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SUPREME COURT OF INDIA
INDIRA BANERJEE, A.S. BOPANNA, JJ.
National Highways Authority of India - Appellant
Versus
Sri P. Nagaraju @ Cheluvaiah & Anr. - Respondents
Civil Appeal No. 4671, 4676 to 4681 of 2022 (Arising out of SLP (CIVIL) No.19775 of 2021), SLP(C)No.19811, 19958, 19810, 20762, 17929 of 2021, 2503 of 2022
Decided on : 11-07-2022
The Court held that the awards passed by the learned Arbitrator are to be set aside and the matters be remanded in terms of Section 34(4) of Act, 1996 so as to enable the learned Arbitrators to assign reasons to arrive at their conclusion.
Fact of the Case:
The instant case involves a dispute over the determination of compensation for land acquired by the National Highways Authority of India (NHAI) under the National Highways Act (NH Act). The land losers challenged the awards passed by the learned Arbitrator, which enhanced the compensation from Rs.2026/- and Rs.17,200/- per sq. mtr to Rs.15,400/- and Rs.25,800/- respectively. The NHAI contended that the awards were against the law and public policy, and that the Arbitrator had erred in determining the market value and compensation.
Finding of the Court:
The Court held that the Arbitrator had committed patent illegality in applying two different notifications in determining the market value. The Court also held that the Arbitrator had failed to provide sufficient reasons for arriving at the conclusion to uniformly adopt the value of Rs.15,400/- per sq. mtr fixed in respect of lands in a layout which was separately indicated in the notification.
Issues: 1. Whether the Arbitrator had committed patent illegality in applying two different notifications in determining the market value? 2. Whether the Arbitrator had failed to provide sufficient reasons for arriving at the conclusion to uniformly adopt the value of Rs.15,400/- per sq. mtr fixed in respect of lands in a layout which was separately indicated in the notification?
Ratio Decidendi: 1. The Court held that the Arbitrator had committed patent illegality in applying two different notifications in determining the market value. The Court reasoned that the Arbitrator had relied on the market value at Rs.17,200/- sq. mtr. based on the guideline value Notification dated 27.10.2014, but had relied on the special instructions in the notification dated 05.12.2018 to determine the market value for industrial land. The Court held that such procedure was not justified and amounted to material irregularity on the face of the award. 2. The Court held that the Arbitrator had failed to provide sufficient reasons for arriving at the conclusion to uniformly adopt the value of Rs.15,400/- per sq. mtr fixed in respect of lands in a layout which was separately indicated in the notification. The Court reasoned that the Arbitrator had not referred to the manner in which the notification dated 28.03.2016 was brought on record and relied upon in the proceedings, and had not indicated any evidence relating to the comparability with the land in question.
Final Decision: The Court allowed the appeals in part and set aside the awards passed by the learned Arbitrator. The Court remanded the matters to the learned Arbitrators to reconsider the determination of compensation in accordance with the law.
The arbitral award sought to be executed is vitiated by patent illegality and non-speaking defects, rendering it inexecutable and liable to be set aside with remand under Section 34(4) of the Arbitration and Conciliation Act, 1996, warranting an immediate stay on execution proceedings under Section 36 thereof read with Order 21 CPC. The arbitrator has committed material irregularity by inconsistently cherry-picking base market values from one notification (e.g., 2014 guidelines) while applying uplift factors or special instructions from a later unrelated notification (e.g., 2018 guidelines for 50% enhancement on industrial land), without any reasoned justification or comparability analysis between the acquired land and selectively adopted nearby layouts like 'City Greens' or 'Zunadu', thereby ignoring survey-specific values within the same applicable notification (e.g., Rs.8,000/sq.mtr for converted land vs. higher values for unrelated layouts) (!) (!) (!) (!) (!) (!) (!) (!) . Further, the award fails to furnish intelligible and adequate reasons as mandated under Sections 31(3) and 28(3), with no discussion on discarding same-survey-number values, absence of evidence establishing proximity or market parity with post-notification guidelines (e.g., 28.03.2016 notification applied to 01.02.2016 acquisition), and violation of natural justice by relying on unpleaded documents without affording opportunity to rebut under Sections 18, 24(3) and 26 (!) (!) (!) (!) (!) (!) (!) (!) . Market value must be determined as on the Section 3A notification date under the National Highways Act, with post-notification escalations requiring explicit justification, which is wholly absent here, making the award ex facie perverse and non-est (!) (!) (!) (!) . Execution court must exercise inherent powers to halt proceedings to prevent unjust enrichment, remit the matter for fresh reasoned adjudication by the arbitrator, and adjust any excess payments post-remand, as courts cannot modify but only set aside such defective awards (!) (!) (!) (!) (!) .
