REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. OF 2021
[ARISING OUT OF SLP (CIVIL) NO.13020 OF 2020]
THE PROJECT DIRECTOR,
NATIONAL HIGHWAYS NO.45 E AND 220
NATIONAL HIGHWAYS
AUTHORITY OF INDIA ...APPELLANT
VERSUS
M. HAKEEM & ANR. ...RESPONDENTS
WITH
CIVIL APPEAL NO. 2797 OF 2021
[ARISING OUT OF SLP (CIVIL) NO.13481 OF 2020]
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CIVIL APPEAL NO. 2787 OF 2021
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CIVIL APPEAL NO. 2799 OF 2021
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CIVIL APPEAL NO. 2807 OF 2021
[ARISING OUT OF SLP (CIVIL) NO.13922 OF 2020]
J U D G M E N T
R.F. Nariman, J
1. Applications for substitution are allowed. Leave granted.
2. The appeals in the present case raise an interesting question of law
– as to whether the power of a court under Section 34 of the
Arbitration and Conciliation Act, 1996 [“Arbitration Act”] to “set
aside” an award of an arbitrator would include the power to modify
5
such an award. A Division Bench of the Madras High Court has
disposed of a large number of appeals filed under Section 37 of the
said Act laying down as a matter of law that, at least insofar as
arbitral awards made under the National Highways Act, 1956
[“National Highways Act”], Section 34 of the Arbitration Act must
be so read as to permit modification of an arbitral award made
under the National Highways Act so as to enhance compensation
awarded by a learned Arbitrator.
3. The facts in all these appeals concern notifications issued under the
provisions of the National Highways Act and awards passed
thereunder. These notifications are all of the years 2009 onwards
and consist of awards that have been made by the competent
authority under the Act, who is a Special District Revenue Officer. In
all these cases, awards were made based on the ‘guideline value’ of
the lands in question and not on the basis of sale deeds of similar
lands. The result is, in all these cases, that abysmally low amounts
were granted by the competent authority. As an example, in SLP
(Civil) No.13020 of 2020, amounts ranging from Rs.46.55 to 83.15
per square meter were awarded. In the arbitral award made by the
District Collector in all these cases, being an appointee of the
6
Government, no infirmity was found in the aforesaid award, as a
result of which the same amount of compensation was given to all
the claimants. In Section 34 petitions that were filed before the
District and Sessions Judge, these amounts were enhanced to
Rs.645 per square meter and the award of the Collector was
therefore modified by the District Court in exercise of jurisdiction
under Section 34 Arbitration Act to reflect these figures. In the
appeal filed to the Division Bench, the aforesaid modification was
upheld, with there being a remand order to fix compensation for
certain trees and crops.
4. Shri Tushar Mehta, learned Solicitor General of India, has taken us
through the scheme of the National Highways Act, and has argued
that since it was necessary to speed up the acquisition process for a
very important public purpose, that is construction of national
highways, the National Highways Act was amended in 1997 by the
National Highway Laws (Amendment) Act, 1997 [“NH Amendment
Act”], to include Sections 3 to 3J under which, notifications were
issued under Sections 3A to 3D. Before vesting takes place of the
land acquired under Section 3E, compensation is determined under
Section 3G of the Act, which is an amount determined by the
7
competent authority who is set up under Section 3(a) of the Act.
Unlike the Land Acquisition Act, 1984 [“Land Acquisition Act”], if
the amount determined by the competent authority is not acceptable
to either the National Highways Authority of India [“NHAI”] or the
land-owner, on application by either of the parties, the amount of
compensation will be determined by an arbitrator who is appointed
only by the Central Government. Then, subject to the provisions of
the National Highways Act, the provisions of the Arbitration Act
apply. The competent authority and the arbitrator, while determining
the amount of compensation, must take into account, under Section
3G(7), the market value of the land on the date of publication of the
notification under Section 3A, damage sustained and various other
factors mentioned in the sub-section. Importantly, under Section 3J,
the Land Acquisition Act does not apply to such acquisitions. The
learned Solicitor General argued that, given the object sought to be
achieved by the Act, a speedy procedure was provided by which a
challenge to the arbitrator’s award is then made only under Section
34 of the Arbitration Act, which, as has been held by a catena of
judgments, is not a challenge on the merits of the award. The
8
court’s limited power under the said Section is wholly unlike the
power of an appellate court under the Land Acquisition Act, and
hence such power is only limited to either setting aside the award or
remitting the award to the arbitrator under Section 34(4) so as to
eliminate any ground of challenge under Section 34. He argued that
this was in contrast to the Arbitration Act, 1940 which contained a
specific provision to remit an award under Section 15, and further
argued that the Arbitration Act, 1996, being based on the
UNCITRAL Model Law on International Commercial Arbitration,
1985, has specifically restricted the grounds of challenge and the
consequent remedy, which is only to set aside or remit in limited
circumstances. He argued, based on a reading of Section 34 itself
as well as a number of judgments of this Court and High Courts that
this well settled position cannot possibly be given a go-by when it
comes to arbitration under the National Highways Act, in which
either party can ask for the appointment of an arbitrator who is then
appointed not by the parties, but by the Central Government. He
attacked the Division Bench judgment, arguing that the fact that
either party could approach the Central Government to appoint an
9
arbitrator, unlike the Land Acquisition Act, and that it is the Central
Government who appoints the arbitrator, the arbitration thus not
being consensual in nature, would make no difference to the
interpretation of Section 34 of the Arbitration Act in its application to
the National Highways Act. He therefore argued that the impugned
judgment was wrong on law and equally wrong in following an
earlier Single Judge judgment of the Madras High Court in which it
was held, in a situation not under the National Highways Act but
under the Arbitration Act itself (arising from a consensual
arbitration), that the court, under Section 34, can modify the arbitral
award. He attacked the learned Single Judge’s judgment in Gayatri
Balaswamy v. ISG Novasoft Technologies Ltd., 2014 SCC
OnLine Mad 6568 arguing that once the Supreme Court had laid
down as a matter of law that no modification of an award is
possible, it was not open to a single judge to differ from such view.
