Ballari Highway Landowners’ Fear Of Compensation Cuts Not Enough To Replace Arbitrator, Karnataka HC Says

The petitioners were landowners whose lands were acquired for the Ballari–Moka National Highway project. Dissatisfied with the compensation determined by the competent authority, they sought redetermination under Section 3G(5) of the National Highways Act, 1956; their applications were pending before the Additional Deputy Commissioner acting as arbitrator.

The petitioners alleged bias and predetermination, relying principally on an asserted oral observation that compensation might be reduced, the arbitrator’s request for a Registration Department report, and certain valuation decisions. They sought substitution of the arbitrator and a fresh hearing of their applications.

Section 3G(5) of the National Highways Act permits either party dissatisfied with the competent authority’s compensation determination to seek determination by an arbitrator; Section 3G(6) applies the Arbitration and Conciliation Act, 1996, to such proceedings, subject to the National Highways Act.

Sections 12 and 13 of the 1996 Act provide the grounds and procedure for challenging an arbitrator’s independence or impartiality, while Section 34 permits a challenge to the resulting award.

Under Bhaven Construction v. Executive Engineer, Sardar Sarovar Narmada Nigam Ltd., constitutional intervention in arbitration is exceptional, including where the statutory framework leaves a party remediless or demonstrable bad faith is shown.

Deep Industries Ltd. v. ONGC Ltd. and SBP & Co. v. Patel Engineering Ltd. affirm the policy of minimal judicial intervention in arbitral proceedings, with Article 227 intervention confined to exceptional cases, including orders patently lacking inherent jurisdiction.

The test for bias is whether objective circumstances establish a real likelihood or reasonable apprehension of bias, not merely a party’s suspicion.

Allegations of bad faith or mala fides require cogent material and particulars, not general assertions or subjective impressions.

The Court held that the asserted oral observation about possible reduction, viewed alone, did not establish a closed mind or a real likelihood of bias; the petitioners produced no cogent material showing that the arbitrator acted for an improper purpose or relied on extraneous considerations.

The awards relied on by the petitioners showed enhancement of compensation from ₹188 to ₹1,184 per square metre, which did not support their allegation of a predetermined approach against landowners.

Disagreement with valuation, deductions or treatment of converted lands could be raised through the remedies available under the 1996 Act, but did not itself establish bias.

Because no exceptional circumstance, patent jurisdictional defect, demonstrable bias or established bad faith was shown, constitutional intervention was unwarranted.

It left the petitioners at liberty to approach the appropriate fora under the Arbitration and Conciliation Act, 1996, if they considered the arbitrator biased or the orders lopsided.

If they institute proceedings of the nature raised in the writ petitions, the benefit of Section 14 of the Limitation Act, 1963, may be considered if available in law.