JUDGMENT :
A.S. Bopanna, J.
C.A. No.4676/2022 @ SLP(C)No.19811/2021
C.A. No.4677/2022 @ SLP(C)No.19958/2021
C.A. No.4678/2022 @ SLP(C)No.19810/2021
C.A. No.4679/2022 @ SLP(C)No.20762/2021
C.A. No.4680/2022 @ SLP(C)No.19729/2021
1. Leave granted.
2. The appellant - National Highways Authority of India (‘NHAI’ for short) is before this Court in these appeals assailing the judgment dated 26.07.2021 by the Division Bench, High Court of Karnataka, Bengaluru in MFA No.2037/2021 (AA) and connected matters. The appeals filed by the appellant herein before the High Court were dismissed, whereby the judgment dated 26.02.2021 passed by the Principal District Sessions Judge, Ramanagara in Arbitration Suit No.22/2019 and analogous suits as also the judgment dated 27.01.2021 by the Principal and District and Sessions Judge, Bengaluru Rural District, Bengaluru filed under Section 34 of the Arbitration and Conciliation Act, 1996 (‘Act 1996’ for short) were upheld. The said arbitration suits under Section 34 of Act, 1996 were filed by NHAI assailing the award dated 13.08.2019 and 06.01.2020 passed by the Deputy Commissioner and Arbitrator, National Highway - 275 (land acquisition), Ramanagara District, Ramanagara in Case No.LAQ(A)/NH-275/CR/137/2017-18 and Deputy Commissioner-1 and Arbitrator Bengaluru Urban District, Bengaluru in Case No.LAQ/ARB/BNG/NH-275/CR/02/2018-19. By the said awards the respective learned Arbitrators had enhanced the compensation from Rs.2026/- per sq. mtr and Rs.17,200/- determined by the Special Land Acquisition Officer (‘SLAO’ for short) to Rs.15,400/- per sq. mtr and Rs.25,800/- respectively. Since the learned District Judge and the High Court have upheld the determination of the compensation based on the market value determined at Rs.15,400/- and Rs.25,800 per sq. mtr, the appellant - NHAI, claiming to be aggrieved is before this Court.
3. Considering that the description of the parties was different in the hierarchy of the proceedings, for the sake of convenience and clarity the appellant herein would be described as ‘NHAI’ and the private respondents herein (land losers) would be referred to as the ‘claimants’ hereinafter, wherever the context so requires. The claimants - (private respondents in these appeals) are the owners of the different extent of land in the various survey numbers which were all part of the same acquisition which was initiated under the preliminary notifications dated 01.02.2016 and 02.02.2016 issued under the National Highways Act (‘NH Act’ for short). The facts arising in the appeal relating to SLP(C) No.19775/2021 is referred as the lead case. The facts in the other cases are more or less similar, while the legal issues raised are the same.
4. The lands situated in Survey Nos. 92/1, 90/2A, 42/1 of Mayaganahalli, survey no.35/3 and 37/1 of Madapura, survey no.24 of Kallugopahalli and survey no.40/8 of Kumbalagodu, among others were notified for acquisition under the preliminary notification dated 01.02.2016 and 02.02.2016. The said acquisition was a part of the process for formation of the Bengaluru-Mysore (NH-275) Highway. The final notification was issued on 23.09.2016 and 04.10.2016. The SLAO on initiating the process for passing the award, on consideration of the material available before him, had passed the award dated 10.03.2017 and 04.01.2017 determining the compensation at Rs.2026/-and Rs.17200/- per sq. mtr respectively. The SLAO keeping in view the provisions contained under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (‘RFCTLARR Act, 2013’ for short), took note of the sale exemplars which were available before him but ultimately took note of the value provided under the notification dated 07.11.2014 issued by the Department of Stamps and Registration for the purpose of regist
Point of Law : If arbitral award is found to be suffering from patent illegality it can surely be interfered with.
Section 29A of Arbitration Act inapplicable to arbitrations under Section 3G(5) of National Highways Act as special code; Central Government exclusive appointment overrides court extension/substituti....
The court established that under statutory arbitration for land acquisition, the authority must ensure fair compensation based on proper assessment and documentation, highlighting a constitutional ob....
The nature and status of the land on the date of notification must be considered in determining compensation for land acquired under the NHAI Act, 1956, and settled legal principles must be applied i....
The court upheld the authority to modify arbitration awards in compensation cases if the original decision is perverse or against public policy, ensuring fair compensation is granted to landowners.
Post-notification sale deeds admissible for compensation if proximate, genuine, uninflated; severance awards upheld on uncontroverted evidence; minimal judicial interference in arbitral awards absent....
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