[Cites 18, Cited by 0]
Uttarakhand High Court
National Highway Authority Of India vs Balkar Singh & Others on 3 December, 2025
2025:UHC:10773
RESERVED JUDGMENT
IN THE HIGH COURT OF UTTARAKHAND
AT NAINITAL
HON'BLE SHRI JUSTICE ALOK MAHRA
APPEAL FROM ORDER No. 253 of 2022
National Highway Authority of India. ...Appellant
Versus
Balkar Singh & others. ...Respondents
(Mr. Naresh Pant and Mr. Raunak Pant, Advocates for the appellant.
Mr. Siddhartha Sah, Advocate for respondents nos.1 to 3.
Mr. V.D. Bisen, Additional C.S.C. for the State of Uttarakhand)
Reserved on :14.11.2025
Delivered on :03.12.2025
JUDGMENT
The National Highway Authority of India
(hereinafter, 'NHAI') feeling aggrieved against the
dismissal of its application on 21.05.2022 under
Section 34 of the Arbitration & Conciliation Act, 1996
(hereinafter, ' the Act') by the learned District Judge,
Udham Singh Nagar has taken recourse by way of the
present appeal under Section 37 of the Act.
2. Facts giving rise to the present appeal are:-
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i. A notification dated 19.03.2014 came to be
issued under Section 3A of the National Highways Act,
1956 (hereinafter referred NH Act), whereby the land
of respondent nos. 1 to 3, bearing Khasra No. 117,
admeasuring 0.0544 hectare, situate in Village
Mahtosh, Tehsil Gadarpur, District Udham Singh Nagar,
was notified for acquisition for the purpose of
construction of National Highway No. 74.
ii. Subsequently, vide notification dated
12.09.2014 issued under Section 3D of the NH Act, the
aforesaid land vested with the Central Government,
free from all encumbrances.
iii. The Special Land Acquisition Officer,
Nainital/Udham Singh Nagar, thereafter, passed an
award under Section 3G of the NH Act on 16.04.2015,
determining compensation payable to the respondents
at the rate of ₹500/- per square metre, and further
valuing 18 shops standing on the acquired land at
₹2,78,540/-, thus awarding total compensation of
₹5,77,740/-. The Special Land Acquisition Officer
computed the market value of the land treating it as
Bhumidhar land, as no declaration under Section 143 of
the U.P. Zamindari Abolition and Land Reforms Act,
1950 had been obtained by the respondents.
iv. Being aggrieved by the award so passed, the
respondents preferred an arbitration application dated
08.06.2015 under Section 3G(5) of the NH Act. The
learned Arbitrator/District Magistrate, Udham Singh
Nagar, vide award dated 30.12.2015, enhanced the
compensation from ₹500/- per square metre to
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₹14,000/- per square metre for the land, and
determined the compensation for the 18 shops at
₹44,35,381/-.
v. Aggrieved thereby, the appellant preferred an
application under Section 34 of the Arbitration and
Conciliation Act, 1996 for setting aside of the arbitral
award before the learned District Judge, Udham Singh
Nagar. The said application was dismissed by the
learned District Judge vide judgment dated 21.05.2022,
upholding the arbitral award. Hence, being dissatisfied
with the said judgment and award, the appellant has
preferred the present appeal before this Court.
3. Learned counsel for the appellant vehemently
contended that the arbitral award impugned herein
suffers from patent illegality and manifest error on the
face of the record. It is argued that, while determining
the compensation, the learned Arbitrator failed to
adhere to the mandatory provisions contained under
Sections 26 to 30 of the Right to Fair Compensation
and Transparency in Land Acquisition, Rehabilitation
and Resettlement Act, 2013 (hereinafter referred to as
"the Act of 2013"). In particular, it is submitted that
the Arbitrator did not take into consideration any
exemplar sale deeds of comparable lands pertaining to
the three years immediately preceding the issuance of
the notification under Section 3A of the NH Act, as
required by Section 26(1)(a) of the Act of 2013, for the
purpose of determining the market value of the
acquired land. Section 26 of Right to Fair
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Compensation and Transparency in Land Acquisition,
Rehabilitation and Resettlement Act, 2013 is
reproduced below:
"26. Determination of market value of land
by Collector.-(1) The Collector shall adopt
the following criteria in assessing and
determining the market value of the land,
namely:--
(a) the market value, if any, specified in the
Indian Stamp Act, 1899 (2 of 1899) for the
registration of sale deeds or agreements to
sell, as the case may be, in the area, where
the land is situated; or
(b) the average sale price for similar type of
land situated in the nearest village or nearest
vicinity area; or
(c) consented amount of compensation as
agreed upon under sub-section (2) of section
2 in case of acquisition of lands for private
companies or for public private partnership
projects, whichever is higher:
Provided that the date for determination of
market value shall be the date on which the
notification has been issued under section
11."
