Himachal Pradesh High Court
National Highway Authority Of India vs Brestu Ram on 18 September, 2024
Author: Jyotsna Rewal Dua
Bench: Jyotsna Rewal Dua
2024:HHC:8730
IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA
Arbitration Appeal No.1 of 2024
along with Arbitration Appeal Nos.1, 10, 11,
.
16, 44, 49, 51, 55, 56, 58, 59,
60, 61, 63, 64 and 68 of 2024
Date of decision: 18.09.2024
1. Arbitration Appeal No.1 of 2024
National Highway Authority of India. …Appellant.
Versus
Brestu Ram. ...Respondent.
2. Arbitration Appeal No.10 of 2024
National Highway Authority of India. …Appellant.
Versus
Nityanand. ...Respondent.
3. Arbitration Appeal No.11 of 2024
National Highway Authority of India. …Appellant.
Versus
Lachman Singh & Ors. …Respondents.
4. Arbitration Appeal No.16 of 2024
National Highway Authority of India. …Appellant.
Versus
Surender Singh & Anr. …Respondents.
5. Arbitration Appeal No.44 of 2024
National Highway Authority of India. …Appellant.
Versus
Kuldeep Singh. ...Respondent.
Whether reporters of Local Papers may be allowed to see the judgment? Yes
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6. Arbitration Appeal No.49 of 2024
National Highway Authority of India. …Appellant.
Versus
.
Prabhi Devi & Anr. …Respondents.
7. Arbitration Appeal No.51 of 2024
National Highway Authority of India. …Appellant.
Versus
Vidya Devi. ...Respondent.
r to
8. Arbitration Appeal No.55 of 2024
National Highway Authority of India.
Versus
…Appellant.
Pradeep Kumar. …Respondent.
9. Arbitration Appeal No.56 of 2024
National Highway Authority of India. …Appellant.
Versus
Meena Kumari. ...Respondent.
10. Arbitration Appeal No.58 of 2024
National Highway Authority of India. …Appellant.
Versus
Gursev Singh. ...Respondent.
11. Arbitration Appeal No.59 of 2024
National Highway Authority of India. …Appellant.
Versus
Hari Krishan. ...Respondent.
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12. Arbitration Appeal No.60 of 2024
National Highway Authority of India. …Appellant.
Versus
.
Shalu & Ors. …Respondents.
13. Arbitration Appeal No.61 of 2024
National Highway Authority of India. …Appellant.
Versus
Gandhi & Anr. ...Respondents.
r to
14. Arbitration Appeal No.63 of 2024
National Highway Authority of India.
Versus
…Appellant.
Onkar & Anr. …Respondents.
15. Arbitration Appeal No.64 of 2024
National Highway Authority of India. …Appellant.
Versus
Pawan Kumar Guleria. …Respondent.
16. Arbitration Appeal No.68 of 2024
National Highway Authority of India. …Appellant.
Versus
Nita. ...Respondent.
Coram:
Ms. Justice Jyotsna Rewal Dua, Judge.
Whether approved for reporting? Yes
For the appellant : Mr. K.D.Shreedhar, Sr. Advocate
with Ms. Shreya Chauhan,
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Advocate, for the appellant, in all
the matters.
For the respondent(s) : Ms. Deepa, Advocate, vice Ms.
Suchitra Sen, Mr. G.R. Palsra,
.
Mr. Varun Rana and Ms.
Bhawna Sharma, Advocates, for
the respondent(s), in their
respective cases.
Jyotsna Rewal Dua, Judge
The National Highway Authority of India (for short
‘NHAI’) feeling aggrieved against the dismissal of its
applications on
r 04.12.2021 under Section 34 of the
Arbitration & Conciliation Act, 1996 (for short ‘the Act’) by
the learned District Judge, Mandi (H.P.) has taken recourse
to institution of these arbitration appeals under Section 37 of
the Act.
2. Facts.
2(i). All these appeals arise out of the acquisition of land
by the appellant in Mohal Chamukha, Tehsil Sundernagar,
District Mandi (H.P.).
2(ii). Notification under Section 3A(1) of the National
Highways Act, 1956 (for short ‘NH Act’), was published in the
official Gazettee on 21.04.2012 for acquiring the subject land
for four laning of NH-21 (Bilaspur-Ner Chowk Section).
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2(iii). Notification under Section 3D(1) of the NH Act,
was issued in the official Gazette on 01.04.2013.
.
2(iv). Notification under Section 3G(3) of the NH Act
inviting claims from interested persons was published in the
newspapers on different dates from January to April 2013.
2(v). For the land covered by the above notifications,
the Competent Authority Land Acquisition (‘CALA’)
announced award No.45/2013-14 on 31.10.2013. In terms of
the award, market value of the land was assessed at
Rs.50,00,000/- per bigha.
