Determination of Land Value Based on Government Jantri Rates Does Not Constitute Patent Illegality Under Section 34.

The National Highway Authority of India (NHAI) challenged an arbitral award passed by the District Collector (acting as statutory Arbitrator) under Section 3G(5) of the National Highways Act, 1956.

The Arbitrator re-determined the market value of the acquired land by utilizing the highest jantri (government guideline) rates of the village and adding a 5% annual enhancement.

NHAI challenged this award before the Commercial Court (6th Additional District Judge, Ahmedabad) under Section 34 of the Arbitration and Conciliation Act, 1996, alleging that the award was unreasoned, ignored evidence, and adopted an arbitrary methodology.

The Commercial Court dismissed the Section 34 application on 31.12.2025, leading to the present First Appeal under Section 37 of the Arbitration Act.

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

2. Whether the arbitral award was liable to be set aside under Section 34 or Section 37 of the Arbitration and Conciliation Act, 1996, for being unreasoned or violating principles of natural justice.

The court applied 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, including the use of jantri rates.

The court relied on the precedent National Highways Authority of India v. Nagraju [(2022) 15 SCC 1], which settles the legal position that market value must be determined per the 2013 Act.

The court applied the restrictive principles of judicial interference under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, which prohibit the re-appreciation of evidence or merits unless there is a violation of fundamental policy of Indian law or patent illegality.

The Court observed that the Arbitrator conducted a factual inquiry in accordance with Section 26 of the 2013 Act based on material evidence.

It held that the use of jantri rates—which are government-fixed guideline values—ensures uniformity and transparency, and therefore cannot be termed arbitrary or illegal.

The Court found that the appellant’s arguments regarding the methodology of valuation and the alleged failure to consider NHAI’s evidence pertains to the "merits" of the award, which falls within the exclusive domain of the Arbitrator and is beyond the scope of judicial scrutiny under Sections 34 and 37.

The Court affirmed the Commercial Court’s finding that there was no "patent illegality" or shock to the "conscience of the court," noting that the appellant had participated in the proceedings without raising procedural objections at the relevant time.

The Court affirmed the judgment of the Commercial Court dated 31.12.2025, confirming that the determination of compensation based on jantri rates was legally sound. All connected civil applications were disposed of accordingly.