Arbitral Award Rendered Mechanically, Awarding Lower Value For Land Acquired Under NHA: Madras High Court Remits Matter Back To Arbitrator

The Bench, consisting of Justices R. Subramanian and N. Sathish Kumar, remitted the matter back to the Arbitrator for fixing the value of the land acquired under the National Highways Act afresh in terms of Section 3G (7) of the National Highways Act.

The Court held that the District Collectors who are nominated as Arbitrators by the Central Government are expected to follow the decisions of the higher Courts while deciding the compensation payable in lieu of the land acquired under the National Highways Act. The Court added that the District Collectors often do not devote the required attention and the arbitral awards are passed by them mechanically without adverting to the relevant provisions of the law.

The lands belonging to the respondents were acquired by the National Highways Authority of India (NHAI). Thereafter, the competent authority, i.e., the Special District Revenue Officer passed an award granting compensation to the respondents/land owners for acquisition of their lands by NHAI.

Dissatisfied with the award passed by the competent authority, the land owners sought for arbitration under Section 3G (5) of the National Highways Act, 1956.

The District Collector, who was appointed as an Arbitrator, confirmed the valuation made by the competent authority. The respondents/land owners filed an application under Section 34 of the Arbitration and Conciliation Act (A&C Act) before the Principal District Judge to set aside the arbitral award. The Principal District Judge enhanced the compensation awarded to the respondents/land owners on the basis of certain sale deeds that were produced by them before the District Judge.

Against this order, the appellant NHAI filed an appeal under Section 37 of the A&C Act before the Madras High Court.

NHAI submitted before the High Court that as per the law laid down by the Supreme Court in the case of the Project Director, National Highways Authority of India versus M. Hakeem and Anr. (2021), in an application under Section 34 of the A&C Act the Court has no power to modify the award and that the Court can either set aside the award or confirm it in toto.

NHAI thus averred that the District Judge in its order had modified the arbitral award, therefore its order must be set aside.

The High Court ruled that in view of the judgment of the Supreme Court in the case of The Project Director, National Highways Authority of India versus M. Hakeem and Anr. (2021), the order of the District Judge modifying the arbitral award would have to be set aside.

The High Court held that the District Collector, who was appointed as an Arbitrator, had not followed the mandate of Section 3G (7) of the National Highways Act. The Court observed that Section 3G (7) mandates the arbitrator to take into consideration certain aspects enumerated thereunder while determining the value of the land, including the market value of the land on the date of publication of the notification for acquisition of land.

The Court ruled that the arbitrator while passing the award did not consider anything that was required to be considered by him under Section 3G (7). The Court added that the arbitrator only referred to the sale deed and did not take into consideration the materials that were placed before him.

The Court held that the Arbitrators nominated by the Central Government, i.e., the District Collectors, are expected to follow the decisions of the higher Courts, i.e., the High Court and the Supreme Court, while deciding the compensation payable to the land owners with respect to the land acquired under the National Highways Act. The Court added that the District Collectors often do not devote the required attention and the arbitral awards are passed by them mechanically without adverting to the relevant provisions of the law.

The Court observed that the Division Bench of Madras High Court in the case of Special Tashildar (LA) versus Rathinareddi (2003), following the decision of the Supreme Court in the case of Ranee of Vuyyur versus Collector of Madras (1969), had held that the land owners would be entitled to have the highest value for the lands acquired by the Government.

The Court ruled that the competent authority and the District Collector/ Arbitrator rendered an award granting a lower value to the land owners in a mechanical manner without adverting to the requirements of law.

The Court thus allowed the appeal and set aside the order of the District Court under Section 34 of the A&C Act. The Court remitted the matter back to the Arbitrator for fixing the value of the land acquired by NHAI afresh in terms of Section 3G (7) of the National Highways Act.

The Court held that the Arbitrator was required to take into account the sale deed and the valuation reflected therein and decide the appropriate compensation. The Court added that the Arbitrator was also required to follow the provisions of Section 3G (7) of the National Highways Act, in determining the compensation payable to the land owners/respondents.

Case Title: Union of India versus J. Auuamar and Ors.

Dated: 18.02.2022 (Madras High Court)

Citation: 2022 LiveLaw (Mad) 221

Counsel for the Appellant: M/s. L. Victoriya Gowri (Assistant Solicitor General)

Counsel for the Respondents: Mr. N.Sankar Ganesh, Mr. D. Gandhiraj (Special Government Pleader)

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