Karnataka High Court
National Highway Authority Of India vs Basayya S/O Verayya Kalmath on 2 November, 2022
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MFA No. 25458 of 2012
C/W MFA No. 25456 of 2012,
MFA No. 25457 of 2012,
MFA No. 25459 of 2012
IN THE HIGH COURT OF KARNATAKA
DHARWAD BENCH
DATED THIS THE 2ND DAY OF NOVEMBER, 2022
BEFORE
THE HON'BLE MR JUSTICE R.NATARAJ
MISCELLANEOUS FIRST APPEAL NO. 25458 OF 2012 (AA-)
C/W
MISCELLANEOUS FIRST APPEAL NO. 25456 OF 2012
MISCELLANEOUS FIRST APPEAL NO. 25457 OF 2012
MISCELLANEOUS FIRST APPEAL NO. 25459 OF 2012
IN M.F.A.No.25458/2012
BETWEEN:
1. THE MANAGER (TECH) AND THE
OFFICE OF THE COMPETENT AUTHORITY,
FOR LAND ACQUISITION NHAI,
VIDYAGIRI, DHARWAD.
...APPELLANT
(BY SRI. SHIVASAI M PATIL, ADV.)
AND:
JADAYYA S/O NOORANDAYYA NANJAYANAVARMATH,
SINCE DECEASED BY LR.S.,
1. NINGAMMA W/O JADAYYA NANJAYANAVARMATH,
2. SIDDALINGAYYA S/O JADAYYA NANJAYANAVARMATH,
3. RACHAYYA S/O JADAYYA NAJAYANAVARMATH,
4. IRAMMA D/O JADAYYA NANJAYANAVARMATH,
5. IRAYYA S/O JADAYYA NANJAYANAVARMATH,
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MFA No. 25458 of 2012
C/W MFA No. 25456 of 2012,
MFA No. 25457 of 2012,
MFA No. 25459 of 2012
6. MALLAMMA D/O JADAYYA NANJAYANAVARMATH,
RESPONDENTS 4 TO 6 ARE MINORS
REP. BY HIS MOTHER AND NATURAL GUARDIAN
NINGAMMA W/O JADAYYA NANJAYANAVARAMATH
ALL ARE R/AT: TEGUR VILLAGE,
TQ and DIST: DHARWAD.
7. THE ARBITRATOR FOR
NATIONAL HIGHWAYS AUTHORITY OF INDIA
AND DEPUTY COMMISSIONER,
DHARWAD.
...RESPONDENTS
(BY SRI. S M KALWAD, ADV. FOR R1 TO R3,
R4 TO R6 ARE MINORS REP. BY R1,
SMT.GIRIJA S.HIREMATH, HCGP FOR R7)
THIS MFA FILED U/S. 37 OF THE ARBITRATION AND
CONCILIATION ACT, 1996, FILED AGAINST THE JUDGMENT
AND DECREE DTD:01.10.2012 PASSED IN ARBITRATION CASE
NO.4/2012 ON THE FILE OF THE PRINCIPAL DISTRICT &
SESSIONS JUDGE, DHARWAD, ALLOWING THE PETITION
FILED U/SEC. 34 OF THE ARBITRATION AND CONCILIATION
ACT.
IN M.F.A.No.25456/2012
BETWEEN:
1. THE MANAGER (TECH) AND THE
OFFICE OF THE COMPETENT AUTHORITY,
FOR LAND ACQUISITION NHAI,
VIDYAGIRI, DHARWAD.
...APPELLANT
(BY SRI. SHIVASAI M PATIL, ADV.)
AND:
1. BASAYYA S/O VERAYYA KALMATH,
AGE:40 YEARS, OCC:AGRICULTURE,
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MFA No. 25458 of 2012
C/W MFA No. 25456 of 2012,
MFA No. 25457 of 2012,
MFA No. 25459 of 2012
RESIDING AT TEGUR VILLAGE,
TALUK AND DIST:DHARWAD.
2. THE ARBITRATOR FOR
NATIONAL HIGHWAYS AUTHORITY OF INDIA
AND DEPUTY COMMISSIONER,
DHARWAD.
