TaxTMI 
TaxTMI 
2022 (7) TMI 1413
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.....P. Ravi, Adv., Mr. Dhruv Joshi, Adv.,. Mr. Prafful Saini, Adv., Mr. Nishant Gautam, Adv., Mr. B. Purushottama Reddy, Adv. JUDGMENT A.S. Bopanna,J. 1. Leave granted. 2. The appellant - National Highways Authority of India ('NHAI' for short) is before this Court in these appeals assailing the judgment dated 26.07.2021 by the Division Bench, High Court of Karnataka, Bengaluru in MFA No.2037/2021 (AA) and connected matters. The appeals filed by the appellant herein before the High Court were dismissed, whereby the judgment dated 26.02.2021 passed by the Principal District Sessions Judge, Ramanagara in Arbitration Suit No.22/2019 and analogous suits as also the judgment dated 27.01.2021 by the Principal and District and Sessions Judge, Bengaluru Rural District, Bengaluru filed under Section 34 of the Arbitration and Conciliation Act, 1996 ('Act 1996' for short) were upheld. The said arbitration suits under Section 34 of Act, 1996 were filed by NHAI assailing the award dated 13.08.2019 and 06.01.2020 passed by the Deputy Commissioner and Arbitrator, National Highway - 275 (land acquisition), Ramanagara District, Ramanagara in Case No.LAQ(A)/NH-275/CR/137/2017-18 an....
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....e exemplars which were available before him but ultimately took note of the value provided under the notification dated 07.11.2014 issued by the Department of Stamps and Registration for the purpose of registration of the sale transactions, to award compensation. 5. The claimants being dissatisfied with the determination of the compensation awarded by SLAO, filed their respective petitions before the learned Arbitrator in terms of the provisions contained under Section 3G(7) of NH Act. The learned Arbitrator having taken into consideration the method adopted by the SLAO while determining the compensation, though has adopted the same mode of determination by reckoning the guideline value provided by the Department of Stamps and Registration for the purpose of registration of sale transactions, has however taken into consideration the subsequent notifications dated 28.03.2016 and 05.12.2018 to reckon the guideline value. In addition, the learned Arbitrator while applying the guideline dated 28.03.2016 and 05.12.2018 has taken note that the lands which were the subject matter of acquisition were converted for residential use and industrial purpose, from agricultural purpose. While ....
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....ior to the date of preliminary notification for acquisition dated 01.02.2016 was fixed and considering the fact that Section 26 of RFCTLARR Act, 2013 provides for awarding the higher of the value, the SLAO had adopted the guideline value of Rs.2026/- per sq. mtr in respect of lands in survey nos.92/1, 90/2A of Mayaganahalli and survey no.35/3 and 37/1 of Madapura while the properties in survey no.42/1 of Mayaganahalli was awarded Rs.7833/- and the property in survey no.24 of Kallugopahalli was awarded Rs.8102/- and the property in survey no.40/8 of Kumbalagodu was awarded Rs.17,200/-. 7. The learned Principal District and Sessions Judge while taking note of the contentions as put forth has kept in view the narrow scope available in a suit/petition under Section 34 of Act, 1996 and also keeping in view the provisions contained in Section 26 and 28 of RFCTLARR Act, 2013 has arrived at the conclusion that as against the consideration made by the SLAO by reckoning the land under acquisition as agricultural land, the learned Arbitrator has taken note that the lands were converted for residential purpose and in that light had taken into consideration the guideline value fixed in respe....
