Applicable Collector Guidelines must be considered when determining compensation for land acquired under the National Highways Act.

The appellants were agriculturists whose lands situated in Village Uda/Badus, District Harda, were acquired for the maintenance, management and operation of National Highway No. 47.

In the lead matter, 0.052 hectares of land bearing Khasra Nos. 260/1(a), 260/1(b) and 260/2(a) were acquired, and the Competent Authority determined compensation at ₹2,48,862 under Section 3-G(1) of the 1956 Act.

Dissatisfied with the compensation, the appellant invoked Section 3-G(5) of the National Highways Act before the statutory Arbitrator.

The Arbitrator rejected the claim for enhancement and confirmed the compensation awarded by the Competent Authority.

The appellant’s application under Section 34 of the Arbitration and Conciliation Act, 1996 was dismissed by the Second Additional District Judge, Harda, on 30 January 2023. The present appeal was filed under Section 37 of the 1996 Act.

Whether the Collector Guidelines/circle rates framed under the statutory framework governing valuation of immovable property were required to be considered while determining compensation for land acquired under the National Highways Act, 1956?

Whether the Arbitrator’s complete rejection of the applicable Collector Guidelines constituted a legally unsustainable approach warranting interference under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996?

Whether the High Court could remit the matter to the Arbitrator for fresh determination without itself deciding the actual quantum of compensation?

The Court applied Sections 3-A, 3-D, 3-G(1) and 3-G(5) of the National Highways Act, 1956, which govern acquisition, determination of compensation and arbitration concerning compensation disputes.

It also applied Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, under which judicial interference with an arbitral award is limited and is not equivalent to ordinary appellate review; however, interference is permissible where the award is perverse, patently illegal, contrary to public policy, or based on an approach contrary to binding law.

Relying on M.P. Road Development Corporation v. Mohd. Shahbuddin, 2022 SCC OnLine MP 697, the Court held that Collector Guidelines, having statutory recognition when read with Section 75 of the Indian Stamp Act and the Madhya Pradesh Guidelines Rules, 2018, may form the basis for determining compensation.

This principle was affirmed by the Supreme Court in Madhya Pradesh Road Development Corporation v. Vincent Daniel, (2025) 7 SCC 798, which held that the market value specified under the Stamp Act and the applicable circle rate must be considered under Section 26(1)(a) of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, where applicable.

The Court also relied on Konkan Railway Corporation Ltd. v. Chenab Bridge Project Undertaking, MMTC Ltd. v. Vedanta Ltd., Dyna Technologies Pvt. Ltd. v. Crompton Greaves Ltd., and M/s C and C Construction Ltd. v. Ircon International Ltd., for the proposition that Section 37 review is restricted but permits interference where the award rests on an impermissible or legally erroneous approach.

The Court held that the controversy was substantially settled by Mohd. Shahbuddin and its affirmation in Vincent Daniel.

Although the Court recognised that Section 37 jurisdiction is narrow and does not permit reassessment of evidence or substitution of a merely possible factual view, it distinguished the present case from an ordinary challenge to factual findings.

The Arbitrator had completely discarded the applicable Collector Guidelines on an erroneous legal premise that they were relevant only for stamp-duty purposes.

In light of Vincent Daniel, notified circle rates have legal relevance in determining market value and cannot be ignored without a legally sustainable basis.

Thus, the Court found that the award and the Section 34 order required interference because they proceeded contrary to authoritative precedent, rather than merely reflecting an alternative view on valuation.

At the same time, the Court declined to determine the precise compensation itself and directed the Arbitrator to undertake the valuation afresh, considering the applicable circle rates and other relevant factors.

It held that the applicable Collector Guidelines/circle rates must be considered while determining compensation for the acquired lands and that their complete rejection by the Arbitrator was legally unsustainable.

The order dated 30 January 2023 passed under Section 34 and the arbitral award dated 26 July 2022 were set aside.

The matters were remitted to the Arbitrator/Competent Authority for fresh adjudication of the claims for enhancement in accordance with law, after considering Mohd. Shahbuddin, Vincent Daniel, the applicable Collector Guidelines/circle rates and other relevant factors.

The Court expressly left the actual quantum of compensation open and directed completion of the exercise within six months from production of the certified copy of the order.

The appeals were accordingly partly allowed and disposed of.