Himachal Pradesh High Court
National Highway Authority Of India vs Daljeet Singh And Others on 17 July, 2025
( 2025:HHC:23193 )
IN THE HIGH COURT OF HIMACHAL PRADESH
AT SHIMLA
Arbitration Appeal No.76 of 2024
Reserved on: 06.06.2025
.
Announced on: 17.07.2025
National Highway Authority of India. …APPELLANT
Versus
Daljeet Singh and others. …RESPONDENTS.
Coram:
The Hon’ble Mr. Justice Ranjan Sharma, Judge.
Whether approved for reporting? No.
___________________________________________________________
For the appellant : Ms. Shreya Chauhan, Advocate,For the respondents : Mr. Varun Rana, Advocate.
Ranjan Sharma, Judge.
Appellant, National Highway Authority of India
(for short ‘NHAI’), has come up before this Court, under
Section 37 of the Arbitration & Conciliation Act, 1996
assailing the judgement dated 04.12.2021 [Annexure A-1]
passed in proceedings under Section 34 of the Arbitration
& Conciliation Act, 1996 (for short ‘the Act’) by Learned
District Judge, Mandi (H.P.) dismissing the application/
objections and in upholding of the Award passed by
Learned Arbitrator dated 28.11.2017 in proceedings under
Section 3G(5) of the National Highways Act.
Whether reporters of Local Papers may be allowed to see the judgment? Yes
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2. FACTUAL MATRIX:
2(i). Instant appeal arises out of acquisition of land
by Appellant, in Revenue Estate Chamukha, Tehsil
.
Sundernagar, District Mandi (H.P.).
2(ii). Notification under Section 3A(1) of the National
Highways Act, 1956 (for short ‘NH Act‘), was published
in the Official Gazettee on 17.09.2012, for acquiring
the subject land for four laning of NH-21 ( Bilaspur- Ner
and the
Chowk Section). In terms of Section 3G(3) of the NH
Act, the notification was published in newspapers on
14.01.2013
Revenue Authorities made local
publication on 14.01.2013 and on 22.02.2013 in the area,
inviting objections from interested persons. Upon decision
of objections, the acquisition proceedings were undertaken
by Competent Authority Land Acquisition (‘CALA’) leading
to passing of an Award No.45/2070-14 dated 31.10.2013,
assessing the market value of the land at Rs.50,00,000/-
per bigha, which included the land(s) of the respondents-
landowners herein.
2(iii). For seeking enhancement in market value, the
landowners-respondents herein, filed reference petition(s)
under Section 3G(5) of the NH Act before Learned Arbitrator-
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cum Divisional Commissioner, Mandi. During the Arbitral
proceedings, Learned Arbitrator gave opportunity to
complete proceedings and thereafter framed Issues on
.
04.11.2016. Thereafter, the parties were granted
opportunities to adduce evidence and the Learned
Arbitrator passed an Award on 28.11.2017, enhancing
the market value of acquired land(s) to Rs.68,16,513/-
per bigha.
2(iv). Feeling aggrieved, against the Award dated
28.11.2017 passed by Learned Arbitrator, the appellant-
NHAI, took recourse to proceedings under Section 34
of the Arbitration and Conciliation Act before Learned
District Judge, Mandi. The applications/objections under
Section 34 were dismissed by a common judgment dated
04.12.2021. It is in this backdrop that the appellant-
NHAI has come up in instant appeal, under Section 37
of the Act, assailing the judgment dated 04.12.2021,
passed by Learned District Judge, in this matter.
3. GROUNDS-CONTENTIONS OF APPELLANT-
NHAI IN INSTANT APPEAL:
3(i). First contention of Learned Counsel for the
appellant-National Highway Authority of India is that
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( 2025:HHC:23193 )the proceedings commenced before Learned Arbitrator
on 06.02.2015 and Award was passed on 28.11.2017
and in view of Section 29A of the Act, since the Award
.
could not be passed within 12 months from the date
of entering upon reference; therefore, the Award passed
by Learned Arbitrator on 28.11.2017 was non est as
the aforesaid Arbitrator had become functus officio on
that date.
3(ii). Second contention of Learned Counsel for
appellant is that the Sale-Deed relied upon by Learned
Arbitrator pertaining to Mohal Thala was for a very small
area compared to large tracts of land acquired under the
questioned land acquisition process, which could not
have been relied upon for assessing market value of
large tracts of land. It is asserted that Learned Arbitrator
did not justify the conclusions regarding the market value
of acquired land. It is averred that CALA has awarded
Rs.50,00,000/- per bigha and therefore, the enhancement
by Learned Arbitrator to Rs 68,16,513/- per bigha, is
without any justification and no other sale deed was
produced by the parties.
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3(iii). Third contention of Learned Counsel for
the appellant is that the Learned Counsel below failed
to appreciate that while enhancing market value, Learned
.
Arbitrator had wrongly taken into consideration the
Inspection Report prepared by a retired Officer of
State Administrative Service, which provided that grant
of compensation amount since the provisions of CPC did not
apply, therefore, the aforesaid report of Expert-Local
Commissioner could not be looked into.
