Standard for Judicial Review Under Sections 34 and 37 of Arbitration Act in Land Compensation Disputes

The National Highways 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 adopting the highest jantri (government-fixed guideline) value of the village and adding a 5% annual increment.

The NHAI unsuccessfully challenged this award before the Commercial Court (6th Additional District Judge, Ahmedabad) under Section 34 of the Arbitration and Conciliation Act, 1996.

NHAI then preferred this First Appeal under Section 37 of the 1996 Act, alleging that the award was unreasoned, ignored evidence, and adopted an irrational methodology for valuation.

1. Whether the Arbitrator committed a patent illegality by determining compensation based on the highest jantri rates and a 5% annual increase.

2. Whether the arbitral award was liable to be set aside under Section 34 or Section 37 of the Arbitration and Conciliation Act, 1996, for being unreasoned or violating principles of natural justice.

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 mandate the criteria for determined market value, including the use of jantri rates.

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

Regarding the scope of judicial review, the court applied Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, which restrict interference to grounds of patent illegality or violation of fundamental policy, prohibiting the re-appreciation of evidence.

The High Court observed that the Arbitrator is statutorily required to determine market value as per Section 26 of the 2013 Act, and since jantri rates are a prescribed criterion, their application ensures transparency and does not constitute illegality.

The Court noted that the Commercial Court had correctly found no "patent illegality" as the objections raised by NHAI pertained to the methodology of quantification and factual inquiries, which fall within the exclusive domain of the Arbitrator.

The Court further held that under Section 37 of the 1996 Act, the power of judicial scrutiny is even more circumscribed than under Section 34; therefore, as long as the Arbitrator's view is a plausible one based on the material collected, the court cannot act as an appellate authority to re-evaluate the evidence or valuation.

The court upheld the Commercial Court’s decision, affirming that the use of jantri rates for compensation is a valid statutory exercise and not "shshoking to the conscience" or against the fundamental policy of Indian law.