Arbitral Valuation Based on Government Jantri Rates Within Statutory Framework Does Not Constitute Patent Illegality

The National Highway Authority of India (NHAI) challenged an arbitral award passed under Section 3G(5) of the National Highways Act, 1956.

The Arbitrator (District Collector) had re-determined the market value of the acquired land by applying the highest 'jantri' (government-fixed guideline) rate of the village and adding a 5% annual increase.

NHAI moved an application under Section 34 of the Arbitration and Conciliation Act, 1996, before the Commercial Court (6th Additional District Judge, Ahmedabad), alleging the award was unreasoned, arbitrary, and violated principles of natural justice.

The Commercial Court dismissed the challenge on December 31, 2025.

NHAI subsequently filed this First Appeal under Section 37 of the 1996 Act.

1. Whether the Arbitrator committed a patent illegality by re-determining market value based on the highest jantri rates plus a 5% increase

2. Whether the arbitral award was liable to be set aside under Section 34 or 37 of the Arbitration and Conciliation Act, 1996, for being unreasoned or contrary to the fundamental policy of Indian law

Section 3G(7) of the National Highways Act, 1956, and Section 26 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, which mandates the criteria for determining market value

Supreme Court precedent NHAI v. Nagraju [(2022) 15 SCC 1], establishing that market value must be determined per the 2013 Act

Restrictive scope of judicial interference under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, which prohibits re-appreciation of evidence or merits unless the award is patently illegal or shocks the conscience of the court

The High Court observed that the Arbitrator is legally required to factor in criteria under Section 26 of the 2013 Act, including jantri values, when determining compensation.

The Court found that the factual inquiry conducted by the Arbitrator based on collected material constitutes a merit-based finding that cannot be re-examined by a Section 37 court.

Regarding the NHAI’s contention that the award was "non-speaking," the Court noted that the Commercial Court had already verified that the award was signed and based on government-prescribed jantri rates, ensuring transparency.

The High Court emphasized that since the Arbitrator followed the statutory framework of the 1956 and 2013 Acts, the valuation method—even if disputed—does not constitute "patent illegality" or a violation of "fundamental policy of Indian law"

The court upheld the Commercial Court's judgment dated 31.12.2025, confirming that reliance on jantri rates for statutory compensation is neither arbitrary nor illegal.