TaxTMI 
TaxTMI 
2021 (7) TMI 1343
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....G OUT OF SLP (CIVIL) NO.13431 OF 2020], CIVIL APPEAL NO. 2767OF 2021 [ARISING OUT OF SLP (CIVIL) NO.13410 OF 2020], CIVIL APPEAL NO. 2768OF 2021 [ARISING OUT OF SLP (CIVIL) NO.13363 OF 2020], CIVIL APPEAL NO. 2769OF 2021 [ARISING OUT OF SLP (CIVIL) NO.13502 OF 2020], CIVIL APPEAL NO. 2770OF 2021 [ARISING OUT OF SLP (CIVIL) NO.13373 OF 2020], CIVIL APPEAL NO. 2771OF 2021 [ARISING OUT OF SLP (CIVIL) NO.13371 OF 2020], CIVIL APPEAL NO. 2772OF 2021 [ARISING OUT OF SLP (CIVIL) NO.13494 OF 2020], CIVIL APPEAL NO. 2773OF 2021 [ARISING OUT OF SLP (CIVIL) NO.13382 OF 2020], CIVIL APPEAL NO. 2774OF 2021 [ARISING OUT OF SLP (CIVIL) NO.13366 OF 2020], CIVIL APPEAL NO. 2775OF 2021 [ARISING OUT OF SLP (CIVIL) NO.13303 OF 2020], CIVIL APPEAL NO. 2776OF 2021 [ARISING OUT OF SLP (CIVIL) NO.13477 OF 2020], CIVIL APPEAL NO. 2777OF 2021 [ARISING OUT OF SLP (CIVIL) NO.13235 OF 2020], CIVIL APPEAL NO. 2778OF 2021 [ARISING OUT OF SLP (CIVIL) NO.13354 OF 2020], CIVIL APPEAL NO. 2779OF 2021 [ARISING OUT OF SLP (CIVIL) NO.13408 OF 2020], CIVIL APPEAL NO. 2780OF 2021 [ARISING OUT OF SLP (CIVIL) NO.13292 OF 2020], CIVIL APPEAL NO. 2781OF 2021 [ARISING OUT OF SLP (CIVIL) NO.13236 OF 2020], CIVIL APPEAL NO. 278....
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....iled under Section 37 of the said Act laying down as a matter of law that, at least insofar as arbitral awards made under the National Highways Act, 1956 ["National Highways Act"], Section 34 of the Arbitration Act must be so read as to permit modification of an arbitral award made under the National Highways Act so as to enhance compensation awarded by a learned Arbitrator. 3. The facts in all these appeals concern notifications issued under the provisions of the National Highways Act and awards passed thereunder. These notifications are all of the years 2009 onwards and consist of awards that have been made by the competent authority under the Act, who is a Special District Revenue Officer. In all these cases, awards were made based on the 'guideline value' of the lands in question and not on the basis of sale deeds of similar lands. The result is, in all these cases, that abysmally low amounts were granted by the competent authority. As an example, in SLP (Civil) No.13020 of 2020, amounts ranging from Rs.46.55 to 83.15 per square meter were awarded. In the arbitral award made by the District Collector in all these cases, being an appointee of the Government, no infirmity was ....
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....as has been held by a catena of judgments, is not a challenge on the merits of the award. The court's limited power under the said Section is wholly unlike the power of an appellate court under the Land Acquisition Act, and hence such power is only limited to either setting aside the award or remitting the award to the arbitrator under Section 34(4) so as to eliminate any ground of challenge under Section 34. He argued that this was in contrast to the Arbitration Act, 1940 which contained a specific provision to remit an award under Section 15, and further argued that the Arbitration Act, 1996, being based on the UNCITRAL Model Law on International Commercial Arbitration, 1985, has specifically restricted the grounds of challenge and the consequent remedy, which is only to set aside or remit in limited circumstances. He argued, based on a reading of Section 34 itself as well as a number of judgments of this Court and High Courts that this well settled position cannot possibly be given a go-by when it comes to arbitration under the National Highways Act, in which either party can ask for the appointment of an arbitrator who is then appointed not by the parties, but by the Central Go....