He also argued that under Section 34, post setting aside of an
award, a fresh arbitration could ensue as a matter of law, and it was
not open to his client or anybody to thwart a fresh arbitration in case
an award is set aside under Section 34.
5. Col. R. Balasubramanian, learned senior advocate appearing on
10
behalf of the respondent in SLP (Civil) No. 12987 of 2020, raised by
way of a preliminary point, that in at least three cases arising out of
the same notification for the same village and the same purpose as
in his case, the NHAI had deposited the compensation before the
learned court concerned and the same was received by the
claimants. The judgment of the learned District Judge was thus
complied with. He also pointed out that in two other cases being,
AROP No. 9,10,11 of 2014 and CMA No.650 to 680 of 2013, the
NHAI had deposited the entire award amount with the accrued
interest before the District Judge in accordance with the District
Judge’s judgment, no appeal being filed therefrom. He therefore
argued that the NHAI being ‘State’ under Article 12 of the
Constitution of India, cannot pick and choose as to when it will file
appeals against certain District Judge judgments and not against
others. On this ground alone, according to the learned senior
advocate, all these appeals ought to be dismissed. On merits, he
pointed out the facts of his case and the fact that an abysmally low
sum had been given as compensation which was then raised by the
District Judge, having regard to the relevant sale deeds in the
11
vicinity. He then copiously read from the learned Single Judge’s
judgment of the Madras High Court in Gayatri Balaswamy’s case
and supported this line of reasoning. He also supported the
impugned judgment to argue that even if the learned Single Judge
in Gayatri Balaswamy had not laid down the law correctly so far as
matters arising under the Arbitration Act are concerned, yet the
impugned judgment correctly makes the distinction between
consensual arbitration and an arbitrator appointed by the Central
Government, who is none other than some government servant who
merely rubber stamps awards that are passed by yet another
government servant. He argued that if Section 34 were to be
construed in the manner suggested by the learned Solicitor
General, then for a very grievous wrong there would be no remedy
as all that the District Judge could then do in the Section 34
jurisdiction is to set aside the award, resulting in a fresh arbitration
before either the self-same bureaucrat or another bureaucrat
appointed by the Central Government. This being the case, these
appeals even on merits ought to be dismissed.
6. Having heard learned counsel appearing on both sides, it is
important to first set out the relevant sections under the National
12
Highways Act. As has been argued by the learned Solicitor General,
the National Highways Act was amended in 1997. Para 2 of the
Statement of Objects and Reasons for this amendment is set out
hereunder: -
“STATEMENT OF OBJECTS AND REASONS
One of the impediments in the speedy implementation of
highways projects has been inordinate delay in the
acquisition of land. In order to expedite the process of land
acquisition, it is proposed that once the Central Government
declares that the land is required for public purposes for
development of a highway, that land will vest in the
Government and only the amount by way of compensation
is to be paid and any dispute relating to compensation will
be subject to adjudication through the process of
arbitration.”
7. The “competent authority” under the National Highways Act is
defined in Section 3(a) as follows:
3. Definitions. — In this Act, unless the context otherwise
requires, —
(a) “competent authority” means any person or authority
authorised by the Central Government, by notification in the
Official Gazette, to perform the functions of the competent
authority for such area as may be specified in the
notification;
8. Section 3A of the Act states: -
3A. Power to acquire land, etc.—
13
(1) Where the Central Government is satisfied that for a
public purpose any land is required for the building,
maintenance, management or operation of a national
highway or part thereof, it may, by notification in the Official
Gazette, declare its intention to acquire such land.
(2) Every notification under sub-section (1) shall give a brief
description of the land.
(3) The competent authority shall cause the substance of
the notification to be published in two local newspapers, one
of which will be in a vernacular language.
9. After objections are then heard under Section 3C, the requisite
declaration is made under Section 3D which reads as follows: -
3D. Declaration of acquisition. —
(1) Where no objection under sub-section (1) of section 3C
has been made to the competent authority within the period
specified therein or where the competent authority has
disallowed the objection under subsection (2) of that
section, the competent authority shall, as soon as may be,
submit a report accordingly to the Central Government and
on receipt of such report, the Central Government shall
declare, by notification in the Official Gazette, that the land
should be acquired for the purpose or purposes mentioned
in sub-section (1) of section 3A.
