Gujarat High Court
National Highways Authority Of India ... vs Mer Devabhai Ramdebhai on 9 October, 2025
Author: Sunita Agarwal
Bench: Sunita Agarwal
NEUTRAL CITATION
C/FA/2339/2024 ORDER DATED: 09/10/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/FIRST APPEAL NO. 2339 of 2024
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2024
In R/FIRST APPEAL NO. 2339 of 2024
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NATIONAL HIGHWAYS AUTHORITY OF INDIA THRO HARMENDRA
SINGH ROTRWAL
Versus
MER DEVABHAI RAMDEBHAI & ORS.
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Appearance:
MR. MAULIK NANAVATI, ADVOCATE WITH MS. MANVI DAMPLE,
ADVOCATE FOR NANAVATI & CO.(7105) for the Appellant(s) No. 1
RULE THROUGH RPAD NOT RECEIVED UNSERVED(27) for the
Defendant(s) No. 1,
MS. HETAL PATEL, AGP FOR THE RESPONDENT NOS. 3
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CORAM:HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE
SUNITA AGARWAL
and
HONOURABLE MR.JUSTICE D.N.RAY
Date : 09/10/2025
ORAL ORDER
(PER : HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE SUNITA AGARWAL)
1. As per the Office Report, notice sent to respondent No.1 has been served as on 23.07.2024, through RPAD, which is evident from the Track Consignment Report placed on record.
2. No-one has put in appearance on behalf of the contesting respondent No.1. Respondent Nos. 2 and 3 are the formal parties.
3. This appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (for short, "the Act' 1996") is directed against the orders dated 27.10.2023 passed by the Court on Page 1 of 13 Uploaded by BINA SHAH(HC00353) on Tue Oct 14 2025 Downloaded on : Tue Oct 14 23:15:09 IST 2025 NEUTRAL CITATION C/FA/2339/2024 ORDER DATED: 09/10/2025 undefined the applications under Section 34 of the Act' 1996, whereby while setting aside the arbitral award dated 29.10.2018 passed by the Arbitrator under Section 3G(5) of the National Highways Act, 1956 (for short "the Act, 1956") enhanced amount of compensation for acquisition of the lands of the private respondents herein has been awarded. It was a statutory arbitration where the learned Arbitrator was appointed by the Central Government under Section 3G(5) of the Act, 1956 for redetermination of the compensation payable for acquisition of lands under the provisions of the Act, 1956 where landholders have invoked the arbitration under Section 3G(5) of the Act, 1956.
4. It is demonstrated before us by the learned counsel for the appellant-NHAI that the Civil Court has gone to the extent of reappreciation of evidence in returning a finding of fact on the evidence such as exemplar sale deeds submitted by the applicant / landholders before the arbitrator on the premise that they were ignored by the arbitrator in the proceedings under Section 3G(5) of the Act, 1956. The market value of the lands in question, thus, has been redetermined by the Court in the proceedings under Section 34 of the Act' 1996.
5. Reliance is placed on the decision of the Apex Court in the case of NHAI v. M. Hakeem, [(2021) 9 SCC 1] to submit that the Court exercising power under Section 34 of the Act,1996 cannot modify an arbitral award, by reappreciation of the evidence allegedly ignored by the Page 2 of 13 Uploaded by BINA SHAH(HC00353) on Tue Oct 14 2025 Downloaded on : Tue Oct 14 23:15:09 IST 2025 NEUTRAL CITATION C/FA/2339/2024 ORDER DATED: 09/10/2025 undefined arbitrator. The manner in which the proceedings under Section 34 have been conducted by the Civil Court, it is clear that it has dealt with the merits of the arbitral award to arrive at a different conclusion from that arrived at by the arbitrator. The Civil Court has, thus, committed a grave error of law in exceeding in its jurisdiction by embarking on a journey of assessment of the market value of the land and determining the total amount of compensation payable for the acquisition of the lands. The order of the Civil Court holding that the claimants are entitled for a higher rate of market value for the acquired land is wholly without jurisdiction or authority of law. Such a course is not open or permissible rather is expressly prohibited by law of arbitration.
6. Ms. Hetal Patel, the learned Assistant Government Pleader appearing for the respondent would, however, submit that there were exemplar sale deeds brought on record by the landholders, which have been conveniently ignored by the statutory Arbitrator and the Civil Court could not be said to have erred in holding that the arbitral award was based on no evidence and then proceeded to look to the evidence which were already on record to arrive at the conclusion that just and adequate compensation should be awarded to the landholders, by computing the market value at the rate of 66.30 paise per sq.mts.