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....ed separately here below. The market value determined at Rs.15,400/- per sq. mtr in respect of all the lands has accordingly been upheld by the High Court. In that view, the High Court was of the opinion that in the limited scope available in an appeal under Section 37 of Act, 1996 an examination beyond the scope provided under Section 34 of Act, 1996 is not to be undertaken and has indicated that if a plausible view is taken by the learned Arbitrator, it should not be substituted by another view of the Court under Sections 34 and 37 of Act, 1996. Accordingly, the appeals filed by NHAI have been dismissed. 9. It is in that view the NHAI claiming to be aggrieved is before this Court in these appeals. 10. We have heard Ms. Madhavi Divan, learned Additional Solicitor General for NHAI, Mr. S. Nagamuthu learned senior counsel, Mr. Naresh Kaushik and Mr. K. Parameshwar being assisted by the advocates on record for the respective claimants. We have also perused the appeal papers in great detail. 11. From the narration of the sequence made above it would be clear that the factual aspects involved in the instant case are to be considered in the background of the legal contentions u....
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.... to the affected families cannot be a criteria to determine the market value. To press home the point, the learned Additional Solicitor General has referred to a comparative statement between the two provisions under the said two enactments which is taken note as hereunder: Section 28 of the LA Act, 2013 Section 3G (7) (a) of the NH Act 28. Parameters to be considered by Collector in determination of award.- In determining the amount of compensation to be awarded for land acquired under this Act, the Collector shall take into consideration- firstly, the market value as determined under Section 26 and the award amount in accordance with the First and Second Schedules; secondly, the damage sustained by the person interested, by reason of the taking of any standing crops and trees which may be on the land at the time of the Collector's taking possession thereof; thirdly, the damage (if any) sustained by the person interested, at the time of the Collector's taking possession of the land, by reason of severing such land from his other land; fourthly, the damage (if any) sustained by the person interested, at the time of the Collector's taking possession of the land, by....
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....te of the decision rendered by this Court in Union of India vs. Tarsem Singh, (2019) 9 SCC 304 relied on by both sides, wherein it has been held as hereunder: "51. We were also referred to an order in Sunita Mehra v. Union of India, in which this Court held: "5. The only point agitated before us by the learned Solicitor General is that in para 23 of the impugned judgment of the High Court, it has been held that landowners would "henceforth" be entitled to solatium and interest as envisaged by the provisions of Sections 23 and 28 of the Land Acquisition Act, 1894. In the ultimate paragraph of the impugned judgment it has, however, been mentioned that in respect of all acquisitions made under the National Highways Act, 1956, solatium and interest in terms similar to those contained in Sections 23(2) and 28 of the Land Acquisition Act, 1894 will have to be paid. 6. The learned Solicitor General has pointed out that there is an apparent inconsistency in the judgment, which needs to be clarified. It has also been submitted by the learned Solicitor General that the order of the High Court should be clarified to mean that the issue of grant of interest and solat....
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....e declare that the provisions of the Land Acquisition Act relating to solatium and interest contained in Sections 23(1-A) and (2) and interest payable in terms of Section 28 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." (emphasis supplied) 16. While arriving at the conclusion that notification bearing SO No.2368(E)dated 28.8.2015 whereunder the provisions of RFCTLARR Act, 2013 are made applicable, it is noted that NH Act is also one of the enactments specified in the Fourth Schedule. The relevant portion of the notification dated 28.08.2015 reads as hereunder: "And whereas, the Central Government considers it necessary to extend the benefits available to the land owners under the RFCTLARR Act to similarly placed land owners whose lands are acquired under the 13 enactments specified in the Fourth Schedule; and accordingly the Central Government keeping in view the aforesaid difficulties has decided to extend ....
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....on for the purpose of national highways slows down as a result of award of solatium and interest. Thus, a classification made between different sets of landowners whose lands happen to be acquired for the purpose of National Highways and landowners whose lands are acquired for other public purposes has no rational relation to the object sought to be achieved by the Amendment Act, i.e. speedy acquisition of lands for the purpose of National Highways. On this ground alone, the Amendment Act falls foul of Article 14. 30. Even otherwise, in P. Vajravelu Mudaliar, despite the fact that the object of the Amendment Act was to acquire lands for housing schemes at a low price, yet the Amendment Act was struck down when it provided for solatium at the rate of 5% instead of 15%, that was provided in the Land Acquisition Act, the Court holding that whether adjacent lands of the same quality and value are acquired for a housing scheme or some other public purpose such as a hospital is a differentiation between two sets of landowners having no reasonable relation to the object sought to be achieved. More pertinently, another example is given - out of two adjacent plots belonging to the ....
