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LAND ACQUISITION – NATIONAL HIGHWAYS ACT – ARBITRATION – JUST COMPENSATION – APPLICABILITY OF RFCTLARR ACT – SCOPE OF INTERFERENCE UNDER SECTIONS 34 & 37 OF ARBITRATION ACT – PATENT ILLEGALITY – REASONS IN AWARD

A. National Highways Act – Sections 3G(5), 3G(7), 3J – RFCTLARR Act, 2013 – Sections 26 & 28 – Applicability of all parameters under Section 28 – “Just compensation” – Article 14 – Article 300A

Where land acquired under National Highways Act forms part of enactments included in Fourth Schedule of RFCTLARR Act, 2013, all beneficial provisions relating to determination of compensation under Sections 26 to 28 of RFCTLARR Act become applicable by virtue of Removal of Difficulties Order dated 28.08.2015 – Section 3G(7)(a) of NH Act only provides basic parameters and does not exclude broader principles under Section 28 of RFCTLARR Act – Determination of compensation under different acquisition enactments cannot discriminate between similarly situated land losers – Section 3J of NH Act, to extent it excludes such benefits, would offend Article 14 – “Just and fair compensation” must guide interpretation.
(Paras 12 to 18)

Facts Analysis:

Lands belonging to claimants were acquired for Bengaluru–Mysore NH-275 project. SLAO fixed compensation based on agricultural guideline value under 2014 notification. Arbitrator enhanced compensation considering converted residential/industrial nature of lands and later guideline notifications. NHAI challenged award contending Section 28 RFCTLARR Act was inapplicable. Supreme Court rejected said contention.
(Paras 4 to 18)

Ratio:

All parameters under Sections 26 and 28 of RFCTLARR Act, 2013 apply to acquisitions under NH Act by virtue of Fourth Schedule inclusion and Removal of Difficulties Order, 2015. Compensation under compulsory acquisition statutes must satisfy constitutional requirement of fairness and equality.
(Paras 16 to 18)

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B. Arbitration under NH Act – Nature of proceedings – Difference from consensual commercial arbitration – Duty of Arbitrator to determine fair compensation – Requirement of reasons

Arbitration under National Highways Act is statutory and not consensual contractual arbitration – Land loser has no bargaining equality – Arbitrator determining compensation must advert to Sections 26 to 28 RFCTLARR Act and assign reasons demonstrating comparative analysis – Absence of proper reasoning regarding market value determination may amount to patent illegality under Section 34(2A) of Arbitration and Conciliation Act.
(Paras 11, 23, 24)

Facts Analysis:

Court observed that unlike commercial arbitration arising from contractual terms, statutory arbitration under NH Act concerns compulsory deprivation of property and determination of fair compensation. Therefore, stricter scrutiny regarding adequacy of reasons is necessary.
(Paras 11, 23)

Ratio:

In statutory land acquisition arbitration, Arbitrator must record intelligible reasons showing consideration of material evidence and comparative valuation principles. Failure to do so violates Sections 28(2) and 31(3) of Arbitration Act and constitutes patent illegality.
(Paras 23, 24)

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C. Arbitration and Conciliation Act, 1996 – Section 34 – Patent illegality – Scope of judicial review

Patent illegality must go to root of matter – Mere erroneous application of law or re-appreciation of evidence is impermissible – Award becomes vulnerable where Arbitrator ignores vital evidence, acts perversely, relies upon material behind back of parties, or gives no intelligible reasons.
(Paras 19, 22, 25)

Law Analysis:

Court extensively referred to principles in:

• Associate Builders v. DDA
• Ssangyong Engineering & Construction Co. Ltd. v. NHAI
• Delhi Airport Metro Express Pvt. Ltd. v. DMRC
• Dyna Technologies Pvt. Ltd. v. Crompton Greaves Ltd.

Court reiterated that absence of proper reasoning, reliance on undisclosed material, or findings unsupported by evidence would amount to patent illegality.
(Paras 19 to 25)

Ratio:

Court exercising jurisdiction under Sections 34 and 37 cannot sit in appeal over arbitral award; however, where award suffers from perversity, absence of reasons, or violation of natural justice, interference is justified.
(Paras 19 to 25)

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D. Market value – Guideline value notification subsequent to acquisition notification – Whether can be relied upon

Subsequent guideline notification issued shortly after acquisition notification can be relied upon where revision process had commenced prior to acquisition notification and where escalation in market value is evident – No straightjacket formula applies in land valuation.
(Paras 31 to 35)

Facts Analysis:

Acquisition notification issued on 01.02.2016. Arbitrator relied upon guideline notification dated 28.03.2016. NHAI contended subsequent notification could not be basis for compensation. Court noticed revision process had commenced through notification dated 14.09.2015 and revised values merely reflected escalation already underway.
(Paras 31 to 35)

Ratio:

Reliance on guideline value notification issued subsequent to acquisition notification is not per se illegal where surrounding circumstances establish that revised valuation process had already commenced and revised rates merely reflect proximate escalation in value.
(Paras 32 to 34)

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E. Violation of principles of natural justice – Reliance upon “Zunadu” and “City Greens” valuation without pleadings/evidence

Application of valuation fixed for different layouts such as “Zunadu” and “City Greens” to acquired lands without pleadings, evidence, comparative material, and opportunity to rebut amounts to violation of principles of natural justice and absence of reasons.
(Paras 36, 37)

Facts Analysis:

Though Arbitrator adopted higher valuation applicable to “Zunadu” and “City Greens” layouts, there was no pleading, evidence, or comparative analysis establishing parity with acquired lands. NHAI had no opportunity to rebut such reliance.
(Paras 36, 37)

Ratio:

Before applying market value of different lands/layouts to acquired property, necessary pleadings, evidence, and opportunity to rebut must exist; otherwise award becomes vulnerable under Sections 34(2A), 28(2), and 31(3) of Arbitration Act.
(Paras 36, 37)

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FINAL DISPOSITION

Supreme Court held:

• Sections 26 to 28 of RFCTLARR Act apply to acquisitions under NH Act.
• Reliance upon subsequent 2016 guideline notification was not itself illegal.
• However, Arbitrator failed to assign proper reasons and failed to provide evidentiary basis for applying values of “Zunadu” and “City Greens”.
• Such deficiency amounted to patent illegality and violation of natural justice.
• Courts under Sections 34 and 37 cannot modify compensation but may set aside and remit award.

(Paras 23 to 37)