(2) On the publication of the declaration under sub-section
(1), the land shall vest absolutely in the Central Government
free from all encumbrances.
(3) Where in respect of any land, a notification has been
published under sub-section (1) of section 3A for its
acquisition but no declaration under sub-section (1) has
been published within a period of one year from the date of
14
publication of that notification, the said notification shall
cease to have any effect:
Provided that in computing the said period of one year, the
period or periods during which any action or proceedings to
be taken in pursuance of the notification issued under subsection (1) of section 3A is stayed by an order of a court
shall be excluded.
(4) A declaration made by the Central Government under
sub-section (1) shall not be called in question in any court or
by any other authority.
10. Section 3G with which we are directly concerned and which speaks
of the determination of an amount payable as compensation reads
as follows: -
3G. Determination of amount payable as compensation.
(1) Where any land is acquired under this Act, there shall be
paid an amount which shall be determined by an order of
the competent authority.
(2) Where the right of user or any right in the nature of an
easement on, any land is acquired under this Act, there shall
be paid an amount to the owner and any other person
whose right of enjoyment in that land has been affected in
any manner whatsoever by reason of such acquisition an
amount calculated at ten per cent, of the amount determined
under sub-section (1), for that land.
(3) Before proceeding to determine the amount under subsection (1) or sub-section (2), the competent authority shall
give a public notice published in two local newspapers, one
15
of which will be in a vernacular language inviting claims from
all persons interested in the land to be acquired.
(4) Such notice shall state the particulars of the land and
shall require all persons interested in such land to appear in
person or by an agent or by a legal practitioner referred to in
sub-section (2) of section 3C, before the competent
authority, at a time and place and to state the nature of their
respective interest in such land.
(5) If the amount determined by the competent authority
under sub-section (1) or sub-section (2) is not acceptable to
either of the parties, the amount shall, on an application by
either of the parties, be determined by the arbitrator to be
appointed by the Central Government—
(6) Subject to the provisions of this Act, the provisions of the
Arbitration and Conciliation Act, 1996 (26 of 1996) shall
apply to every arbitration under this Act.
(7) The competent authority or the arbitrator while
determining the amount under sub-section (1) or subsection (5), as the case may be, shall take into
consideration—
(a)the market value of the land on the date of publication
of the notification under section 3A;
(b) the damage, if any, sustained by the person
interested at the time of taking possession of the land,
by reason of the severing of such land from other land;
(c) the damage, if any, sustained by the person
interested at the time of taking possession of the land,
by reason of the acquisition injuriously affecting his other
immovable property in any manner, or his earnings;
(d) if, in consequences of the acquisition of the land, the
person interested is compelled to change his residence
16
or place of business, the reasonable expenses, if any,
incidental to such change.
11. Section 3J then states:
3J. Land Acquisition Act 1 of 1894 not to apply. —
Nothing in the Land Acquisition Act, 1894 shall apply to an
acquisition under this Act.
12. It will be seen that the competent authority, as defined, is to first
determine an amount which is payable by way of compensation for
compulsory acquisition of land. Under Section 3G(5), if the amount
determined by the said authority is not acceptable to either of the
parties, the amount shall, on application by either of the parties, be
determined by an arbitrator to be appointed by the Central
Government. What is of importance is that the ‘competent authority’
is a person or authority authorised by the Central Government by
notification to determine the amount of compensation. In the present
case, a notification designating a Special District Revenue Officer
as the competent authority has been made. The amount determined
by the aforesaid authority has then to be sent to an arbitrator, on
application by either of the parties. What is important to remember
is that the aforesaid arbitration is not a consensual process with
both parties having a hand in appointing the arbitrator. As a matter
17
of fact, the land owner has no say in the appointment of the
arbitrator, who is to be appointed only by the acquiring authority,
that is the Central Government.
13. Section 34 of the Arbitration Act, 1996 occurs in Chapter VII under
the title “Recourse against arbitral award”. We are directly
concerned with sub-sections (1) and (4) of Section 34 which are set
out hereunder.
34. Application for setting aside arbitral award. —
(1) Recourse to a Court against an arbitral award may be
made only by an application for setting aside such award in
accordance with sub-section (2) and sub-section (3).
xxx xxx xxx
(4) On receipt of an application under sub-section (1), the
Court may, where it is appropriate and it is so requested by
a party, adjourn the proceedings for a period of time
determined by it in order to give the arbitral tribunal an
opportunity to resume the arbitral proceedings or to take
such other action as in the opinion of arbitral tribunal will
eliminate the grounds for setting aside the arbitral award.
