Principle of using Jantri rates to determine market value does not constitute patent illegality under Section 34.

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

The Arbitrator (District Collector) re-determined the market value by utilizing the highest "jantri" (government-fixed guideline) value of the land and adding a 5% annual increment

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 NHAI's evidence, and applied an arbitrary methodology

The Commercial Court dismissed the challenge on 31.12.2025

NHAI subsequently filed 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 plus a 5% enhancement

2. Whether the arbitral award was liable to be set aside under Section 34 for being unreasoned or in violation of the principles of natural justice

3. Whether the High Court, in a Section 37 appeal, can re-appreciate the factual evidence used by the Arbitrator to determine compensation

The court applied Section 3G(5) and 3G(7) of the National Highways Act, 1956, which mandates the determination of market value in accordance with Section 26 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013

It cited NHAI v. Nagraju (2022) 15 SCC 1, establishing that Section 26 criteria (including jantri/guideline values) are the valid basis for assessment

Furthermore, the court applied the restrictive standards for judicial interference under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, which limit setting aside awards to grounds of patent illegality or violations of fundamental policy/justice, prohibiting merits-based re-appreciation of evidence

The High Court affirmed the Commercial Court’s reasoning that an arbitral award cannot be set aside merely due to a disagreement with the valuation methodology or the amount of compensation

The court noted that because the Arbitrator followed the statutory framework of Section 26 of the 2013 Act by using government-prescribed jantri rates, the determination was neither arbitrary nor illegal

The court emphasized that a factual inquiry into market value is within the exclusive domain of the Arbitrator and cannot be re-examined through a re-appreciation of evidence in Section 34 or 37 proceedings, as this would exceed the "circumscribed" scope of judicial scrutiny

The court rejected the claims of procedural unfairness, noting NHAI had participated in the proceedings without prior objection

The court held that reliance on jantri rates ensures transparency and does not constitute patent illegality

The judgment dated 31.12.2025 passed by the 6th Additional District Judge, Ahmedabad, was upheld, and all connected civil applications were disposed of