2(vi). Seeking enhancement in the market value of the
acquired land, the landowners filed their claim petitions
under Section 3G(5) of the NH Act before the notified
Arbitrator. Learned Arbitrator passed the award on
28.11.2017 under Section 3G(5) of the NH Act. The claim
petitions filed by the landowners were allowed. The market
value of the acquired land was enhanced to Rs.68,16,513/-
per bigha.
2(vii). The NHAI feeling aggrieved against the
enhancement in the market value determined by the
Arbitrator took recourse to Section 34 of the Act and filed
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applications assailing the awards passed in favour of the
landowners before the learned District Judge, Mandi. All
.
these applications moved under Section 34 of the Act by
NHAI were clubbed and vide common judgment passed on
04.12.2021, the same were dismissed.
It is in the aforesaid background that NHAI has
now taken recourse to Section 37 of the Act and has assailed
the judgment dated 04.12.2021 passed by the learned
District Judge in all these matters.
3. Submissions.
3(i). Learned Senior Counsel for the appellant
contended that:-
3(i)(a). The proceedings had commenced before the
learned Arbitrator on 06.02.2015, whereas the award was
passed on 28.11.2017. In view of Section 29A of the Act,
which came into force w.e.f. 23.10.2015, the award was
required to be passed within 12 months from the date of
entering upon reference. The award passed by the learned
Arbitrator on 28.11.2017 was non est as the Arbitrator had
become functus officio on that date.
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3(i)(b). The second ground urged for the appellant is that
reliance placed by the learned Arbitrator upon a sale deed
.
having registration No.781/2008 pertaining to land
measuring 0-4-4 bighas situated at Mohal Thala was
misplaced. The aforesaid sale deed pertained to a different
revenue estate. Mohal Thala is adjacent to Sundernagar,
however village Chamukha, where the subject lands were
acquired, is not adjacent to Sundernagar. Learned Arbitrator
had wrongly held that Mohal Chamukha and Thala are in
contiguity.
3(i)(c). It was also submitted that Sale deed relied upon
by learned Arbitrator pertaining to Mohal Thala was for a
very small area compared to large tracts of land acquired
under the questioned land acquisition process. It could not
have been relied upon for assessing the market value of large
tracts of land. That learned Arbitrator has applied 33%
deduction, whereas deduction should not have been less
than 60-70%.
3(i)(d). Yet another point put forth is that the learned
Court below failed to appreciate the fact that while
enhancing the market value, the Arbitrator had wrongly
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taken into consideration the inspection report prepared by a
retired Officer of the State Administrative Service. Provisions
.
of Civil Procedure Code do not apply to the arbitration
proceedings. Therefore, the aforesaid report could not be
looked into.
3(i)(e). It was also contended that the Arbitrator had not
followed the procedure & parameters laid down in Section
3G(7) of the NH Act. The award passed by him, therefore,
suffers from patent illegality and is required to be declared as
void.
3(ii). Learned counsel for the respondents defended the
award passed by learned Arbitrator as also the judgment
passed by learned District Judge.
4. CONSIDERATION.
4(i). Arbitrator – functus officio.
In Construction Company & Anr. vs. Shimla
Municipal Corporation & Ors.1, it has been held that
provisions of Section 29A of the Act will not be applicable to
the arbitration proceedings that had started before the
Arbitration & Conciliation (Amendment) Act, 2015 (3 of 2016)
came into force.
1 AIR 2017 HP 103 ::: Downloaded on - 24/09/2024 20:29:19 :::CIS -9- 2024:HHC:8730
In the instant case, the proceedings commenced
before the learned Arbitrator on 06.02.2015, whereas Section
.
29A of the Act came into force from 23.10.2015, therefore,
learned District Judge did not err in holding that the award
passed in the present case cannot be held to be non est.
4(ii). Contiguity of Mohal Thala with Mohal
Chamukha:-
r to
Learned District Judge in paragraph 31 of the
judgment has recorded that:-
“It is not disputed that land in Muhal Thala and
Muhal Chamukha are located in continuity. Both
parcels of land were located adjacent to theroadside. Since the land was acquired for
widening, it was natural that the land located
adjacent to roadside would be acquired.”
In view of the stand taken by the appellant before
the learned District Judge about contiguity of Mohal Thala
with Mohal Chamukha, there arises no reason to question
the same in this appeal.
4(iii). Sale deed pertaining to Mohal Thala.
While enhancing the market value of the acquired
land in Mohal Chamukha, learned Arbitrator had taken into
consideration sale deed Exhibit-PB pertaining to the land in
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Muhal Thala. This was justified as held by the learned
District Judge:-
.
The appellant had already admitted in its
pleadings before the Arbitrator that the circle rate
was not relevant for determining the market value.
The appellant had not filed any sale deed/evidence
before the Arbitrator to show the market value.
The
Arbitrator had no other
determining the market value except the sale
r material fordeed, Exhibit-PB.
It was an otherwise admitted position that Mohal
Thala was contiguous to Muhal Chamukha.
Hence, reliance placed by learned Arbitrator upon
sale deed, Exhibit-PB, pertaining to land located in
Muhal Thala for enhancing the market value of
land in Muhal Chamukha, cannot be faulted.