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....ective of the Act under which it is acquired or the purpose for which it is acquired. In that light, if Section 28 of RFCTLARR Act, 2013 is held not applicable in view of Section 3J of NH Act, the same will be violative of Article 14 of the Constitution. In that circumstance, the observation in Tarsem Singh (supra) that Section 3J of NH Act is unconstitutional to that extent though declared so while on the aspect of solatium and interest, it is held so on all aspects relating to determination of compensation. In any event, the extracted portion of the notification dated 28.08.2015 is explicit that the benefits available to the land owners under RFCTLARR Act is to be also available to similarly placed land owners whose lands are acquired under the 13 enactments specified in the Fourth Schedule, among which NH Act is one. Hence all aspects contained in Section 26 to 28 of RFCTLARR Act for determination of compensation will be applicable notwithstanding Section 3J and 3G(7)(a) of NH Act. 19. In that background, the award passed by the Arbitrator is to be examined keeping in view the limited scope available under Section 34 of Act, 1996 to interfere with an award. The learned Additi....
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....ispute- (1)- (2) * * * (3) In all cases, the Arbitral Tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction.' This last contravention must be understood with a caveat. An Arbitral Tribunal must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground. Construction of the terms of a contract is primarily for an arbitrator to decide unless the arbitrator construes the contract in such a way that it could be said to be something that no fair-minded or reasonable person could do." 15. In Ssangyong Engg. & Construction Co. Ltd. v. NHAI (Ssanguyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 : (2020) 2 SCC (Civ) 213], speaking for the Bench, R.F. Nariman, J. has spelt out the contours of the limited scope of judicial interference in reviewing the arbitral awards under the 1996 Act and observed thus : xxx 37. Insofar as domestic awards made in India are concerned, an additional ground is now av....
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....y appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse." 16. In Delhi airport Metro Express (P) Ltd. [Delhi Airport Metro Express (P) Ltd. v. DMRC, (2022) 1 SCC 131] referring to the facets of patent illegality, this Court has held as under : 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 reapprec....
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....rial number, instead of relying on the value for the same survey number. Without indicating reasons to draw a comparison with the land under acquisition, the same is applied though value of the very same lands containing same survey number was provided for in the same notification. Further, no opportunity was given to rebut the same. 21. On the aspect relating to the scope of examination of an award within the limited power to interfere provided under Section 34 of Act 1996, the learned senior counsel and other counsel for the claimants in order to contend that the award passed by the Arbitrator is sustainable in the instant case where the Arbitrator is none other than the Deputy Commissioner who has taken note of the market value in the vicinity, has relied on the decision of this Court in NHAI vs. M. Hakeem & Anr., (2021) 9 SCC 1. The decision in Emkay Global Financial Services Ltd. vs. Girdhar Sondhi (2018) 9 SCC 49 is relied to contend that the proceedings under Section 34 of Act, 1996 is summary in nature. Proceedings does not require framing of issues and leading evidence. The expression 'furnishes proof' in Section 34 is only to examine the record. However, what is to be ....
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....party who requests for these things. Secondly, once the report is arrived at, if requested, parties have to be given an opportunity to put questions to him and to present their own expert witnesses in order to testify on the points at issue. 52. Under the rubric of a party being otherwise unable to present its case, the standard textbooks on the subject have stated that where materials are taken behind the back of the parties by the Tribunal, on which the parties have had no opportunity to comment, the ground under Section 34(2)(a)(iii) would be made out." Permissibility of interference is on specific grounds of (i) arbitrator not adopting judicial approach (ii) breach of principles of natural justice (iii) contravention of statute not linked to public policy or public interest, as being patent illegality under Section 34(2A) and (iv) most basic notions of justice. The decision in Delhi Airport Metro Express Pvt. Ltd. vs. Delhi Metro Rail Corporation Ltd. (2022) 1 SCC 131 is relied upon to indicate that there should be minimal interference in arbitral awards, save, it suffers from patent illegality. What is patent illegality is delineated in para 29 which is as....