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...., all these appeals ought to be dismissed. On merits, he pointed out the facts of his case and the fact that an abysmally low sum had been given as compensation which was then raised by the District Judge, having regard to the relevant sale deeds in the vicinity. He then copiously read from the learned Single Judge's judgment of the Madras High Court in Gayatri Balaswamy's case and supported this line of reasoning. He also supported the impugned judgment to argue that even if the learned Single Judge in Gayatri Balaswamy had not laid down the law correctly so far as matters arising under the Arbitration Act are concerned, yet the impugned judgment correctly makes the distinction between consensual arbitration and an arbitrator appointed by the Central Government, who is none other than some government servant who merely rubber stamps awards that are passed by yet another government servant. He argued that if Section 34 were to be construed in the manner suggested by the learned Solicitor General, then for a very grievous wrong there would be no remedy as all that the District Judge could then do in the Section 34 jurisdiction is to set aside the award, resulting in a fresh arbitrat....
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.... competent authority within the period specified therein or where the competent authority has disallowed the objection under subsection (2) of that section, the competent authority shall, as soon as may be, submit a report accordingly to the Central Government and on receipt of such report, the Central Government shall declare, by notification in the Official Gazette, that the land should be acquired for the purpose or purposes mentioned in sub-section (1) of section 3A. (2) On the publication of the declaration under sub-section (1), the land shall vest absolutely in the Central Government free from all encumbrances. (3) Where in respect of any land, a notification has been published under sub-section (1) of section 3A for its acquisition but no declaration under sub-section (1) has been published within a period of one year from the date of publication of that notification, the said notification shall cease to have any effect: Provided that in computing the said period of one year, the period or periods during which any action or proceedings to be taken in pursuance of the notification issued under sub- section (1) of section 3A is stayed by an order of....
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....time of taking possession of the land, by reason of the severing of such land from other land; (c) the damage, if any, sustained by the person interested at the time of taking possession of the land, by reason of the acquisition injuriously affecting his other immovable property in any manner, or his earnings; (d) if, in consequences of the acquisition of the land, the person interested is compelled to change his residence or place of business, the reasonable expenses, if any, incidental to such change. 11. Section 3J then states: 3J. Land Acquisition Act 1 of 1894 not to apply. - Nothing in the Land Acquisition Act, 1894 shall apply to an acquisition under this Act. 12. It will be seen that the competent authority, as defined, is to first determine an amount which is payable by way of compensation for compulsory acquisition of land. Under Section 3G(5), if the amount determined by the said authority is not acceptable to either of the parties, the amount shall, on application by either of the parties, be determined by an arbitrator to be appointed by the Central Government. What is of importance is that the 'competent authority' is a person or autho....
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....nge under sub-sections (2) and (3), an application can only be made to set aside an award. This becomes even clearer when we see sub- section (4) under which, on receipt of an application under sub- section (1) of Section 34, the court may adjourn the Section 34 proceedings and give the arbitral tribunal an opportunity to resume the arbitral proceedings or take such action as will eliminate the grounds for setting aside the arbitral award. Here again, it is important to note that it is the opinion of the arbitral tribunal which counts in order to eliminate the grounds for setting aside the award, which may be indicated by the court hearing the Section 34 application. 15. It is important to remember that Section 34 is modelled on the UNCITRAL Model Law on International Commercial Arbitration, 1985, under which no power to modify an award is given to a court hearing a challenge to an award. The relevant portion of the Model Law reads as follows: Article 34. Application for setting aside as exclusive recourse against arbitral award (1) Recourse to a court against an arbitral award may be made only by an application for setting aside in accordance with paragraphs (2) and (2....
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....eferred to arbitration and such part can be separated from the other part and does not affect the decision on the matter referred; or (b) where the award is imperfect in form, or contains any obvious error which can be amended without affecting such decision; or (c) where the award contains a clerical mistake or an error arising from an accidental slip or omission. 16. Power to remit award. (1) The Court may from time to time remit the award or any matter referred to arbitration to the arbitrators or umpire for reconsideration upon such terms as it thinks fit- (a) where- the award has left undetermined any of the matters referred to arbitration, or where it determines any matter not referred to arbitration and such matter cannot be separated without affecting the determination of the matters referred; or (b) where the award is so indefinite as to be incapable of execution; or (c) where an objection to the legality of the award is apparent upon the face of it., (2) Where an award is remitted under sub- section (1) the Court shall fix the time within which the arbitrator or umpire shall submit his decision to the Co....
