Time Limit Under Arbitration Act Not Applicable To National Highway Act Arbitration: Bombay High Court

The Bombay High Court at Aurangabad has recently held that the time limit for making an arbitral award under Section 29A of the Arbitration and Conciliation Act, 1996, does not apply to arbitrations conducted under Section 3G(5) of the National Highways Act, 1956, as the Arbitration Act applies only to the limited extent provided under Section 3G(6) and only where it is not inconsistent with the special statutory scheme.

Under the provision, an award in domestic commercial arbitration needs to be passed in 12 months from the completion of pleadings. 

Refusing to set aside arbitral awards passed in land acquisition proceedings under the National Highways Act, the court held that applying Section 29A would conflict with the statutory mechanism under which arbitrators are appointed by the central government and arbitration is conducted through designated offices, making the provision unworkable within the framework of the NH Act.

“Both the National Highways Act and the Arbitration and Conciliation Act, 1996 are Central enactments. Nevertheless, the application of the Arbitration Act, 1996 is by way of reference and only to the extent provided under Section 3G(6).", it said.

"The application of Section 29A of the Arbitration and Conciliation Act, 1996 to arbitrations conducted under the National Highways Act, 1956 would render the statutory scheme of appointment of arbitrators and conduct of proceedings of the arbitrator under the National Highways Act unworkable," it added.

A bench of Justice Arun R. Pedneker dismissed a batch of appeals filed by the National Highways Authority of India (NHAI) and upheld arbitral awards enhancing compensation for land acquired for widening National Highway No. 211 in village Gandheli.

The acquisition proceedings were initiated under the National Highways Act after a notification under Section 3A dated 18 September 2015, followed by a declaration under Section 3D on 16 September 2016, after which compensation was determined under Section 3G.

The Competent Authority for Land Acquisition awarded compensation of Rs 83,19,534 at the rate of Rs 1,086 per square metre for the acquisition of 3,400 square meters, with different rates depending on the classification of the land.

Dissatisfied with the amount awarded, the landowners sought arbitration under Section 3G(5) of the National Highways Act.

By an award dated January 12, 2024, the arbitrator enhanced the compensation and fixed a uniform rate of Rs. 1,742 per square metre.

The National Highways Authority of India challenged the award before the Principal District Judge under Section 34 of the Arbitration and Conciliation Act on June 27, 2024, but the challenge was dismissed on October 16, 2024. NHAI then filed appeals before the High Court under Section 37.

Before the High Court, NHAI argued that the award was invalid as it had been passed nearly six years after the reference to arbitration, beyond the time limit prescribed under Section 29A of the Arbitration Act. It also contended that the arbitrator had failed to determine compensation in accordance with Section 26 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation, and Resettlement Act, 2013, which applies to acquisitions under the National Highways Act through Section 105(3).

The landowners opposed the challenge, maintaining that arbitration under Section 3G of the National Highways Act is a statutory mechanism under a special enactment. According to them, the Arbitration Act applies only to a limited extent under Section 3G(6) and only where its provisions are not inconsistent with the scheme of the National Highways Act.

Accepting this submission, the High Court relied on the Supreme Court ruling in NHAI v. Sayedabad Tea Company Ltd. and held that the National Highways Act operates as a complete code for acquisition, determination of compensation, and arbitration and that the general provisions of the Arbitration Act cannot override that statutory framework.

The court further held that Section 29A of the Arbitration Act, which allows courts to extend the mandate of an arbitrator or appoint a substitute, is inconsistent with Section 3G(5) of the National Highways Act, under which the arbitrator is appointed by the Central Government and arbitration is conducted through the designated office for the region.

“In such a statutory framework, the application of Section 29A of the Arbitration and Conciliation Act, 1996, which contemplates extension of the mandate of a specific arbitrator and substitution of the arbitrator by the Court, becomes impracticable. Since the arbitration under the National Highways Act is conducted by the incumbent officer holding the designated office, the concept of substitution of an arbitrator for the purpose of extension of mandate under Section 29A would be inconsistent with the statutory scheme. Therefore, the application of Section 29A to arbitrations under the National Highways Act would, per se, render the arbitration mechanism under the NH Act unworkable," the court observed.

Relying on the doctrine of legislation by reference, as explained by the Supreme Court in Girnar Traders v. State of Maharashtra, the High Court observed that provisions of the Arbitration Act cannot be applied in a manner that disrupts or defeats the scheme of a special statute such as the National Highways Act.

On the merits of the case, the Court found no patent illegality in the arbitral awards. It noted that the arbitrator had assessed compensation in line with Section 26 of the 2013 Act, after examining the relevant sale transactions and the potential value of the acquired land. The adoption of a uniform rate of compensation, the Court said, did not justify interference in proceedings under Sections 34 or 37 of the Arbitration Act.

The appeals were therefore dismissed, and the enhanced compensation awarded by the arbitrator was allowed to stand.

For Petitioner (National Highway Authority of India): Advocates Sagar Varma, Ladda Sagar Somnath.

For Respondent (landowners): Advocates R. M. Patil, P. H. Patil.