Appellate Court Can't Reassess Arbitral Award After District Court Upholds It: Karnataka High Court

The Karnataka High Court has held that when a District Court rejects a challenge to an arbitral award after finding no grounds for interference, the appellate court cannot take a different view unless a legally sustainable ground for interference is established.

A Division Bench of Justices Anu Sivaraman and T.P. Vivekananda dismissed the National Highways Authority of India's appeal challenging the order dated February 1, 2024, passed by the Additional District and Sessions Judge, Dakshina Kannada, Mangaluru which dismissed the landowners' petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging the arbitral award.

"If the District Court while exercising the power under Section 34(2) of the Arbitration and Conciliation Act, 1996, has held that no grounds are made out for setting aside the arbitral award, this Court while considering an appeal under Section 37 of the Arbitration and Conciliation Act, 1996, is not in a position to take a different view than that of the view taken by the District Court under Section 34 of the Arbitration and Conciliation Act, 1996.", the Court observed.

The dispute concerned the acquisition of 291.38 square metres of land in Survey No. 27/5B, Surathkal Village for highway expansion. Following a preliminary acquisition notification dated September 8, 2012 and a final notification dated August 29, 2013, the Land Acquisition Officer determined compensation at ₹43,262 per cent. On January 3, 2023, the Deputy Commissioner acting as arbitrator enhanced the compensation to ₹3,24,800 per cent, relying on an earlier award dated September 22, 2011, concerning land in the same village.

The NHAI challenged the award before the Commercial Court, which dismissed its petition on April 1, 2025. The landowners' challenge seeking higher compensation had earlier been dismissed on February 1, 2024.

The Bench held that the grounds raised by the NHAI and the arguments advanced before it did not establish any basis to interfere with the arbitral award, which had already been upheld by the District Court. It emphasised that the appellate court could not substitute its own view merely because the NHAI disagreed with the compensation determination.

Relying on the Supreme Court's decision in Larsen Air Conditioning & Refrigeration Co. v. Union of India, the Court reiterated that judicial interference with arbitral awards is permissible only where patent illegality goes to the root of the matter and is not merely trivial. The limited jurisdiction under the arbitration law does not allow courts to reappraise evidence or interfere simply because another interpretation is possible.

The Court also found no error in the arbitrator relying on an earlier award concerning land in the same village. It noted that the claimants had not produced material evidence to substantiate their assertions regarding the land's proximity to the National Highway, engineering colleges and hospitals.

Since the earlier award had been accepted by the NHAI, the arbitrator's reliance on it could not be faulted.

Both appeals were accordingly dismissed, with the Court clarifying that interest at 9% on the enhanced compensation would be payable only from the date the landowners surrender or hand over possession of the acquired land to the NHAI.

For the Appellant: Advocate Shobhith N Shetty

For the Respondents: Advocate Sachin BS, Byregowda N, AGA