...RESPONDENTS
(BY SRI. S M KALWAD, ADV. FOR R1,
R2 SERVED)
THIS MFA FILED U/S. 37 OF THE ARBITRATION AND
CONCILIATION ACT, 1996, FILED AGAINST THE JUDGMENT
AND DECREE DTD:01.10.2012 PASSED IN ARBITRATION CASE
NO.3/2012 ON THE FILE OF THE PRINCIPAL DISTRICT &
SESSIONS JUDGE, DHARWAD, ALLOWING THE PETITION
FILED U/SEC. 34 OF THE ARBITRATION AND CONCILIATION
ACT.
IN M.F.A.No.25457/2012
BETWEEN:
1. THE MANAGER (TECH) AND THE
OFFICE OF THE COMPETENT AUTHORITY,
FOR LAND ACQUISITION NHAI,
VIDYAGIRI, DHARWAD.
...APPELLANT
(BY SRI. SHIVASAI M PATIL, ADV.)
AND:
1. IRANAGOUDA S/O MALLANAGOUDA PATIL,
AGE:44 YEARS, OCC:AGRICULTURE,
RESIDING AT TEGUR VILLAGE,
TALUK AND DIST:DHARWAD.
2. THE ARBITRATOR FOR
NATIONAL HIGHWAYS AUTHORITY OF INDIA
AND DEPUTY COMMISSIONER,
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MFA No. 25458 of 2012
C/W MFA No. 25456 of 2012,
MFA No. 25457 of 2012,
MFA No. 25459 of 2012
DHARWAD.
...RESPONDENTS
(BY SRI. S M KALWAD, ADV. FOR R1,
SMT.GIRIJA S.HIREMATH, HCGP FOR R2)
THIS MFA FILED U/S. 37(1) OF THE ARBITRATION AND
CONCILIATION ACT, 1996, FILED AGAINST THE JUDGMENT
AND DECREE DTD:01.10.2012 PASSED IN ARBITRATION CASE
NO.2/2012 ON THE FILE OF THE PRINCIPAL DISTRICT &
SESSIONS JUDGE, DHARWAD, ALLOWING THE PETITION
FILED U/SEC. 34 OF THE ARBITRATION AND CONCILIATION
ACT, 1996.
IN M.F.A.No.25459/2012
BETWEEN:
1. THE MANAGER (TECH) AND THE
OFFICE OF THE COMPETENT AUTHORITY,
FOR LAND ACQUISITION NHAI,
VIDYAGIRI, DHARWAD.
...APPELLANT
(BY SRI. SHIVASAI M PATIL, ADV.)
AND:
1. RAJA SINGH S/O BHIMSINGH HAJARI,
AGE:48 YEARS, OCC:AGRICULTURE,
RESIDING AT TEGUR VILLAGE,
TALUK AND DIST:DHARWAD.
2. THE ARBITRATOR FOR
NATIONAL HIGHWAYS AUTHORITY OF INDIA
AND DEPUTY COMMISSIONER,
DHARWAD.
...RESPONDENTS
(BY SRI. S M KALWAD, ADV. FOR R1,
R2 SERVED)
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MFA No. 25458 of 2012
C/W MFA No. 25456 of 2012,
MFA No. 25457 of 2012,
MFA No. 25459 of 2012
THIS MFA FILED U/S. 37(1) OF THE ARBITRATION AND
CONCILIATION ACT, 1996, FILED AGAINST THE JUDGMENT
AND DECREE DTD:01.10.2012 PASSED IN ARBITRATION CASE
NO.1/2012 ON THE FILE OF THE PRINCIPAL DISTRICT &
SESSIONS JUDGE, DHARWAD, ALLOWING THE PETITION
FILED U/SEC. 34 OF THE ARBITRATION AND CONCILIATION
ACT, 1996.
THESE APPEALS COMING ON FOR FINAL HEARING,
THIS DAY, THE COURT DELIVERED THE FOLLOWING:
JUDGMENT
These appeals are filed by the beneficiary of an acquisition, challenging the order dated 01.10.2012 passed by the Prl. District and Sessions Judge, Dharwad, in Arbitration Suit Nos.1/2012 to 4/2012 filed by the landlosers under Section 34 of the Arbitration and Conciliation Act, 1996, was allowed and the award of the Arbitrator was set aside and the compensation was enhanced from Rs.6/- per sq. ft. to a sum of Rs.18/- per sq. ft along with 50% additional weightage granted by the Arbitrator.
