Collector’s circle rates must be considered when determining compensation for land acquired under the National Highways Act.

The appellant’s agricultural land situated at Village Uda, Tehsil and District Harda, was acquired for the maintenance, management and operation of National Highway No. 47.

The acquisition proceedings were initiated under the National Highways Act, 1956, following notifications under Sections 3-A and 3-D. The Competent Authority determined compensation of ₹2,48,862 for the acquired land by award dated 29 July 2020.

The appellant challenged the quantum of compensation under Section 3-G(5) of the National Highways Act, 1956, before the statutory Arbitrator. By award dated 26 July 2022, the Arbitrator declined enhancement and confirmed the compensation determined 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 appellant contended that the Competent Authority and the Arbitrator had failed to consider the Collector Guidelines/circle rates issued under the Indian Stamp Act for determining the market value of the acquired land.

The respondents maintained that such guidelines were intended only for stamp-duty assessment and that the limited jurisdiction under Sections 34 and 37 of the Arbitration and Conciliation Act did not permit interference with the arbitral award.

1. Whether the Collector Guidelines/circle rates framed under the statutory framework governing valuation under the Indian Stamp Act could be considered for determining compensation for land acquired under the National Highways Act, 1956?

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

3. Whether the High Court, while exercising jurisdiction under Section 37 of the Arbitration and Conciliation Act, could remit the matter for fresh determination without itself fixing the quantum of compensation?

The Court applied Sections 3-A, 3-D and 3-G(5) of the National Highways Act, 1956, concerning acquisition of land and arbitration of disputes relating to compensation.

Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, restrict judicial interference with arbitral awards to recognised grounds such as patent illegality, perversity, violation of public policy or other statutory grounds; however, an award based on an erroneous legal approach may be interfered with.

Relying on M.P. Road Development Corporation v. Mohd. Shahbuddin, 2022 SCC OnLine MP 697, the Court held that Collector Guidelines framed under the Indian Stamp Act and the applicable valuation rules possess statutory significance and may form the basis for determining compensation under the Highways Act.

The Court further relied on Madhya Pradesh Road Development Corporation v. Vincent Daniel, (2025) 7 SCC 798, which held that, under Section 26(1)(a) of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, the market value specified under the Stamp Act must be considered where applicable, and that notified circle rates cannot be disregarded without legally sustainable reasons.

The Court also applied the principle that jurisdiction under Section 37 is narrower than ordinary appellate jurisdiction and does not permit substitution of a merely possible view taken by the Arbitrator.

The Court accepted that the jurisdiction under Section 37 was limited, but held that the present case involved an erroneous legal approach rather than a mere reappreciation of evidence or substitution of factual findings.

The Arbitrator had completely discarded the Collector Guidelines on the premise that they were relevant only for stamp-duty collection.

That approach was inconsistent with the binding principles recognised in Mohd. Shahbuddin and subsequently affirmed by the Supreme Court in Vincent Daniel, under which statutory circle rates constitute a relevant basis for determining market value and compensation.

Since the arbitral award and the Section 34 order proceeded without considering the applicable circle rates and relevant valuation factors, they could not be sustained.

Nevertheless, the Court did not itself determine the appropriate compensation, as the actual quantum required fresh consideration by the Arbitrator in accordance with the applicable guidelines and other relevant factors.

The appeals were partly allowed.

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 appellants’ claims for enhancement, after considering the applicable Collector Guidelines/circle rates and other relevant factors, within six months from production of the certified copy of the order.

The Court expressly declined to determine the actual quantum of compensation.