Conditions Of Remand Not Followed, Allahabad High Court Sets Aside Arbitral Award Under NHAI Act In Writ Jurisdiction

The Allahabad High Court has held that existence of an alternate remedy is not a bar to exercising jurisdiction under Article 226 of the Constitution of India.

While exercising writ jurisdiction under Article 226 of the Constitution of India, the Court set aside an arbitral award passed by the District Magistrate/Collector, Jhansi acting as an Arbitrator under Section 3G(5) of the National Highways Act, 1965 for not following the directions given by the District Judge while allowing appeal under Section 34 of the Arbitration and Conciliation Act, 1996.

The bench comprising of Justice Manoj Kumar Gupta and Justice Kshitij Shailendra held

“This Court seriously deprecates the approach of the Arbitrator/Collector who is vested with statutory powers to determine lawful compensation as per the scheme of the Act of 1956 and, therefore, once the Court superior to him analyzed each and every aspect of the initial award dated 30.09.2010 as well as the arbitral award dated 15.09.2017 and set aside the same after recording findings on merits of the petitioner's claim as regards market value of the land on the date of notifications acquiring the land, the Arbitrator/Collector was bound to follow the quasi-judicial discipline and record finding on each of the parameters discussed by the learned District Judge”

Section 3G of NHAI Act

Sub-sections (1) and (2) of Section 3G of the National Highways Act 1956 provide for determination of compensation payable to a landowner where the land is acquired under the NHAI Act. Sub-section (5) of Section 3G provides that where the amount of compensation determined by the Competent Authority is not acceptable to either party, the amount may be determined by an arbitrator appointed by the Central Government.

Section 3G(6) of the NHAI Act makes Arbitration and Conciliation Act, 1996 applicable to all arbitrations under the NHAI Act and Section 3G(7) lays down the considerations for determining the compensation which are to be followed by the Competent Authority or the Arbitrator, as the case may be.

Case Background

Petitioner purchased part of land in Jhansi through registered sale deeds in 1993 and 1994. In 2009, exercising power under Section 3A of NHAI Act, Central Government issued notifications acquiring petitioner's land. Subsequent to the award, petitioner under Section 3G(5) of NHAI Act approached the Collector/ District Magistrate Jhansi where an arbitration case was registered.

The Arbitrator followed the award by the Special Land Acquisition Officer and held that since the land was not declared as 'abadi' under Section 143 of the UP. Zamindari Abolition and Land Reforms Act, 1950, it would continue to remain an 'agricultural land'. This award was challenged under Section 34 of the Act of 1996. The award was set aside by the District Judge, Jhansi and remanded to the Arbitrator for fresh consideration.

The Arbitrator rejected the reference upholding the compensation awarded to the petitioner. The award of the Arbitrator has been challenged under Article 226 of the Constitution of India on grounds that it does not follow the directions of the District Judge, Jhansi in the remand order.

During the course of the proceedings, the Collector/ District Magistrate Jhansi recalled his order and passed a fresh order which was challenged by the NHAI under Article 226 of the Constitution of India on grounds that after the award had been passed, the Arbitrator had become functus officio and no further award could be passed by him.

NHAI argued that the petition filed by the petitioner was not maintainable as there was remedy under Section 34 of the Act of 1996 to challenge an arbitral award.

Counsel for petitioner argued that since the direction of the District Judge while remanding the matter to the Arbitrator were not followed, the writ was maintainable. It was argued that Collector being a lower authority than District Judge was bound by the order of the District Judge. Reliance was placed on the decision of Supreme Court in State of Himachal Pradesh & Ors. v. Gujarat Ambuja Cement Ltd & Anr. and Commercial of Income Tax and Ors. v. Chhabil Dass Agarwal to argue that if the conditions of remand are not complied, then writ jurisdiction can be invoked.

Further, it was argued that the Arbitrator had not applied his independent mind while evaluating the market value. he had only relied on the declaration under Section 143 of the U.P. Z.A. L.R. Act without going through the sale deeds.

High Court Verdict

The question before the Court was whether an award made by an Arbitrator under Section 3G(5) of NHAI Act could be challenged in writ jurisdiction when the remedy of filing an appeal under Section 34 of Act of 1996 existed.

The Court observed that even though the District Judge had directed the Arbitrator/ District Magistrate to consider afresh the entire case after affording opportunity of hearing to both parties, the Arbitrator had not done so and again relied on the same report of the Special Acquisition Officer for passing the arbitral award.

The Court held that Arbitrator being a quasi-judicial authority was bound to follow and discuss each aspect of the remand order passed by the District Judge.

For maintainability of the writ petition despite there being an alternate remedy, the Court relied on State of U.P. v. Mohammad Nooh wherein the Supreme Court had held that “there is no rule with regard to Certiorari as there is with Mandamus, that it will lie only where there is no other equally effective remedy. A Writ of Certiorari will lie, provided the requisite grounds exist, although a right of appeal has been conferred by Statute.”

The Court further relied on a more recent judgment of the Supreme Court in Commissioner of Income Tax and Others v. Chhabil Dass Agarwal where it laid down five illustrative and non-exhaustive exceptions to the rule of exhaustion of remedies:

“(i) Where remedy available under statute is not effective but only mere formality with no substantial relief; or

(ii) Where statutory authority not acted in accordance with provisions of enactment in question, or ;

(iii) Where statutory authority acted in defiance of fundamental principles of judicial procedure, or;

(iv) Where statutory authority resorted to invoke provisions which are repealed, or;

(v) Where statutory authority passed an order in total violation of principles of natural justice.”

The Court held that in the case of the petitioner, the bar of existing alternate remedy will not apply to the exercise of writ jurisdiction under Article 226 of the Constitution of India.

Accordingly, the writ petition was allowed, and the award was set aside with a direction to the Arbitrator to pass fresh order in consonance with the directions issued by the District Judge, Jhansi.

Case Title: Dr. Rajeev Sinha vs. Union Of India And 2 Others 2024 LiveLaw (AB) 138 [WRIT - C No. - 33840 of 2023]

Case citation: 2024 LiveLaw (AB) 138

Click Here To Read/Download Order