2. For the sake of easy understanding and brevity, the parties shall henceforth be referred to as they were referred before the Arbitrator. The National Highways Authority is the beneficiary while the land losers are referred to as claimants. -6- MFA No. 25458 of 2012
C/W MFA No. 25456 of 2012, MFA No. 25457 of 2012, MFA No. 25459 of 2012
3. The claimants were the owners of the below mentioned lands situate at Tegur village, Dharwad taluk:
Sl.No. Names Sy./VPC No. 1. Raja Singh s/o Bhimsingh Hajari 465, 466, 467/1 2. Iranagouda s/o Mallanagouda Patil 23/3, 201, 403 3. Basayya s/o Veerayya Kalmath 453, 454
4. Jadayya s/o Noorandayya Nanjayanavarmath Since dead by LRs
1.Ningamma w/o Jadayya Nanjayanavarmath 23/2,
2.Siddalingayya s/o Jadayya 470/2, Nanjayanavarmatah 467/2
3.Rachayya s/o Jadayya Nanjayanavarmath
4.Iramma d/o Jadayya Nanjayanavarmath
4. The portions of the aforementioned lands were acquired in terms of a preliminary notification dated 12.02.2001 under Section 3A of the National Highways Act, 1956 followed by a final notification dated 05.02.2002. A general award was passed on 03.07.2004 determining the compensation at the rate of Rs.129/- per sq. meter. The claimants received the compensation under protest and initiated proceedings before the Arbitrator under Section 3G(5) of the Act. The Arbitrator in terms of his award dated 03.06.2011, awarded 50% additional compensation i.e., Rs.64.50 per sq. mtr. in respect of the aforesaid lands as they -7- MFA No. 25458 of 2012 C/W MFA No. 25456 of 2012, MFA No. 25457 of 2012, MFA No. 25459 of 2012 lay alongside the National Highway. The Arbitrator awarded interest on the additional amount under Section 3H of the National Highways Act, 1956.
5. Being aggrieved by the aforesaid, the claimants filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996. The claimants contended before the District Court that lands lying in the neighbouring village namely Kenchalarakoppa were acquired and the compensation was determined at Rs.258/- per sq. mtr. It was contended that the land of the claimants was situate 3 kms. away from Kittur where there were several facilities and that Belur industrial area lay within 7 kms. from their lands. They contended that the compensation determined by the Arbitrator as well as the Land Acquisition Officer was inadequate and meager and therefore, sought for enhancement on par with the land losers in Kenchalarakoppa.
6. The beneficiary appeared and contended that the land of the claimants was acquired for the purpose of widening national highway. It contended that the compensation was -8- MFA No. 25458 of 2012 C/W MFA No. 25456 of 2012, MFA No. 25457 of 2012, MFA No. 25459 of 2012 determined at the rate of Rs.129/- per sq. mtr. which was based on the guideline value prescribed by the State Government. It contended that the Arbitrator enhanced the compensation to Rs.64.50/- per sq. mtr. since the acquired lands abutted the highway and hence, contended that the compensation determined by the Arbitrator is just and reasonable.
7. The District Court after considering the above contentions, held that Kenchalarakoppa in Bailhongal taluk of Belagavi district lay adjacent to Tegur village where the lands of the claimants were situate. The District Court held that in respect of the lands lying in Kenchalarakoppa, the beneficiary had fixed the market value at the rate of Rs.258.34/- per sq. mtr. in respect of non-agricultural land and Rs.398.27/- per sq. mtr. in respect of non-agricultural commercial land. It therefore, held that the Arbitrator acted with patent illegality in not considering the market value of Kenchalarakoppa while determining the market value of land in Tegur village. It held that the lands belonging to the claimants lay within Dharwad taluk and that it was acquired for the widening of National -9- MFA No. 25458 of 2012 C/W MFA No. 25456 of 2012, MFA No. 25457 of 2012, MFA No. 25459 of 2012 Highway-4 between Dharwad and Belagavi and lay adjacent to each other. The District Court held that the only difference between both the lands were that Kenchalarakoppa lay within Belagavi district while Tegur village lay within Dharwad district but they lay adjacent to each other. The District Court hence held that the Arbitrator ought to have considered the market value of the properties in question at the same rates as was done in the case of Kenchalarakoppa. Therefore, the District Court modified the award passed by the Arbitrator and held that the claimants are entitled to enhanced compensation at the rate of Rs.18/- per sq. ft apart from 50% additional weightage granted by the Arbitrator. Being aggrieved by the said order, the beneficiary is before this Court in these appeals.