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.... 1994 Supp (1) SCC 644, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 [the "New York Convention"] and various other authorities to conclude that there could be no challenge on merits under the grounds mentioned in Section 34 - (see paras 34 to 48). This Court also held, in Maharashtra State Electricity Distribution Co. Ltd. v. Datar Switchgear Ltd., (2018) 3 SCC 133 (at 170), that the court hearing a Section 34 petition does not sit in appeal (see para 51). 23. As a matter of fact, the point raised in the appeals stands concluded in McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181, where this Court held: - 51. After the 1996 Act came into force, under Section 16 of the Act the party questioning the jurisdiction of the arbitrator has an obligation to raise the said question before the arbitrator. Such a question of jurisdiction could be raised if it is beyond the scope of his authority. It was required to be raised during arbitration proceedings or soon after initiation thereof. The jurisdictional question is required to be determined as a preliminary ground. A decision taken thereupon by the arbitrator would ....
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....tration as an effective and expeditious forum itself stands effaced. 26. Some of the judgments of the High Courts are also instructive. A learned Single Judge of the Delhi High Court in Cybernetics Network Pvt. Ltd. v. Bisquare Technologies Pvt. Ltd., 2012 SCC OnLine Del 1155, held: 47. The next question that arises is whether the above claims as mentioned in para 44 that have been erroneously rejected by the learned Arbitrator can be allowed by this Court in exercise of its powers under Section 34(4) of the Act? 48. Under Section 34(4) of the Act, the Court while deciding a challenge to an arbitral award, can either "adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of the arbitral tribunal will eliminate the grounds for setting aside the arbitral award". This necessarily envisages the Court having to remit the matter to the Arbitral Tribunal. This is subject to the Court finding it appropriate to do so and a party requesting it to do so. 49. In Union of India v. Arctic India2007 (4) Arb LR 524 (Bom), a le....
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....unds specified therein. The remand to the Arbitrator under Section 34(4) is to a limited extent of requiring the Arbitral Tribunal "to eliminate the grounds for setting aside the arbitral award". There is no specific power granted to the Court to itself allow the claims originally made before the Arbitral Tribunal where it finds the Arbitral Tribunal erred in rejecting such claims. If such a power is recognised as falling within the ambit of Section 34(4) of the Act, then the Court will be acting no different from an appellate court which would be contrary to the legislative intent behind Section 34 of the Act. Accordingly, this Court declines to itself decide the claims of CNPL that have been wrongly rejected by the learned Arbitrator. 27. The Delhi High Court in Nussli Switzerland Ltd. v. Organizing Committee Commonwealth Games, 2014 SCC OnLine Del 4834, held: - 34. A party like the Organizing Committee which has its claims rejected, except a part, but which subsumes into the larger amount awarded in favour of the opposite party, even if succeeds in the objections to the award would at best have the award set aside for the reason the Arbitration and Conciliation Act, ....
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....IFFCO Tokio General Insurance Co. Ltd. v. Indo Rama Synthetics Ltd. (decided on 20.01.2015) and Canara Bank v. Bharat Sanchar Nigam Ltd. (decided on 26.03.2015). In Modern Laminators, the Court relied upon the Supreme Court's decision in Numaligarh Refinery Ltd. v. Daelim Industrial Company Ltd., (2007) 8 SCC 466, noting that the Court therein had modified the award in terms of its findings; and the decision in Krishna Bhagya Jala Nigam Ltd. v. G. Harischandra Reddy, AIR 2007 SC 817, where the interest rate awarded by the arbitrator was modified. The learned Single Judge in Canara Bank relied upon a decision of a Single Judge of the Madras High Court in Gayatri Balaswamy v. ISG Novasoft Technologies Ltd., (2015) 1 MLJ 5. The Court in Gayatri Balaswamy examined the issue in significant [sic] and held as follows: "Therefore, in my considered view, the expression 'recourse to a Court against an arbitral award' appearing in Section 34(1) cannot be construed to mean only a right to seek the setting aside of an award. Recourse against an arbitral award could be either for setting aside or for modifying or for enhancing or for varying or for revising an award. The expression ....