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....der Section 11 of the Act, 1996 to exclude the right of the land loser to seek the appointment of an Arbitrator keeping in view the statutory provision in the NH Act, the larger perspective of such limited right to the land loser in the process of arbitration is also to be kept in view. Unlike the arbitration in a contractual matter where the parties from the very inception at the stage of entering into a contract would mutually agree to refer any future dispute to an arbitrator, at that very stage are aware that in the event of any dispute arising between the parties the contours of the right, remedy, and scope from the commencement of the arbitration up to the conclusion through the judicial process. The terms of arbitration and the rights and obligations will also be a part of the agreement and a reference to the same in the award will constitute sufficient reasons for sustaining the award in terms of Section 31(3) of Act, 1996. Whereas, in the arbitration proceedings relating to NH Act, the parties are not governed by an agreement to regulate the process of arbitration. However, in the process of determination of just and fair compensation, the provisions in Section 26 to 28 of....
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....ns 26 and 28 of the RFCTLARR Act, 2013, the concept of just compensation for the acquired land should be kept in view while taking note of the award considering the sufficiency of the reasons given in the award for the ultimate conclusion. In such event an error if found, though it would not be possible for the Court entertaining the petition under Section 34 or for the appellate court under Section 37 of Act 1996 to modify the award and alter the compensation as it was open to the court in the reference proceedings under Section 18 of the old Land Acquisition Act or an appeal under Section 54 of that act, it should certainly be open to the court exercising power under Section 34 of Act, 1996 to set aside the award by indicating reasons and remitting the matter to the Arbitrator to reconsider the same in accordance with law. The said exercise can be undertaken to the limited extent without entering into merits where it is seen that the Arbitrator has on the face of the award not appropriately considered the material on record or has not recorded reasons for placing reliance on materials available on record in the background of requirement under RFCTLARR Act, 2013. 25. In that co....
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.... make the award enforceable, after giving an opportunity to the Tribunal to undo the curable defects. This provision cannot be brushed aside and the High Court could not have proceeded further to determine the issue on merits. 37. In case of absence of reasoning the utility has been provided under Section 34(4) of the Arbitration Act to cure such defects. When there is complete perversity in the reasoning then only it can be challenged under the provisions of Section 34 of the Arbitration Act. The power vested under Section 34(4) of the Arbitration Act to cure defects can be utilised in cases where the arbitral award does not provide any reasoning or if the award has some gap in the reasoning or otherwise and that can be cured so as to avoid a challenge based on the aforesaid curable defects under Section 34 of the Arbitration Act. However, in this case such remand to the Tribunal would not be beneficial as this case has taken more than 25 years for its adjudication. It is in this state of affairs that we lament that the purpose of arbitration as an effective and expeditious forum itself stands effaced. 42. From the facts, we can only state that from a perusal of ....
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....e of State of Chhattisgarh (supra) to contend with regard to the different facets of patent illegality in an award including violation of requirement under Section 28(2) and 31(3) of Act 1996. 28. In order to demonstrate that the award passed in the instant case suffers from such patent illegality, the learned Additional Solicitor General has contended that the compensation determined by the SLAO is not just an offer as was the case under the Land Acquisition Act in view of the provision contained in Section 3G (5) of NH Act. In that regard, it is contended that Section 3G (5) is explicit that either of the parties if dissatisfied with the amount determined by the competent authority under sub-section (1) or sub-section (2) of Section 3G of NH Act are entitled to file an application to the Arbitrator appointed by the Central Government for determination. Hence, it is contended that unlike Section 18 of the Land Acquisition Act wherein the land loser alone could seek reference for enhancement of the compensation, under NH Act the acquiring authority is also granted the liberty of filing an application before the learned Arbitrator if the compensation determined by the SLAO is exc....