3(iv). Fourth contention is that Learned Arbitrator
has not applied deduction, whereas the deduction to the
extent of 60-70% should have been applied.
3(v). Fifth contention is that Learned Arbitrator had
not followed the procedure and parameters laid down in
Section 3G(7) of National Highways Act and therefore,
the Award suffers from patent illegality and the same
required to be declared as void.
STAND OF RESPONDENT(S)-LANDOWNER(S):
4. Learned Counsel for the respondents-landowners
has supported the Impugned Award dated 28.11.2017
passed by Learned Arbitrator as also the judgment passed by
learned District Judge.
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5. Heard, Ms. Shreya Chauhan, Advocate, for the
appellant and Mr. Varun Rana, Learned Counsel for the
respondents.
.
6. ANALYSIS.
6(i). First Contention: Arbitrator a Functus Officio.
In P.K.Construction Company & Anr. vs.
Shimla Municipal Corporation & Ors., AIR 2017 HP
103, it has been held that provisions of Section 29A of
the Act will not be applicable to arbitration proceedings that
had started before the Arbitration & Conciliation
(Amendment) Act, 2015 (3 of 2016) came into force.
In the instant case, the proceedings commenced before
the learned Arbitrator on 06.02.2015, whereas Section
29A of the Act came into force from 23.10.2015 and
therefore, Learned District Judge had rightly recorded
a finding that the Award passed in present case cannot
be held to be non est.
6(ii). Second contention: Small tract of
land/deduction:-
Appellant contended that the sale deed
relied upon was in respect of 0-4-4 bighas of land,
whereas the land acquired runs in several bighas (33
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( 2025:HHC:23193 )approximately). Therefore, the sale deed for small parcel
of land could not have been made the basis for determining
market value for acquired large chunk of land. Even
.
Learned District Judge, affirmed that Arbitrator had relied
upon the report of Local Commissioner. It is not in dispute
that Learned Counsel for the appellant had also admitted
before Learned Arbitrator that lands of Mohal Thala
viz Muhal Chamukha were of same nature and potentiality.
It was on this basis that Learned Arbitrator had treated
the land in Muhal Thala, and Chamukha as a single
unit and assessed compensation as Rs 68,16,513/-
per bigha irrespective of classification. In the given facts,
Learned District Judge justifiably held that when the
appellant had itself admitted before the learned Arbitrator
that land in Muhals was having similar potential
and the same nature, it was lawfully treated similar
by the Learned Arbitrator for assessment of compensation.
Since the Arbitrator was the final Court of facts then,
in such an eventuality, re-appreciation of evidence
cannot be permitted so as to determine as to whether
the land ‘in Muhals is similar or not. Moreover, the
Award passed by Learned Arbitrator after due appreciation
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( 2025:HHC:23193 )of the facts and evidence cannot be interfered with in
absence of any perversity in the Impugned Award. Even
reappreciation of facts-evidence lies outside the domain of
.
Section 34 and Section 37 proceedings, when no patent
illegality exists in the Award passed by Learned Arbitrator.
NO PATENT ILLEGALITY IN AWARD:
REAPPRECIATION OF EVIDENCE IMPERMISSIBLE
AND BEYOND SCOPE OF INTERFERENCE IN
SECTION 37 PROCEEDINGS:
6(ii-a). It is by now well-settled that the scope of
Appellate Court exercising jurisdiction under Section 37
of the Act to review the findings in an award, is
narrow/limited, if the award has been upheld or
substantially upheld under Section 34.
6(ii-b). In Konkan Railway Corporation Ltd. Vs.
Chenab Bridge Project Undertaking (2023) 9 SCC 85, it
was held that jurisdiction of the Court under Section 37
of the Act is akin to that under Section 34 of the Act.
Attaching finality to the Arbitral Award based on party
autonomy to get their dispute resolved by alternative
disputes resolution cannot be interfered with by the
Courts in Section 34 and Section 37 proceedings in
casual and cavalier manner. Mere possibility of an
alternative view on facts or interpretation of contract cannot
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( 2025:HHC:23193 )be a ground for the Courts to reverse the findings of Arbitral
Tribunal and when there is no perversity in the award.
Re-interpreting a contractual clause is outside the purview
.
of the proceedings under Section 34 and 37 of the
Arbitration and Conciliation Act, has been spelt out, in
the following terms:
“19. Therefore, the scope of jurisdiction under
Section 34 and Section 37 of the Act is not akinto normal appellate jurisdiction. It is well-
settled that courts ought not to interfere
with the arbitral award in a casual and
cavalier manner. The mere possibility of an
r alternative view on facts or interpretation of
the contract does not entitle courts to
reverse the findings of the Arbitral Tribunal.
In Dyna Technologies Private Limited v.
Crompton Greaves Limited, this Court held:
“24. There is no dispute that Section 34
of the Arbitration Act limits a challenge
to an award only on the grounds
provided therein or as interpreted byvarious courts. We need to be cognizant
of the fact that arbitral awards should
not be interfered with in a casual andcavalier manner, unless the court
comes to a conclusion that the
perversity of the award goes to the rootof the matter without there being a
possibility of alternative interpretation
which may sustain the arbitral award.
