2022 (7) TMI 1413 - SC - Indian Laws

Validity of Arbitral Award - compensation payable to a land loser - fixation of the market value of land - applicability of Section 3G(7)(a) of the NH Act or Section 28 of RFCTLARR Act 2013 - contention is that while determining the market value the definite parameters as contained in Section 3G(7)(a) of NH Act alone would be applicable and in view of the provisions contained in Section 3J of NH Act the provisions of the Land Acquisition Act shall not be made applicable. HELD THAT - Reliance placed on decision referred to in the case of NATIONAL HIGHWAYS AUTHORITY OF INDIA VERSUS SAYEDABAD TEA COMPANY LTD. AND ORS. 2019 (8) TMI 1227 - SUPREME COURT . In the said case this Court while examining the question as to whether the land loser can seek the appointment of an Arbitrator in terms of Section 11 of Act 1996 it was noted that such power would not be available in view of the provisions contained in Section 3G(5) of NH Act since Arbitrator is to be appointed by the Central Government to discharge its functions as per the provisions of the Arbitration and Conciliation Act. Having taken note of the said decision though it is seen that it was held so while considering the maintainability of petition under Section 11 of the Act 1996 to exclude the right of the land loser to seek the appointment of an Arbitrator keeping in view the statutory provision in the NH Act the larger perspective of such limited right to the land loser in the process of arbitration is also to be kept in view. Unlike the arbitration in a contractual matter where the parties from the very inception at the stage of entering into a contract would mutually agree to refer any future dispute to an arbitrator at that very stage are aware that in the event of any dispute arising between the parties the contours of the right remedy and scope from the commencement of the arbitration up to the conclusion through the judicial process. The terms of arbitration and the rights and obligations will also be a part of the agreement and a reference to the same in the award will constitute sufficient reasons for sustaining the award in terms of Section 31(3) of Act 1996. In the arbitration proceedings relating to NH Act the parties are not governed by an agreement to regulate the process of arbitration. However in the process of determination of just and fair compensation the provisions in Section 26 to 28 of RFCTLARR Act 2013 will be the guiding factor. The requirement therein being adverted to should be demonstrated in the award to satisfy that Section 28(2) and 31(3) of Act 1996 is complied. Therefore what is also to be kept in perspective while noticing the validity or otherwise of an award regarding which the non-furnishing of reasons is contended as patent illegality is the reason assigned for determining just compensation in terms thereof. The situation which may arise in cases when a lesser compensation is determined in the arbitration proceedings and the land loser is complaining of the award is also to be kept in perspective since the requirement of reasons to be given by the learned Arbitrator in cases for determination of market value and compensation should indicate reasons since the same will have to be arrived at on a comparative analysis for which the reasons should be recorded and Section 26 to 28 of RFCTLARR Act will be relevant. Neither the land loser nor the exchequer should suffer in the matter of just and fair compensation. Hence the reasons under Section 31(3) is to be expected in that manner the absence of which will call for interference under Section 34 of Act 1996. Under the scheme of the Act 1996 it would not be permissible to modify the award passed by the learned Arbitrator to enhance or reduce the compensation based on the material available on record in proceeding emanating from Section 34 of Act 1996. The option would be to set aside the award and remand the matter. Whether the award passed by the learned Arbitrator would stand vitiated merely because the guideline dated 28.03.2016 which is marginally subsequent in point of time is reckoned when the acquisition notification under Section 3A of NH Act was prior to the same i.e. on 01.02.2016? - HELD THAT - Section 3G(7)(a) of NH Act provides for determination of the market value on the date of publication of the acquisition notification under Section 3A. In a normal circumstance for the determination of the market value the rate prevailing prior to the date of the notification shall be the basis more particularly when the determination is made based on sale exemplars as otherwise there is a likelihood of manipulation with escalated price being dishonestly indicated in the subsequent transactions - In circumstances where a document which is proximal to the date of acquisition is not available it would be open to rely on a document which is much prior in point of time and if the time gap is more determination could be made by providing for reasonable escalation depending on the area wherein the acquired property is situate and nature of property. Similarly in a circumstance where no document which is prior to the date of the acquisition notification is available and the exemplars are subsequent to the date of acquisition notification the value therein could be noted and reasonable de-escalation be considered to determine the appropriate value. Needless to mention that no strait-jacket formula can be applicable to all cases with arithmetical precision in the matter of determination of compensation. In the instant case it is no doubt true that the notification issued by the Department of Stamps and Registration on 07.11.2014 is prior to the acquisition notification dated 01.02.2016. It