acquisition of land for the purpose of widening National Highway No. 26 for commercial use. Initially, the Competent Authority/Special Land Acquisition Officer, Lalitpur, granted compensation to the Respondent for the acquired land at the rate of Rs.9,88,000/- per hectare (Rs.98.8/- per square meter).

The Respondent contested the compensation awarded by filing an application under Section 3G (5) of the National Highway Act, 1956, before the District Magistrate/Arbitrator. She argued that the compensation was incorrect, one-sided, and undervalued. Subsequently, the Arbitrator increased the compensation from Rs.98.8/- per square meter to Rs.2500/- per square meter.

Challenging the Arbitrator's decision, the Appellant filed an application under Section 34 of the Arbitration and Conciliation Act, 1996 before the District and Session Judge, Lalitpur, who upheld the Arbitrator's award. Dissatisfied with this ruling, the Appellant appealed to the Allahabad High Court (“High Court”).

The Appellant contended that the compensation awarded by the Competent Authority was based on the agricultural rate prevailing at the time of the notification under Section 3A. It argued that the Arbitrator's decision to increase the compensation to Rs.2500/- per square meter was unwarranted, as there was no evidence provided by the Respondent to prove any commercial or residential activities on the acquired land at the time of the notification.

Additionally, the Appellant raised concerns regarding the timing of the Arbitrator's decision, which was made more than five years after the publication of the 3A Notification, without sufficient justification for the delay or relevance of examples provided by the Respondent.

On the other hand, the Respondent argued that the acquired land was designated as "Abadi" in the Schedule under Section 3E which indicated its non-agricultural nature. She contended that the compensation awarded by the Competent Authority at agricultural rates was arbitrary, considering the land's location on the main road and its potential for commercial use.

Observations by the High Court:

The High Court noted that the Arbitrator duly considered the crucial date of the publication of the notification under Section 3A as the point for determining the market value of the acquired land. The Competent Authority adhered to the stamp rate list effective on this date and determined the compensation at Rs.9,88,000 per hectare, based on the agricultural classification of the land. Additionally, the Arbitrator acknowledged the absence of substantial evidence presented by the Respondent to indicate any commercial activity on the land at the time of the 3A Notification. The High Court noted that the Arbitrator, although recognizing the lack of direct evidence of commercial use, observed that the land's location on a main road (National Highway) suggested potential value and warranted a higher compensation rate.

The High Court noted that the Respondent's land constituted a small piece (200 square meters) which indicated its unsuitability for agricultural purposes. Furthermore, the land's proximity to the main road suggested its commercial potentiality. The High Court referred to its decision in Union Of India Through Garrison Engineer v. Ms. Satendra Nath Sanjeev Kumar Architect, Contractors/Builders, Civil Engineers, And Colonisers and held that the scope of interference in appellate proceedings under Section 37 of the Arbitration Act is limited to the grounds available under Section 34 for challenging the award.

The High Court held that an arbitral award should not be set aside unless it is vitiated by "patent illegality" on the face of the record. It held that an award should not be set aside merely on the grounds of erroneous application of law or appreciation of evidence. Furthermore, interference is not warranted when the interpretation provided by the arbitrator is a plausible one. Therefore, the High Court dismissed the appeal.

Case Title: National Highways Authority Of India V. Rampyari And Another 2024 LiveLaw (AB) 368

Citation: 2024 LiveLaw (AB) 368

Case Number: ARBITRATION APPEAL No. 394 OF 2022

Advocate for the Petitioner: Mr. Pranjal Mehrotra

Advocate for the Respondent: Mr. Manish Kumar Jain

Click Here To Read/Download Order or Judgment