xxx xxx xxx
14. What is important to note is that, far from Section 34 being in the
nature of an appellate provision, it provides only for setting aside
awards on very limited grounds, such grounds being contained in
sub-sections (2) and (3) of Section 34. Secondly, as the marginal
18
note of Section 34 indicates, “recourse” to a court against an arbitral
award may be made only by an application for setting aside such
award in accordance with sub-sections (2) and (3). “Recourse” is
defined by P Ramanatha Aiyar’s Advanced Law Lexicon (3rd
Edition) as the enforcement or method of enforcing a right. Where
the right is itself truncated, enforcement of such truncated right can
also be only limited in nature. What is clear from a reading of the
said provisions is that, given the limited grounds of challenge under
sub-sections (2) and (3), an application can only be made to set
aside an award. This becomes even clearer when we see subsection (4) under which, on receipt of an application under subsection (1) of Section 34, the court may adjourn the Section 34
proceedings and give the arbitral tribunal an opportunity to resume
the arbitral proceedings or take such action as will eliminate the
grounds for setting aside the arbitral award. Here again, it is
important to note that it is the opinion of the arbitral tribunal which
counts in order to eliminate the grounds for setting aside the award,
which may be indicated by the court hearing the Section 34
application.
15. It is important to remember that Section 34 is modelled on the
19
UNCITRAL Model Law on International Commercial Arbitration,
1985, under which no power to modify an award is given to a court
hearing a challenge to an award. The relevant portion of the Model
Law reads as follows:
Article 34. Application for setting aside as exclusive
recourse against arbitral award
(1) Recourse to a court against an arbitral award may be
made only by an application for setting aside in accordance
with paragraphs (2) and (2) of this article.
xxx xxx xxx
(4) The court, when asked to set aside an award, may,
where appropriate and so requested by a party, suspend the
setting aside proceedings for a period of time determined by
it in order to give the arbitral tribunal an opportunity to
resume the arbitral proceedings or to take such other action
as in the arbitral tribunal’s opinion will eliminate the grounds
for setting aside.
16. Redfern and Hunter on International Arbitration (6th edition), states
that the Model Law does not permit modification of an award by the
reviewing court (at page 570) as follows:
“10.06 The purpose of challenging an award before a
national court at the seat of arbitration is to have that court
declare all, or part, of the award null and void. If an award is
set aside or annulled by the relevant court, it will usually be
treated as invalid, and accordingly unenforceable, not only
by the courts of the seat of arbitration, but also by national
courts elsewhere. This is because, under both the New York
Convention and the Model Law, a competent court may
20
refuse to grant recognition and enforcement of an award
that has been set aside by a court of the seat of arbitration.
It is important to note that, following complete annulment,
the claimant can recommence proceedings because the
award simply does not exist-that is, the status quo ante is
restored. The reviewing court cannot alter the terms of an
award nor can it decide the dispute based on its own vision
of the merits. Unless the reviewing court has a power to
remit the fault to the original tribunal, any new submission of
the dispute to arbitration after annulment has to be
undertaken by commencement of a new arbitration with a
new arbitral tribunal.”
17. The statutory scheme under Section 34 of the Arbitration Act, 1996
is in keeping with the UNCITRAL Model Law and the legislative
policy of minimal judicial interference in arbitral awards.
18. By way of contrast, under Sections 15 and 16 of the Arbitration Act,
1940, the court is given the power to modify or correct an award in
the circumstances mentioned in Section 15, apart from a power to
remit the award under Section 16 as follows: -
15. Power of Court to modify award.
The Court may by order modify or correct an award-
(a) where it appears that a part of, the award is upon a
matter not referred to arbitration and such part can be
separated from the other part and does not affect the
decision on the matter referred; or
21
(b) where the award is imperfect in form, or contains any
obvious error which can be amended without affecting such
decision; or
(c) where the award contains a clerical mistake or an error
arising from an accidental slip or omission.
16. Power to remit award.
(1) The Court may from time to time remit the award or any
matter referred to arbitration to the arbitrators or umpire for
reconsideration upon such terms as it thinks fit-
(a) where- the award has left undetermined any of the
matters referred to arbitration, or where it determines
any matter not referred to arbitration and such matter
cannot be separated without affecting the determination
of the matters referred; or
(b) where the award is so indefinite as to be incapable of
execution; or
(c) where an objection to the legality of the award is
apparent upon the face of it.,
(2) Where an award is remitted under sub- section (1) the
Court shall fix the time within which the arbitrator or umpire
shall submit his decision to the Court: Provided that any
time so fixed may be extended by subsequent order of the
Court.
(3) An award remitted under sub- section (1) shall become
void on the failure of the arbitrator or umpire to reconsider it
and submit his decision within the time fixed.
19. As a result therefore, a judgment in terms of the award is given
under Section 17 of the 1940 Act which reads as follows: -
17. Judgment in terms of award.
22
Where the Court sees no cause to remit the award or any
of the matters referred to arbitration for reconsideration or to
set aside the award, the Court shall, after the time for
making an application to set aside the award has expired, or
such application having been made, after refusing it,
proceed to pronounce judgment according to the award, and
upon the judgment so pronounced a decree shall follow and
no appeal shall lie from such decree except on the ground
that it is in excess of, or not otherwise in accordance with,
the award.