is also to be noted that there was a time gap of more than one year between the two. In a normal circumstance even if the notification dated 07.11.2014 was taken into consideration it would be open for the learned Arbitrator to consider certain amount of escalation to determine the market value - in the present facts and circumstances the reliance placed on the guideline value notification dated 28.03.2016 for reckoning the market value of the property acquired under the preliminary notification dated 01.02.2016 by itself cannot be accepted to be a patent illegality committed by the learned Arbitrator. Whether an appropriate consideration has been made by the learned Arbitrator in the matter of applying the market value notified as a guideline value under the notification dated 28.03.2016 - whether the manner in which the said guideline was taken into consideration amounts to denial of opportunity to NHAI amounting to violation of principles of natural justice violating Section 28(2)? - HELD THAT - The land value for Zunadu and City Greens are notified separately at Serial Nos.250 and 529. In that circumstance not just to place reliance on the notification dated 28.03.2016 but also to apply the value notified for Zunadu and City Greens to the acquired lands necessary pleading in claim petition and evidence with opportunity to NHAI to rebut the same should have been placed before the learned Arbitrator. Based on the same a consideration in that regard was required to be made by the learned Arbitrator to arrive at a conclusion with regard to the applicability of the guideline value fixed under notification dated 28.03.2016 for the lands that had been converted to purposes other than agriculture. Further while applying the guideline value fixed for Zunadu and City Greens to the acquired lands by discarding guideline value for the same survey number necessary evidence to derive comparison between the lands so as to apply the value fixed in respect of another item of land in the same notification was necessary to be brought on record and was to be considered by the learned Arbitrator by assigning reasons. From the pleading in the claim petition and from the portion extracted from the award which is the only basis for the ultimate order made by the learned Arbitrator it would indicate that the NHAI did not have sufficient opportunity before the learned Arbitrator to controvert the material sought to be relied upon by the learned Arbitrator nor has the learned Arbitrator indicated sufficient reasons which to that extent would indicate patent illegality in the award passed by the learned Arbitrator being contrary to Section28(2) and 31(3) of Act 1996. That being the fact situation and also the position of law being clear that it would not be open for the court in the proceedings under Section 34 or in the appeal under Section 37 to modify the award the appropriate course to be adopted in such event is to set aside the award and remit the matter to the learned Arbitrator in terms of Section 34(4) to keep in view these aspects of the matter and even if the notification dated 28.03.2016 relied upon is justified since we have indicated that the same could be relied upon the further aspects with regard to the appropriate market value fixed under the said notification for the lands which is the subject matter of the acquisition or comparable lands is to be made based on appropriate evidence available before it and on assigning reasons for the conclusion to be reached by the learned Arbitrator. C.A. No.4681/2022 @ SLP(C)No.2503/2022 Whether the course adopted by the learned Arbitrator to apply the subsequent notification dated 05.12.2018 issued by the Department of Stamps and Registration to reckon the special instructions contained in that notification so as to enhance the market value by 50% of the guidance value which is provided in the notification dated 27.10.2014 and thus arrive at the market value of Rs.25, 800/- per sq. mtr. with the aid of two different guideline value notifications is justified? HELD THAT - The learned Arbitrator has committed patent illegality in applying two different notifications in determining the market value keeping in view the scope available under Section 34 of Act 1996 it would not be open for this Court to substitute our view to that of the learned Arbitrator and modify the award. Further the learned Additional Solicitor General sought to refer to Special Instruction No.6 in the notification of 2014 to arrive at the market value even if it is accepted that the value of industrial land is not indicated in the notification. These are aspects to which the learned Arbitrator is required to advert so as to arrive at the conclusion. In the circumstance where we have opined that the award passed by the learned Arbitrator suffers from patent illegality and appropriate consideration is necessary the only course open is to set aside the award and allow the learned Arbitrator to reconsider the matter on that aspect. The awards passed by the learned Arbitrator is to be set aside and the matters be remanded in terms of Section 34(4) of Act 1996 so as to enable the learned Arbitrators to assign reasons to arrive at their conclusion - The consideration to be made by the learned Arbitrator however is as to the material and evidence if any available to treat the acquired land as comparable to the lands situate in City Greens and Zunadu layout and award the compensation based on the guidance value indicated for the lands in the said layout if found comparable. The reason for not applying the guideline value indicated for the lands in the very survey number of the acquired lands is to be disclosed on such consideration. Appeal disposed off.