8. Learned counsel for the beneficiary submitted that the District Court committed an error in interfering with the well reasoned order of the Arbitrator unmindful of the jurisdictional constraint to exercise jurisdiction under Section 34 of the Act of 1996. He submitted that the District Court has treated the proceedings before it as an appeal and had acted with material irregularity in modifying the award. He
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MFA No. 25458 of 2012 C/W MFA No. 25456 of 2012, MFA No. 25457 of 2012, MFA No. 25459 of 2012 contended that a division bench of this Court in the case of The National Highways Authority of India and another Vs. Smt.Mahadevi and others in M.F.A.No.25323/2012 had held that the District Court under Section 34 of the Arbitration and Conciliation Act, 1996, cannot set aside or modify an award and the Court is not entitled to substitute its own judgment or valuation for the purpose of awarding compensation. He submitted that the impugned order passed by the District Court is liable to be set aside and the case should be remitted back to the Arbitrator for reconsideration in accordance with law.
9. Per contra, the learned counsel for the landlosers submitted that the District Court has considered the patent illegality in the matter of determining the compensation. He submitted that the District Court is entitled to test the award passed by the Arbitrator to see whether the consideration was legal and whether such consideration went to the root of the matter. He submitted that the District Court was well within its jurisdiction to modify the award having regard to the fact that the Arbitrator and the Land Acquisition Officer did not consider that both the villages were situate adjacent to each other and
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MFA No. 25458 of 2012 C/W MFA No. 25456 of 2012, MFA No. 25457 of 2012, MFA No. 25459 of 2012 therefore, the compensation determined in respect of Kenchalarakoppa should be equally applied to the land in Tegur village. He further submitted that the Hon'ble Apex Court in the case of Smt.Mahadevi and others Vs. The National Highways Authority of India and another had set aside the judgment of the division bench in M.F.A.No.25323/2012 and therefore, the order passed by the division bench cannot be relied upon. He further submitted that in view of the judgment of the Hon'ble Apex Court in the case of UNION OF INDIA AND ANOTHER VS. TARSEM SINGH AND OTHERS (2019) 9 SCC 304, the claimants are entitled to solatium which the Land Acquisition Officer and the Arbitrator did not grant on the ground that the provisions of the Land Acquisition Act, 1894, is not applicable as provided under Section 3G of the National Highways Act.
10. I have considered the submissions made by the learned counsel for the beneficiary as well as the learned counsel for the claimants.
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MFA No. 25458 of 2012 C/W MFA No. 25456 of 2012, MFA No. 25457 of 2012, MFA No. 25459 of 2012
11. As noticed by the Hon'ble Apex Court in the case of NATIONAL HIGHWAYS AUTHORITY OF INDIA VS. P.NAGARAJU ALIAS CHELUVAIAH AND ANOTHER (2022 SCC ONLINE SC 864), the arbitration in question was not akin to an arbitration based on an agreement entered into between the parties to a contract but was one initiated under statutory provisions of National Highways Act which provides for such arbitration, which is comparable to a 'reference' under the regime for acquisition of land for public purpose. One of the parties to such arbitration proceedings would be a land loser and the adjudication in the arbitration proceedings is to determine 'just compensation' payable in respect of land which is compulsorily acquired for a public purpose. Therefore, when the award of an arbitrator is challenged under Section 34 of the Arbitration and Conciliation Act, 1996, care should be taken to manoeuvre the proceedings based on the limited grounds to challenge an award under Section 34 of the Act, 1996. The issue in these cases relate to award of compensation in respect of land lying in Tegur village in Dharwad taluk, which was acquired for widening the existing National Highway. Likewise,
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MFA No. 25458 of 2012 C/W MFA No. 25456 of 2012, MFA No. 25457 of 2012, MFA No. 25459 of 2012 lands lying in the adjoining Kenchalarakoppa and abutting the National Highway was acquired.