20. Thus, under the scheme of the old Act, an award may be remitted,
modified or otherwise set aside given the grounds contained in
Section 30 of the 1940 Act, which are broader than the grounds
contained in Section 34 of the 1996 Act.
21. It is settled law that a Section 34 proceeding does not contain any
challenge on the merits of the award. This has been decided in
MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163, at 167 as follows: -
14. As far as interference with an order made under Section
34, as per Section 37, is concerned, it cannot be disputed
that such interference under Section 37 cannot travel
beyond the restrictions laid down under Section 34. In other
words, the court cannot undertake an independent
assessment of the merits of the award, and must only
ascertain that the exercise of power by the court under
Section 34 has not exceeded the scope of the provision.
Thus, it is evident that in case an arbitral award has been
confirmed by the court under Section 34 and by the court in
an appeal under Section 37, this Court must be extremely
cautious and slow to disturb such concurrent findings.
23
22. Likewise, in Ssangyong Engg. & Construction Co. Ltd. v. NHAI,
(2019) 15 SCC 131, this Court under the caption “Section 34(2)(a)
does not entail a challenge to an arbitral award on merits” referred
to this Court’s judgment in Renusagar Power Co. Ltd. v. General
Electric Co., 1994 Supp (1) SCC 644, the Convention on the
Recognition and Enforcement of Foreign Arbitral Awards, 1958 [the
“New York Convention”] and various other authorities to conclude
that there could be no challenge on merits under the grounds
mentioned in Section 34 - (see paras 34 to 48). This Court also
held, in Maharashtra State Electricity Distribution Co. Ltd. v.
Datar Switchgear Ltd., (2018) 3 SCC 133 (at 170), that the court
hearing a Section 34 petition does not sit in appeal (see para 51).
23. As a matter of fact, the point raised in the appeals stands
concluded in McDermott International Inc. v. Burn Standard Co.
Ltd., (2006) 11 SCC 181, where this Court held: -
51. After the 1996 Act came into force, under Section 16 of
the Act the party questioning the jurisdiction of the arbitrator
has an obligation to raise the said question before the
arbitrator. Such a question of jurisdiction could be raised if it
is beyond the scope of his authority. It was required to be
raised during arbitration proceedings or soon after initiation
thereof. The jurisdictional question is required to be
determined as a preliminary ground. A decision taken
thereupon by the arbitrator would be the subject-matter of
24
challenge under Section 34 of the Act. In the event the
arbitrator opined that he had no jurisdiction in relation
thereto an appeal thereagainst was provided for under
Section 37 of the Act.
52. The 1996 Act makes provision for the supervisory role of
courts, for the review of the arbitral award only to ensure
fairness. Intervention of the court is envisaged in few
circumstances only, like, in case of fraud or bias by the
arbitrators, violation of natural justice, etc. The court cannot
correct errors of the arbitrators. It can only quash the award
leaving the parties free to begin the arbitration again if it is
desired. So, the scheme of the provision aims at keeping
the supervisory role of the court at minimum level and this
can be justified as parties to the agreement make a
conscious decision to exclude the court's jurisdiction by
opting for arbitration as they prefer the expediency and
finality offered by it.
24. This statement of the law was followed in Kinnari Mullick v.
Ghanshyam Das Damani, (2018) 11 SCC 328 at page 334 (see
para 15).
25. Also, in Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd.,
(2019) 20 SCC 1, this Court held: -
36. At this juncture it must be noted that the legislative
intention of providing Section 34(4) in the Arbitration Act was
to make the award enforceable, after giving an opportunity
to the Tribunal to undo the curable defects. This provision
cannot be brushed aside and the High Court could not have
proceeded further to determine the issue on merits.
37. In case of absence of reasoning the utility has been
provided under Section 34(4) of the Arbitration Act to cure
such defects. When there is complete perversity in the
25
reasoning then only it can be challenged under the
provisions of Section 34 of the Arbitration Act. The power
vested under Section 34(4) of the Arbitration Act to cure
defects can be utilised in cases where the arbitral award
does not provide any reasoning or if the award has some
gap in the reasoning or otherwise and that can be cured so
as to avoid a challenge based on the aforesaid curable
defects under Section 34 of the Arbitration Act. However, in
this case such remand to the Tribunal would not be
beneficial as this case has taken more than 25 years for its
adjudication. It is in this state of affairs that we lament that
the purpose of arbitration as an effective and expeditious
forum itself stands effaced.
26. Some of the judgments of the High Courts are also instructive. A
learned Single Judge of the Delhi High Court in Cybernetics
Network Pvt. Ltd. v. Bisquare Technologies Pvt. Ltd., 2012 SCC
OnLine Del 1155, held:
47. The next question that arises is whether the above
claims as mentioned in para 44 that have been erroneously
rejected by the learned Arbitrator can be allowed by this
Court in exercise of its powers under Section 34(4) of the
Act?
