Scope of interference under Section 37 is limited to patent illegality, excluding reappreciation of evidence or valuation methodology.

The National Highway Authority of India (NHAI) challenged an arbitral award passed by the District Collector (acting as Arbitrator) 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-fixed guideline) value 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, arbitrary, and violated principles of natural justice

The Commercial Court dismissed the challenge on 31.12.2025

NHAI subsequently filed this First Appeal under Section 37 of the Arbitration Act

1. Whether the Arbitrator’s determination of market value using the highest jantri rate plus a 5% enhancement constitutes a patent illegality or a violation of the fundamental policy of Indian law under Section 34 of the Act, 1996

2. Whether the High Court, in its appellate jurisdiction under Section 37, can re-examine the factual inquiry and evidence appreciation conducted by the Arbitrator

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 provides criteria for determining market value, including the use of jantri rates

It relied on the precedent National Highways Authority of India v. Nagraju [(2022) 15 SCC 1], establishing that market value must be determined per Section 26 of the 2013 Act

The court also applied the restrictive standards for judicial interference under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, highlighting that awards can only be set aside for patent illegality or violation of fundamental policy, and not on the merits of evidence

The Court observed that the Arbitrator is legally mandated to determine market value following the parameters of Section 26 of the 2013 Act

It held that utilizing the government-prescribed jantri rate as a baseline ensures uniformity and transparency, and therefore cannot be deemed arbitrary or illegal

The Court emphasized that the Arbitrator’s factual inquiry—based on material and evidence collected—falls within the exclusive domain of the Arbitrator and cannot be re-evaluated by the Court through a reappreciation of evidence

It noted that NHAI participated in the proceedings without prior objection and that the Commercial Court correctly found no "patent illegality" that struck at the root of the matter; mere disagreement with the valuation methodology or quantification does not warrant interference under the limited scope of Section 34 or 37

The Court affirmed that valuation based on jantri rates is a valid statutory exercise and does not shock the conscience of the court. The judgment dated 31.12.2025 was upheld, and all connected civil applications were disposed of