Himachal Pradesh High Court
National Highway Authority Of India vs Bansi Ram And Others on 17 July, 2025
( 2025:HHC:23198 ) IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA Arbitration Appeal No.70 of 2024 Reserved on: 06.06.2025 .
Announced on: 17.07.2025 National Highway Authority of India. ...APPELLANT Versus Bansi Ram and others. ...RESPONDENTS.
Coram:
The Hon'ble Mr. Justice Ranjan Sharma, Judge.
Whether approved for reporting? Yes ___________________________________________________________ For the appellant : Ms. Shreya Chauhan, Advocate, For the respondent : 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 26.07.2017 in proceedings under Section 3G(5) of the National Highways Act.
Whether reporters of Local Papers may be allowed to see the judgment? Yes ::: Downloaded on - 18/07/2025 21:29:05 :::CIS -2- ( 2025:HHC:23198 )
2. FACTUAL MATRIX:
2(i). Instant appeal arises out of acquisition of land by Appellant, in Mohal Bhantrehad, 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 17.08.2012, 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 28.02.2013 and on 13.03.2013 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.30/2013-14 dated 05.09.2013, assessing the market value of the land at Rs.28,00,000/-
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-
::: Downloaded on - 18/07/2025 21:29:05 :::CIS -3-( 2025:HHC:23198 ) cum Divisional Commissioner, Mandi. During the Arbitral proceedings, Learned Arbitrator gave opportunity to complete proceedings and thereafter framed Issues on .
30.10.2015. Thereafter, the parties were granted opportunities to adduce evidence and the Learned Arbitrator passed an Award on 26.07.2017, enhancing the market value of acquired land(s) to Rs.35,00,000/-
per bigha.
2(iv). Feeling aggrieved, against the Award dated 26.07.2017 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 the proceedings commenced before Learned Arbitrator ::: Downloaded on - 18/07/2025 21:29:05 :::CIS -4- ( 2025:HHC:23198 ) on 30.10.2014 and Award was passed on 26.07.2017 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 26.07.2017 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 Bhantrehad 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. The sale deed no. 255/2008 dated 24-03-2008 relied upon is of 3 biswas of land for a consideration of Rs. 2.25 lacs and after a hike of 10% per year the market value based on the sale deed comes to Rs. 24,15,754/- per bigha. However, CALA has awarded Rs 28,00,000/- per bigha as compared to Rs. 24,14,754/-
and this amount was further enhanced by the ::: Downloaded on - 18/07/2025 21:29:05 :::CIS -5- ( 2025:HHC:23198 ) Learned Arbitrator to Rs 35,00,000/- per bigha, without any justification and no other sale deed was produced by the parties.
.
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 to the tune of Rs 35,00,000/-
per bigha and 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 50-60% 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):::: Downloaded on - 18/07/2025 21:29:05 :::CIS -6-
( 2025:HHC:23198 )
4. Learned Counsel for the respondent(s)-landowner(s) has supported the Impugned Award dated 26.07.2017 passed by Learned Arbitrator as also the judgment passed by .
learned District Judge.
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 30.10.2014, 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. ::: Downloaded on - 18/07/2025 21:29:05 :::CIS -7- ( 2025:HHC:23198 ) 6(ii). Second contention: Small tract of land/deduction:-
Appellant contended that the sale deed .
relied upon was in respect of 3 biswas, whereas the land acquired runs in several bighas (38 bighas 11 biswas and 7 biswansis approximately). Therefore, the sale deed for small parcel of land could not have been made the basis for determining market value for the acquired large chunk of land. Even Learned District Judge, affirmed that Learned Arbitrator had relied upon the report of the Local Commissioner who had stated that Village Bhantrehad and Dehar were in proximity of village Baloh. It is not in dispute that Learned Counsel for the appellant had also admitted before Learned Arbitrator that lands of three Muhals viz Baloh, Bhantrehad and Dehar were of same nature and potentiality. It was on this basis that Learned Arbitrator had treated the land in Muhals Baloh, Bhantrehad and Dehar as a single unit and assessed the compensation as Rs. 35,00,000/-
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 ::: Downloaded on - 18/07/2025 21:29:05 :::CIS -8- ( 2025:HHC:23198 ) that land in three 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 the re-appreciation of evidence cannot be permitted so as to determine as to whether the land in three Muhals is similar or not. Moreover, the Award passed by the Learned Arbitrator after due appreciation 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 ::: Downloaded on - 18/07/2025 21:29:05 :::CIS -9- ( 2025:HHC:23198 ) 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 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 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. 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 ::: Downloaded on - 18/07/2025 21:29:05 :::CIS -10- ( 2025:HHC:23198 ) 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, r 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 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 ::: Downloaded on - 18/07/2025 21:29:05 :::CIS -11- ( 2025:HHC:23198 ) 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 r 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 ::: Downloaded on - 18/07/2025 21:29:05 :::CIS -12- ( 2025:HHC:23198 ) 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 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 ::: Downloaded on - 18/07/2025 21:29:05 :::CIS -13- ( 2025:HHC:23198 ) 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 lightly interfered 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 "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.