4(iv). Small tract of land/deduction:-
A contention has been raised for the appellant
that the sale deed relied upon was in respect of 0-4-4 bighas,
whereas the land acquired runs in several bighas (33 bighas
approximately). Therefore, the sale deed for small parcel of
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land could not have been made the basis for determining
market value for the acquired large chunk of land. It was
.
also urged that deduction in the amount should have been to
the extent of 60-70% and not just 33%.
As observed by the learned District Judge, learned
Arbitrator had considered the sale deed, Exhibit-PB, for
determining the market value, as it was the only piece of
evidence of the rate of purchase of land, available before him.
The sale deed, however, pertained to the year 2008, whereas
notifications in the instant case were issued in the year
2012. Learned Arbitrator justly increased the value by 10%.
This increase cannot be said to be excessive. [Refer Land
Acquisition Officer vs. Raman2]
In Spl. Land Acquisition Officer & Anr. vs.
M.K. Rafiq Saheb3, the Hon’ble Supreme Court held that
there is no absolute rule that sale instances of smaller
chunks of land cannot be considered when a large tract of
land is acquired. In certain scenarios, such sale deeds
pertaining to smaller pieces of land can be put to use for
determining the value of acquired land which is
2
(2005) 9 SCC 594
3
(2011) 7 SCC 714::: Downloaded on – 24/09/2024 20:29:19 :::CIS
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comparatively large in area. The Court further held that it is
hardly possible for a claimant to produce sale instances of
.
large tracts of land as they are generally very far & few and
normally the sale instances would relate to small pieces of
land. The Apex Court noted that this limitation of sale
transaction cannot operate to the disadvantage of the
claimant. Relevant paragraphs from the judgment reads as
under:-
r to
“19. The judgment of the High Court is well reasoned
and well considered. We find no perversity in its
reasoning. The only issue is that Ex. P-5, which was
relied upon by the High Court, relates to a small piece
of land, whereas the acquisition is of a larger piece of
land. It is not an absolute rule that when the acquired
land is a large tract of land, sale instances relating to
smaller pieces of land cannot be considered. There are
certain circumstances when sale deeds of small pieces
of land can be used to determine the value of acquired
land which is comparatively large in area, as can be
seen from the judicial pronouncements mentioned
hereunder.
20. It has been held in the case of Land Acquisition
Officer, Kammarapally Village, Nizamabad District,
Andhra Pradesh v. Nookala Rajamallu and Ors.4 that:-
“6. Where large area is the subject-matter of
acquisition, rate at which small plots are sold
cannot be said to be a safe criterion.
Reference in this context may be made to few
decisions of this Court in Collector of
Lakhimour v. Bhuban Chandra Dutta5, Prithvi4
(2003) 12 SCC 334
5
(1972) 4 SCC 236 : AIR 1971 SC 2015::: Downloaded on – 24/09/2024 20:29:19 :::CIS
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Raj Taneja v. State of M.P.6 and Kausalya
Devi Bogra v. Land Acquisition Officer7 .
7. It cannot, however, be laid down as an
absolute proposition that the rates fixed for.
the small plots cannot be the basis for
fixation of the rate. For example, where there
is no other material, it may in appropriate
cases be open to the adjudicating Court to
make comparison of the prices paid for small
plots of land. However, in such cases
necessary deductions/adjustments have to
be made while determining the prices.”
21. In the case of Bhagwathula Samanna and Ors. v.
Special Tahsildar and Land Acquisition Officer 8, it was
held:
“13. The proposition that large area of land
r cannot possibly fetch a price at the same
rate at which small plots are sold is notabsolute proposition and in given
circumstances it would be permissible to
take into account the price fetched by the
small plots of land. If the larger tract ofland because of advantageous position is
capable of being used for the purpose for
which the smaller plots are used and is
also situated in a developed area with littleor no requirement of further development,
the principle of deduction of the value forpurpose of comparison is not warranted.”
22. In Land Acquisition Officer, Revenue Divisional
Officer, Chittoor v. Smt. L. Kamalamma (dead) by Lrs.
and others9, this Court held as under:-
“6. …when no sales of comparable land was
available where large chunks of land had
been sold, even land transactions in respect
of smaller extent of land could be taken note
of as indicating the price that it may fetch in
respect of large tracts of land by making
appropriate deductions such as for
6
AIR 1977 SC 1560
7
AIR 1984 SC 892
8
(1991) 4 SCC 506
9
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development of the land by providing enough
space for roads, sewers, drains, expenses
involved in formation of a lay out, lump sum
payment as also the waiting period required
for selling the sites that would be formed.”
.
23. Further, it has also been held in the case of Smt.
Basavva and Ors. v. Special Land Acquisition Officer
and Ors.10, that the court has to consider whether sales
relating to smaller pieces of land are genuine and
reliable and whether they are in respect of comparable
lands. In case the said requirements are met, sufficient
deduction should be made to arrive at a just and fair
market value of large tracts of land. Further, the court
stated that the time lag for real development and the
waiting period for development were also relevant
factors to be considered in determining compensation.