Section 34 is different in its approach
and cannot be equated with a normal
appellate jurisdiction. The mandate
under Section 34 is to respect the
finality of the arbitral award and the
party autonomy to get their dispute
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( 2025:HHC:23193 )provided under the law. If the courts
were to interfere with the arbitral award
in the usual course on factual aspects,
then the commercial wisdom behind
opting for alternate dispute resolution.
would stand frustrated.
25. Moreover, umpteen number of
judgments of this Court have
categorically held that the courtsshould not interfere with an award
merely because an alternative view on
facts and interpretation of contract
exists. The courts need to be cautious
and should defer to the view taken bythe Arbitral Tribunal even if the
reasoning provided in the award is
implied unless such award portrays
perversity unpardonable under Section
34 of the Arbitration Act.”
XX XX XX
25. The principle of interpretation of contracts
adopted by the Division Bench of the High
Court that when two constructions are
possible, then courts must prefer the one
which gives effect and voice to all clauses, does
not have absolute application. The said
interpretation is subject to the jurisdiction
which a court is called upon to exercise. While
exercising jurisdiction under Section 37 of the
Act, the Court is concerned about the
jurisdiction that the Section 34 Court exercised
while considering the challenge to the Arbitral
Award. The jurisdiction under Section 34 of the
Act is exercised only to see if the Arbitral
Tribunal’s view is perverse or manifestly
arbitrary. Accordingly, the question of
reinterpreting the contract on an alternative
view does not arise. If this is the principle
applicable to exercise of jurisdiction under
Section 34 of the Act, a Division Bench
exercising jurisdiction under Section 37 of the
Act cannot reverse an Award, much less the
decision of a Single Judge, on the ground that
they have not given effect and voice to all
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clauses of the contract. This is where the
Division Bench of the High Court committed an
error, in re-interpreting a contractual clause
while exercising jurisdiction under Section 37 of
the Act. In any event, the decision in Radha
.
Sundar Dutta (supra), relied on by the High
Court was decided in 1959, and it pertains to
proceedings arising under the Village
Chaukidari Act, 1870 and Bengal Patni Taluks
Regulation of 1819. Reliance on this judgment
particularly for interfering with the concurrent
interpretations of the contractual clause by the
Arbitral Tribunal and Single Judge under
Section 34 of the Act is not justified.”
6(ii-c). While dealing with the scope of interference in
proceedings under Section 34 and Section 37 of the
Arbitration and Conciliation Act, the Hon’ble Supreme
Court in Bombay Slum Redevelopment Corporation
Pvt. Ltd. Vs. Samir Barain Bhojwani (2024) 7 SCC
218, held that supervisory role of Courts is very restricted
in dealing with appeals under Section 37 of the Act. Scope
of interference in a petition under Section 34 of the Act is
very narrow. Jurisdiction under Section 37 of the Act is
narrower. By their own volition, the parties choose to
go before the Arbitral Tribunal instead of availing remedy
before the traditional Civil Courts. Therefore, Courts must
be very conservative while dealing with Arbitral Awards and
confine themselves to the grounds strictly available under
Section 34 of the Act.
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6(ii-d). While dealing with the sphere of interference
in Arbitral Award in proceedings under Section 34 and
even in appellate proceedings under Section 37 of the
.
Arbitration and Conciliation Act, the Hon’ble Supreme
Court has held in Reliance Infrastructure Ltd. versus
State of Goa (2024) 1 SCC 479, that restraint is
to be exercised in terming the arbitral award as “perverse”
or “patently illegal” in a casual manner. However, it is
only in case an Arbitral Award is patently illegal, interference
can be shown by a Court. Such patent illegality should
be such which can be culled out without reference to
the pleadings and the evidence in these proceedings. Limits
of judicial review qua the Arbitral Award in Section 34
and Section 37 proceedings, has been spelt out as under:
“57. As noticed, arbitral award is not an
ordinary adjudicatory order so as to be lightlyinterfered with by the Courts under Sections
34 or 37 of the Act of 1996 as if dealing with an
appeal or revision against a decision of anysubordinate Court. The expression “patent
illegality” has been exposited by this Court in
the cases referred hereinbefore. The significant
aspect to be reiterated is that it is not a mere
illegality which would call for interference, but it
has to be “a patent illegality”, which obviously
signifies that it ought to be apparent on the face
of the award and not the one which is culled out
by way of a long-drawn analysis of the pleadings
and evidence.
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58. Of course, when the terms and
conditions of the agreement governing the
parties are completely ignored, the matter
would be different and an award carrying such
a shortcoming shall be directly hit by Section.
28(3) of the Act, which enjoins upon an Arbitral
Tribunal to decide in accordance with the
terms of contract while taking into account the
usage of trade applicable to the transaction. As
said by this Court in Associate Builders vs.DDA, if an Arbitrator construes the term of
contract in a reasonable manner, the award
cannot be set aside with reference to the
deduction drawn from construction. The
possibility of interference would arise only if theconstruction of the Arbitrator is such which
could not be made by any fairminded and
reasonable person.