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....fore considering enhancement. Notwithstanding the documents relied upon by the SLAO it would still be open for the learned Arbitrator to rely upon any additional material that may be brought before the learned Arbitrator not necessarily to point out an error in the consideration made by SLAO but such material could be considered despite the consideration made by the SLAO if such material aids in deciding just and fair compensation. Though, as contended by the learned Additional Solicitor General it is seen that in Tarsem Singh (supra) it is held that there is a regime change and the stage to offer an amount by way of compensation is removed, it only means that the process of award notice etc. from Section 9 to 15A, before possession under Section 16 of L.A. Act is removed, which only alters the procedure and enables immediate vesting of the land with the acquiring authority but does not take away the character of the SLAO award from being an offer of compensation. Hence, in the present case, though the SLAO has taken note of the guideline dated 07.11.2014 it would be open for the learned Arbitrator to take note of any other evidence that would be more relevant than the said guideli....
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....uments, it would be open to place reliance on the guideline issued for the purpose of the registration under the Stamp Act to determine the market value to be tendered as compensation for acquisition. 32. In that view, the question that would arise for consideration in the case on hand is as to whether the award passed by the learned Arbitrator would stand vitiated merely because the guideline dated 28.03.2016 which is marginally subsequent in point of time is reckoned, when the acquisition notification under Section 3A of NH Act was prior to the same i.e. on 01.02.2016. As already noted, Section 3G(7)(a) of NH Act provides for determination of the market value on the date of publication of the acquisition notification under Section 3A. In a normal circumstance, for the determination of the market value, the rate prevailing prior to the date of the notification shall be the basis more particularly when the determination is made based on sale exemplars, as otherwise there is a likelihood of manipulation with escalated price being dishonestly indicated in the subsequent transactions. While taking note of the documents relied on for the purpose of determination of the market value,....
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....ess for redetermining the guideline value had commenced through the notification bearing No.CBC-25/2014-15 dated 14.09.2015 and proceedings of the committee were also held during 2015-2016 which ultimately led to the notification dated 28.03.2016. Further, though the preliminary notification for acquisition was issued on 01.02.2016, the final notification under Section 3D of NH Act was issued on 23.09.2016. During the intervening period the guideline value notification dated 28.03.2016, the process for which had commenced through the notification dated 14.09.2015, was already published. Furthermore, when all these proceedings were in close proximity to the date of the preliminary notification for acquisition and the revision of the market value by the Department of Stamps and Registration itself was within a period of one year and 4 months from the earlier guideline value published on 07.11.2014, it would indicate that the escalation which was otherwise open for being worked out and applied by the learned Arbitrator on taking note of the notification dated 07.11.2014 was undertaken by the Department of Stamps and Registration and the benefit of considering such escalation was avail....
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....acquired land has been issued on 03.07.2017. In that light, it was contended that the market value of the non-agricultural lands adjoining the Bengaluru Mysuru National Highway such as the one owned by the claimant has increased considerably after the acquisition of the schedule land and accordingly the Registration Department has revised the guideline value. However, there is no reference to any specific notification relating to the guideline value much less the notification dated 28.03.2016. Further, there is no other indication to the manner in which the notification dated 28.03.2016 was brought on record though the said notification is published in the gazette. Comparison with lands in 'Zunadu' and 'City Greens' is also not pleaded. Further, as pointed out by the learned Additional Solicitor General the land situate in Madhapura and Mayaganahalli have been notified at serial Nos. 519, 524 and 525 respectively with reference the same survey number as that of the acquired land. The land value for 'Zunadu' and 'City Greens' are notified separately at Serial Nos.250 and 529. In that circumstance not just to place reliance on the notification dated 28.03.2016 but also to apply the v....