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....tt International Inc. were not in the context of the specific issue being dealt herewith, this Court is of the opinion that it is determinative of the Court's approach in an enquiry under Section 34 of the Act. Indeed, a Court, while modifying or varying the award would be doing nothing else but "correct[ing] the errors of the arbitrators". This is expressly against the dictat of McDermott International Inc. Further, if the power to remit the matter to the arbitrator is read into Section 34, it would render inexplicable the deliberate omission by Parliament of a provision analogous to Section 16 of the Arbitration Act, 1940 in the present Act. Section 16 of the 1940 Act specifically armed courts with the power to remit the matter to arbitration. Noticeably, the scope of remission under the present Act is confined to that prescribed in sub-section (4) of Section 34. Besides the Division Bench rulings of this Court in Delhi Development Authority, State Trading Corporation of India Ltd., this was also noted by a Full Bench of the Bombay High Court in R.S. Jiwani v. Ircon International Ltd., 2010 (1) Bom CR 529, where the Court held: "An award can only be set aside under t....
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....wer to the question raised finally. 30. The first judgment of this Court referred to by the learned Single Judge is the judgment in Gautam Constructions and Fisheries Ltd. v. National Bank for Agriculture & Rural Development, (2000) 6 SCC 519. The learned Single Judge correctly pointed out that this judgment was under the Arbitration Act, 1940. In para 31, the learned Single Judge then went on to state that modifications were made in the award by the Supreme Court outside the provisions of Section 15 of the Arbitration Act, 1940 and that, therefore, the Supreme Court took the power of the Court to modify an Award for granted. The comment made in para 31 does not appear to be justified. Obviously, the power used was the power to do complete justice between the parties, which is a power relatable to the Constitution vested only in the Supreme Court of India as a final court of last resort under Article 142 of the Constitution of India. 31. The next judgment referred to in para 32 is the judgment in Tata Hydro-Electric Power Supply Co. Ltd. v. Union of India, (2003) 4 SCC 172. In para 21, this Court modified the award qua interest, granting interest at the same rate but with ref....
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....bitration are to be set aside as it cannot be given as an order of the Court. Useful reference can be had to the judgment of the Supreme Court in the case of Mcdermott International Inc. v. Burn Standard co. Ltd., (2006) 11 SCC 181, wherein it was held that the 1996 Act makes provisions for supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. Hence, in an application taken out under section 34 of the Act, the Court can set aside the award leaving the parties free to begin the arbitration again if it is desired. 19. Therefore, the order of the learned single judge setting aside the award is confirmed for the reasons given by us. However, the other observations of the learned single Judge are set aside. The issue is left open to the parties to proceed further. The appeal is disposed of in the above terms. However, there is no order as to costs. The connected miscellaneous petition is close....
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....was made in para No. 32 of the order of the learned single Judge to the decision of the Honourable Supreme Court in Tata Hydero Electric Power Supply Co. Ltd. v. Union of India, (2003) 4 SCC 172 in which also the Honourable Supreme Court, while reversing the judgment of the High Court, interfered with the award passed by the arbitrator in so far as it relates to payment of interest. For the very same proposition that the Court is empowered to modify or vary the award passed by the arbitrator, reliance was placed on the decision of the Honourable Supreme Court in Hindustan Zinc Limited v. Friends Coal Carbonisation, (2006) 4 SCC 445 to drive home the point that the Court has power under Section 34 to modify the award passed by the Arbitrator. We are also in entire agreement with the reasoning of the learned single Judge that merely because the word "modify" or "vary" is not indicated in Section 34 of the Act, it will not take away the jurisdiction of the Court exercising under jurisdiction Section 34 of the Act to interfere with the award passed by an arbitrator partially. If such a power is not vested with the Court, it will only lead to multiplicity of proceedings, which is not in....
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....the award, or set aside the award if the grounds contained in sub-sections (2) and (2A) are made out. There is no power to modify an arbitral award. 40. It can therefore be said that this question has now been settled finally by at least 3 decisions of this Court. Even otherwise, to state that the judicial trend appears to favour an interpretation that would read into Section 34 a power to modify, revise or vary the award would be to ignore the previous law contained in the 1940 Act; as also to ignore the fact that the 1996 Act was enacted based on the UNCITRAL Model Law on International Commercial Arbitration, 1985 which, as has been pointed out in Redfern and Hunter on International Arbitration, makes it clear that, given the limited judicial interference on extremely limited grounds not dealing with the merits of an award, the 'limited remedy' under Section 34 is co- terminus with the 'limited right', namely, either to set aside an award or remand the matter under the circumstances mentioned in Section 34 of the Arbitration Act, 1996. 41. A look at the Arbitration Acts of England, the United States, Canada, Australia and Singapore also lead to the same conclusion. In each ....