48. Under Section 34(4) of the Act, the Court while deciding
a challenge to an arbitral award, can either “adjourn the
proceedings for a period of time determined by it in order to
give the arbitral tribunal an opportunity to resume the arbitral
proceedings or to take such other action as in the opinion of
the arbitral tribunal will eliminate the grounds for setting
aside the arbitral award”. This necessarily envisages the
Court having to remit the matter to the Arbitral Tribunal. This
is subject to the Court finding it appropriate to do so and a
party requesting it to do so.
26
49. In Union of India v. Arctic India2007 (4) Arb LR 524
(Bom), a learned Single Judge of the Bombay High Court
opined that the Court can modify the Award even if there is
no express provision in the Act permitting it. The Court
followed the decision of the Supreme Court in Krishna
Bhagya Jala Nigam Ltd. v. Harischandra Reddy (2007) 2
SCC 720. A similar view has been taken by a learned Single
Judge of this Court in Union of India v. Modern
Laminators2008 (3) Arb LR 489 (Del). There the question
was whether in light of the arbitrator having failed to decide
the counter claim of the respondent in that case the Court
could itself decide the counter claim. After discussing the
case law, the Court concluded that it could modify the award
but only to a limited extent. It held (Arb LR p. 496):
“Such modification of award will be a species of ‘setting
aside’ only and would be ‘setting aside to a limited
extent’. However, if the courts were to find that they
cannot within the confines of interference permissible or
on the material before the arbitrator are unable to modify
and if the same would include further fact finding or
adjudication of intricate questions of law the parties
ought to be left to the forum of their choice i.e. to be
relegated under Section 34(4) of the Act to further
arbitration or other civil remedies.”
50. However, none of the above decisions categorically hold
that where certain claims have been erroneously rejected by
the Arbitrator, the Court can in exercise of its powers under
Section 34(4) of the Act itself decide those claims. The
Allahabad High Court has in Managing Director v. Asha
Talwar2009 (5) ALJ 397, held that while exercising the
powers to set aside an Award under Section 34 of the Act
the Court does not have the jurisdiction to grant the original
relief which was prayed for before the Arbitrator. The
Allahabad High Court referred to the decision of the
Supreme Court in McDermott International Inc. v. Burn
27
Standard Co. Ltd.(2006) 11 SCC 181, where it was
observed (SCC @ p. 208):
xxx xxx xxx
51. The view of the Allahabad High Court in Managing
Director v. Asha Talwar appears to be consistent with the
scheme of the Act, and in particular Section 34 thereof
which is a departure from the scheme of Section 16 of the
1940 Act which perhaps gave the Court a wider amplitude of
powers. Under Section 34(2) of the Act, the Court is
empowered to set aside an arbitral award on the grounds
specified therein. The remand to the Arbitrator under
Section 34(4) is to a limited extent of requiring the Arbitral
Tribunal “to eliminate the grounds for setting aside the
arbitral award”. There is no specific power granted to the
Court to itself allow the claims originally made before the
Arbitral Tribunal where it finds the Arbitral Tribunal erred in
rejecting such claims. If such a power is recognised as
falling within the ambit of Section 34(4) of the Act, then the
Court will be acting no different from an appellate court
which would be contrary to the legislative intent behind
Section 34 of the Act. Accordingly, this Court declines to
itself decide the claims of CNPL that have been wrongly
rejected by the learned Arbitrator.
27. The Delhi High Court in Nussli Switzerland Ltd. v. Organizing
Committee Commonwealth Games, 2014 SCC OnLine Del 4834,
held: -
34. A party like the Organizing Committee which has its
claims rejected, except a part, but which subsumes into the
larger amount awarded in favour of the opposite party, even
if succeeds in the objections to the award would at best
have the award set aside for the reason the Arbitration and
Conciliation Act, 1996 as distinct from the power of the
Court under the Arbitration Act, 1940, does not empower the
28
Court to modify an award. If a claim which has been
rejected by an Arbitral Tribunal is found to be faulty, the
Court seized of the objections under Section 34 of the
Arbitration and Conciliation Act, 1996 has to set aside the
award and leave the matter at that. It would be open to the
party concerned to commence fresh proceedings (including
arbitration) and for this view one may for purposes of
convenience refer to sub-Section (4) of Section 43 of the
Arbitration and Conciliation Act, 1996. It reads: -
“43. Limitations-
(1) xxxxx
(2) xxxxx
(3) xxxxx
(4) Where the Court orders that an arbitral award be set
aside, the period between the commencement of the
arbitration and the date of the order of the Court shall be
excluded in computing the time prescribed by the
Limitation Act, 1963, for the commencement of the
proceedings (including arbitration) with respect to the
dispute so submitted.”
28. An instructive judgment of the Delhi High Court in Puri
Construction P. Ltd. v. Larsen and Toubro Ltd., 2015 SCC
OnLine Del 9126 deals with the authorities of the Madras and
Calcutta High Courts on the one hand and the other High Courts
dealing with this problem as follows: -
115. In these circumstances, this Court holds that the reliefs
granted by the Tribunal cannot be sustained and are hereby
set aside. The question that follows is whether this Court,
exercising jurisdiction under Section 37 read with Section 34
29
of the Act, can modify, vary or remit the award. At the outset,
it is noticed that there are divergent views on this issue.