7. Considering the submissions, we have gone through the order of the Civil Court, it is more than evident that it had proceeded to take into consideration the documentary Page 3 of 13 Uploaded by BINA SHAH(HC00353) on Tue Oct 14 2025 Downloaded on : Tue Oct 14 23:15:09 IST 2025 NEUTRAL CITATION C/FA/2339/2024 ORDER DATED: 09/10/2025 undefined evidence brought on record to reach at the conclusion that the Arbitrator has erred in ignoring the claim of the landholders and, thus, worked out the market value of the land in question to the tune of Rs.66.30 paise per sq.mts. on appreciation of the material on record.
8. The Civil Court, thus, in the proceedings under Section 34, enhanced the market value of the land in question. There is no dispute about the fact that not only the documentary evidence on record of the arbitral proceedings were appreciated by the Court under Section 34, but certain new material was also admitted to reassess the market value and redetermine the compensation amount payable to the landholders.
9. This exercise conducted by the Court under Section 34 of the Act, 1996 is completely beyond its jurisdiction. The question as to whether the Court under Section 34 would have the power of modification of the arbitral award, has been considered by the Bench of five Judges of the Apex Court in the case of Gayatri Balasamy v. ISG Novasoft Technologies Ltd., [2025 SCC OnLine SC 986] in its decision dated 30.04.2025. Considering the earlier judgments of the Apex Court in M.Hakeem (supra) and other various judgments, speaking for the majority of four, Hon'ble Mr. Justice Sanjiv Khanna (as he then was) has considered the scope and ambit of 'recourse' under Section 34 of the Act' 1996 and noted in paragraph Nos. '26' to '30' as under:-
"26. We begin by examining the scope and ambit of the power of 'recourse' under Section 34 of the 1996 Act.
Page 4 of 13 Uploaded by BINA SHAH(HC00353) on Tue Oct 14 2025 Downloaded on : Tue Oct 14 23:15:09 IST 2025 NEUTRAL CITATION C/FA/2339/2024 ORDER DATED: 09/10/2025 undefined I. Contours of Section 34, 1996 Act
27. Section 5 of the 1996 Act limits judicial intervention in an arbitral award to what is authorized by Part I of the Act. Section 34(1) stipulates that 'recourse' to a court against an arbitral award may be made only by an application for setting aside the award in accordance with Section 34(2) and 34(3).
28. Section 34(2)(a) enumerates specific grounds on which an award can be set aside. These include - the incapacity of a party, invalidity of an arbitration agreement in law, improper notice for appointment of an arbitrator or arbitral proceedings, denying the opportunity to a party to present their case, the award being beyond the scope of submission to arbitration, and the composition of the arbitral tribunal or the arbitral procedure not being by the agreement of the parties in certain circumstances. The proviso to Section 34(2)(a)(iv) outlines the concept of "severability of awards". This has been addressed separately in Part II of our Analysis.
29. Section 34(2)(b) stipulates that an arbitral award may be set aside when the subject matter of the dispute cannot be settled by arbitration per the applicable law or if the arbitral award conflicts with the public policy of India. Explanation I clarifies that an award can conflict with public policy of India only if (i) the award is induced or affected by fraud, corruption or is in violation of Section 75or Section 81of the 1996 Act; (ii) when it is in contravention with the fundamental policy of Indian law; or (iii) when it conflicts with the most basic notions of morality or justice. Explanation 2 mandates that no review on the merits shall be undertaken when determining a contravention of the fundamental policy of Indian law.
30. Section 34(2-A) stipulates that an award may be set aside when it is vitiated by patent illegality appearing on the face of the award. The proviso clarifies that such determination shall not be made solely because there is an erroneous application of law or through reappreciation of evidence. Section 34(3) provides timelines which needs to be adhered to while filing an application under Section 34. Section 34(4) stipulates the court's power of remanding an award to the arbitral tribunal. We have addressed this remand power in Part VI of our Analysis. Section 34(5) outlines notice requirements, while Section 34(6) mandates the expeditious disposal of Section 34 applications, setting a hard Page 5 of 13 Uploaded by BINA SHAH(HC00353) on Tue Oct 14 2025 Downloaded on : Tue Oct 14 23:15:09 IST 2025 NEUTRAL CITATION C/FA/2339/2024 ORDER DATED: 09/10/2025 undefined outer limit of one year from the date of service of notice on the other party under Section 34(5)."