4. It is further contended that the determination
of valuation in respect of the shops and other
structures standing on the acquired land was not made
strictly in accordance with Section 29 of the Act of
2013, which mandates valuation based upon the latest
schedule of rates or cost of construction prevailing in
the locality. The learned Arbitrator, according to the
appellant, adopted an arbitrary and inflated rate of
₹14,000/- per square metre without any cogent
material or documentary evidence to substantiate such
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enhancement while totally bypassing Section 26 of the
Act of 2013.
5. Learned counsel argued that the subject land
was recorded as Bhumidhar land in the revenue
records, and since the respondents had not obtained
any declaration under Section 143 of the U.P.
Zamindari Abolition and Land Reforms Act, 1950, the
nature of the land continued to be agricultural land and
the market value should have been assessed as
provided in Section 26 (a) of the Act of 2013. It is
submitted that, in disregard of this legal position, the
learned Arbitrator erred in treating the acquired land as
commercial land while fixing the market value, instead
of applying the prevailing circle rate applicable to
agricultural lands in the area at the relevant time. In
support of his submissions, learned counsel for the
appellant placed reliance upon judgment rendered in
the case of State of Chhattisgarh and another Vs. SAL
Udyog Private Ltd., (2022) 2 SCC 275. Relevant
paragraph of the said judgment is extracted below:
"26. To sum up, existence of Clause 6(b) in the
agreement governing the parties, has not been
disputed, nor has the application of the Circular
dated 27-7-1987 issued by the Government of
Madhya Pradesh regarding imposition of 10%
supervision charges and adding the same to cost of
the Sal seeds, after deducting the actual expenditure
been questioned by the respondent Company. We
are, therefore, of the view that failure on the part of
the learned sole arbitrator to decide in accordance
with the terms of the contract governing the parties,
would certainly attract the "patent illegality ground",
as the said oversight amounts to gross contravention
of Section 28(3) of the 1996 Act, that enjoins the
Arbitral Tribunal to take into account the terms of the
contract while making an award. The said "patent
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illegality" is not only apparent on the face of the
award, it goes to the very root of the matter and
deserves interference. Accordingly, the present
appeal is partly allowed and the impugned award,
insofar as it has permitted deduction of "supervision
charges" recovered from the respondent Company by
the appellant State as a part of the expenditure
incurred by it while calculating the price of the Sal
seeds, is quashed and set aside, being in direct
conflict with the terms of the contract governing the
parties and the relevant circular. The impugned
judgment dated 21-10-2009 is modified to the
aforesaid extent."
6. Learned counsel for the appellant has also
placed reliance on the judgment rendered in the case of
Delhi Airport Metro Express Private Ltd. Vs. Delhi Metro
Rail Corporation Limited, (2022) 1 SCC 131. Relevant
paragraph of the said judgment is reproduced below:
"29. Patent illegality should be illegality which goes
to the root of the matter. In other words, every error
of law committed by the Arbitral Tribunal would not
fall within the expression "patent illegality". Likewise,
erroneous application of law cannot be categorised
as patent illegality. In addition, contravention of law
not linked to public policy or public interest is beyond
the scope of the expression "patent illegality". What
is prohibited is for Courts to reappreciate evidence to
conclude that the award suffers from patent illegality
appearing on the face of the award, as Courts do not
sit in appeal against the arbitral award. The
permissible grounds for interference with a domestic
award under Section 34(2-A) on the ground of patent
illegality is when the arbitrator takes a view which is
not even a possible one, or interprets a clause in the
contract in such a manner which no fair-minded or
reasonable person would, or if the arbitrator commits
an error of jurisdiction by wandering outside the
contract and dealing with matters not allotted to
them. An arbitral award stating no reasons for its
findings would make itself susceptible to challenge on
this account. The conclusions of the arbitrator which
are based on no evidence or have been arrived at by
ignoring vital evidence are perverse and can be set
aside on the ground of patent illegality. Also,
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consideration of documents which are not supplied to
the other party is a facet of perversity falling within
the expression "patent illegality"."