The court added that each case depended upon its own
facts. In the said case, based on the particular facts
and circumstances, this court made a total deduction of
65% in determination of compensation.
24. It may also be noticed that in the normal course
of events, it is hardly possible for a claimant to produce
sale instances of large tracts of land. The sale of land
containing large tracts are generally very far and few.
Normally, the sale instances would relate to small
pieces of land. This limitation of sale transaction cannot
operate to the disadvantage of the claimants. Thus, the
Court should look into sale instances of smaller pieces
of land while applying reasonable element of
deduction.”
On deductions, the Apex Court in Lal Chand vs.
Union of India & Anr.11 held, inter alia, that development of
road is not necessary for widening the National Highway.
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In C.R.Nagaraja Shetty (2) vs. Spl. Land
Acquisition Officer and Estate Officer & Anr.12 also, land
.
was acquired for widening the highway. Deduction of Rs.25/-
per sq.ft. made by the High Court was not accepted, as
development of the land was not held necessary for widening
the highway. Relevant paragraphs from the judgment read as
under:-
“12. That leaves us with the other question of
deduction ordered by the High Court. The High Court
has directed the deduction of Rs.25/- per square feet.
Unfortunately, the High Court has not discussed the
reason for this deduction of Rs.25/- per square feet norhas the High Court relied on any piece of evidence for
that purpose.
13. It is true that where the lands are acquired for
public purpose like setting up of industries or setting up
of housing colonies or other such allied purposes, the
acquiring body would be entitled to deduct some
amount from the payable compensation on account ofdevelopment charges, however, it has to be established
by positive evidence that such development charges arejustified. The evidence must come for the need of
development contemplated and the possible
expenditure for such development. We do not find any
such discussion in the order of the High Court.
14. As if this is not sufficient, when we see the
judgment of the Principal Civil Judge (Sr. Division),
Bangalore, Rural District, Bangalore in Reference
proceedings, we find that there is no deduction ordered
for the so-called development charges. We are,
therefore, not in a position to understand as to from
where such development charges sprang up.
15. The Learned Counsel appearing on behalf of the
respondents was also unable to point out any such
12
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evidence regarding the proposed development. We
cannot ignore the fact that the land is acquired only for
widening of the National Highway. There would,
therefore, be no question of any such development or
any costs therefor.
.
16. In Nelson Fernandes and Others Vs. Special
Land Acquisition Officer, South Goa & Ors 13, this Court
has discussed the question of development charges.
That was a case, where, the acquisition was for laying
a Railway line. This Court found that the land under
acquisition was situated in an area, which was
adjacent to the land already acquired for the same
purpose, i.e., for laying Railway line. In paragraph 29,
the Court observed that the Land Acquisition Officer,
the District Judge and the High Court had failed to
notice that the purpose of acquisition was for Railways
and that the purpose is a relevant factor to be taken
into consideration for fixing the compensation.
17. The Court in Nelson Fernandes 13 relied on
Viluben Jhalejar Contractor Vs. State of Gujarat 14,
where it was held that:-
“29. ……the purpose for which the land is
acquired, must also be taken into
consideration in fixing the market value and
the deduction of development charges.”
Further, in paragraph 30, the Court specifically
referred to the deduction for the development charges
and observed:-
“30. We are not, however, oblivious of the fact
that normally 1/3rd deduction of further
amount of compensation has been directed in
some cases. However, the purpose for which
the land is acquired must also be taken into
consideration. In the instant case, the land
was acquired for the construction of new BG
line for the Konkan Railways. …. In the
instant case, acquisition is for laying a
railway line. Therefore, the question of
development thereof would not arise.”
13
(2007) 9 SCC 447
14
2005(4) SCC 789
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The Court made a reference to two other cases,
viz., Hasanali Khanbhai & Sons Vs. State of Gujarat 15
and Land Acquisition Officer Vs. Nookala Rajamallu 16,
where, the deduction by way development charges,
was held permissible.
.
18. The situation is no different in the present case.
All that the acquiring body has to achieve is to widen
the National Highway. There is no further question of
any development. We again, even at the cost of
repetition, reiterate that no evidence was shown before
us in support of the plea of the proposed development.
We, therefore, hold that the High Court has erred in
directing the deduction on account of the developmental
charges at the rate of Rs.25/- per square feet out of the
ordered compensation at the rate of Rs.75/- per square
feet. We set aside the judgment to that extent.”