10. On the question of partial setting aside of the arbitral award in the scope and ambit of the power of recourse under Section 34 of the Act, 1996, it was observed in paragraph Nos. '35' and '36' as under:-
"35. However, we must add a caveat that not all awards can be severed or segregated into separate silos. Partial setting aside may not be feasible when the "valid" and "invalid" portions are legally and practically inseparable. In simpler words, the "valid" and "invalid"
portions must not be inter-dependent or intrinsically intertwined. If they are, the award cannot be set aside in part.
36. The Privy Council, in Pratap Chamaria v. Durga Prasad Chamaria, addressed this issue with the following pertinent observations:
"...If, however, the pronouncement of the arbitrators is such that matters beyond the scope of the suit are inextricably bound up with matters falling within the purview of the litigation, in that case, the court would be unable to give effect to the award because of the difficulty that it cannot determine to what extent the decision of the subject-matter of the litigation has been affected and coloured by the decision of the arbitrators in regard to matters beyond the ambit of the suit...."
Thus, the power of partial setting aside should be exercised only when the valid and invalid parts of the award can be clearly segregated--particularly in relation to liability and quantum and without any corelation between valid and invalid parts."
11. On the question of permissibility and scope of the modification powers of the Courts within the parameters of Section 34 of the Act, 1996 it was held in paragraph Nos. '40' to '46' as under:-
Page 6 of 13 Uploaded by BINA SHAH(HC00353) on Tue Oct 14 2025 Downloaded on : Tue Oct 14 23:15:09 IST 2025NEUTRAL CITATION C/FA/2339/2024 ORDER DATED: 09/10/2025 undefined "40. A core principium of arbitration, an Alternative Dispute Resolution mechanism, is to provide a quicker and cost-effective alternative to courtroom litigation. While this suggests minimal judicial interference, the role of domestic courts remains crucial, as they function in a supportive capacity to facilitate and expedite the resolution of disputes. Therefore, it follows that judicial intervention is legitimate and necessary when it furthers the ends of justice, including the resolution of disputes.
41. To deny courts the authority to modify an award--
particularly when such a denial would impose significant hardships, escalate costs, and lead to unnecessary delays--would defeat the raison d'être of arbitration. This concern is particularly pronounced in India, where applications under Section 34 and appeals under Section 37 often take years to resolve.
42. Given this background, if we were to decide that courts can only set aside and not modify awards, then the parties would be compelled to undergo an extra round of arbitration, adding to the previous four stages : the initial arbitration, Section 34 (setting aside proceedings), Section 37 (appeal proceedings), and Article 136 (SLP proceedings). In effect, this interpretation would force the parties into a new arbitration process merely to affirm a decision that could easily be arrived at by the court. This would render the arbitration process more cumbersome than even traditional litigation.
43. Equally, Section 34 limits recourse to courts to an application for setting aside the award. However, Section 34 does not restrict the range of reliefs that the court can grant, while remaining within the contours of the statute. A different relief can be fashioned as long as it does not violate the guardrails of the power provided under Section 34. In other words, the power cannot contradict the essence or language of Section 34. The court would not exercise appellate power, as envisaged by Order XLI of the Civil Procedure Code, 1908.
44. We are of the opinion that modification represents a more limited, nuanced power in comparison to the annulment of an award, as the latter entails a more severe consequence of the award being voided in toto. Read in this manner, the limited and restricted power of severing an award implies a power of the court to vary or modify the award. It will be wrong to argue that silence Page 7 of 13 Uploaded by BINA SHAH(HC00353) on Tue Oct 14 2025 Downloaded on : Tue Oct 14 23:15:09 IST 2025 NEUTRAL CITATION C/FA/2339/2024 ORDER DATED: 09/10/2025 undefined in the 1996 Act, as projected, should be read as a complete prohibition.
45. We are thus of the opinion that the Section 34 court can apply the doctrine of severability and modify a portion of the award while retaining the rest. This is subject to parts of the award being separable, legally and practically, as stipulated in Part II of our Analysis.
