Himachal Pradesh High Court
National Highway Authority Of India vs Krishan Chand & Ors on 1 August, 2025
Author: Tarlok Singh Chauhan
Bench: Tarlok Singh Chauhan
( 2025:HHC:25782 )
IN THE HIGH COURT OF HIMACHAL PRADESH
AT SHIMLA
Arbitration Appeal No.174 of 2024
Decided on: 01.08.2025
.
National Highway Authority of India. …APPELLANT
Versus
Krishan Chand & Ors. …RESPONDENTS.
Coram:
The Hon’ble Mr. Justice Ranjan Sharma, Judge.
Whether approved for reporting? No.
__________________________________________________________
For the appellant
r : Ms. Shreya Chauhan, Advocate,For the respondents: Mr. Suneet Verma, Advocate vice
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 Chowk
Revenue
Section). In terms of Section 3G(3) of the NH Act, the
notification was published in newspapers on 14.01.2013 and
the
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. Based on facts in lead case titled as NHAI
Versus Tulsiya [arising from Arbitration Petition No. 36 of
2018] the applications/objections under Section 34 were
dismissed by Learned District Judge, Mandi by a common
judgment dated 04.12.2021. It is in this back drop 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:
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3(i). First contention of Learned Counsel for the
appellant-National Highway Authority of India is that 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 nonest 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 High ways 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-land owners
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. Suneet Verma, Advocate appearing vice
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. Therefore, the sale
deed for small parcel of land could not have been made the
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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 and Muhal Chamukha are in contiguity and
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 of the facts and evidence cannot be interfered
with in absence of any perversity in the Impugned Award.
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Even re-appreciation 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 37of
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 be a ground for the
Courts to reverse the findings of Arbitral Tribunal and when
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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 akin
to 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
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.
r 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 by
various courts. We need to be cognizant
of the fact that arbitral awards should
not be interfered with in a casual and
cavalier manner, unless the court
comes to a conclusion that the
perversity of the award goes to the root
of 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
adjudicated by an alternative forum as
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
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opting for alternate dispute resolution
would stand frustrated.
25. Moreover, umpteen number of
judgments of this Court have
.
categorically held that the courts
should 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 by
the 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
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
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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.
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
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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 any
subordinate Court. The expression “patentillegality” has been exposited by this Court in
the cases referred hereinbefore. The significantaspect 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 faceof the award and not the one which is culled out
by way of a long-drawn analysis of the pleadings
and evidence.
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
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( 2025:HHC:25782 )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 the
construction of the Arbitrator is such whichcould not be made by any fairminded and
reasonable person.
95. The narrow scope of “patent illegality”
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
r 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 patent
illegality and such illegality goes to the root of matter and is
not of a trivial nature; and the Award reveals violation of
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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 matterand cannot be of a trivial nature”; and that the
tribunal “must decide in accordance with the
terms of the contract, but if an arbitrator
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 an
r award, if it has been upheld, or substantiallyupheld under Section 34. It is important to
notice that the old Act contained a provision
which 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. This
position has been iterated decisively by thisCourt in Project Director, National Highways
No. 45E and 220 National Highways Authorityof India v M. Hakeem:
“42. It can therefore be said that this
question has now been settled finallyby at least 3 decisions [McDermott
International Inc. v. Burn Standard Co.
Ltd.], [Kinnari Mullick v. Ghanshyam
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
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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
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 merits is impermissible, in
Section 34 proceedings and/or in Section 37 as has been
spelt out in the following terms:
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( 2025:HHC:25782 )“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, as per.
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 court cannot
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 thescope of the provision. Thus, it is
evident 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
r 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 Section34 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 anappellate court in examining an order,
setting aside or refusing to set aside an
award, is all the more circumscribed.”
xx xx xx
49. We may also notice that the
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( 2025:HHC:25782 )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)
4SCC 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 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
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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 thatthe interference is confined only to the
extent envisaged under Section 34 of the
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
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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
thatthe 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
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
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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-NC-NEC(JV) versus National Highways Authority
of India and others, 2025 SCC OnLine SC 170has
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 areasonable 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
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( 2025:HHC:25782 )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 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
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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 arbitral tribunal,and
(b) require a party to give the expert
any relevant information or to produce,
or to provide access to,any relevant
r documents, goods or other property forhis inspection.
(2) Unless otherwise agreed by the parties,
if a party so requests or if the arbitral tribunal
considers it necessary, the expert shall, afterdelivery of his written or oral report, participate
in an oral hearing where the parties have the
opportunity to put questions to him and to
present expert witnesses in order to testify onthe 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 thepossession 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
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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 Thala, which is adjoining to Muhal
Chamukha 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 re-appreciation 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::: Downloaded on – 01/08/2025 21:28:24 :::CIS
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amount shall, on an application by either of the
parties, be determined by the arbitrator to be
appointed 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 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.
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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 75also, 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:-
“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
expenditure for such development. We do
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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
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
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and 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 deduction
of further amount of compensation hasbeen directed in some cases. However,
the purpose for which the land is
acquired must also be taken into
consideration. In the instant case, the
land was acquired for the construction
of 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.”
r 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 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)
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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 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
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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 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
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;
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(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 his
earnings;
(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.”
As
r 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
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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.
APPEAL FOR SAME SUBJECT LAND-DISMISSED:
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, 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
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( 2025:HHC:25782 )interfering with it. Having considered the
impugned judgment, the award and the
contentions now urged, I do not find it a case
to 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 underSection34 of the Act were dismissed and the
award passed by the learned Arbitrator was
affirmed. Accordingly, all these appeals under
Section 37 of the Act are dismissed.
7(i). This Court has also adjudicated similar appeal
relating to r same subject land [in Revenue Estate
Chamukha] in Arbitration Appeal No. 90 of 2024 titled
as NHAI versus Tulsiya decided on 17.07.2025.
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.60 of 2018 is upheld;
(ii) The Award dated 28.11.2017 passed by
Learned Arbitrator-cum Divisional
Commissioner, Mandi in reference
petition(s) under Section 3G(5) of the
NH Act before the Learned Arbitrator-
cum Divisional Commissioner, Mandi,
is affirmed;
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(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)
1st August, 2025 Judge
(himani)
r to
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