Interference With Arbitral Award for Land Compensation Prohibited Where Valuation Follows Statutory Framework and Jantri Rates

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

The Arbitrator had re-determined the market value of the acquired land by adopting the highest jantri (government guideline) value and adding a 5% annual increase.

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, arbitrary, and violated principles of natural justice.

The Commercial Court dismissed the challenge on 31.12.2025.

NHAI subsequently preferred 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 and a 5% annual 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 against 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, including the use of jantri rates.

Supreme Court precedent NHAI v. Nagraju (2022) 15 SCC 1, which settles that market value determination must follow the 2013 Act.

Restrictive standards for judicial interference under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, which prohibit re-appreciation of evidence or merits unless there is patent illegality or a violation of fundamental policy.

The High Court observed that the Arbitrator is statutorily empowered to determine market value based on material facts and evidence, and such factual inquiries cannot be re-examined by a court acting under Sections 34 or 37 of the 1996 Act.

The Court upheld the Commercial Court’s finding that jantri rates are objective government-fixed parameters, and their use ensures transparency rather than arbitrariness.

Regarding the procedural challenges, the Court noted that NHAI had participated in the proceedings without prior objection and failed to demonstrate any illegality that "shocks the conscience".

It emphasized that a court cannot act as an appellate body to reassess the quantification of compensation or the methodology unless it hits the "root of the matter".

Since the valuation was within the statutory framework of the 2013 Act, no patent illegality was found.

The Court affirmed that determination of compensation based on prevailing jantri rates is a valid statutory exercise.

The judgment of the Commercial Court was upheld, and all connected civil applications were disposed of.