Compensation U/S 3G National Highways Act Can Be Challenged Under Arbitration Act, Writ Petition Not Maintainable: Allahabad High Court

The Allahabad High Court has held that compensation awarded under Section 3G of the National Highways Act, 1956 can be challenged under the Arbitration and Conciliation Act, 1996 and writ petitions for the same will not be maintainable.

A bench of Justice Mahesh Chandra Tripathi and Justice Anish Kumar Gupta held

“Section 3G(6) of the Act, 1956 expressly provides that the provisions of the Arbitration Act, 1996 shall apply to proceedings under Section 3G. This creates a complete statutory scheme where disputes regarding compensation are to be resolved through arbitration, and challenges thereto are to be made under Section 34 of the Arbitration Act, 1996. Allowing landowners to bypass this statutory mechanism and directly approach the High Court under Article 226 would render the Arbitration Act, 1996 redundant and defeat the legislative intent.”

Section 3G of the National Highways Act, 1956 provides the mechanism for determination of compensation for the land acquired under the Act. Section 3G (5) provides that in case the determined compensation is not satisfactory, any party can approach the Central Government who shall then appoint an arbitrator. Sub-section (6) provides that the provisions of the Arbitration and Conciliation Act, 1996 shall apply to every arbitration under the NHAI Act.

After purchasing the land in question, petitioners had applied for its change in use from agricultural to non-agricultural, which was approved. In 2018, NHAI initiated acquisition proceedings under Section 3A of the 1956 Act. Petitioner filed objections before The Competent Authority Land Acquisition, Additional District Magistrate (Finance and Revenue) for redetermining compensation by treating their land as non-agricultural/ abadi land.

The Authority determined the compensation by treating the land as agricultural. Thereafter, petitioners approached the Arbitrator, who rejected their claim and upheld the order of the Competent Authority.

The award was set aside by Special Judge, SC/ST (Prevention of Atrocities) Act, Hathras, under Section 34 of the Arbitration and Conciliation Act, 1996. After multiple rounds of redetermination and setting aside of the arbitral award, the impugned award was passed whereby the compensation was enhanced to Rs.4,000/- per square meter, treating the land as abadi land situated at a distance of six meters from the main road.

This award was challenged before the High Court in writ jurisdiction.

The Court observed that primary consideration was whether the writ petition was maintainable in lieu of the remedy of appeal under Section 34 of the Arbitration and Conciliation Act, 1996.

The Court referred to Commissioner of Income Tax v. Chhabil Dass Agarwal, where the Apex Court has held that arbitral awards must be challenged by way of the statutory remedy under Section 34 of the 1996 Act except in rarest of rare exception cases where the order is passed in “complete defiance of law, without jurisdiction, or in violation of natural justice.”

The Court held that the dispute regarding determination of compensation by applying correct rates for the land are matters of facts and evidence which falls within the domain of Section 34 proceedings under the 1996 Act.

Referring to earlier judgments of the High Court where it had been held that adequacy of compensation cannot be decided in writ jurisdiction, the Court held that

“If every dissatisfied landowner is permitted to challenge arbitral awards directly through writ petitions on grounds of inadequate compensation, it would flood the High Courts with matters that are meant to be resolved through the specialized arbitration machinery. This would not only clog/ block judicial administration but also undermine the statutory arbitration process established by Parliament.”

Accordingly, the Court dismissed the writ petition with liberty to the petitioner to avail the statutory remedy under Section 34 of the Arbitration and Conciliation Act, 1996.

Case Title: Ramashankar Yadav And Another v. Union Of India And 3 Others [WRIT - C No. - 26529 of 2025]

Appearances: Mrs. Vatsala, counsel for petitioners, Pranjal Mehrotra, counsel for National Highways Authority of India, and Fuzail Ahmad Ansari, Standing Counsel for the State respondents.

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