Court Under Section 34,37 Arbitration Act Cannot Modify An Award ; It Can Only Remand : Supreme Court

The Supreme Court observed that, under Section 34 or 37 of Arbitration and Conciliation Act, a Court cannot modify the award passed by the Arbitrator.

The option would be to set aside the award and remand the matter, the bench comprising Justices Indira Banerjee and AS Bopanna said.

The court was considering the appeals filed by National Highways Authority of India ('NHAI') assailing the judgment of High Court of Karnataka, Bengaluru which upheld awards passed by Deputy Commissioner and Arbitrator, National Highway – 275 (land acquisition),  and Deputy Commissioner-1 and Arbitrator Bengaluru Urban District. By the said awards the respective  Arbitrators had enhanced the compensation from Rs.2026/- per sq. mtr and Rs.17,200/- determined by the Special Land Acquisition Officer ('SLAO' for short) to Rs.15,400/- per sq. mtr and Rs.25,800/- respectively. 

One of the contentions raised in this appeal was that the award passed by the  Arbitrator is ex-facie erroneous amounting to patent illegality since the Arbitrator while redetermining the compensation has taken into consideration the guideline value as provided under the notification dated 28.03.2016 issued by the Department of Stamps and Registration which is notably the market value fixed on a date subsequent to the acquisition notification dated 01.02.2016. Two other issues raised in this appeal was (1) whether an appropriate consideration has been made by the  Arbitrator in the matter of applying the market value notified as a guideline value under the notification dated 28.03.2016 and as to whether the manner in which the said guideline was taken into consideration amounts to denial of opportunity to NHAI amounting to violation of principles of natural justice violating Section 28(2). (2) Whether the guideline value fixed in respect of 'City Greens' and 'Zunadu' being applied automatically to the land in question was justified and as to whether the learned Arbitrator has indicated sufficient reasons to place such reliance since the non-assignment of reasons or discussion would also amount to patent illegality being contrary to Section 31(3) of Act, 1996

On this first issue, the bench held that the reliance placed on the guideline value notification dated 28.03.2016 for reckoning the market value of the property acquired under the preliminary notification dated 01.02.2016, by itself cannot be accepted to be a patent illegality committed by the Arbitrator. On the other issues, the bench observed that appropriate reasons have not been indicated by the Arbitrator to arrive at the conclusion to uniformly adopt the value of Rs.15,400/- per sq.mtr fixed in respect of lands in a layout which was separately indicated in the notification. The court also observed that Arbitrator has not indicated sufficient reasons which to that extent would indicate patent illegality in the award passed by the learned Arbitrator being contrary to Section 28(2) and 31(3) of Act, 1996.

The bench therefore allowed the appeal by observing thus:

"That being the fact situation and also the position of law being clear that it would not be open for the court in the proceedings under Section 34 or in the appeal under Section 37 to modify the award, the appropriate course to be adopted in such event is to set aside the award and remit the matter to the learned Arbitrator in terms of Section 34(4) to keep in view these aspects of the matter and even if the notification dated 28.03.2016 relied upon is justified since we have indicated that the same could be relied upon, the further aspects with regard to the appropriate market value fixed under the said notification for the lands which is the subject matter of the acquisition or comparable lands is to be made based on appropriate evidence available before it and on assigning reasons for the conclusion to be reached by the learned Arbitrator. In that regard, all contentions of the parties are left open to be put forth before the learned Arbitrator."

National Highways Authority of India vs P. Nagaraju @ Cheluvaiah | 2022 LiveLaw (SC) 584 | CA 4671 OF 2022 | July 2022

Coram: Justices Indira Banerjee and AS Bopanna

Counsel For the Petitioner :  ASG Madhavi Divan  for NHAI  and Adv . Abhishek Thakur

Counsel for the Respondents: Sr. Adv S. Nagamuthu, Adv Naresh Kaushik and Adv K. Parameshwar  

Headnotes

Arbitration and Conciliation Act ; Section 34,37 - It would not be open for the court in the proceedings under Section 34 or in the appeal under Section 37 to modify the award, the appropriate course to be adopted in such event is to set aside the award and remit the matter. (Para 40)

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