95. The narrow scope of “patent illegality”
r cannot be breached by mere use of different
expressions which nevertheless refer only to
“error” and not to “patent illegality”. We are
impelled to reiterate what has been stated and
underscored by this Court in Delhi Airport
Metro Express (P) Ltd. Vs. DMRC that restraint
is required to be shown while examining the
validity of arbitral award by the Courts, else
interference with the award after reassessing the
factual aspects would be defeating the object of
the Act of 1996. This is apart from the fact that
such an approach would render several judicial
pronouncements of this Court redundant if the
arbitral awards are set aside by categorizing
them as “perverse” or “patently illegal” without
appreciating the contours of these expressions.”
6(ii-e). While examining the jurisdiction of Courts to
interfere in Section 34 and Section 37 proceedings, the
Hon’ble Supreme Court in Larsen Air Conditioning and
Refrigeration Company versus Union of India (2023)
15 SCC 472 held that in case an arbitral award reveals
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patent illegality and such illegality goes to the root of
matter and is not of a trivial nature; and the Award
reveals violation of principle of natural justice then only
.
the Court or Appellate Court can show indulgence, by
observing that:-
15. The limited and extremely circumscribed
jurisdiction of the court under Section 34 of
the Act, permits the court to interfere with an
award, sans the grounds of patent illegality, i.e.,that “illegality must go to the root of the matter
and cannot be of a trivial nature”; and that the
tribunal “must decide in accordance with the
terms of the contract, but if an arbitrator
r construes a term of the contract in a
reasonable manner, it will not mean that theaward can be set aside on this ground” [ref:
Associate Builders (supra)]. The other ground
would be denial of natural justice. In appeal,
Section 37 of the Act grants narrower scope to
the appellate court to review the findings in anaward, if it has been upheld, or substantially
upheld under Section 34. It is important to
notice that the old Act contained a provisionwhich enabled the court to modify an award.
However, that power has been consciously
omitted by Parliament, while enacting the Actof 1996. This means that the Parliamentary
intent was to exclude power to modify an
award, in any manner, to the court. Thisposition has been iterated decisively by this
Court in Project Director, National Highways
No. 45E and 220 National Highways Authority
of India v M. Hakeem:
“42. It can therefore be said that this
question has now been settled finally
by at least 3 decisions [McDermott
International Inc. v. Burn Standard Co.
Ltd.], [Kinnari Mullick v. Ghanshyam
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Das Damani], [Dakshin Haryana Bijli
Vitran Nigam Ltd. v. Navigant
Technologies (P) Ltd.] of this Court.
Even otherwise, to state that the
judicial trend appears to favour an
.
interpretation that would read into
Section 34 a power to modify, revise or
vary the award would be to ignore the
previous law contained in the 1940 Act;
as also to ignore the fact that the 1996
Act was enacted based on the Uncitral
Model Law on International
Commercial Arbitration, 1985 which,
as has been pointed out in Redfern and
Hunter on International Arbitration,
makes it clear that, given the limited
judicial interference on extremely
limited grounds not dealing with the
merits of an award, the “limited
remedy” under Section 34 is
r coterminous with the “limited right”,
namely, either to set aside an award or
remand the matter under the
circumstances mentioned in Section 34
of the Arbitration Act, 1996.”
6(ii-f). In S.V. Samudram vs. State of Karnataka
(2024) 3 SCC 623, while dealing with an order in
proceedings under Section 34 and Section 37 of the Act,
the Appellate Court is not to undertake an independent
assessment of the Award but is only to ascertain whether
the Court in Section 34 proceedings has exceeded its
scope or not. In Section 37 proceedings, the Appellate
Court should be slow and conscious to disturb the
concurrent findings recorded by the Arbitral Tribunal
and Courts in Section 34 proceedings. Re-examination of
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merits is impermissible, in Section 34 proceedings and/or
in Section 37 as has been spelt out in the following terms:
.
“46. It has been observed by this Court in
MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163.
“14. As far as interference with an
order made under Section 34, asper Section 37, is concerned, it cannot
be disputed that such interference
under Section 37 cannot travel beyond
the restrictions laid down under
Section 34. In other words, the courtcannot undertake an independent
assessment of the merits of the
award, and must only ascertain that
the exercise of power by the court
under Section 34 has not exceeded the
r scope of the provision. Thus, it isevident that in case an arbitral award
has been confirmed by the court under
Section 34 and by the court in an
appeal under Section 37, this Court
must be extremely cautious and slowto disturb such concurrent findings.”
(Emphasis Supplied)
47. This view has been referred to with
approval by a bench of three learned Judges in
UHL Power Company Ltd v. State of Himachal
Pradesh (2022) 2 SCC (Civ) 401. In respect of
Section 37, this court observed:-
“16. As it is, the jurisdiction
conferred on courts under Section
34 of the Arbitration Act is fairly
narrow, when it comes to the scope of
an appeal under Section 37 of the
Arbitration Act, the jurisdiction of an
appellate court in examining an order,
setting aside or refusing to set aside an
award, is all the more circumscribed.”
xx xx xx ::: Downloaded on - 18/07/2025 21:29:07 :::CIS -17- ( 2025:HHC:23193 ) 49. We may also notice that the
circumscribed nature of the exercise of
power under Sections 34 and 37 i.e.,
interference with an arbitral award, is clearly
demonstrated by legislative intent. The.
