Scope of judicial scrutiny under Section 37 precludes re-appreciation of evidence in market value determination.

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

The Arbitrator (District Collector) had re-determined the market value of the acquired land by applying the highest 'jantri' (government-fixed guideline) value of the village and adding a 5% annual enhancement.

NHAI challenged this award before the Commercial Court 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 1996 Act.

1. Whether the Arbitrator committed a patent illegality by adopting the highest jantri value plus 5% enhancement for determining compensation

2. Whether the arbitral award was liable to be set aside under Section 34 or 37 of the Arbitration and Conciliation Act, 1996 for being unreasoned or against public policy

The Court applied Section 3G(5) and (7) of the National Highways Act, 1956, noting that market value must be determined as per Section 26 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.

It relied on the precedent National Highways Authority of India v. Nagraju [(2022) 15 SCC 1], which settles that the 2013 Act's valuation criteria apply to NHAI acquisitions.

The Court applied the restrictive scope of judicial interference defined under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, which limits setting aside awards to grounds of patent illegality, violation of fundamental policy of Indian law, or shocks to the conscience of the court.

The Court reasoned that the Arbitrator conducted a factual inquiry based on Section 26 of the 2013 Act, and market value determination is an evidentiary matter that cannot be re-examined by a court acting under Sections 34 or 37 of the 1996 Act.

It upheld the Commercial Court’s finding that using 'jantri' rates (government-prescribed values) ensures transparency and uniformity, and thus cannot be termed arbitrary.

The Court emphasized that a disagreement with the methodology or quantum of compensation does not constitute "patent illegality" or a violation of "fundamental policy".

It further noted that the Arbitrator is the exclusive judge of the evidence, and the High Court’s powers under Section 37 are even more circumscribed than those under Section 34.

It affirmed that the valuation based on jantri rates was legally sound and that the procedural objections raised by NHAI lacked merit. The court ordered the dismissal of both the First Appeal and the connected Civil Application for stay.