National Highways Act, 1956 — Section 3G(6) — Arbitration for enhancement of compensation — Dismissal on ground of limitation — Principles of natural justice — Opportunity of hearing — Mandatory. Arbitration and Conciliation Act, 1996 — Applicability to NH Act arbitrations — Arbitrator rejecting claim without notice — Impermissibility. Constitution of India — Articles 14 & 300-A — Expropriatory legislation — Fair procedure — Compensation determination — Requirement of adherence to natural justice. Held: Even where an application under Section 3G(6) of the National Highways Act, 1956 is alleged to be barred by limitation, the Arbitrator cannot dismiss the same at the threshold without issuing notice and affording opportunity of hearing; such dismissal amounts to violation of principles of natural justice and is liable to be set aside. (Paras 13 to 16)

advocatemmmohan

National Highways Act, 1956 — Section 3G(6) — Arbitration for enhancement of compensation — Dismissal on ground of limitation — Principles of natural justice — Opportunity of hearing — Mandatory.

Arbitration and Conciliation Act, 1996 — Applicability to NH Act arbitrations — Arbitrator rejecting claim without notice — Impermissibility.

Constitution of India — Articles 14 & 300-A — Expropriatory legislation — Fair procedure — Compensation determination — Requirement of adherence to natural justice.

Held:
Even where an application under Section 3G(6) of the National Highways Act, 1956 is alleged to be barred by limitation, the Arbitrator cannot dismiss the same at the threshold without issuing notice and affording opportunity of hearing; such dismissal amounts to violation of principles of natural justice and is liable to be set aside.
(Paras 13 to 16)

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FACTS (As emerging from the Judgment)

1. The petitioners purchased plots in a TUDA-approved layout (TLP No.1/2014/A) and their lands were acquired for NH-71 (Renigunta–Poyya Section) under the National Highways Act, 1956. (Para 2)

2. Compensation was determined treating the plots as agricultural lands, which according to the petitioners resulted in meagre compensation. (Para 2)

3. Aggrieved, the petitioners filed arbitration applications under Section 3G(6) of the National Highways Act, 1956 seeking enhancement of compensation. (Para 2)

4. The District Collector / Arbitrator (2nd respondent) dismissed the arbitration applications by proceedings dated 18-01-2024, holding that they were barred by limitation, reckoning limitation from the date of award dated 16-11-2018. (Paras 2 & 12)

5. The petitioners contended that:

   • The award was passed behind their back.

   • Compensation was paid only on 04-10-2021, which was received under protest.

   • Limitation would commence only from the date of receipt/payment of compensation. (Para 2)

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ISSUE FOR CONSIDERATION

Whether the dismissal of arbitration applications under Section 3G(6) of the National Highways Act, 1956 on the ground of limitation, without issuing notice and without affording opportunity of hearing, is sustainable in law.

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LAW CONSIDERED

• Section 3G(6), National Highways Act, 1956

• Arbitration and Conciliation Act, 1996

• Article 137, Limitation Act, 1963

• Articles 14 & 300-A, Constitution of India

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ANALYSIS & REASONING OF THE COURT

Nature of NH Act Arbitration

The Court noted that Section 3G(6) of the National Highways Act, 1956 confers a statutory right upon landowners to seek enhancement of compensation and makes the Arbitration and Conciliation Act, 1996 applicable to such arbitrations. (Paras 10 & 11)

Dismissal on Limitation — Without Hearing

The Court observed that the Arbitrator rejected the applications solely on the ground of limitation by invoking Article 137 of the Limitation Act, without issuing notice or affording an opportunity to the petitioners to explain maintainability. (Paras 12 to 14)

Violation of Natural Justice

The Court held that even if the objection of limitation is assumed to be correct, the Arbitrator cannot dismiss the application without hearing the applicant. Failure to provide an opportunity constitutes a violation of principles of natural justice. (Paras 13 & 14)

Reliance on Supreme Court Precedent

Placing reliance on Dharampal Satyapal Ltd. v. Deputy Commissioner of Central Excise, the Court reiterated that:

• Authorities cannot dispense with principles of natural justice on the presumption that no prejudice would be caused.

• Opportunity of hearing cannot be bypassed on the assumption that it would not change the outcome. (Para 15)

Expropriatory Nature of NH Act

The Court emphasized that the National Highways Act is an expropriatory legislation, and therefore, strict adherence to fair procedure is mandatory while determining compensation. (Paras 2 & 15)

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FINAL ORDER / DIRECTIONS

1. The Writ Petition was allowed. (Para 16)

2. The impugned proceedings dated 18-01-2024 passed by the 2nd respondent dismissing the arbitration applications were set aside. (Para 16)

3. The matter was remanded to the Arbitrator with a direction:

   • To issue notice to the petitioners.

   • To afford them an opportunity of hearing.

   • To adjudicate the matter afresh in accordance with law. (Para 15 & 16)

4. No order as to costs.

5. Miscellaneous applications, if any, were ordered to stand closed. (Para 16)

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RATIO DECIDENDI

An Arbitrator under Section 3G(6) of the National Highways Act, 1956 cannot dismiss an application for enhancement of compensation on the ground of limitation without issuing notice and granting opportunity of hearing; such dismissal violates principles of natural justice and is unsustainable.