Arbitration Act of 1940 had a provision (Section
15) which allowed for a court to interfere in
awards, however, under the current legislation,
that provision has been omitted.
50. The learned Single Judge, similar to the
learned Civil Judge under Section 34, appears
to have not concerned themselves with the
contours of Section 37 of the A&C Act. The
impugned judgment reads like a judgment
rendered by an appellate court, for whom
reexamination of merits is open to be taken
as the course of action.”
6(ii-g). Analyzing the scope of power of the
Appellate Court in proceedings under Section 37 of
the Act, the Hon’ble Supreme Court after reiterating
the mandate of law in the cases of MMTC Ltd.
versus Vedanta Ltd., (2019) 4 SCC 163, Konkan
Railway Corporation Ltd. Versus Chenab Bridge
Project Undertaking, (2023) 9 SCC 85, UHL Power
Company Ltd. versus State of Himachal Pradesh
(2022) 2 SCC (Civ) 401 and Bombay Slum Redevelopment
Corporation Pvt. Ltd. Versus Samir Barain Bhojwani
(2024) 7 SCC 218, has outlined that the scope of
intervention of a Court in Arbitral matters is
virtually prohibited, if not absolutely barred. Interference
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is confined only to the extent envisaged in Section 34
of the Act. Indulgence in Section 37 proceedings is
exercisable only to find out if Court exercising power
.
under Section 34 of the Act has acted out of its limits
as prescribed thereunder or has exceeded or failed to
exercise so conferred. The merits of an Arbitral Award,
by reappraisal of the evidence, is outside the purview
of Section 37 proceedings, except in case where the
Court in Section 34 proceedings has failed to exercise
its jurisdiction or has travelled beyond its jurisdiction.
Merely for the reason that another view is possible is not
a ground for interference in Section 37 proceedings.
Interference with the Award in Section 34/37 proceedings
is virtually prohibited unless it is contrary to substantive
provisions of law or any provisions of the Act or the terms
of the agreement by reiterating these parameters in Punjab
State Civil Supplies Corporation Limited and another
versus M/s Sanman Rice Mills and others, 2024
SCC OnLine SC 2632, in the following terms:
20. In view of the above position in law on
the subject, the scope of the intervention of
the court in arbitral matters is virtually
prohibited, if not absolutely barred and that
the interference is confined only to the
extent envisaged under Section 34 of the::: Downloaded on – 18/07/2025 21:29:07 :::CIS
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( 2025:HHC:23193 )Act. The appellate power of Section 37 of the
Act is limited within the domain of Section 34
of the Act. It is exercisable only to find out if
the court, exercising power under Section
34 of the Act, has acted within its limits as.
prescribed thereunder or has exceeded or
failed to exercise the power so conferred.
The Appellate Court has no authority of law to
consider the matter in dispute before the
arbitral tribunal on merits so as to find out as
to whether the decision of the arbitral
tribunal is right or wrong upon reappraisal
of evidence as if it is sitting in an ordinary
court of appeal. It is only where the court
exercising power under Section 34 has failed to
exercise its jurisdiction vested in it by Section
34 or has travelled beyond its jurisdiction that
the appellate court can step in and set aside
the order passed under Section 34 of the Act.
Its power is more akin to that
superintendence as is vested in civil courts
while exercising revisionary powers. The
arbitral award is not liable to be interfered
unless a case for interference as set out in
the earlier part of the decision, is made out.
It cannot be disturbed only for the reason
that instead of the view taken by the
arbitral tribunal, the other view which is
also a possible view is a better view
according to the appellate court.
21. It must also be remembered that
proceedings under Section 34 of the Act are
summary in nature and are not like a full-
fledged regular civil suit. Therefore, the scope
of Section 37 of the Act is much more
summary in nature and not like an ordinary
civil appeal. The award as such cannot be
touched unless it is contrary to the
substantive provision of law; any provision
of the Act or the terms of the agreement.
22. In the case at hand, the arbitral award
dated 08.11.2012 is based upon evidence
and is reasonable. It has not been found to be
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against public policy of India or the
fundamental policy of Indian law or in conflict
with the most basic notions of morality and
justice. It is not held to be against any
substantive provision of law or the Act.
.
Therefore, the award was rightly upheld by the
court exercising the powers under Section 34 of
the Act. The Appellate Court, as such, could
not have set aside the award without recording
any finding that the award suffers from any
illegality as contained in Section 34 of the Act
or that the court had committed error in
upholding the same. Merely for the reason
that the view of the Appellate Court is a
better view than the one taken by the
arbitral tribunal, is no ground to set aside
the award.
