Courts Hearing Challenges To NH Act Arbitral Awards Cannot Enhance Compensation: Karnataka High Court

The Karnataka High Court has reiterated that courts cannot enhance compensation by modifying arbitral awards in land acquisition disputes under the National Highways Act.

Referring to the precedent set by apex court, the court held,

"The question whether the court could modify the award was also considered by the Constitution Bench of the Supreme Court in a recent decision in Gayatri Balasamy v. ISG Novasoft Technologies Limited3 . The Supreme Court, by a majority held that the arbitral award could be modified to a limited extent to rectify computable, clerical or typographical errors as well as other manifest errors. However, the Supreme Court also clarified that the same was subject to such modification not necessitating a meritsbased evaluation. Thus, the Court exercising the power under Section 34 of the A&C Act cannot re-adjudicate the disputes and substitute its opinion on the merits of the disputes in place of the award of the arbitral tribunal"

A Division Bench comprising Chief Justice Vibhu Bakhru and Justice C.M. Poonacha made the observation while dismissing an appeal filed by landowner P. Nagaraju against an order remanding his compensation dispute to the arbitrator for fresh consideration.

The dispute arose from the acquisition of Nagaraju's lands at Mayaganahalli village in Ramanagara district for expansion and widening of the Mysuru-Bengaluru National Highway No.25.

The Special Land Acquisition Officer awarded compensation at Rs.7,833 per sq. metre for converted residential land and Rs.2,026 per sq. metre for dry agricultural land. Dissatisfied with the compensation, Nagaraju sought enhancement under Section 3G(5) of the National Highways Act.

An arbitral tribunal initially enhanced the compensation to Rs.15,400 per sq. metre in August 2019. However, after multiple rounds of litigation, including proceedings before the Supreme Court, the matter was remanded to the arbitrator for reconsideration.

Following reconsideration, the arbitral tribunal fixed compensation at Rs.8,300 per sq. metre for one parcel of land and Rs.2,236 per sq. metre for another parcel, while also granting solatium, interest and other statutory benefits under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.

The District Court later set aside the award after finding that the arbitral tribunal had failed to properly consider documents produced by Nagaraju and directions issued by the Supreme Court. It also remanded the matter for fresh consideration.

Before the High Court, Nagaraju challenged only the remand direction and argued that the District Court itself should determine the compensation instead of relegating the parties to another round before the arbitrator.

Rejecting the contention, the High Court relied on Supreme Court rulings including McDermott International Inc. v. Burn Standard Co. Ltd., NHAI v. M. Hakeem and Gayatri Balasamy v. ISG Novasoft Technologies Limited to reiterate that courts exercising jurisdiction under Section 34 of the Arbitration and Conciliation Act have limited supervisory powers.

The bench observed that courts cannot re-adjudicate disputes and substitute their own determination in place of an arbitral award.

On the issue of remand, the bench observed that courts have no power to remand arbitral matters except in accordance with Section 34(4) of the Arbitration and Conciliation Act.

“We also note that the court has no power to remand to the Arbitral Tribunal, except in accordance with Section 34(4) of the A&C Act.”

The court further observed that once an arbitral award under Section 3G(5) of the National Highways Act is set aside, the claimant would, prima facie, have to approach the arbitral tribunal again.

“Thus, the arbitral award under Section 33G (5) of the NH Act being set aside, the applicant would be required to once again, prima facie, move the Arbitral Tribunal.”

Accordingly, the appeal was dismissed.