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 the construction of the Arbitrator is such which could 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 ::: Downloaded on - 18/07/2025 21:29:05 :::CIS -14- ( 2025:HHC:23198 ) 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 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 construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground" [ref:
Associate Builders (supra)]. The other ground ::: Downloaded on - 18/07/2025 21:29:05 :::CIS -15- ( 2025:HHC:23198 ) 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 award, if it has been upheld, or substantially upheld 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 Act of 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 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 r 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 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 ::: Downloaded on - 18/07/2025 21:29:05 :::CIS -16- ( 2025:HHC:23198 ) 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:
"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 the scope of the provision. Thus, it is evident that in case an arbitral award ::: Downloaded on - 18/07/2025 21:29:05 :::CIS -17- ( 2025:HHC:23198 ) 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 slow to 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, r setting aside or refusing to set aside an award, is all the more circumscribed."
xx xx xx
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."
::: Downloaded on - 18/07/2025 21:29:05 :::CIS -18-( 2025:HHC:23198 ) 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 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 ::: Downloaded on - 18/07/2025 21:29:05 :::CIS -19- ( 2025:HHC:23198 ) 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 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 ::: Downloaded on - 18/07/2025 21:29:05 :::CIS -20- ( 2025:HHC:23198 ) 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 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.
::: Downloaded on - 18/07/2025 21:29:05 :::CIS -21-( 2025:HHC:23198 ) 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 the 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 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 ::: Downloaded on - 18/07/2025 21:29:05 :::CIS -22- ( 2025:HHC:23198 ) 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 26 of the Arbitration and Conciliation Act to appoint expert(s) to submit report on specific issues to ::: Downloaded on - 18/07/2025 21:29:05 :::CIS -23- ( 2025:HHC:23198 ) 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 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 hearing where the parties have the opportunity 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 ::: Downloaded on - 18/07/2025 21:29:05 :::CIS -24- ( 2025:HHC:23198 ) 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 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 ::: Downloaded on - 18/07/2025 21:29:05 :::CIS -25- ( 2025:HHC:23198 ) 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 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 ::: Downloaded on - 18/07/2025 21:29:05 :::CIS -26- ( 2025:HHC:23198 ) 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:-
"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.::: Downloaded on - 18/07/2025 21:29:05 :::CIS -27-
( 2025:HHC:23198 ) The evidence must come for the need of development contemplated and the possible 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 r 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:-::: Downloaded on - 18/07/2025 21:29:05 :::CIS -28-
( 2025:HHC:23198 ) "29. ......the purpose for which the land is acquired, must also be taken into consideration in fixing the market value 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 has been 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 r 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 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."
::: Downloaded on - 18/07/2025 21:29:05 :::CIS -29-( 2025:HHC:23198 ) 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 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 ::: Downloaded on - 18/07/2025 21:29:05 :::CIS -30- ( 2025:HHC:23198 ) 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-PX, nor increase in value by 7% 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 ::: Downloaded on - 18/07/2025 21:29:05 :::CIS -31- ( 2025:HHC:23198 ) 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 his earnings;
(d) if, in consequences of the acquisition of r 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 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 Jarol. It has already been held that reliance placed upon this sale deed ::: Downloaded on - 18/07/2025 21:29:05 :::CIS -32- ( 2025:HHC:23198 ) was in order, this being the only piece of evidence available on record regarding rate of purchase of land. The Learned Arbitrator had allowed 7% increase in the value .
for covering the gap of 2 years. 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 7% cannot be said to be excessive. The stipulated parameters were duly considered by Arbitrator.
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. 8 and 47 of 2024 in NHAI versus Rakesh Kumar and Anr. dated 5.11.2024 in the following terms:
2(i). All these appeals arise out of the acquisition of land by the appellant in Mohal Bhantrehad, Tehsil Sundernagar, District Mandi (H.P.).::: Downloaded on - 18/07/2025 21:29:05 :::CIS -33-
( 2025:HHC:23198 ) 2(ii). Notification under Section 3A(1) of the National Highways Act, 1956 (for short 'NH Act'), was published in the official Gazettee on 21.04.2012 for acquiring the subject land for four laning of NH-21 .
( Bilaspur- Ner Chowk ).
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 Section 34 of the Arbitration Act for 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 r 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 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 Petition No.57 of 2017 is upheld;::: Downloaded on - 18/07/2025 21:29:05 :::CIS -34-
( 2025:HHC:23198 )
(ii) The Award dated 26.07.2017 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;
(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
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