20 Jul 2121

Section 34 of the Arbitration Act of 1996 expressly states that no power of amendment of an award exists - Supreme Court of India

Case : The Project Director, National Highways No.45 E And 220 National Highways Authority of India v. M. Hakeem & Anr. Civil Appeal No. 2797 of 2021 [Arising Out of SLP (Civil) No. 13481 of 2020]

Court : Supreme Court of India

Bench : Justice R. F. Nariman and Justice B. R. Gavai

Decided on : 20 Jul 2121

The Relevant Statutes

Article 142, 12, 34, 342A, 14, 136 of the Constitution of India

Section 34, 37, 43(3), 34(4), 34(1), 34(2), 34(3) of the Arbitration and Conciliation Act, 1996

Section 15, 16, 30 of Arbitration Act, 1940

Sections 3 to 3J, National Highway Laws (Amendment) Act, 1997

Land Acquisition Act, 1984

Brief Facts & Procedural History

1. The circumstances in all of these appeals relate to notifications and awards granted under the terms of the National Highways Act. These notices cover the years 2009 and onwards, and they contain awards made by the competent authority under the Act, a Special District Revenue Officer. All of these awards were granted based on the land "guideline value,' not based on sale deeds for similar holdings. As a result, the competent body has given abysmally low amounts in each of these situations. SLP (Civil) No.13020 of 2020, for example, granted sums ranging from Rs.46.55 to 83.15 per square metre. In all of these cases, the arbitral judgement issued by the District Collector, who is a government appointee, found no flaws, as a consequence of which the same sum of compensation was paid to all of the claimants. These sums were increased to Rs.645 per square metre in Section 34 petitions filed before the District and Sessions Judge, and the Collector's award was thus amended by the District Court in exercise of authority under Section 34 Arbitration and Conciliation Act, 1996 to reflect these values. The aforementioned amendment was upheld in an appeal to the Division Bench, with a remand order to establish compensation for particular trees and crops.

2. In an appeal, the Madras High Court Division Bench dismissed a significant number of appeals filed under Section 37 of the aforementioned Act, holding that, at least in the case of arbitral decisions rendered under the National Highways Act, 1956, Section 34 of the Arbitration Act, 1996 must be construed in such a way that it allows an arbitral award issued under the National Highways Act to be modified to increase remuneration granted by a knowledgeable Arbitrator.

The Issue(s) of the Case

Whether a court's jurisdiction to "set aside" an arbitrator's decision under Section 34 of the Arbitration and Conciliation Act, 1996 includes the power to amend such an award?

The Observations of the Court

1. Honourable Supreme Court of India observes that There is little doubt that, under the law established by this Court, Section 34 of the Arbitration Act, 1996 does not include a power to alter an award. The respondents' main point of contention is the judgement of the learned Single Judge in Gayatri Balaswamy v. ISG Novasoft Technologies Ltd., (2015) 1 MLJ 5. This case originated from an employee's claim for damages as a result of sexual harassment at work. In paragraph 29 of the ruling, the learned Single Judge mentioned the ability to alter or correct an award under Section 15 of the Arbitration Act, 1940. Following that, several judgments of this Court were cited in which awards were amended by this Court, apparently by its authority under Article 142 of the Indian Constitution. The learned Single Judge referred to para 52 in McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181 in para 34 and then concluded that because the observations made in that para were not made in response to a pointed question as to whether the court had the power under Section 34 to modify or vary an award, this judgement could not be said to have finally answered the question.

2. Honourable Supreme Court of India also observes that The NHAI has not filed appeals in numerous cases, even in comparable situations, i.e., deriving from the same Section 3A Notification, as a consequence of which certain property owners have gotten away with increased compensation from the District Court. Furthermore, we cannot ignore the fact that the arbitrator awarded compensation on a wholly erroneous basis, namely, by relying on "guideline value," which is only important for stamp duty reasons, rather than sale deeds, which would have represented the appropriate market worth of the land. Given the absurd nature of the awards in all of these cases, the District Judge was correct in interfering.

3. Honourable Supreme Court of India also observes that There is little question that in these situations, the arbitral judgement is made by a government official chosen by the Central Government, resulting in the rubber-stamping of compensation paid on a purely arbitrary basis. Given that the constitutional validity of the National Highway Laws (Amendment) Act, 1997 has not been challenged in these petitions, we must proceed on the assumption that intervening on facts, setting aside the awards, and remanding the matter to the same government servant who took into account depressed land values that were only relevant for stamp duty purposes would be a grave injustice. A limited challenge to Section 3J of the National Highways Act, which excluded the requirements of the Land Acquisition Act in the context of solatium and interest not being given under the National Highways Act, was filed at this time.

4. Honourable Supreme Court of India also observes that the purpose of the National Highway Laws (Amendment) Act, 1997, as stated by us, is to speed up the purchase process. This was accomplished by reducing the time for hearing complaints from 30 days under the Land Acquisition Act to 21 days under the National Highways Act. Furthermore, unlike the Land Acquisition Act, once a notification under Section 3D (2) of the National Highways Act (equivalent to Section 6 of the Land Acquisition Act) is issued, the land vests in the Central Government totally and free of any encumbrances. The competent authority may then direct that possession be taken within 60 days of service of notice if the 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 by Section 3H (1).

5. Honourable Supreme Court of India also observes that Differential compensation cannot, without a doubt, be granted based on a distinct public aim being attempted to be attained. Furthermore, the legislature cannot declare that, no matter how noble the public goal or how critical it is to accelerate the land acquisition process, differential compensation is to be given based on the public purpose or the legislation in question.

The Decision Held by the Court

Honourable Supreme Court of India declines to exercise its jurisdiction under Article 136 of the Indian Constitution in favour of the appellants, on the circumstances of these instances. Also, considering that the majority of the awards in these cases were issued 7-10 years ago, it would not be fair to send them back for a de novo start before the same arbitrator or another arbitrator selected by the Central Government rather than by the parties. As a result, the appeals are rejected on the facts, with no decision as to costs.

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