Here, the Court notices a somewhat divergent approach of
various High Courts. The case law is discussed in the
following part of the judgment.
Authorities in Favour of the Power to Modify, Vary or Remit
the award
116. A learned Single Judge of this Court in Bhasin
Associates v. NBCC, (2005) ILR 2 Delhi 88 held that “the
power to set aside an award when exercised by the Court
would leave a vacuum if the said power was not understood
to include the power to remand the matter back to the
arbitrator”. This view was subsequently adopted in Single
Bench decisions in Union of India v. Modern Laminators
Ltd., 2008 (3) ARB LR 489 (Delhi) (in the context of
modification of the award), IFFCO Tokio General Insurance
Co. Ltd. v. Indo Rama Synthetics Ltd. (decided on
20.01.2015) and Canara Bank v. Bharat Sanchar Nigam
Ltd. (decided on 26.03.2015). In Modern Laminators, the
Court relied upon the Supreme Court's decision
in Numaligarh Refinery Ltd. v. Daelim Industrial Company
Ltd., (2007) 8 SCC 466, noting that the Court therein had
modified the award in terms of its findings; and the decision
in Krishna Bhagya Jala Nigam Ltd. v. G. Harischandra
Reddy, AIR 2007 SC 817, where the interest rate awarded
by the arbitrator was modified. The learned Single Judge
in Canara Bank relied upon a decision of a Single Judge of
the Madras High Court in Gayatri Balaswamy v. ISG
Novasoft Technologies Ltd., (2015) 1 MLJ 5. The Court
in Gayatri Balaswamy examined the issue in significant [sic]
and held as follows:
“Therefore, in my considered view, the expression
‘recourse to a Court against an arbitral award’ appearing
in Section 34(1) cannot be construed to mean only a
right to seek the setting aside of an award. Recourse
against an arbitral award could be either for setting
30
aside or for modifying or for enhancing or for varying or
for revising an award. The expression ‘application for
setting aside such an award’ appearing in Section 34(2)
and (3) merely prescribes the form, in which, a person
can seek recourse against an arbitral award. The form,
in which an application has to be made, cannot curtail
the substantial right conferred by the statute. In other
words, the right to have recourse to a Court, is a
substantial right and that right is not liable to be
curtailed, by the form in which the right has to be
enforced or exercised. Hence, in my considered view,
the power under Section 34(1) includes, within its ambit,
the power to modify, vary or revise.”
The same view had been adopted earlier by Single Bench
decisions of the Bombay High Court in Axios Navigation Co.
Ltd. v. Indian Oil Corporation Limited, 2012 (114) BOM LR
392 and Angerlehner Structurals and Civil Engineering
Co. v. Municipal Corporation of Greater Mumbai, 2013 (7)
Bom CR 83 and a Division Bench of the Calcutta High Court
in West Bengal Electronics Industries Development
Corporation Ltd. v. Snehasis Bhowmick (in A.P.O. No. 240 of
2012).
Authorities holding there is no power to Modify, Vary or
Remit the award
xxx xxx xxx
118. This Court is inclined to follow the decisions in Central
Warehousing Corporation, Delhi Development
Authority, State Trading Corporation of India Ltd., Bharti
Cellular Limited, Cybernetics Network Pvt. Ltd. and Asha
Talwar. The guiding principle on this issue was laid down by
the Supreme Court in McDermott International Inc. (supra),
where the Court held:
“The 1996 Act makes provision for the supervisory role
of courts, for the review of the arbitral award only to
31
ensure fairness. Intervention of the court is envisaged in
few circumstances only, like, in case of fraud or bias by
the arbitrators, violation of natural justice, etc. The court
cannot correct errors of the arbitrators. It can only quash
the award leaving the parties free to begin the arbitration
again if it is desired. So, scheme of the provision aims at
keeping the supervisory role of the court at minimum
level and this can be justified as parties to the
agreement make a conscious decision to exclude the
court's jurisdiction by opting for arbitration as they prefer
the expediency and finality offered by it.”
Although the Madras High Court in Gayatri
Balaswamy (supra) appropriately noted that these
observations in McDermott International Inc. were not in the
context of the specific issue being dealt herewith, this Court
is of the opinion that it is determinative of the Court's
approach in an enquiry under Section 34 of the Act. Indeed,
a Court, while modifying or varying the award would be
doing nothing else but “correct[ing] the errors of the
arbitrators”. This is expressly against
the dictat of McDermott International Inc. Further, if the
power to remit the matter to the arbitrator is read into
Section 34, it would render inexplicable the deliberate
omission by Parliament of a provision analogous to Section
16 of the Arbitration Act, 1940 in the present Act. Section 16
of the 1940 Act specifically armed courts with the power to
remit the matter to arbitration. Noticeably, the scope of
remission under the present Act is confined to that
prescribed in sub-section (4) of Section 34. Besides the
Division Bench rulings of this Court in Delhi Development
Authority, State Trading Corporation of India Ltd., this was
also noted by a Full Bench of the Bombay High Court
in R.S. Jiwani v. Ircon International Ltd., 2010 (1) Bom CR
529, where the Court held:
“An award can only be set aside under the provisions of
Section 34 as there is no other provision except Section
32
33 which permits the arbitral tribunal to correct or
interpret the award or pass additional award, that too, on
limited grounds stated in Section 33… It is also true that
there are no parimateria provisions like Sections 15 and
16 of the Act of 1940 in the 1996 Act but still the
provisions of Section 34 read together, sufficiently
indicate vesting of vast powers in the court to set aside
an award and even to adjourn a matter and such acts
and deeds by the Arbitral Tribunal at the instance of the
party which would help in removing the grounds of
attack for setting aside the arbitral award.”
