Scope of judicial scrutiny under Sections 34 and 37 is limited; Jantri-based valuation does not constitute patent illegality.

The National Highways Authority of India (NHAI) challenged an arbitral award passed 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 filed an application under Section 34 of the Arbitration and Conciliation Act, 1996, before the Commercial Court (6th Additional District Judge, Ahmedabad), alleging that the award was unreasoned, ignored NHAI's evidence, and violated principles of natural justice

The Commercial Court dismissed the challenge on December 31, 2025

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

1. Whether the Arbitrator committed a patent illegality by applying the highest Jantri rate and a 5% annual increase to determine market value

2. Whether the arbitral award was liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996, for being unreasoned or contrary to the fundamental policy of Indian law

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 NHAI v. Nagraju (2022) 15 SCC 1, establishing that market value under the 1956 Act must be determined as per the 2013 Act

The court also applied Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, which severely circumscribe the scope of judicial interference in arbitral awards, prohibiting the re-appreciation of evidence or merits

The High Court observed that the Arbitrator conducted a factual inquiry in accordance with Section 26 of the 2013 Act based on the material and evidence produced by the parties

It held that the choice of methodology—specifically using the highest Jantri rate to ensure uniformity and transparency—falls within the exclusive domain of the Arbitrator and does not constitute a "patent illegality"

The Court concurred with the Commercial Court’s finding that NHAI failed to show how the award shocked the conscience of the court or violated fundamental policy; mere disagreement with the valuation method or amount of compensation is insufficient for invocation of Section 34

Finally, the Court emphasized that under Section 37, its powers are even more restricted and it cannot act as an appellate court to re-examine factual findings

The court affirmed the Commercial Court’s judgment, ruling that Jantri-based valuation is neither illegal nor arbitrary

All stay applications were disposed of accordingly