In V.Hanumantha Reddy (dead) by LRs vs. The
Land Acquisition Officer & Mandal R. Officer 17, the Apex
Court held that the land might be having high potentialities
or proximity to developed area, but that by itself would not
be a reason for not deducting developmental charges. The
Court relied upon its judgment rendered in Kasturi & Ors.
vs. State of Haryana18 wherein it was held that there may
be various factual factors which may have to be taken into
consideration while deducting the compensation towards
developmental charges. In some cases, deduction may be
more than 1/3rd and in some cases less than 1/3rd. There is
15
1995 (5) SCC 422
16
2003(12) SCC 334
17
(2003) 12 SCC 642
18
(2003) 1 SCC 354
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difference between a developed area and an area having
potential value, but is yet to be developed. The fact that an
.
area is developed or adjacent to a developed area will not ipso
facto make every land situated in the area also developed to
be valued as a building site or plot, particularly when vast
tracts are acquired for development purposes.
While deciding Mala etc. vs. State of Punjab &
Ors.19, the Apex Court reiterated that while determining the
deduction for development charges, the Court should keep in
mind the nature of land, area under acquisition, whether the
land is developed or not, if developed, to what extent, the
purpose of acquisition etc. The percentage of deduction or
the extent of area required to be set apart has to be assessed
by the Courts having regard to the size, shape, situation,
user etc. of the land acquired. It is essentially a kind of
guess-work, the Courts are expected to undertake.
In view of above, neither the reliance placed upon
sale deed, Exhibit-PB, nor increase in value by 10% nor the
deduction by 33%, while determining the market value of the
acquired land can be faulted.
19
Civil Appeal No.3992-4000 of 2011, decided on 17.08.2023
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4(v). Report of Local Commissioner.
The contention that learned Arbitrator could
.
neither appoint the Local Commissioner nor his report could
be relied upon, is not tenable. Section 26 of the Act reads as
under :-
“Section 26. Expert appointed by arbitral
tribunal.Previous Next
(1) Unless otherwise agreed by the parties, the arbitraltribunal may–
(a) appoint one or more experts to report to it on specific
issues to be determined by the arbitral tribunal, and
(b) require a party to give the expert any relevant
information or to produce, or to provide access to, anyrelevant documents, goods or other property for his
inspection.
(2) Unless otherwise agreed by the parties, if a party so
requests or if the arbitral tribunal considers it necessary,the expert shall, after delivery of his written or oral report,
participate in an oral hearing where the parties have the
opportunity to put questions to him and to present expert
witnesses in order to testify on the points at issue.
(3) Unless otherwise agreed by the parties, the expert
shall, on the request of a party, make available to that
party for examination all documents, goods or other
property in the possession of the expert with which he
was provided in order to prepare his report.”
Section 26 of the Act provides that unless
otherwise agreed by the parties, the Arbitral Tribunal may
appoint one or more experts to report to it on a specific issue
to be determined by the Tribunal. The Arbitral Tribunal has
jurisdiction to appoint an expert. The only prohibition being,
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the parties should not have stipulated that no expert should
be appointed before the learned Arbitral Tribunal.
.
Admittedly, no such agreement was placed on record by the
parties. In view of above facts, learned District Judge has
correctly held that the plea that the Arbitrator could not
appoint the expert or could not consider the report of the
expert was not tenable.
Further it may be observed that the landowners
had moved before the learned Arbitrator under Section 3G(5)
of the Act, which reads as under:-
“3G(5). If the amount determined by the
competent authority under sub-section (1) or sub-
section (2) is not acceptable to either of the
parties, the amount shall, on an application by
either of the parties, be determined by the
arbitrator to be appointed by the CentralGovernment.”
In terms of the aforesaid provision, in case the
amount determined by the Competent Authority is not
acceptable to either of the parties then the amount shall be
determined by the Arbitrator to be appointed by the Central
Government. The aggrieved party has the right to produce
relevant material before the Arbitrator to prove that the
compensation determined by Competent Authority Land
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Acquisition was not correct and required to be enhanced.
The grievance projected by the appellant that the Arbitrator
.
had erred in relying upon the evidence inclusive of the report
of Local Commissioner, which was not produced before the
CALA, is not justified.
No further submissions were urged on this issue.
4(vi). The procedure not followed by the Arbitrator
Act:-
r to
as per parameters laid down in Section 3G(7) of the NH
Section 3G(7) of the NH Act reads as under:-
“3G.(7) The competent authority or the
arbitrator while determining the amount under
sub-section (1) or sub-section (5), as the case maybe, shall take into consideration–
(a) the market value of the land on the date of
publication of the notification under section 3A;
(b) the damage, if any, sustained by the
person interested at the time of taking
possession of the land, by reason of the severing
of such land from other land;
(c) the damage, if any, sustained by the
person interested at the time of taking
possession of the land, by reason of the
acquisition injuriously affecting his other
immovable property in any manner, or his
earnings;
(d) if, in consequences of the acquisition of the
land, the person interested is compelled to
change his residence or place of business, the
reasonable expenses, if any, incidental to such
change.”
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As per Section 3G(7), the Arbitrator is to
determine market value of the land as on date of publication
.
of notification under Section 3A of the Act. Damage to
land/person/property & reasonable expenses for change of
residence etc. are also to be considered.
