Arbitrator Must Consider 3-Yr Deeds To Fix Land Value Under 2013 Land Acquisition Act: Uttarakhand High Court

The Uttarakhand High Court on 19 June held that an arbitral tribunal cannot determine the market value of acquired land under Section 26(1)(b) of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, unless it follows the statutory methodology of considering registered sale deeds executed during the three years immediately preceding the proposed acquisition and identifies the transactions relied upon.

Justice Ravindra Maithani upheld the arbitral award granting landowners Gurbachan Singh and Harjinder Kaur compensation at Rs. 11,000 per square metre while deciding cross appeals filed by them and the National Highways Authority of India (NHAI). He held:

“It is evident that under issue no. 3, the AT did not follow the scheme of Section 26(1)(b) of the 2013 Act. Which sale deeds were considered? It is nowhere specified by the AT. What were the rates in those sale deeds? Sale deeds of preceding three years were to be taken into consideration, which has not been done.”

Singh, Kaur and the NHAI filed cross-appeals against an order of the District Judge upholding the arbitral award arising from the acquisition of land for the Sitarganj–Khatima National Highway (NH-125) and a truck by-lane/truck parking facility.

NHAI acquired 0.4929 hectares of land belonging to Gurbachan Singh and Harjinder Kaur at Sitarganj, Udham Singh Nagar, through notifications dated 19 March 2014 for the construction of NH-125 and the truck facility. The Special Land Acquisition Officer passed an award dated 26 August 2015 granting compensation at Rs. 38 lakh per hectare.

Following a reference under Section 3-G(5) of the National Highways Act, 1956 (which provides for arbitration where parties dispute the compensation amount), the Arbitrator enhanced the compensation to Rs. 11,000 per square metre through an award dated 17 March 2017.

Both parties challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996 (which allows a court to set aside an arbitral award on limited grounds). The District Judge dismissed the challenges on 30 May 2023, leading to the present appeals before the High Court under Section 37 of the Arbitration and Conciliation Act (which provides for appeals against certain arbitration orders).

Singh argued that although the Arbitrator recorded compensation ranging from Rs. 11,000 to Rs. 13,000 per square metre under different valuation methods, it ultimately granted only Rs. 11,000 per square metre. He, however, submitted that the award could not be modified in view of the Supreme Court's judgments in M. Hakeem and Gayatri Balasamy. NHAI argued that the award suffered from patent illegality as the Tribunal failed to follow the valuation methodology prescribed under the 2013 Act.

The High Court held that the Tribunal erred in determining the market value by applying annual escalation to compensation awarded in a 2008 acquisition. It further held that Explanation 1 to Section 26(1)(b) of the 2013 Act requires the average sale price to be calculated only on the basis of registered sale deeds executed during the three years immediately preceding the proposed acquisition. It observed:

“A bare reading of Explanation-1, makes it abundantly clear that when average sale price is taken, it should be taken of sale deeds executed immediately preceding three years of the year in which such acquisition of land is proposed to be made.”

However, the Bench held that these errors did not affect the final award since the Tribunal ultimately relied on the Collector's circle rate notification dated 31 March 2012, which fixed the applicable rate at Rs. 11,000 per square metre. It observed:

“The law is well settled that the Arbitrators are not considered to be the legally trained minds. The reasonings may be implicit. Under issue no. 2, the AT has discussed various factors and finally took into consideration the circle rate determined by the Collector on 31.03.2012.”

Accordingly, the High Court held that the compensation determination did not suffer from patent illegality and dismissed both appeals, leaving the arbitral award intact.

For the Landowners (Appellants in AO No. 224 of 2023 / Respondents in AO No. 307 of 2023): Mr. Gurbachan Singh appeared in person.

For the National Highways Authority of India (Respondent No. 1 in AO No. 224 of 2023 / Appellant in AO No. 307 of 2023): Advocate Mr. Naresh Pant assisted by Mr. Advocate Raunak Pant.

For the State of Uttarakhand / Competent Authority: Standing Counsel Mr. Narain Dutt