Karnataka HC Rejects Landowners’ 504-Day-Late Appeal, Upholds Compensation Award And Ties 9% Interest To Handover of Acquired Land

The National Highways Authority of India (NHAI) acquired 291.38 sq. m. of garden land in Survey No. 27/5B, Surathkal Village, following a preliminary notification dated 8 September 2012.

The Arbitrator enhanced compensation to Rs. 3,24,800 per cent, relying on an earlier award for land in the same village; the landowners’ claim for a higher value based on a sale deed dated 3 December 2012 was rejected.

The Commercial Court dismissed both the landowners’ Section 34 challenge and NHAI’s separate Section 34 challenge.

NHAI appealed under Section 37, contesting the award and the landowners’ entitlement to interest. The landowners’ Section 37 appeal was filed 504 days late.

Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 confine judicial review of an arbitral award; a Section 37 court cannot exceed the limits applicable under Section 34 or independently reassess the merits.

Interference is generally unavailable where the arbitrator has taken a possible view, and patent illegality must go to the root of the matter [MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163, paras. 19–20; Konkan Railway Corpn. Ltd. v. Chenab Bridge Project, (2023) 9 SCC 85, para. 20].

Appeals under Section 37 are also subject to the applicable limitation periods, and delay is to be condoned by way of exception, not rule, consistently with the objective of speedy resolution under the Arbitration Act and the Commercial Courts Act [Government of Maharashtra (Water Resources Department) v. Borse Brothers Engineers and Contractors Pvt. Ltd., (2021) 6 SCC 460, paras. 15–17].

Under Section 3H(5) of the National Highways Act, interest on compensation is payable from the date possession is surrendered or handed over.

The landowners’ stated grounds did not justify condoning a 504-day delay, particularly given the statutory emphasis on speedy resolution and the absence of a sufficient explanation; their appeal was therefore dismissed without determination of its merits.

As to NHAI’s appeal, the High Court held that the Commercial Court had found no Section 34 ground for setting aside the award and that Section 37 did not permit a fresh assessment of the evidence.

The Arbitrator’s reliance on an earlier award for land in the same village was a permissible basis for valuation; the subject land abutted the highway and had development potential, while the later sale deed involved land itself notified for acquisition and was not a bona fide market exemplar.

In light of the dispute over possession, the Court clarified that interest would run only from the date the landowners surrendered or handed over the land to NHAI.

The landowners’ application to condone the 504-day delay was rejected, and NHAI’s challenge to the compensation award failed.

The Court clarified that interest at 9% per annum on the redetermined compensation would be payable only from the date the landowners surrender or hand over possession of the acquired land to NHAI.