6(iii-h). While discussing the scope of interference
in proceedings under Section 37 of the Arbitration
and Conciliation Act and after taking into account
the mandate of Hon’ble Supreme Court in Somdatt
Builders – NCC – NEC (JV) versus National Highways
Authority of India and others, 2025 SCC OnLine SC
170 has outlined that the great deal of restraint
is required to be exercised by the Courts while
examining the validity of the Arbitral Award
when such an award has been upheld, wholly or
substantially, in the following terms:-
42. As already discussed above, the Arbitral
Tribunal had interpreted Clause 51 in a::: Downloaded on – 18/07/2025 21:29:07 :::CIS
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( 2025:HHC:23193 )reasonable manner based on the evidence on
record. This interpretation was affirmed by the
learned Single Judge exercising jurisdiction
under Section 34 of the 1996 Act. Therefore,
Division Bench of the High Court was not at all.
justified in setting aside the arbitral award
exercising extremely limited jurisdiction under
Section 37 of the 1996 Act by merely using
expressions like ‘opposed to the public policy of
India’, ‘patent illegality’ and ‘shocking the
conscience of the court’. As reiterated by this
Court in Reliance Infrastructure Ltd. (supra), it
is necessary to remind the courts that a great
deal of restraint is required to be shown while
examining the validity of an arbitral award
when such an award has been upheld, wholly
or substantially, under Section 34 of the 1996
Act. Frequent interference with arbitral awards
would defeat the very purpose of the 1996 Act.
In the backdrop of above legal position and
on scanning the material on record, this Court is of
the considered view that the Award passed by Learned
Arbitrator cannot be said to be suffering from any
patent illegality, necessitating interference by the Court.
The learned District Judge has examined the award
in accordance with law vis-à-vis the contentions urged
by the appellant and did not find any ground in exercise
of jurisdiction under Section 34 of the Arbitration Act
for interfering with it. Having considered the Impugned
Judgment, the Award and the contentions now urged
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( 2025:HHC:23193 )
this Court does not find it a case to interfere in essence
of limited jurisdiction under Section 37 of the Act.
6(iii). Third contention: Report of Local Commissioner.
.
Contention of the appellant-NHAI that Learned
Arbitrator could neither appoint the Local Commissioner
nor his report could be relied upon, is devoid of any
merit, when an Arbitrator/Arbitral Tribunal is empowered
under Section 26 of the Arbitration and Conciliation Act
to appoint expert(s) to submit report on specific issues to
the said Arbitral Tribunal. Section 26 of the Act reads as
under:-
“Section 26. Expert appointed by arbitral
tribunal.
(1) Unless otherwise agreed by the
parties, the arbitral tribunal may–
(a) appoint one or more experts
to report to it on specific issues
to be determined by the arbitraltribunal, and
(b) require a party to give the
expert any relevant information orto produce, or to provide access
to, any relevant documents, goods
or other property for his inspection.
(2) Unless otherwise agreed by the
parties, if a party so requests or if the
arbitral tribunal considers it necessary,
the expert shall, after delivery of his written
or oral report, participate in an oral
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( 2025:HHC:23193 )to put questions to him and to present
expert witnesses in order to testify on
the points at issue.
(3) Unless otherwise agreed by the parties,
.
the expert shall, on the request of a
party, make available to that party for
examination all documents, goods or
other property in the possession of the
expert with which he was provided in order
to prepare his report.”
Section 26 of the Arbitration and Conciliation
Act provides that unless otherwise agreed by the parties,
the Arbitral Tribunal may appoint one or more experts
to report to it on a specific issue to be determined
by the Tribunal. The Arbitral Tribunal has jurisdiction
to appoint an expert. The only prohibition being, the
parties should not have stipulated that no expert should
be appointed before the Learned Arbitral Tribunal.
Admittedly, no such agreement was placed on record
by the parties. In view of above facts, Learned District
Judge has correctly held that the plea of National
Highway Authority of India that the Arbitrator could
not appoint State Administrative Service Officer to act
as expert is misconceived. Moreover, on facts, the NHAI
has accepted the report submitted by the Expert-Local
Commissioner that the lands in Mohal Baloh, Bhantrehad
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( 2025:HHC:23193 )
and Dehar constitute single unit and the lands in these
Mohals were similar in potentiality and nature. After
admitting these lands to be similar in nature, it was
.
impermissible, for appellant-NHAI to assert in Section
34 proceedings or in this appeal under Section 37 that
lands were dissimilar by intending to seek reappreciation
of evidence is impermissible, at this stage. Further it
may be observed that the landowners approached
the Learned Arbitrator, under Section 3G(5) of the Act,
reads as under:-
3G(5). If the amount determined by the competent
authority under sub-section (1) or subsection
(2) is not acceptable to either of the parties, the
amount shall, on an application by either of the
parties, be determined by the arbitrator to beappointed by the Central Government.”
In terms of the aforesaid provision, in case,
the amount determined by the Competent Authority is not
acceptable to either of the parties then, the amount
shall be determined by the Arbitrator to be appointed
by the Central Government. The aggrieved party has the
right to produce relevant material before the Arbitrator to
prove that the compensation determined by Competent
Authority Land Acquisition was not correct and required
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( 2025:HHC:23193 )
to be enhanced. The grievance projected by the appellant-
NHAI that the Arbitrator had erred in relying upon
the evidence including the Report of Local Commissioner,
.
which was not produced before the CALA, is not justified.
