An arbitral award that ignores material contentions is patently illegal and liable to be set aside.

The appellants’ 0.054-hectare share of land in Village Golva was acquired for the four-laning of National Highway No. 3. The Land Acquisition Officer valued it as unirrigated land and awarded compensation of ₹1,71,072.

The appellants challenged the valuation before the statutory arbitrator, contending, among other things, that the land was diverted and used for a factory, that the applicable 2011–12 guideline categories did not cover its location on AB Road, and that other losses and the 2013 land-acquisition legislation required consideration. The arbitrator rejected the application without addressing those grounds; the District Court dismissed the appellants’ Section 34 challenge. The appellants then appealed under Section 37 of the Arbitration and Conciliation Act, 1996.

Whether the arbitrator’s failure to address the appellants’ material grounds and supporting documents rendered the award patently illegal and in conflict with basic notions of justice

Whether the District Court’s failure to consider those grounds while deciding the Section 34 application warranted setting aside its order under Section 37

Under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, an award may be set aside where it suffers from patent illegality or conflicts with the most basic notions of justice; an arbitrator must address the material factual contentions raised for determination. The High Court stated that its jurisdiction under Section 37 is akin to that of the District Court under Section 34.

Section 3G of the National Highways Act, 1956 governed the statutory arbitration and determination of compensation in this acquisition; the court did not decide the merits of the appellants’ contentions concerning the applicable guidelines or the 2013 Act.

The appellants had raised specific grounds concerning the land’s commercial use and factory, the guideline categories applicable to its AB Road location, damage to the boundary wall, loss of use of adjoining land, trees on the acquired land, and the applicability of the 2013 Act.

Although the arbitrator recorded the parties’ contentions, the decision did not address them and merely referred to the notification, guideline-based valuation, and receipt of compensation. The District Court likewise failed to examine the material grounds.

The High Court therefore found that both decisions lacked consideration of the issues requiring determination, making the award patently illegal and in conflict with basic notions of justice.

The appellants were permitted to institute fresh arbitration proceedings, which were directed to be decided as early as possible and, if practicable, within four months of filing.