7. Learned counsel for the appellant, by relying
on the aforesaid judicial pronouncements laying down
the settled position, submits that an arbitral award
contrary to statutory provisions amounts to patent
illegality and is liable to be set aside under Section 34
of the Arbitration and Conciliation Act, 1996. It is thus
contended that the impugned award, being contrary to
law and unsupported by evidence, is unsustainable in
the eyes of law and deserves to be set aside.
8. Per contra, learned counsel for respondent
nos. 1 to 3 refuted the contentions advanced on behalf
of the appellant and submitted that the learned
Arbitrator had rightly and lawfully determined the
amount of compensation payable to the respondents. It
is contended that the procedure adopted by the
Arbitrator was in strict conformity with the provisions of
the Act of 2013 and that there was no violation of
Sections 26 to 30 thereof, as alleged by the appellant.
9. Learned counsel submitted that, as per sub-
section (3) of Section 26 of the Act of 2013, the market
value is to be determined on the basis of the sale deeds
or agreements to sell of comparable lands, executed
during the three years immediately preceding the date
of the preliminary notification. However, in the present
case, no such sale deeds relating to similarly situated
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or comparable lands were placed on record by the
acquiring authority before the Arbitrator. Consequently,
in the absence of reliable documentary evidence of the
prevailing market rate, the Arbitrator was fully justified
in adopting a reasonable and pragmatic approach,
taking into account the potential and location of the
acquired land, its proximity to commercial
establishments, and the nature of constructions
existing thereon.
10. Learned counsel further argued that the
Arbitrator was competent to take into consideration the
intrinsic value of the land as reflected by the evidence
adduced during the proceedings, including the presence
of 18 constructed shops and the commercial viability of
the area, which warranted compensation at a higher
rate than that applicable to purely agricultural lands.
The contention of the appellant that the land ought to
have been valued at the agricultural circle rate was,
according to the respondents, wholly misconceived and
devoid of merit.
11. In support of his submission, learned counsel
for the respondent nos.1 to 3 placed reliance upon the
judgment of the Hon'ble Supreme Court in the case of
Periyar and Pareekani Rubbers Ltd. Vs. State of Kerala,
(1991) 4 SCC 195, wherein it was held that in cases of
compulsory acquisition, the best indicator of market
value would be the price reflected in a bona fide sale
transaction relating to the very property or a property
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adjoining it, and not merely the circle rate fixed by the
revenue authorities. It was thus submitted that the
Arbitrator, having acted within the parameters of law
and in accordance with the principles laid down by the
Hon'ble Supreme Court, rightly enhanced the
compensation, and the same has been rightly upheld
by the learned District Judge in appeal.
12. Learned counsel for the appellant contends
that the judgment in the case of Periyar and Pareekani
Rubbers Ltd. (supra) relied upon by the respondent
nos.1 to 3 was rendered in the year 1991; whereas,
the Right to Fair Compensation and Transparency in
Land Acquisition, Rehabilitation and Resettlement Act,
2013, came into force much later. Therefore, it is
submitted that the ratio of the said judgment is not
applicable to the facts of the present case.
13. Learned counsel for the respondent nos.1 to
3 submits that this Court, while exercising jurisdiction
under Section 37 of the Arbitration and Conciliation Act,
1996, is not empowered to re-appreciate the evidence
or enter into the factual matrix of the dispute, the
scope of interference being narrowly circumscribed. It
is further contended that no modification or alteration
of the arbitral award on merits of dispute is permissible
in view of the authoritative pronouncement of the
Constitution Bench of the Hon'ble Supreme Court in the
case of Gayatri Balasamy Vs. ISG Novasoft
Technologies Limited, reported in (2025) 7 SCC 1. It is
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submitted that the learned Arbitrator has rendered a
reasoned and well-considered award based on the
material available on record and, therefore, no
interference with the impugned order is warranted in
the facts and circumstances of the case.