6(iv). Fourth contention: Deduction not applied.
Contention of the appellant-National Highway
Authority of India that the Learned Arbitrator has not
applied the deduction charges, is misconceived and devoid
of any merit when, in case, the acquisition is made for
widening the highway. The deduction on account
of development of land was not permissible.
6(iv-a). On deductions, the Apex Court in Lal Chand
versus Union of India & Anr., (2009) 15 SCC 769
held, inter alia, that development of road is not necessary
for widening the National Highway.
6(iv-b). Likewise in C.R.Nagaraja Shetty (2) versus
Spl. Land Acquisition Officer and Estate Officer &
Anr. (2009) 11 SCC 75 also, land was acquired for
widening the highway. Deduction of Rs.25/- per sq.ft.
made by the High Court was not accepted, as development of
the land was not held necessary for widening the highway.
Relevant paragraphs from the judgment read as under:-
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( 2025:HHC:23193 )
“12. That leaves us with the other question of
deduction ordered by the High Court. The High
Court has directed the deduction of Rs.25/-
per square feet. Unfortunately, the High Court
has not discussed the reason for this deduction
.
of Rs.25/- per square feet nor has the High
Court relied on any piece of evidence for that
purpose.
13. It is true that where the lands are acquired
for public purpose like setting up of
industries or setting up of housing colonies
or other such allied purposes, the acquiring
body would be entitled to deduct some
amount from the payable compensation on
account of development charges, however,
it has to be established by positive evidence
that such development charges are justified.
The evidence must come for the need of
development contemplated and the possible
r expenditure for such development. We do
not find any such discussion in the order of the
High Court.
14. As if this is not sufficient, when we see the
judgment of the Principal Civil Judge (Sr.
Division), Bangalore, Rural District, Bangalore
in Reference proceedings, we find that there is
no deduction ordered for the so-called
development charges. We are, therefore, not in
a position to understand as to from where such
development charges sprang up.
15. The Learned Counsel appearing on behalf of
the respondents was also unable to point out
any such evidence regarding the proposed
development. We cannot ignore the fact
that the land is acquired only for widening
of the National Highway. There would,
therefore, be no question of any such
development or any costs therefor.
16. In Nelson Fernandes and Others Vs. Special
Land Acquisition Officer, South Goa & Ors
(2007) 9 SCC 447, this Court has discussed
the question of development charges. That was
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( 2025:HHC:23193 )
a case, where, the acquisition was for laying a
Railway line. This Court found that the land
under acquisition was situated in an area,
which was adjacent to the land already
acquired for the same purpose, i.e., for laying
.
Railway line. In paragraph 29, the Court
observed that the Land Acquisition Officer, the
District Judge and the High Court had failed to
notice that the purpose of acquisition was for
Railways and that the purpose is a relevant
factor to be taken into consideration for fixing
the compensation.
17. The Court in Nelson Fernandes relied on
Viluben Jhalejar Contractor Vs. State of
Gujarat 2005(4) SCC 789, where it was held
that:-
“29. ……the purpose for which the land
is acquired, must also be taken into
r consideration in fixing the market valueand the deduction of development
charges.”
Further, in paragraph 30, the Court specifically
referred to the deduction for the development
charges and observed:-
30. We are not, however, oblivious of
the fact that normally 1/3rd deductionof further amount of compensation has
been directed in some cases. However,
the purpose for which the land isacquired must also be taken into
consideration. In the instant case, the
land was acquired for the constructionof new BG line for the Konkan Railways.
…. In the instant case, acquisition is for
laying a railway line. Therefore, the
question of development thereof would
not arise.”
The Court made a reference to two other
cases, viz., Hasanali Khanbhai & Sons
Vs. State of Gujarat and Land Acquisition
Officer Vs. Nookala Rajamallu, where, the
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( 2025:HHC:23193 )
deduction by way development charges, was
held permissible.
18. The situation is no different in the present
case. All that the acquiring body has to
.
achieve is to widen the National Highway.
There is no further question of any
development. We again, even at the cost of
repetition, reiterate that no evidence was
shown before us in support of the plea of the
proposed development. We, therefore, hold that
the High Court has erred in directing the
deduction on account of the developmental
charges at the rate of Rs.25/- per square feet
out of the ordered compensation at the rate of
Rs.75/- per square feet. We set aside the
judgment to that extent.”
6(iv-c). In V.Hanumantha Reddy (dead) by LRs
versus The Land Acquisition Officer & Mandal R.
Officer, (2003) 12 SCC 642, the Apex Court held that
the land might be having high potentialities or proximity
to developed area, but that by itself would not be a reason
for not deducting developmental charges. The Court relied
upon its judgment rendered in Kasturi & Ors. versus State
of Haryana, (2003) 1 SCC 354 wherein it was held that
there may be various factual factors which may have to
be taken into consideration while deducting the
compensation towards developmental charges. In some
cases, deduction may be more than 1/3rd and in some
cases less than 1/3rd. There is difference between a
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( 2025:HHC:23193 )
developed area and an area having potential value, but is
yet to be developed. The fact that an area is developed
or adjacent to a developed area will not ipso facto make
.
every land situated in the area also developed to be valued
as a building site or plot, particularly when vast tracts
are acquired for development purposes.
