Mangaluru Landowners’ ₹3.24-Lakh-Per-Cent Highway Award Stands; Karnataka HC Says 9% Interest Starts Only On Handover

Land measuring 291.38 sq. metres in Survey No. 27/5B, Surathkal Village, was notified for acquisition under Sections 3A and 3D of the National Highways Act, 1956.

The Deputy Commissioner, acting as Arbitrator under Section 3G(5), redetermined compensation at ₹3,24,800 per cent, relying on an earlier award concerning land in the same village; the Arbitrator rejected the owners’ higher valuation claim and did not rely on a sale deed executed after the preliminary notification.

The Commercial Court dismissed the owners’ Section 34 petition on 1 February 2024 and the NHAI’s Section 34 petition on 1 April 2025, leaving the award undisturbed.

The landowners appealed after a delay of 504 days.

The NHAI separately appealed, challenging the award and raising, among other matters, the owners’ entitlement to interest before surrender or handover of possession.

Under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, a court does not reappraise the merits of an arbitral award; Section 37 review cannot exceed the restricted grounds available under Section 34, and interference is limited to recognised grounds such as patent illegality going to the root of the matter.

Section 13(1A) of the Commercial Courts Act, 2015, and the limitation principles explained in Government of Maharashtra (Water Resources Department) v. Borse Brothers Engineers and Contractors Pvt. Ltd., (2021) 6 SCC 460, require delay in commercial appeals to be condoned exceptionally, not routinely, having regard to the objective of speedy dispute resolution and the need for a bona fide, sufficient explanation.

The Court also applied Section 3H(5) of the National Highways Act, 1956, in holding that interest at 9% on the redetermined compensation would run from surrender or handover of possession.

The owners’ explanation did not justify the 504-day delay: their participation in the acquisition challenge and the related compensation proceedings did not establish sufficient cause for failing to appeal in time, and the Court found no basis to depart from the strict approach required in commercial appeals.

On the NHAI’s appeal, the Court held that the Section 34 court had found no ground to set aside the award and that Section 37 did not permit a fresh assessment of valuation.

The acquired land was garden land abutting the highway; part of the same survey number had been converted, indicating similar development potential.

The Arbitrator’s reliance on an earlier award for land in the same village was therefore not shown to be patently illegal.

The later sale deed was not a reliable exemplar because the purchaser’s land was itself covered by the notification and the transaction was not considered bona fide for valuation purposes.

As to interest, the Court addressed the NHAI’s contention that possession had not been handed over while the acquisition challenge was pending, and tied the interest entitlement to surrender or handover.

It clarified that interest at 9% per annum on the redetermined compensation is payable only from the date the landowners surrender or hand over the acquired land to the NHAI.