Both sides were in unison in their stand before
the learned Arbitrator that circle rate was not relevant for
determining the market value. The Arbitrator had considered
the sale deed of land pertaining to Mohal Thala, which was
admitted to be contiguous to Mohal Chamukha. It has
already been held that reliance placed upon this sale deed
was in order, this being the only piece of evidence available
on record regarding rate of purchase of land. Learned
Arbitrator had allowed 10% increase in the value for covering
the gap of five years. The Arbitrator had considered the
potentiality of the land & increased the value keeping in view
the proximity from the road and other developed areas. This
was justifiable. The increase in value by 10% cannot be said
to be excessive. Learned Arbitrator had also allowed
deduction of 33% on account of developmental charges. The
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stipulated parameters were duly considered by the
Arbitrator.
.
4(vii). Patent illegality in the Award/re-appreciation
of evidence/jurisdiction.
4(vii)(a). It is by now well-settled that the scope of
Appellate Court exercising jurisdiction under Section 37 of
the Act to review the findings in an award, is narrow/limited,
if the award has been upheld or substantially upheld under
Section 34. [Ref. Larsen Air Conditioning and
Refrigeration Company vs. Union of India20]
In Konkan Railway Corporation Ltd. Vs.
Chenab Bridge Project Undertaking 21, it was held that
jurisdiction of the Court under Section 37 of the Act is akin
to that under Section 34 of the Act. The Courts ought not to
interfere with arbitral award in a casual and cavalier
manner. Mere possibility of an alternative view on facts or
interpretation of contract does not entitle Courts to reverse
findings of the Arbitral Tribunal. Relevant paragraphs from
the decision are as follows:-
20
Civil Appeal No.3798 of 2023, decided on 11.08.2023
21
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“19. Therefore, the scope of jurisdiction under
Section 34 and Section 37 of the Act is not akin to
normal appellate jurisdiction.22 It is well-settled
that courts ought not to interfere with the arbitral
award in a casual and cavalier manner. The
.
mere possibility of an alternative view on facts or
interpretation of the contract does not entitle
courts to reverse the findings of the Arbitral
Tribunal.23 In Dyna Technologies Private Limited
v. Crompton Greaves Limited24, this Court held:
“24. There is no dispute that
Section 34 of the Arbitration Act limits a
challenge to an award only on thegrounds provided therein or as
interpreted by various courts. We need
to be cognizant of the fact that arbitral
awards should not be interfered with
in a casual and cavalier manner,unless the court comes to a conclusion
that the perversity of the award goes to
the root of the matter without there
being a possibility of alternative
interpretation which may sustain the
arbitral award. Section 34 is differentin its approach and cannot be equated
with a normal appellate jurisdiction.
The mandate under Section 34 is torespect the finality of the arbitral
award and the party autonomy to get
their dispute adjudicated by analternative forum as provided under
the law. If the courts were to interfere
with the arbitral award in the usualcourse on factual aspects, then the
commercial wisdom behind opting for
alternate dispute resolution would
stand frustrated.
25. Moreover, umpteen number of
judgments of this Court have
22
UHL Power Company Ltd. v. State of Himachal Pradesh (2022) 2 SCC (Civ) 401, para 15. See
also: Dyna Technologies Pvt Ltd v. Crompton Greaves Limited (2019) 20 SCC 1, para 24, 25.
23
ibid; Ssangyong Engineering. & Construction Company Ltd. v. National Highways Authority
of India (NHAI) (2019) 15 SCC 131; Parsa Kente Collieries Ltd. v. Rajasthan Rajya Vidyut
Utpadan Nigam Ltd., (2019) 7 SCC 236, para 11.1.
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categorically held that the courts
should not interfere with an award
merely because an alternative view on
facts and interpretation of contract
exists. The courts need to be cautious.
and should defer to the view taken by
the Arbitral Tribunal even if the
reasoning provided in the award is
implied unless such award portrays
perversity unpardonable under Section
34 of the Arbitration Act.”
XX XX XX
25. The principle of interpretation of contracts
adopted by the Division Bench of the High Court
that when two constructions are possible, then
courts must prefer the one which gives effect and
voice to all clauses, does not have absolute
application. The said interpretation is subject to
the jurisdiction which a court is called upon to
exercise. While exercising jurisdiction under
Section 37 of the Act, the Court is concerned
about the jurisdiction that the Section 34 Court
exercised while considering the challenge to the
Arbitral Award. The jurisdiction under Section 34
of the Act is exercised only to see if the Arbitral
Tribunal’s view is perverse or manifestly
arbitrary. Accordingly, the question of
reinterpreting the contract on an alternative view
does not arise. If this is the principle applicable to
exercise of jurisdiction under Section 34 of the
Act, a Division Bench exercising jurisdiction
under Section 37 of the Act cannot reverse an
Award, much less the decision of a Single Judge,
on the ground that they have not given effect and
voice to all clauses of the contract. This is where
the Division Bench of the High Court committed
an error, in re-interpreting a contractual clause
while exercising jurisdiction under Section 37 of
the Act. In any event, the decision in Radha
Sundar Dutta (supra), relied on by the High Court
was decided in 1959, and it pertains to
proceedings arising under the Village Chaukidari
Act, 1870 and Bengal Patni Taluks Regulation of
1819. Reliance on this judgment particularly for
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interfering with the concurrent interpretations of
the contractual clause by the Arbitral Tribunal
and Single Judge under Section 34 of the Act is
not justified.”