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....ant of compensation at a higher rate than the same. On perusal of the said Notification of the Stamps and Registration Department, it is seen that the price of the applicant's converted lands situated in the survey numbers of Mayaganahalli village is fixed at Rs.8,000/- per Sq. Mtr. and the price of the converted lands of Green City in the same village has been fixed at Rs.15,400/- per Sq. Mtr. Section 26 of the said Act clearly defines the procedure for fixing the market price. Even then, it could be seen that the applicant has not been given the fair price. Therefore, it is opined that instead of the present price fixed for the lands in question, its price has to be fixed on par with the rates fixed by the Stamps and Registration Department on the basis of land conversion value in respect of the similarly situated lands of the same village and that compensation be awarded accordingly. Further, since the Award has been passed by fixing the value of the assets and structures existing on the lands in question as per the assessment of the concerned officers, the prayer of the applicant to enhance compensation for the same has been rejected and the following order is passed." 39. T....
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....ever, from the pleading in the claim petition and from the portion extracted from the award which is the only basis for the ultimate order made by the learned Arbitrator, it would indicate that the NHAI did not have sufficient opportunity before the learned Arbitrator to controvert the material sought to be relied upon by the learned Arbitrator nor has the learned Arbitrator indicated sufficient reasons which to that extent would indicate patent illegality in the award passed by the learned Arbitrator being contrary to Section28(2) and 31(3) of Act, 1996. 40. That being the fact situation and also the position of law being clear that it would not be open for the court in the proceedings under Section 34 or in the appeal under Section 37 to modify the award, the appropriate course to be adopted in such event is to set aside the award and remit the matter to the learned Arbitrator in terms of Section 34(4) to keep in view these aspects of the matter and even if the notification dated 28.03.2016 relied upon is justified since we have indicated that the same could be relied upon, the further aspects with regard to the appropriate market value fixed under the said notification for th....
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.... is contended that the learned Arbitrator has chosen to apply the Notification dated 05.12.2018 to consider enhancement by 50% for industrial land since it was not specifically provided for in the guideline, by relying on the special instruction in guideline of 2018. In such event, the guideline value which was much lesser in the notification of 2018 itself should have been taken into consideration. It is pointed out that the guideline value for residential land in the 2018 Notification works out to Rs.11,900/- per sq. mtr. If 50% of the same is added to derive the value for industrial land, it will be Rs.16,680/- per sq. mtr. But the learned Arbitrator has chosen to sustain Rs.17,200/- awarded by SLAO based on the guideline value of 2014 notification but relied on the 2018 notification to apply the 50% value addition of the same to determine market value for industrial land, which is not sustainable. It is contended that if Clause 6 of special instruction was applied the market value will work out to Rs.12,900/- i.e. 75% of Rs.17,200/-. 45. The learned counsel for the claimant contended, the fact remains that the industrial land belonging to the claimant has been acquired. It i....
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.... in applying two different notifications in determining the market value, keeping in view the scope available under Section 34 of Act, 1996 it would not be open for this Court to substitute our view to that of the learned Arbitrator and modify the award. Further, the learned Additional Solicitor General sought to refer to Special Instruction No.6 in the notification of 2014 to arrive at the market value even if it is accepted that the value of industrial land is not indicated in the notification. These are aspects to which the learned Arbitrator is required to advert so as to arrive at the conclusion. In the circumstance where we have opined that the award passed by the learned Arbitrator suffers from patent illegality and appropriate consideration is necessary, the only course open is to set aside the award and allow the learned Arbitrator to reconsider the matter on that aspect. 49. From the conclusion reached above, in both the set of cases it is evident that awards passed by the learned Arbitrator is to be set aside and the matters be remanded in terms of Section 34(4) of Act, 1996 so as to enable the learned Arbitrators to assign reasons to arrive at their conclusion. In th....