12. The Hon'ble Apex Court in TARSEM SINGH referred to supra held:
"29. Both, P. Vajravelu Mudaliar (supra) and Nagpur Improvement Trust (supra) clinch the issue in favour of the Respondents, as has been correctly held by the Punjab and Haryana High Court in M/s Golden Iron and Steel Forging (supra). First and foremost, it is important to note that, as has been seen hereinabove, the object of the 1997 Amendment was to speed up the process of acquiring lands for National Highways. This object has been achieved in the manner set out hereinabove. It will be noticed that the awarding of solatium and interest has nothing to do with achieving this object, as it is nobody's case that land acquisition for the purpose of national highways slows down as a result of award of solatium and interest. Thus, a classification made between different sets of landowners whose lands happen to be acquired for the purpose of National Highways and landowners whose lands are acquired for other public purposes has no rational relation to the object sought to be achieved by the Amendment Act, i.e. speedy acquisition of lands for the purpose of National Highways. On this ground alone, the Amendment Act falls foul of Article 14.
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C/W MFA No. 25456 of 2012, MFA No. 25457 of 2012, MFA No. 25459 of 2012
30. Even otherwise, in P. Vajravelu Mudaliar (supra), despite the fact that the object of the Amendment Act was to acquire lands for housing schemes at a low price, yet the Amendment Act was struck down when it provided for solatium at the rate of 5% instead of 15%, that was provided in the Land Acquisition Act, the Court holding that whether adjacent lands of the same quality and value are acquired for a housing scheme or some other public purpose such as a hospital is a differentiation between two sets of landowners having no reasonable relation to the object sought to be achieved. More pertinently, another example is given - out of two adjacent plots belonging to the same individual one may be acquired under the principal Act for a particular public purpose and one acquired under the Amending Act for a housing scheme, which, when looked at from the point of view of the landowner, would be discriminatory, having no rational relation to the object sought to be achieved, which is compulsory acquisition of property for public purposes.
31. Nagpur Improvement Trust (supra) has clearly held that ordinarily a classification based on public purpose is not permissible under Article 14 for the purpose of determining compensation. Also, in para 30, the Seven- Judge Bench unequivocally states that it is immaterial whether it is one Acquisition Act or another Acquisition Act under which the land is acquired, as, if the existence of these two Acts would enable the State to give one
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C/W MFA No. 25456 of 2012, MFA No. 25457 of 2012, MFA No. 25459 of 2012 owner different treatment from another who is similarly situated, Article 14 would be infracted. In the facts of these cases, it is clear that from the point of view of the landowner it is immaterial that his land is acquired under the National Highways Act and not the Land Acquisition Act, as solatium cannot be denied on account of this fact alone."
13. Therefore, the Arbitrator was bound to consider whether the land acquired in Tegur and Kenchalarakoppa were comparable in the light of the fact that they were adjacent villages but lying in different talukas. He was also bound to consider whether there were any characteristic that was peculiar only to Kenchalarakoppa and not Tegur village. Further, in view of the judgment in TARSEM SINGH case referred supra, he was bound to award solatium and other benefits provided under the Land Acquisition Act, 1894.
14. Though the ground of patent illegality is one of the grounds available for setting aside the award but what constitutes patent illegality was elaborated by the Hon'ble Apex Court in ASSOCIATE BUILDERS VS. DELHI DEVELOPMENT AUTHORITY (2015) 3 SCC 49, which was confirmed in
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MFA No. 25458 of 2012 C/W MFA No. 25456 of 2012, MFA No. 25457 of 2012, MFA No. 25459 of 2012 STATE OF CHHATTISGARH AND ANOTHER VS. SAL UDYOG PRIVATE LIMITED (2022) 2 SCC 275, where it was held as follows:
"14. The law on interference in matters of Awards under the 1996 Act has been circumscribed with the object of minimising interference by courts in arbitration matters. One of the grounds on which an Award may be set aside is "patent illegality". What would constitute "patent illegality" has been elaborated in Associate Builders v. Delhi Development Authority8, where "patent illegality"
that broadly falls under the head of "Public Policy", has been divided into three sub-heads in the following words:-
"...42. In the 1996 Act, this principle is substituted by the "patent illegality" principle which, in turn, contains three subheads:
42.1. (a) A contravention of the substantive law of India would result in the death knell of an Arbitral Award.