.
In Bombay Slum Redevelopment
Corporation Pvt. Ltd. Vs. Samir Barain Bhojwani 25, the
Hon’ble Apex Court emphasized that supervisory role of
Courts is very restricted in dealing with appeals under
Section 37 of the Act. Scope of interference in a petition
under Section 34 of the Act is very narrow. Jurisdiction
under Section 37 of the Act is narrower. By their own
volition, the parties choose to go before the Arbitral Tribunal
instead of availing remedy before the traditional Civil Courts.
Therefore, Courts must be very conservative while dealing
with arbitral awards and confine themselves to the grounds
strictly available under Section 34 of the Act.
4(vii)(b). In Reliance Infrastructure Ltd. vs. State of
Goa26, the Hon’le Apex Court held that ‘patent illegality’ in
the award calls for interference but a mere illegality is not
patent illegality. It ought to be apparent on the face of the
award and not the one which is culled out by way of a long
25
(2024) 7 SCC 218
26
(2024) 1 SCC 479
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drawn analysis of pleadings and evidence. Relevant
paragraphs of the decision relevant to the context are under:-
.
“57. As noticed, arbitral award is not an ordinary
adjudicatory order so as to be lightly interfered with by
the Courts under Sections 34 or 37 of the Act of 1996 as if
dealing with an appeal or revision against a decision ofany subordinate Court. The expression “patent illegality”
has been exposited by this Court in the cases referred
hereinbefore. The significant aspect to be reiterated is
that it is not a mere illegality which would call for
interference, but it has to be “a patent illegality”, which
obviously signifies that it ought to be apparent on the face
of the award and not the one which is culled out by way
of a long-drawn analysis of the pleadings and evidence.
58. Of course, when the terms and conditions of the
agreement governing the parties are completely ignored,
the matter would be different and an award carrying
such a shortcoming shall be directly hit by Section 28(3)
of the Act, which enjoins upon an Arbitral Tribunal to
decide in accordance with the terms of contract while
taking into account the usage of trade applicable to the
transaction. As said by this Court in Associate Builders
vs. DDA27, if an Arbitrator construes the term of contract
in a reasonable manner, the award cannot be set aside
with reference to the deduction drawn from construction.
The possibility of interference would arise only if the
construction of the Arbitrator is such which could not be
made by any fairminded and reasonable person.
95. The narrow scope of “patent illegality” cannot be
breached by mere use of different expressions which
nevertheless refer only to “error” and not to “patent
illegality”. We are impelled to reiterate what has been
stated and underscored by this Court in Delhi Airport
Metro Express (P) Ltd. Vs. DMRC28 that restraint is
required to be shown while examining the validity of
arbitral award by the Courts, else interference with the
award after reassessing the factual aspects would be
defeating the object of the Act of 1996. This is apart from
the fact that such an approach would render several
27
(2015) 3 SCC 49
28
(2022) 1 SCC 131
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judicial pronouncements of this Court redundant if the
arbitral awards are set aside by categorizing them as
“perverse” or “patently illegal” without appreciating the
contours of these expressions.”
.
In the Larsen Air Conditioning and
Refrigeration Company’s case,14 the Hon’ble Apex Court
held that Section 34 of the Act, permits the Court to interfere
with an award, sans the grounds of patent illegality, i.e., that
illegality must go to the root of the matter and cannot be of a
trivial nature. Relevant paragraphs from the decision reads
as under:-
15. The limited and extremely circumscribed
jurisdiction of the court under Section 34 of the Act,
permits the court to interfere with an award, sans thegrounds of patent illegality, i.e., that “illegality must go
to the root of the matter and cannot be of a trivial
nature”; and that the tribunal “must decide in
accordance with the terms of the contract, but if anarbitrator construes a term of the contract in a
reasonable manner, it will not mean that the awardcan be set aside on this ground” [ref: Associate
Builders (supra)]. The other ground would be denial of
natural justice. In appeal, Section 37 of the Act grantsnarrower scope to the appellate court to review the
findings in an award, if it has been upheld, or
substantially upheld under Section 34. It is important
to notice that the old Act contained a provision 29 which
enabled the court to modify an award. However, that
power has been consciously omitted by Parliament,
while enacting the Act of 1996. This means that the
Parliamentary intent was to exclude power to modify
29
“15. Power of court to modify award.–The court may by order modify or correct an award–
(a) where it appears that a part of the award is upon a matter not referred to arbitration and such part can be
separated from the other part and does not affect the decision on the matter referred; or
(b) where the award is imperfect in form, or contains any obvious error which can be amended without
affecting such decision; or
(c) where the award contains a clerical mistake or an error arising from an accidental slip or omission.”
