Arbitral Award Not Providing Statutory Compensation On Land Acquired Under NHA Is Perverse: Madras High Court

The Single Bench of Justice P.T. Asha held that an Arbitrator exercising jurisdiction under the National Highways Act has to be more vigilant in ensuring that the arbitral award is fair and that the land owner is compensated adequately as per his legal entitlement. The Court upheld the order of the District Judge that had set aside the arbitral award and had directed the competent authority to pay compensation to the land owner as provided under the statute.

A specified land was acquired under the National Highways Act, 1956 and compensation was awarded to the 1^st respondent/land owner T. Palanisamy. Subsequently, certain disputes arose which were referred to arbitration. The 1^st respondent raised claims seeking enhancement in compensation and against the non-payment of compensation in respect of certain buildings acquired. Thereafter, the compensation awarded by the Special District Revenue Officer was revised and the Arbitrator cum District Collector confirmed the revised compensation. The 1^st respondent/land owner filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act) to set aside the award passed by the Arbitrator cum District Collector and to direct the competent authority to sanction the statutory benefits available to the 1^st respondent/ land owner. The petition under Section 34 of the A&C Act was allowed and the Principal District Judge set aside the arbitral award. The District Judge passed an order directing the competent authorities to pay additional market value to the first respondent along with solatium and interest. The appellant Project Director, National Highways Authority of India (NHAI) filed an appeal against the order of the District Judge under Section 37 of the A&C Act before the Madras High Court.

The appellant NHAI submitted before the Madras High Court that under the provisions of Section 34 of the A&C Act, the power of the Court is restricted and the Court does not have the power to modify or vary the award passed by the Arbitrator. The appellant contended that the Court can only set aside the award on the grounds set out in Section 34(2) of the A&C Act.

The 1^st respondent/land owner submitted that award of solatium is a statutory right and its denial by the Arbitrator can be challenged before the Court. The 1^st respondent contended that the Principal District Judge did not set aside the award passed by the Arbitrator, but only modified it to include the relief which the 1^st respondent was statutorily entitled to. Thus, the 1^st respondent averred that no appeal could lie under Section 37 of the A&C Act before the High Court.

Section 23(1-A) of the Land Acquisition Act, 1894 provides that the Court shall award an additional market value of 12% on the land acquired under the Land Acquisition Act. Additionally, Section 23 (2) provides that the Court shall award a sum of 30% on such market value, in consideration of the compulsory nature of the acquisition. Proviso to Section 28 provides for interest at the rate of 15% on the excess compensation as specified under the Land Acquisition Act.

Section 3 J of the National Highways Act, 1956 provides that nothing in the Land Acquisition Act, 1894 shall apply to an acquisition under the National Highways Act.

The High Court noted that the Supreme Court in the case of Union of India and Another versus Tarsem Singh and Others (2019) has declared that the provisions of Section 3 J of the National Highways Act are unconstitutional insofar as it relates to Section 23(1-A), Section 23 (2) and the proviso to Section 28 of the Land Acquisition Act.

The High Court observed that the first respondent/land owner was not aggrieved by the amount of compensation but with the omission to grant the statutory compensation payable under the Land Acquisition Act, which included the additional market value at 12%, solatium at 30% and interest.

The Court noted that the Supreme Court in the case of Narain Das Jain versus Agra Nagar Mahapalika (1991) had ruled that there is no discretion with the Court to not award solatium and that it automatically follows the market value of the land acquired, as a shadow would to a man.

The High Court thus held that the additional market value at 12%, solatium at 30% and interest are an integral part of the award which are not required to be pleaded by the land owner to be paid to him. The Court added that the said amounts have been omitted to be given to the land owner by the Arbitrator and the omission had been corrected by the Principal District Judge in a petition under Section 34 of the A&C Act.

The Court ruled that arbitral proceedings under the National Highways Act are not conducted by consensus amongst the parties but it is a mechanism thrust upon a land owner. The Court held that in the case of a land owner whose lands have been acquired under the National Highways Act and the Arbitrator fails to pass an order for payment of solatium, the land owner is left with no alternate to have the award corrected in a Section 34 petition.

"A land owner whose lands have been acquired under the Land Acquisition Act can have the omission rectified in the proceedings that he files in the civil Court against the award passed by the Land Acquisition Officer or in the further appeal to the Appellate Court. However, in the case of a land owner whose lands have been acquired under the NH Act and the Arbitrator fails to pass an order for payment of solatium etc., he is left with no alternate to have the award corrected in a Section 34 petition."

The Court ruled that an Arbitrator exercising jurisdiction under the National Highways Act has to be more vigilant in ensuring that the award is fair and that the person is compensated adequately as per his legal entitlement.

The Court reiterated that the payment of solatium is compulsory and is payable even in the absence of a specific plea or proof by the land owner as per the law laid down by the Supreme Court in the case of Union of India and Another versus Tarsem Singh and Others (2019). The Court thus held that the 1^st respondent/land owner was entitled to the benefits of Section 23(1-A), Section 23(2) and the proviso to Section 28 of the Land Acquisition Act.

The Court observed that as per the law laid down by the Supreme Court in Dyna Technologies Pvt Ltd versus Crompton Greaves Limited (2019), the arbitral awards should not be interfered with in a casual manner unless the Court comes to the conclusion that the perversity of the award goes to the root of the matter and there is no possibility of an alternative interpretation which may sustain the arbitral award. The Court added that the arbitral award passed by the arbitrator was perverse in as much as the mandatory compensation amounts were not provided to the land owner.

The Court thus held that there was no reason to interfere with the order passed by the Principal District Court.

The Court thus dismissed the appeal.

Case Title: The Project Director (LA), NHAI versus T. Palanisamy and Ors.

Dated: 22.04.2022 (Madras High Court)

Counsel for the Appellant: Mr. Su. Srinivasan

Counsel for the Respondents: Mr. R. Anand Padmanabhan for Respondent 1;

Mr. Edwin Prabhakar, Special Government Pleader for Respondents 2 and 3

Citation: 2022 LiveLaw (Mad) 196

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