This must be understood in the sense that such illegality must go to the root of the matter and cannot be of a trivial nature. This again is really a contravention of Section 28(1)(a) of the Act, which reads as under:
"28. Rules applicable to substance of dispute. -
(1) Where the place of arbitration is situated in India-
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MFA No. 25458 of 2012 C/W MFA No. 25456 of 2012, MFA No. 25457 of 2012, MFA No. 25459 of 2012
(a) In an arbitration other than an international commercial arbitration, the Arbitral Tribunal shall decide the dispute submitted to arbitration in accordance with the substantive law for the time being in force in India;"
42.2. (b) A contravention of the Arbitration Act itself would be regarded as a patent illegality - for example if an arbitrator gives no reasons for an award in contravention of Section 31(3) of the Act, such award will be liable to be set aside.
42.3. (c) Equally, the third subhead of patent illegality is really a contravention of Section 28(3) of the Arbitration Act, which reads as under:
"28. Rules applicable to substance of dispute. - (1) - (2) *** (3) In all cases, the Arbitral Tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction."
This last contravention must be understood with a caveat. An Arbitral 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 the award can be set aside on this ground. Construction of the terms of a contract is primarily for an arbitrator to decide unless the arbitrator construes the contract in such a way that it could be said
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MFA No. 25458 of 2012 C/W MFA No. 25456 of 2012, MFA No. 25457 of 2012, MFA No. 25459 of 2012 to be something that no fair-minded or reasonable person could do." (emphasis supplied)
15. In Ssangyong Engineering and Construction Company Limited v. National Highways Authority of India (NHAI), speaking for the Bench, Justice R.F. Nariman has spelt out the contours of the limited scope of judicial interference in reviewing the Arbitral Awards under the 1996 Act and observed thus :
"34. What is clear, therefore, is that the expression "public policy of India", whether contained in Section 34 or in Section 48, would now mean the "fundamental policy of Indian law" as explained in paras 18 and 27 of Associate Builders [Associate Builders v. DDA (2015) 3 SCC 49, the fundamental policy of Indian law would be relegated to "Renusagar" understanding of this expression. This would necessarily mean that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 expansion has been done away with. In short, Western Geco, as explained in paras 28 and 29 of Associate Builders, would no longer obtain, as under the guise of interfering with an award on the ground that the arbitrator has not adopted a judicial approach, the Court's intervention would be on the merits of the award, which cannot be permitted post amendment. However, insofar as principles of natural justice are concerned, as contained in Sections 18 and 34(2)(a)(iii) of the 1996 Act,
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C/W MFA No. 25456 of 2012, MFA No. 25457 of 2012, MFA No. 25459 of 2012 these continue to be grounds of challenge of an award, as is contained in para 30 of Associate Builders.
35. It is important to notice that the ground for interference insofar as it concerns "interest of India" has since been deleted, and therefore, no longer obtains. Equally, the ground for interference on the basis that the award is in conflict with justice or morality is now to be under- stood as a conflict with the "most basic notions of morality or justice". This again would be in line with paras 36 to 39 of Associate Builders, as it is only such Arbitral Awards that shock the conscience of the court that can be set aside on this ground.
36. Thus, it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law, as understood in paras 18 and 27 of Associate Builders, or secondly, that such award is against basic notions of justice or morality as understood in paras 36 to 39 of Associate Builders. Explanation 2 to Section 34(2)(b)(ii) and Explanation 2 to Section 48(2)(b)(ii) was added by the Amendment Act only so that Western Geco, as understood in Associate Builders and paras 28 and 29 in particular, is now done away with.
37. Insofar as domestic awards made in India are concerned, an additional ground is now available under sub-section (2-A), added by the Amendment Act, 2015, to
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C/W MFA No. 25456 of 2012, MFA No. 25457 of 2012, MFA No. 25459 of 2012 Section 34. Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within "the fundamental policy of Indian law", namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality.
38. Secondly, it is also made clear that reappreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award.
39. To elucidate, para 42.1 of Associate Builders, namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an Arbitral Award. Para 42.2 of Associate Builders, however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award.
40. The change made in Section 28(3) by the Amendment Act really follows what is stated in paras 42.3 to 45 in Associate Builders, namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner
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C/W MFA No. 25456 of 2012, MFA No. 25457 of 2012, MFA No. 25459 of 2012 that no fair-minded or reasonable person would; in short, that the arbitrator's view is not even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2-A).