Summary

Issues Involved:
1. Determination of market value and compensation for acquired land.
2. Applicability of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLARR Act, 2013) to acquisitions under the National Highways Act (NH Act).
3. Scope of judicial interference under Section 34 of the Arbitration and Conciliation Act, 1996 (Act, 1996).
4. Patent illegality in arbitral awards.
5. Violation of principles of natural justice.
6. Assignment of reasons by the arbitrator.

Detailed Analysis:

1. Determination of Market Value and Compensation for Acquired Land:
The National Highways Authority of India (NHAI) challenged the compensation determined by the Special Land Acquisition Officer (SLAO) and the subsequent enhancement by the Arbitrator. The SLAO had determined compensation based on the guideline value of Rs.2026/- and Rs.17200/- per sq. mtr. The Arbitrator, however, enhanced the compensation to Rs.15,400/- and Rs.25,800/- per sq. mtr. by relying on subsequent guideline values and considering the conversion of land for residential and industrial purposes.

2. Applicability of RFCTLARR Act, 2013:
The Supreme Court noted that the factors under Section 26 and 28 of the RFCTLARR Act, 2013, including the seventh factor relating to equity, justice, and benefit to affected families, are applicable in determining compensation under the NH Act. This is because the NH Act is included in the Fourth Schedule of the RFCTLARR Act, 2013, which extends the beneficial provisions of the RFCTLARR Act to acquisitions under the NH Act.

3. Scope of Judicial Interference under Section 34 of Act, 1996:
The Court highlighted the limited scope of interference under Section 34 of Act, 1996, which allows setting aside an arbitral award only on specific grounds such as patent illegality, violation of public policy, or lack of reasons. The Court emphasized that reappreciation of evidence is not permissible under this section.

4. Patent Illegality in Arbitral Awards:
The Court found that the Arbitrator committed patent illegality by relying on a subsequent guideline value notification dated 28.03.2016, which was issued after the acquisition notification dated 01.02.2016. The Arbitrator also failed to provide sufficient reasons for applying the guideline value for 'City Greens' and 'Zunadu' to the acquired lands without proper evidence or opportunity for NHAI to rebut.

5. Violation of Principles of Natural Justice:
The Court observed that the Arbitrator did not provide NHAI sufficient opportunity to contest the reliance on the subsequent guideline value notification and the comparison with 'City Greens' and 'Zunadu'. This amounted to a violation of principles of natural justice.

6. Assignment of Reasons by the Arbitrator:
The Court noted that the Arbitrator failed to provide adequate reasons for the conclusions reached, particularly in applying the guideline value for 'City Greens' and 'Zunadu' to the acquired lands. The absence of detailed reasoning and reliance on materials without proper consideration amounted to patent illegality.

Conclusion:
The Supreme Court set aside the awards passed by the Arbitrator and remanded the matters for reconsideration. The Court directed the Arbitrator to provide sufficient reasons for the conclusions reached, ensuring compliance with Section 26 to 28 of the RFCTLARR Act, 2013, and to consider the evidence properly with due opportunity to NHAI. The Court emphasized the need for just and fair compensation, keeping in view the market value and the hardship faced due to the deprivation of property.