Kerala High Court Upholds Award Granting Compensation For Entire House Rendered Unusable By NHAI Acquisition

The Kerala High Court dismissed an appeal challenging an arbitral award granting compensation for an entire residential building affected by land acquisition for National Highway-66 development in Kasaragod, Kerala.

A division bench of Chief Justice Soumen Sen and Justice Syam Kumar V.M. dismissed the appeal filed by the Project Director, National Highways Authority of India, reiterating the limited scope of interference under Section 37 of the Arbitration and Conciliation Act, 1996.

“The appellate power exercised by the Court under Section 37 of the Act, 1996 is not that of an Appellate Authority and much importance has to be attached to the Award which, in the instant case, was passed by an authority who is conversant with the nature of the dispute required to be adjudicated under Section 3G(5) of the National Highways Act, 1956.” the Bench observed

The dispute relates to acquisition of land along with a residential building for development of National Highway-66 in Kasaragod, Kerala. The Competent Authority determined compensation at ₹28.23 lakh after deducting salvage value, which was challenged by the landowner before the Arbitrator under Section 3G(5) of the National Highways Act.

The landowner contended that the compensation was inadequate, objected to deduction of salvage value, and claimed that partial acquisition of the house rendered the remaining structure unfit for habitation, thereby entitling compensation for the entire building.

The Competent Authority opposed the claim, stating that compensation was determined in accordance with statutory provisions and guidelines.

During arbitration, reports from PWD officials and the Tahsildar, along with a joint inspection, indicated that acquisition would affect the front portion of the house and could render the remaining structure unsafe and uninhabitable.

Accepting these findings, the arbitrator awarded compensation of Rs.1.26 crores for the entire residential building along with statutory benefits. The award was upheld by the District Court leading to the appeal before the High Court under Section 37 of the Arbitration and Conciliation Act, 1996.

The Bench referred to precedents on the scope of interference under Section 37 and observed:

“It is equally well settled that the appellate power under Section 37 of the Act is not akin to the normal appellate jurisdiction vested in the civil courts for the reason that the scope of interference of the courts with arbitral proceedings or award is very limited, confined to the ambit of Section 34 of the Act only and even that power cannot be exercised in a casual and a cavalier manner.”

The court held that where the Arbitrator's view is a possible one, it cannot be interfered with or substituted by the court. It further held that since the arbitral award had been upheld by the District Court, the scope of interference under Section 37 would be extremely limited and exercised with circumspection.

"The object of the Act, 1996 is a minimum intervention by the Court in interfering with an Award and unless the grounds mentioned under Section 34 of the Act is fulfilled, the Court should be extremely reluctant to interfere with the Award.” it noted

The Court further noted that the findings were based on appreciation of material on record, including reports of the PWD, CALA and Tahsildar, and that the Arbitrator had duly considered objections to such reports.

“Unless the said Award is manifestly perverse, arbitrary, based on no evidence and passed in violation of the principles of natural justice, the Court will be extremely reluctant to interfere with the Award.” it held

Accordingly, the appeal was dismissed.

For Appellant: Advocate Mathews K Philip

For Respondents: Advocates P Sathisan, Shibu B.S, Razak M, Biju P Paul, Alvin Jewel SS, Vidhya T.U, Abhirami S, Antija James, Leena Varghese, Dijil P.S and V Tekchand, Sr GP.