41. What is important to note is that a decision which is perverse, as understood in paras 31 and 32 of Associate Builders, while no longer being a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse."
(emphasis supplied)
16. In Delhi Airport Metro Express Pvt. Ltd. (supra) referring to the facets of patent illegality, this Court has held as under:
"29. Patent illegality should be illegality which goes to the root of the matter. In other words, every error of law
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C/W MFA No. 25456 of 2012, MFA No. 25457 of 2012, MFA No. 25459 of 2012 committed by the Arbitral Tribunal would not fall within the expression 'patent illegality'. Likewise, erroneous application of law cannot be categorised as patent illegality. In addition, contravention of law not linked to public policy or public interest is beyond the scope of the expression 'patent illegality'. What is prohibited is for courts to re-appreciate evidence to conclude that the award suffers from patent illegality appearing on the face of the award, as courts do not sit in appeal against the Arbitral Award. The permissible grounds for interference with a domestic award under Section 34(2-A) on the ground of patent illegality is when the arbitrator takes a view which is not even a possible one, or interprets a clause in the contract in such a manner which no fair- minded or reasonable person would, or if the arbitrator commits an error of jurisdiction by wandering outside the contract and dealing with matters not allotted to them. An Arbitral Award stating no reasons for its findings would make itself susceptible to challenge on this account. The conclusions of the arbitrator which are based on no evidence or have been arrived at by ignoring vital evidence are perverse and can be set aside on the ground of patent illegality. Also, consideration of documents which are not supplied to the other party is a facet of perversity falling within the expression 'patent illegality."
24. We are afraid, the plea of waiver taken against the appellant-State on the ground that it did not raise such an objection in the grounds spelt out in the Section 34
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MFA No. 25458 of 2012 C/W MFA No. 25456 of 2012, MFA No. 25457 of 2012, MFA No. 25459 of 2012 petition and is, therefore, estopped from taking the same in the appeal preferred under Section 37 or before this Court, would also not be available to the respondent- Company having regard to the language used in Section 34(2A) of the 1996 Act that empowers the Court to set aside an award if it finds that the same is vitiated by patent illegality appearing on the face of the same. Once the appellant-State had taken such a ground in the Section 37 petition and it was duly noted in the impugned judgment, the High Court ought to have interfered by resorting to Section 34(2A) of the 1996 Act, a provision which would be equally available for application to an appealable order under Section 37 as it is to a petition filed under Section 34 of the 1996 Act. In other words, the respondent-Company cannot be heard to state that the grounds available for setting aside an award under sub-section (2A) of Section 34 of the 1996 Act could not have been invoked by the Court on its own, in exercise of the jurisdiction vested in it under Section 37 of the 1996 Act. Notably, the expression used in the sub-rule is "the Court finds that". Therefore, it does not stand to reason that a provision that enables a Court acting on its own in deciding a petition under Section 34 for setting aside an Award, would not be available in an appeal preferred under Section 37 of the 1996 Act."
15. Therefore, it follows that the Courts should be slow to interfere with the findings of fact recorded by the Arbitrator.
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MFA No. 25458 of 2012 C/W MFA No. 25456 of 2012, MFA No. 25457 of 2012, MFA No. 25459 of 2012 Patent illegality should mean contravention of the 1996 Act and/or the terms of the contract and illegality appearing on the face of award but not by re-appreciation of evidence.
16. In the case on hand, the Court has re-appreciated the evidence to hold that the Arbitrator did not consider the market value of the lands lying in Kenchalarakoppa village. The Hon'ble Apex Court in NATIONAL HIGHWAYS AUTHORITY OF INDIA VS. P.NAGARAJU ALIAS CHELUVAIAH AND ANOTHER categorically held that:
"36. In that backdrop, in the instant case it is no doubt true that the notification issued by the Department of Stamps and Registration on 07.11.2014 is prior to the acquisition notification dated 01.02.2016. It is also to be noted that there was a time gap of more than one year between the two. In a normal circumstance, even if the notification dated 07.11.2014 was taken into consideration it would be open for the learned Arbitrator to consider certain amount of escalation to determine the market value. The said process could have been adopted if there was no other document. At this juncture, it is necessary to note that the SLAO in fact had relied on the said notification dated 07.11.2014 and determined the market value but had ignored the fact that the lands regarding which the market value was to be determined
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C/W MFA No. 25456 of 2012, MFA No. 25457 of 2012, MFA No. 25459 of 2012 had been converted for purposes other than agriculture. The SLAO had therefore taken into consideration the registration value which had been fixed in respect of the agricultural property. In that light, firstly it would have been open for the learned Arbitrator to take note of the value fixed for the commercial/industrial lands under that notification itself and provide certain amount of escalation.