14. After a detailed and careful examination of
the arbitral award and the material available on record,
along with the submissions of learned counsel for both
parties, this Court finds that the impugned award
suffers from serious legal infirmities amounting to
patent illegality warranting its setting aside.
15. The Arbitration and Conciliation Act, 1996,
under Section 34, prescribes specific and exhaustive
grounds on which arbitral award may be set aside. The
scope of judicial review under Section 34 and appellate
interference under Section 37 is narrowly confined.
Nevertheless, patent illegality, perversity, or conflicts
with the public policy of India remain valid grounds for
interference as laid down by the Hon'ble Supreme
Court in Gayatri Balasamy's case (Supra).
16. In the case in hand, non-application of mind
and departure from evidentiary record amounts to
patent illegality and perversity that shocks the
conscience of the Court.
17. Hon'ble Supreme Court in the case of State of
Chhattisgarh & another Vs. SAL Udyog Private Ltd.,
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reported in (2022) 2 SCC 275 has reiterated that
patent illegality is not any legal mistake, but arises
when an arbitral Tribunal blatantly disregards the
express terms of the contract or the law, the appellate
jurisdiction under Section 37 aligns with that of Section
34 and therefore Section 34(2A)'s threshold for patent
illegality applies equally under Appeals under Section
37.
18. Further, the Constitution Bench of the
Hon'ble Supreme Court in Gayatri Balasamy's case
(Supra) has affirmed that Courts have narrow (limited)
circumscribed powers of modification.
19. Considering the facts and circumstances of
the present case, this Court is of the considered view
that the impugned award is vitiated by patent illegality
and suffers from non-application of mind. The
Arbitrator failed to take into account the mandatory
provisions of Sections 26 and 29 of the Act of 2013
while determining the compensation. It is evident from
the record that no exemplar sale deeds of comparable
land for the period of three years preceding the date of
notification were examined for determining the market
value. The market value has thus been arrived at on
the basis of mere presumptions and conjectures.
Furthermore, the valuation of structures and buildings
existing over the acquired land was required to be
assessed strictly in accordance with Section 29 of the
Act of 2013. However, the Arbitrator has erroneously
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relied upon reports furnished by private valuers, who
were not authorized or approved by the competent
Government Authority. Such reliance is impermissible
in law and renders the award unsustainable.
20. The award also suffers from patent illegality
for the reason that the acquired land was agricultural in
nature on the date of notification. In the absence of
any contemporaneous sale transactions of similar land
within a span of three years from the date of issuance
of notification under Section 3A of the NH Act, the only
lawful basis for determining the market value was the
rate specified by the Collector under the Indian Stamp
Act. Failure to adopt this statutory guideline further
vitiates the award.
21. The impugned award falls squarely within
these parameters of patent illegality and non-
application of mind, justifying interference. The legal
principles laid down by the Hon'ble Supreme Court in
the aforementioned judgments mandate setting aside
such award in the interests of justice.
22. Accordingly, this Court is satisfied that the
impugned arbitral award dated 21.05.2022 is liable to
be set aside.
23. The Appeal from Order is allowed and the
impugned arbitral award is hereby set aside in its
entirety and the matter is remitted back to the learned
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Arbitrator for fresh consideration and decision in line
with this judgment. Since the proceedings were
initiated in the year 2014, the learned Arbitrator is
requested to conclude the arbitration proceedings
expeditiously, preferably within a period of three
months from the date of production of certified copy of
this judgment. Parties are directed not to seek any
unnecessary adjournments.
(ALOK MAHRA, J.)
Arpan
ARPAN
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2.5.4.20=eabb68a3895e41937c266c23964c0485365
445e3a20dddb7393398f9fe45ba3e,
JAISWAL
postalCode=263001, st=UTTARAKHAND,
serialNumber=060FC17022BEAE3DE215D68D9D454
C5109CB987446351E4DF04AADAA2C2CEA66,
cn=ARPAN JAISWAL
Date: 2025.12.04 10:33:47 +05'30'
