The Supreme Court, on May 12, 2026, partly allowed an appeal filed by the National Highways Authority of India (NHAI) against the enhancement of the compensation awarded by an Arbitrator for land acquired for the widening of a National Highway in Maharashtra. The Apex Court found that the Arbitrator and the Bombay High Court erred in relying upon a single sale deed relating to residential land for determining compensation payable for industrial land.
Brief Facts
The dispute arose from the acquisition of 1,394 square meters of land owned by Alfa Remidis Ltd. in Nagpur for the four-laning of a National Highway.
The competent authority initially classified the land as agricultural/dry crop land and awarded compensation at just ₹161.63 per square meter.
Alfa Remidis challenged the valuation by approaching the Arbitrator under Section 3G(5) of the National Highways Act which provides that “If the amount determined by the competent authority under sub-section (1) or sub-section (2) is not acceptable to either of the parties, the amount shall, on an application by either of the parties, be determined by the arbitrator to be appointed by the Central Government.”
Before the arbitrator, Alfa Remedis contended that the land was actually being used for the industrial purpose of manufacturing paracetamol medicine. The company relied upon:
- the Government Ready Reckoner rate of ₹2,020 per square meter for lands abutting the highway; and
- a sale deed showing a residential plot valued at ₹3,588 per square meter.
Accepting the claim, the Arbitrator awarded compensation at ₹3,588 per square meter. Though the District Judge later set aside the award under Section 34 of the Arbitration and Conciliation Act (Arbitration Act), the Bombay High Court restored it under Section 37 of the Arbitration Act.
NHAI then approached the Supreme Court.
Supreme Court’s Observations
The Bench clarified that compensation under the National Highways Act must comply with Sections 26 to 28 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.
The Court observed that Section 26(1) of the 2013 LA Act mandates that the Collector must choose the higher option between the market value for a sale deed or the average sale price for similar land in the nearest vicinity.
Applying Section 26, the Court held that the Arbitrator committed an error by relying upon a sale deed concerning residential land while valuing industrial land. The Court said, “Clearly, the two lands were not of a ‘similar type’ for the purposes of Section 26(1)(b) of the 2013 LA Act and the price in the said sale deed could not have been adopted.”
The Bench further emphasised, “the methodology for working out the ‘average sale price’ under Section 26(1)(b), as set out in Explanations 1 to 4 thereunder, does not permit placing reliance on a single sale deed for that purpose.”
Relying on earlier precedent, Madhya Pradesh Road Development Corporation v. Vincent Daniel, the Court reiterated,
“The language used therein implied that there should be multiple deeds available for reference, as singular deals may not supply adequate and reliable data.”
The Court also found that the arbitral award suffered from patent illegality, warranting interference under Section 34(2A) of the Arbitration Act. “Though the proviso thereto stipulates that an arbitral award should not be set aside merely on the ground of erroneous application of law or by reappreciation of evidence, we are of the opinion that the cloak of protection afforded by the proviso cannot be extended to the present arbitral award,” the top court said.
The Supreme Court noted, “The Arbitrator completely ignored the directives of Section 26(1)(b) of the 2013 LA Act and the Explanations thereunder, by adopting a sale exemplar of a totally dissimilar type of land and, at that, a single sale exemplar, which was contrary to the statutory mandate.”
Supreme Court’s Decision
Allowing the appeal partly, the Supreme Court held that compensation should be calculated at ₹2,020 per square meter and not at ₹3,588 per square meter as awarded by the Arbitrator and affirmed by the High Court.
The Bench further directed that statutory benefits under the 2013 Land Acquisition Act would continue to apply.
Case Title: Project Director, National Highways Authority of India v. Alfa Remidis Ltd. and Ors.
Bench: Judges: Justice Sanjay Kumar and Justice K. Vinod Chandran
Judgment Date: May 12, 2026
Case Details: SLP(C) No. 033773 of 2025
Click here to read the Judgement @LatestLaws.com
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