Summary
Land along the Bengaluru–Mysuru highway (NH-275) was acquired under the National Highways Act, 1956; the SLAO fixed compensation on the 2014 guideline value for agricultural land though the land had been converted, and the Deputy Commissioner as arbitrator under Section 3G(5) re-determined it on the Stamps Department's guideline notification of 28.03.2016, issued after the Section 3A notification of 01.02.2016, applying the rate fixed for the 'City Greens' and 'Zunadu' layouts (Rs 15,400 per sq m) rather than the rate notified for the same survey numbers (Rs 8,000). The Section 34 court and the Karnataka High Court upheld the awards. The Supreme Court partly allowed NHAI's appeals.
Issues
- Whether an arbitrator under Section 3G(5) of the National Highways Act may rely on a guideline value notification published after the Section 3A notification when Section 3G(7)(a) requires market value as on the date of that notification.
- Whether an award that adopts the guideline value fixed for distinct developed layouts, ignoring the value notified for the acquired survey numbers, without pleading, evidence, opportunity to the acquiring body or reasons, suffers from patent illegality under Section 34(2A) of the Arbitration and Conciliation Act, 1996.
- Whether the SLAO's determination under the NH Act is more than an offer, and what the Section 34 court may do on finding such illegality — modify the award or set aside and remit.
Provisions considered
- Sections 3A, 3D, 3G(5), 3G(7)(a) and 3J, National Highways Act, 1956The arbitrator must reckon market value as on the Section 3A notification, but where the revision process began in 2015, the 3D declaration followed in September 2016 and the award notice issued in 2017, using the 28.03.2016 guideline in place of escalating the 2014 figure was not patent illegality; the right of either party to apply under Section 3G(5) does not elevate the SLAO's award beyond an offer of compensation. (¶¶ 30, 31, 32, 34, 35)
- Sections 26 to 28 (and Section 26(1)(a)), Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013These govern determination of just compensation in NH Act arbitrations; Section 26(1)(a) itself permits reliance on the Stamp Act guideline value, so M. Hakeem's remarks on guideline values are not statutory prohibitions. Reasons meeting these parameters must appear in the award. (¶¶ 23, 24, 31)
- Sections 28(2), 31(3), 34(2A) and 34(4), Arbitration and Conciliation Act, 1996Applying the 'City Greens'/'Zunadu' layout rate to the acquired land without pleading, evidence, opportunity to NHAI or reasons was contrary to Sections 28(2) and 31(3) and a patent illegality; the Section 34 court cannot modify the award (M. Hakeem), so the awards were set aside and remitted to the arbitrators under Section 34(4). In the Kumbalagodu matter, using the 2014 guideline for the base value and the 2018 notification's special instruction for a 50% addition was likewise patent illegality. (¶¶ 24, 26, 36, 39, 40, 47, 48, 49)
Held
- In an NH Act arbitration thrust on the land loser, where no reasons are assigned for a determination that approves or reduces compensation, limited interference under Section 34 must not deny just compensation: the court may examine whether the arbitrator adverted to the evidence under Sections 26 to 28 of the 2013 Act, and if not, set aside the award and remit it, though it cannot itself alter the compensation. (¶¶ 23, 24, 26)
- The SLAO's award under the NH Act, though either side may question it under Section 3G(5), remains an offer of compensation; the arbitrator may act on any additional material that aids just compensation without first finding an error in the SLAO's consideration. Tarsem Singh's 'regime change' altered procedure and vesting, not the character of the award as an offer. (¶ 30)
- Market value should ordinarily rest on documents prior to the notification, with reasonable escalation or de-escalation where only earlier or later exemplars exist. Here the SLAO wrongly treated converted land as agricultural; the 28.03.2016 guideline, whose revision process began in 2015 and was in force before the Section 3D declaration and the award notice, merely captured the escalation the arbitrator could otherwise have applied, so relying on it was not patent illegality. (¶¶ 32, 33, 34, 35, 36)
- The award's only reasoning uniformly adopted Rs 15,400 per sq m fixed for self-contained developed layouts, discarding the Rs 8,000 notified for the very survey numbers, with no pleading of comparability, no evidence, no opportunity to NHAI and no reasons; this violated Sections 28(2) and 31(3) and amounted to patent illegality. The claimants are in any event entitled to the guideline value under the 28.03.2016 notification for their properties absent other evidence of higher value. (¶¶ 37, 38, 39, 49)
- In the second set, the arbitrator applied two different notifications — the 2014 guideline for the base rate and the special instruction in the 2018 notification for a 50% industrial addition — which was patent illegality; whether Special Instruction 3 or 6 of the 2014 notification applies is for the arbitrator on remand. (¶¶ 43, 46, 47, 48)
Result
Appeals partly allowed; the Karnataka High Court's judgments in MFA Nos. 2040/2021 and 2041/2021 and connected matters, the orders under Section 34, and the arbitral awards of 13.08.2019 and 06.01.2020 set aside; the arbitration cases remanded to the Deputy Commissioners and Arbitrators (Ramanagar and Bengaluru Rural) for fresh reasoned determination; amounts already disbursed to claimants subject to adjustment. No order as to costs.