6(iv-d). While deciding Mala etc. versus State of
Punjab & Ors. Civil Appeal No. 3992-4000 of 2011,
decided on 17.08.2023, the Apex Court reiterated that
while determining the deduction for development charges,
the Court should keep in mind the nature of land, area
under acquisition, whether land is developed or not,
if developed, to what extent, the purpose of acquisition
etc. The percentage of deduction or the extent of area
required to be set apart has to be assessed by the Courts
having regard to the size, shape, situation, user etc. of
the land acquired. It is essentially a kind of guess-work,
the Courts are expected to undertake.
In view of above, neither the reliance placed
upon sale deed, Exhibit-PB, nor increase in value by
10% while determining the market value of the acquired
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( 2025:HHC:23193 )
land can be faulted. Moreover, no further submissions
were urged on this issue.
6(v). Fifth contention: Procedure not followed by
.
Arbitrator:
Before analyzing this contention, it is necessary
to have a recap of Section 3G(7) of the National Highways
Act, which details the procedure-parameters to be followed
by Learned Arbitrator. Section 3G(7) reads as under:
“3G.(7) The competent authority or the
arbitrator while determining the amount
under sub-section (1) or sub-section (5), as
r the case may be, shall take into
consideration–
(a) the market value of the land on the
date of publication of the notification under
section 3A;
(b) the damage, if any, sustained by the
person interested at the time of taking
possession of the land, by reason of the
severing of such land from other land;
(c) the damage, if any, sustained by the
person interested at the time of taking
possession of the land, by reason of the
acquisition injuriously affecting his other
immovable property in any manner, or hisearnings;
(d) if, in consequences of the acquisition of
the land, the person interested is compelled to
change his residence or place of business,
the reasonable expenses, if any, incidental to
such change.”
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( 2025:HHC:23193 )
As per Section 3G(7), the Arbitrator is to
determine the market value of the land as on the
date of publication of notification under Section 3A of
.
the Act. Damage to land/person/property & reasonable
expenses for change of residence etc. are also to be
considered. Both sides were in unison in their stand
before the learned Arbitrator that circle rate was not
relevant for determining the market value. Learned
Arbitrator considered the sale deed of land pertaining
to Mohal Chamukha. It has already been held that
reliance placed upon this sale deed was in order, this
being the only piece of evidence available on record
regarding rate of purchase of land. The Arbitrator had
considered the potentiality of the land & increased the
value keeping in view the proximity from the road and
other developed areas. This was justifiable. The increase
in value by 10% cannot be said to be excessive. The
stipulated parameters were duly considered by Arbitrator
and therefore, this Court sees no perversity or illegality in the
Impugned Judgement as well as the Award, warranting
interference in appeal.
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7. Another Coordinate Bench of this Court, while
.
dealing with the same subject road; has dismissed an
appeal filed by NHAI, under Section 37 of the Arbitration
and Conciliation Act, by affirming the judgement passed
by Learned District Judge, Mandi in Section 34 proceedings
and by upholding the Award passed by Learned Arbitrator;
in Arbitration Appeal No. 1 of 2024 and other connected
matters in NHAI versus Brestu Ram dated 18.09.2024
in the following terms:
“In the backdrop of above legal
position, the award passed by the learned
Arbitrator cannot be said to be suffering
from any patent illegality, necessitatinginterference by the Court. The learned
District Judge has examined the award in
accordance with law vis-à-vis the contentions
urged by the appellant and did not find anyground in exercise of jurisdiction under
Section 34 of the Arbitration Act forinterfering with it. Having considered the
impugned judgment, the award and the
contentions now urged, I do not find it a caseto interfere in essence of limited jurisdiction
under Section 37 of the Act.
5. In view of above discussion, no case is
made out to interfere with the impugned
judgment dated 04.12.2021, whereby
applications moved by the appellant under
Section 34 of the Act were dismissed and the
award passed by the learned Arbitrator was::: Downloaded on – 18/07/2025 21:29:07 :::CIS
-33-
( 2025:HHC:23193 )affirmed. Accordingly, all these appeals under
Section 37 of the Act are dismissed.
8. CONCLUSION AND DIRECTIONS:
.
In view of the above discussion and for the
reasons recorded herein, the Arbitration Appeal being devoid
of any merit, is dismissed, in the following terms:
(i) The Impugned Judgement dated
04.12.2021, passed by Learned District
Judge, Mandi, in Arbitration PetitionNo.29 of 2018 is upheld;
(ii) The Award dated 28.11.2017 passed
by Learned Arbitrator-cum Divisional
Commissioner, Mandi in reference
r petition(s) under Section 3G(5) of the
NH Act before the Learned Arbitrator-
cum Divisional Commissioner, Mandi,
is affirmed;
(iii). Parties to bear their respective costs.
In aforesaid terms, instant appeal is dismissed
and all pending applications are also disposed of
accordingly.
(Ranjan Sharma)
17th July, 2024 Judge
(tm)
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