46. Mustill and Boyd have observed that an order varying an award is not equivalent to an appellate process. The authors suggest that a modification order would only be appropriate where the modification, including any adjustment of costs, follows inevitably from the tribunal's determination of a question of law. This approach would be beneficial, as it would reduce costs and delays. The courts need not engage in any fact-finding exercise. By acknowledging the Court's power to modify awards, the judiciary is not rewriting the statute. We hold that the power of judicial review under Section 34, and the setting aside of an award, should be read as inherently including a limited power to modify the award within the confines of Section 34."
11.1 It was further observed in Paragraph Nos. '49' and '54' as under:-
"49. Notwithstanding Section 33, we affirm that a court reviewing an award under Section 34 possesses the authority to rectify computational, clerical, or typographical errors, as well as other manifest errors, provided that such modification does not necessitate a merits-based evaluation. There are certain powers inherent to the court, even when not explicitly granted by the legislature. The scope of these inherent powers depends on the nature of the provision, whether it pertains to appellate, reference, or limited jurisdiction as in the case of Section 34. The powers are intrinsically connected as they are part and parcel of the jurisdiction exercised by the court.
54. In the same vein as these judgments, we hold that inadvertent errors, including typographical and clerical errors can be modified by the court in an application under Section 34. However, such a power must not be conflated with the appellate jurisdiction of a higher court or the power to review a judgment of a lower court. The key distinction between Section 33 and Section 34 lies in the fact that, under Section 34, the court must have no Page 8 of 13 Uploaded by BINA SHAH(HC00353) on Tue Oct 14 2025 Downloaded on : Tue Oct 14 23:15:09 IST 2025 NEUTRAL CITATION C/FA/2339/2024 ORDER DATED: 09/10/2025 undefined uncertainty or doubt when modifying an award. If the modification is debatable or a doubt arises regarding its appropriateness, i.e., if the error is not apparent on the face of the record, the court will be left unable to proceed, its hands bound by the uncertainty. In such instances, it would be more appropriate for the party to seek recourse under Section 33 before the tribunal or under Section 34(4)."
12. While holding that there is a difference between the power to modify or power to remand to the arbitral tribunal under Section 34(4), it was observed in paragraph No. '56' as under:-
"56. However, the power of remand permits the court only to send the award to the tribunal for reconsideration of specific aspects. It is not an open-ended process; rather, it is a limited power, confined to limited circumstances and issues identified by the court. Upon remand, the arbitral tribunal may proceed in a manner warranted by the situation - including recording additional evidence, affording a party an opportunity to present its case if previously denied, or taking any other corrective measures necessary to cure the defect. In contrast, the exercise of modification powers does not allow for such flexibility. Courts must act with certainty when modifying an award - like a sculptor working with a chisel, needing precision and exactitude. Therefore, the argument that remand powers make modification unnecessary is misconceived. They are distinct powers and are to be exercised differently."
13. On a careful reading of the judgment of the Apex Court, it may be noted that even the Apex Court has held that the power of judicial review under Section 34, and the setting aside of an award, would inherently include a limited power to modify the award within the confines of Section 34. An order varying an award is not equivalent to an appellate process and a modification order would only be appropriate where the modification, including adjustment of costs, follows inevitably from the tribunal's determination of a question of law and the Page 9 of 13 Uploaded by BINA SHAH(HC00353) on Tue Oct 14 2025 Downloaded on : Tue Oct 14 23:15:09 IST 2025 NEUTRAL CITATION C/FA/2339/2024 ORDER DATED: 09/10/2025 undefined Courts need not engage in any fact-finding exercise. While saying so, it was added that inadvertent errors, including typographical and clerical errors can be modified by the court in an application under Section 34. It was clarified by the Apex Court that such a power must not be conflated with the appellate jurisdiction of a higher court or the power to review a judgment of a lower court. The court must have no uncertainty or doubt when modifying an award. If the modification is debatable or a doubt arises regarding its appropriateness, i.e., if the error is not apparent on the face of the record, the court will be left unable to proceed, its hands bound by the uncertainty. In such instances, it would be more appropriate for the party to seek recourse under Section 33 before the tribunal or under Section 34(4) of the Act, 1996.
14. Taking note of the above, atleast, it is clear that the Court under Section 34 would have a very limited power to sever an invalid part of the award and modification of the award is permissible to a limited extent, provided that such modification does not necessitate a merit evaluation.