37. Notwithstanding such option of providing escalation to the already existing guideline value being available to the learned Arbitrator, what cannot be lost sight in the instant case is that, as evident from the notification dated 28.03.2016 the process for redetermining the guideline value had commenced through the notification bearing No.CBC-25/2014-15 dated 14.09.2015 and proceedings of the committee were also held during 2015-2016 which ultimately led to the notification dated 28.03.2016. Further, though the preliminary notification for acquisition was issued on 01.02.2016, the final notification under Section 3D of NH Act was issued on 23.09.2016. During the intervening period the guideline value notification dated 28.03.2016, the process for which had commenced through the notification dated 14.09.2015, was already published. Furthermore, when all these proceedings were in close proximity to the date of the preliminary notification for acquisition and the revision of the market value by the Department of Stamps and Registration itself was within a period of one year and 4 months from the
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C/W MFA No. 25456 of 2012, MFA No. 25457 of 2012, MFA No. 25459 of 2012 earlier guideline value published on 07.11.2014, it would indicate that the escalation which was otherwise open for being worked out and applied by the learned Arbitrator on taking note of the notification dated 07.11.2014 was undertaken by the Department of Stamps and Registration and the benefit of considering such escalation was available to the learned Arbitrator by taking note of the guideline dated 28.03.2016, though technically published on a date subsequent to the preliminary notification dated 01.02.2016. In that view of the matter, in the present facts and circumstances, the reliance placed on the guideline value notification dated 28.03.2016 for reckoning the market value of the property acquired under the preliminary notification dated 01.02.2016, by itself cannot be accepted to be a patent illegality committed by the learned Arbitrator."
17. In that view of the matter, the Prl. District and Sessions Judge, Dharwad, committed an error in re- appreciating the evidence on its own and modifying the award passed by the Arbitrator. It would have augured well if, the Prl. District and Sessions Judge, Dharwad, had directed the Arbitrator to eliminate the grounds of challenge as mandated under Section 34 (4) of the Act of 1996.
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MFA No. 25458 of 2012 C/W MFA No. 25456 of 2012, MFA No. 25457 of 2012, MFA No. 25459 of 2012
18. In that view of the matter, these appeals are allowed in part and the common order passed by the the Prl. District and Sessions Judge, Dharwad, dated 01.10.2012 is set aside. Consequently, the proceeding under Section 34 of the Arbitration Conciliation Act is restored on the file of the Prl. District and Sessions Judge, Dharwad, who shall frame a question 'whether the land belonging to the respondents herein were comparable to the lands situate at Kenchalarakoppa? and 'whether the landlosers were entitled for solatium and other benefits in the light of the judgment of the Apex Court in TARSEM SINGH? The District Court shall call upon the Arbitrator to eliminate the grounds of challenge of the award.
19. The Prl. District and Sessions Judge, Dharwad, shall after obtaining report from the Arbitrator, dispose off the Arbitration Suit Nos.1 to 4/2012 in accordance with law.
20. The amount in deposit before this Court is ordered to be transmitted to the District and Sessions Judge, Dharwad, who shall redeposit it in a interest earning fixed deposit for such period as may be felt expedient.
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MFA No. 25458 of 2012 C/W MFA No. 25456 of 2012, MFA No. 25457 of 2012, MFA No. 25459 of 2012
21. It is needless to mention that the respondent/land losers are entitled to urge all contentions regarding the grant of additional compensation before the District and Sessions Judge, Dharwad, which are not considered by the Arbitrator including the grant of solatium, in view of the judgment of the Hon'ble Apex Court in UNION OF INDIA AND ANOTHER VS. TARSEM SINGH AND OTHERS.
All contentions are left open.
(Sd/-) JUDGE JM List No.: 1 Sl No.: 39