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....and the Constitution is a living document governing the lives of millions of people, which is required to be interpreted in a flexible evolutionary manner to provide for the demands and compulsions of changing times and needs. 44. The distinction between constitutional and statutory interpretation was felicitously put by Justice Aharon Barak, President of the Supreme Court of Israel thus: "The task of expounding a Constitution is crucially different from that of construing a statute. A statute defines present rights and obligations. It is easily enacted and as easily repealed. A Constitution, by contrast, is drafted with an eye to the future. Its function is to provide a continuing framework for the legitimate exercise of governmental power and, when joined by a Bill or Charter of Rights, for the unremitting protection of individual rights and liberties. Once enacted, its provisions cannot easily be repealed or amended. It must, therefore, be capable of growth and development over time to meet new social, political and historical realities often unimagined by its framers. The judiciary is the guardian of the Constitution and must, in interpreting its provisions, bear th....
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.... the Arbitration Act, 1996, and bring it in line with other legislations the world over. 47. However, this does not end the matter, as has rightly been pointed out by Col. Balasubramanian, learned senior advocate appearing on behalf of the respondent. In several cases, the NHAI has not filed appeals even in matters which are similar i.e., arising from the same Section 3A Notification, as a result of which certain land owners have got away with enhanced compensation given to them by the District Court. Also, we cannot shut our eyes to the fact the arbitrator has awarded compensation on a completely perverse basis i.e., by taking into account 'guideline value' which is relevant only for stamp duty purposes, and not taking into account sale deeds which would have reflected the proper market value of the land. Given the fact that the awards in all these cases are therefore perverse, the District Judge rightly interfered with the same. 48. There is no doubt that, as argued by Col. Balasubramanian, the arbitral award in these cases is given by a government servant appointed by the Central Government, the result being the rubber stamping of compensation awarded on a completely perve....
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....8 proviso will apply to acquisitions made under the National Highways Act. Consequently, the provision of Section 3-J is, to this extent, violative of Article 14 of the Constitution of India and, therefore, declared to be unconstitutional. Accordingly, appeal arising out of SLP (C) No. 9599 of 2019 is dismissed. 50. As has been stated by us, the object of the NH Amendment Act, 1997 is to expedite the process of acquisition. This has been achieved by cutting down the period for hearing of objections from 30 days under Section 5A of the Land Acquisition Act to 21 days under Section 3C of the National Highways Act. Further, unlike the Land Acquisition Act, the moment a notification under Section 3D(2) of the National Highways Act (equivalent to Section 6 Land Acquisition Act) is made, the land vests absolutely in the Central Government free from all encumbrances. Thereafter, where land has vested in the Central Government and the amount determined by the competent authority under Section 3G as compensation has been deposited by the Central Government in accordance with Section 3H(1), the competent authority may then direct that possession be taken within 60 days of service of notic....
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.... Act. This being the case, it is a little difficult to appreciate as to why the wholesome regime of appeals under the Land Acquisition Act has been replaced by a regime in which an award passed by an Arbitrator, who is not consensually appointed but appointed by the Central Government, can only be challenged not on merits, but on the limited grounds contained in Section 34 of the Arbitration Act, 1996. 54. There can be no doubt that differential compensation cannot be awarded on the ground that a different public purpose is sought to be achieved. Also, the legislature cannot say that, however laudable the public purpose and however important it is to expedite the process of land acquisition, differential compensation is to be paid depending upon the public purpose involved or the statute involved. 55. Take the case of a single owner of land who has two parcels of land adjacent to each other. One parcel of land abuts the national highway, whereas the other parcel of land is at some distance from the national highway. Can it be said that the land which abuts the national highway, and which is acquired under the National Highways Act, will yield a compensation much lesser than t....
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....at for a hospital land will be acquired at 50% of the market value, for a school at 60% of the value and for a Government building at 70% of the market value? All three objects are public purposes and as far as the owner is concerned it does not matter to him whether it is one public purpose or the other. Article 14 confers an individual right and in order to justify a classification there should be something which justifies a different treatment to this individual right. It seems to us that ordinarily a classification based on the public purpose is not permissible under Article 14 for the purpose of determining compensation. The position is different when the owner of the land himself is the recipient of benefits from an improvement scheme, and the benefit to him is taken into consideration in fixing compensation. Can classification be made on the basis of the authority acquiring the land? In other words can different principles of compensation be laid if the land is acquired for or by an Improvement Trust or Municipal Corporation or the Government? It seems to us that the answer is in the negative because as far as the owner is concerned it does not matter to him whether the land....