15. Considering the above, it is pertinent to note that, in the instant case, the Court under Section 34 had indulged in an exercise of evaluation of the award on its merit and proceeded to determine the market value of the land in question on reappreciation of evidence as well as admission of new evidence like a Court of appeal under Order XLI of the Code of Civil Procedure, 1908. Such an exercise was impermissible within the scope of modification which has now been Page 10 of 13 Uploaded by BINA SHAH(HC00353) on Tue Oct 14 2025 Downloaded on : Tue Oct 14 23:15:09 IST 2025 NEUTRAL CITATION C/FA/2339/2024 ORDER DATED: 09/10/2025 undefined permitted to a limited extent by the Apex Court in its recent decision dated 30.04.2025 in Gayatri Balasamy (supra).
16. Considering the above, we find that the orders impugned passed under Section 34 of the Act, 1996 by the Courts concerned suffer from manifest error of jurisdiction and hence, cannot be sustained. We, therefore, set aside the orders dated 27.10.2023 of redetermination of the market value of the land in question in the proceedings under Section 34 of the Act, 1996, passed by the Court on the applications under Section 34 of the Act, 1996.
17. However, we may also record that the statutory Arbitrator, while passing the award dated 29.10.2018 in arbitration cases before it under Section 3G(5), has ignored the evidence brought on record by the landholders in the shape of exemplar sale deeds and proceeded to uphold the determination made by the Competent Authority under sub- section (1) of Section 3G. Section 3G(5) is a provision conferring power on the arbitrator appointed by the Central Government to redetermine the amount determined by the competent authority in sub-section (1), on an application filed by the aggrieved party to whom the amount determined by the competent authority is not acceptable. Sub-section (7) of Section 3G further provides the factors which are to be taken into consideration by the competent authority or the arbitrator while determining the amount under sub-section (1) or sub-section (5). Section 3G (5) & (7) of the Act, 1956 are relevant to be extracted hereinunder:-
Page 11 of 13 Uploaded by BINA SHAH(HC00353) on Tue Oct 14 2025 Downloaded on : Tue Oct 14 23:15:09 IST 2025NEUTRAL CITATION C/FA/2339/2024 ORDER DATED: 09/10/2025 undefined "3G. Determination of amount payable as compensation:-
(5) If the amount determined by the competent authority under sub-section (1) or sub-section (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 (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;
(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."
18. A careful reading of the aforesaid provisions indicate that on an application filed by the aggrieved party, the arbitrator was required to take into consideration the relevant factors for determination of market value, damages, etc. The determination of market value on the date of publication of the notification under Section 3A would require evaluation of the evidence of the parties.
19. In the instant case, it is brought on record that the evidence in the shape of exemplar sale deeds brought before the Statutory Arbitrator have not been appreciated while making of the arbitral award. These were the grievances of the landholders, which were recorded for reappreciation of Page 12 of 13 Uploaded by BINA SHAH(HC00353) on Tue Oct 14 2025 Downloaded on : Tue Oct 14 23:15:09 IST 2025 NEUTRAL CITATION C/FA/2339/2024 ORDER DATED: 09/10/2025 undefined evidence by the Court under Section 34.
20. Taking note of the above, we find that the arbitral award dated 29.10.2018 passed in the arbitration cases drawn by the landholders, subject matter of challenge herein cannot be sustained and are, therefore, set aside.
21. The Statutory Arbitrator is required to make a fresh consideration to the claims of the landowners for redetermination of the market value, taking into consideration of the evidence filed by the parties by proceeding afresh and declare an arbitral award, strictly in accordance with law. It is provided that notice be sent to all the parties concerned by the arbitrator to participate in the arbitration proceedings upon receipt of this order.
22. We also leave it open to both the parties to lead further evidence in support of their claims. The Statutory Arbitrator shall make a fresh adjudication by giving due opportunity of hearing to all the concerned parties, keeping in mind the provisions of sub-section (5) read with sub-section (7) of Section 3G of the Act, 1956.
23. With the above, the present appeal stands allowed. No order as to cost. Pending civil applications stand disposed of.
(SUNITA AGARWAL, CJ ) (D.N.RAY,J) BINA SHAH Page 13 of 13 Uploaded by BINA SHAH(HC00353) on Tue Oct 14 2025 Downloaded on : Tue Oct 14 23:15:09 IST 2025