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an award, in any manner, to the court. This position
has been iterated decisively by this Court in Project
Director, National Highways No. 45E and 220 National
Highways Authority of India v M. Hakeem30:
.
“42. It can therefore be said that this question
has now been settled finally by at least 3
decisions [McDermott International Inc. v. Burn
Standard Co. Ltd.31], [Kinnari Mullick v.
Ghanshyam Das Damani32], [Dakshin Haryana
Bijli Vitran Nigam Ltd. v. Navigant Technologies
(P) Ltd.33] of this Court. Even otherwise, to state
that the judicial trend appears to favour an
interpretation that would read into Section 34 apower to modify, revise or vary the award would
be to ignore the previous law contained in the
1940 Act; as also to ignore the fact that the 1996
Act was enacted based on the Uncitral Model
Law on International Commercial Arbitration,1985 which, as has been pointed out in Redfern
and Hunter on International Arbitration, makes it
clear that, given the limited judicial interference
on extremely limited grounds not dealing with the
merits of an award, the “limited remedy” under
Section 34 is coterminous with the “limited right”,namely, either to set aside an award or remand
the matter under the circumstances mentioned in
Section 34 of the Arbitration Act, 1996.”
In S.V. Samudram vs. State of Karnataka34,
the Hon’ble Apex Court held that jurisdiction of Court under
Section 34 is fairly narrow and moreover, when it comes to
jurisdiction under Section 37 it is all the more
circumscribed. The relevant paragraphs from the decision
reads as under:-
30
(2021) 5 SCR 368
31
(2006) 11 SCC 181
32
(2018) 11 SCC 328 : (2018) 5 SCC (Civ) 106
33
(2021) 7 SCC 657
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“46. It has been observed by this Court in MMTC Ltd.
v. Vedanta Ltd.35
“14. As far as interference with an order
made under Section 34, as per Section 37, is
.
concerned, it cannot be disputed that such
interference under Section 37 cannot travel
beyond the restrictions laid down under
Section 34. In other words, the court cannot
undertake an independent assessment of the
merits of the award, and must only ascertain
that the exercise of power by the court under
Section 34 has not exceeded the scope of the
provision. Thus, it is evident that in case an
arbitral award has been confirmed by the
court under Section 34 and by the court in an
appeal under Section 37, this Court must be
extremely cautious and slow to disturb such
concurrent findings.”
(Emphasis Supplied)
47. This view has been referred to with approval by
a bench of three learned Judges in UHL Power
Company Ltd v. State of Himachal Pradesh 36. In respect
of Section 37, this court observed:-
“16. As it is, the jurisdiction conferred on
courts under Section 34 of the Arbitration Actis fairly narrow, when it comes to the scope
of an appeal under Section 37 of theArbitration Act, the jurisdiction of an
appellate court in examining an order, setting
aside or refusing to set aside an award, is allthe more circumscribed.”
xx xx xx
49. We may also notice that the circumscribed nature
of the exercise of power under Sections 34 and 37 i.e.,
interference with an arbitral award, is clearly
demonstrated by legislative intent. The Arbitration Act
of 1940 had a provision (Section 15) which allowed for35
(2019) 4 SCC 163
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a court to interfere in awards, however, under the
current legislation, that provision has been omitted. 37
50. The learned Single Judge, similar to the learned
Civil Judge under Section 34, appears to have not.
concerned themselves with the contours of Section 37
of the A&C Act. The impugned judgment 38 reads like a
judgment rendered by an appellate court, for whom re-
examination of merits is open to be taken as the course
of action.”
In the backdrop of above legal position, the award
passed by the learned Arbitrator cannot be said to be
suffering from any patent illegality, necessitating interference
by the Court. The learned District Judge has examined the
award in accordance with law vis-à-vis the contentions urged
by the appellant and did not find any ground in exercise of
jurisdiction under Section 34 of the Arbitration Act for
interfering with it. Having considered the impugned
judgment, the award and the contentions now urged, I do not
find it a case to interfere in essence of limited jurisdiction
under Section 37 of the Act.
5. In view of above discussion, no case is made out
to interfere with the impugned judgment dated 04.12.2021,
whereby applications moved by the appellant under Section
37
Larsen Air Conditioning and Refrigeration Company v. Union of India and Others 2023 SCC
OnLine 982 (2-Judge Bench)
38
S.V. Samudram v. State of Karnataka, 2017 SCC OnLine Kar 6559
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34 of the Act were dismissed and the award passed by the
learned Arbitrator was affirmed. Accordingly, all these
.
appeals under Section 37 of the Act are dismissed. Pending
miscellaneous application(s), if any, shall also stand disposed
of.
Jyotsna Rewal Dua
18 September, 2024
th
Judge
(Pardeep)
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