On the other hand, the Calcutta High Court in Snehasis
Bhowmick did not analyse this distinction, or the specific
observations of the Supreme Court in McDermott
International Inc. quoted above. Further, the decisions
in Numaligarh Refinery and Harishchandra Reddy (supra)
did not discuss the Court's power to modify, vary or remit the
award under Section 34 of the Act. Therefore, in light of
the dictum in McDermott International Inc. and the
difference in provisions of the 1940 Act and the present Act,
this Court holds that the power to modify, vary or remit the
award does not exist under Section 34 of the Act.
29. Thus, there can be no doubt that given the law laid down by this
Court, Section 34 of the Arbitration Act, 1996 cannot be held to
include within it a power to modify an award. The sheet anchor of
the argument of the respondents is the judgment of the learned
Single Judge in Gayatri Balaswamy (supra). This matter arose out
of a claim for damages by an employee on account of sexual
harassment at the workplace. The learned Single Judge referred to
33
the power to modify or correct an award under Section 15 of the
Arbitration Act, 1940 in para 29 of the judgment. Thereafter, a
number of judgments of this Court were referred to in which awards
were modified by this Court, presumably under the powers of this
Court under Article 142 of the Constitution of India. In para 34, the
learned Single Judge referred to para 52 in McDermott’s case
(supra) and then concluded that since the observations made in the
said para were not given in answer to a pointed question as to
whether the court had the power under Section 34 to modify or vary
an award, this judgment cannot be said to have settled the answer
to the question raised finally.
30. The first judgment of this Court referred to by the learned Single
Judge is the judgment in Gautam Constructions and Fisheries
Ltd. v. National Bank for Agriculture & Rural Development,
(2000) 6 SCC 519. The learned Single Judge correctly pointed out
that this judgment was under the Arbitration Act, 1940. In para 31,
the learned Single Judge then went on to state that modifications
were made in the award by the Supreme Court outside the
provisions of Section 15 of the Arbitration Act, 1940 and that,
therefore, the Supreme Court took the power of the Court to modify
34
an Award for granted. The comment made in para 31 does not
appear to be justified. Obviously, the power used was the power to
do complete justice between the parties, which is a power relatable
to the Constitution vested only in the Supreme Court of India as a
final court of last resort under Article 142 of the Constitution of India.
31. The next judgment referred to in para 32 is the judgment in Tata
Hydro-Electric Power Supply Co. Ltd. v. Union of India, (2003) 4
SCC 172. In para 21, this Court modified the award qua interest,
granting interest at the same rate but with reference to a different
period from that stated in the award. There is no doubt that the
award was in fact “modified” by the Supreme Court – again
referable to Article 142 of the Constitution of India.
32. Likewise, in Hindustan Zinc Ltd. v. Friends Coal Carbonisation,
(2006) 4 SCC 445, the learned Single Judge correctly observed that
the Supreme Court did not specifically address the issue as to
whether the court has the power under Section 34 to modify the
Award. In stating that the Supreme Court affixed a seal of approval
on the decision of the trial court modifying the award would not be
wholly correct. In para 12 only one ground was argued in the
appeal, which ground found favour with this Court. In any case, a
35
modification of an award upheld on facts without any discussion on
the law does not carry the matter very much further.
33. In Krishna Bhagya Jala Nigam Ltd. v. G. Harischandra Reddy,
(2007) 2 SCC 720, a judgment of this Court referred to in para 36,
this Court reduced the rate of interest for the pre-arbitration period,
pendente lite and future interest. It also referred to a suggestion that
a certain amount be reduced from the awarded amount from
Rs.1.47 crores to Rs.1 crore, which the learned counsel for the
respondent therein fairly accepted. Obviously, these orders were
also made under Article 142 of the Constitution of India and do not
carry the matter very much further. From these judgments, to
deduce, in para 39, that the judicial trend appears to favour an
interpretation which would read into Section 34 a power to modify,
revise or vary an award is wholly incorrect. The observation found in
McDermott’s decision clearly bound the learned Single Judge and
any decision to the contrary would be incorrect.
34. At this juncture, it is important to point out that an earlier Division
Bench of the Madras High Court reported in Central Warehousing
Corpn. v. A.S.A. Transport, 2007 SCC OnLine Mad 972 had
specifically considered the judgment of this Court in McDermott
36
(supra) and held: -
18. Though we are not in a position to concur with the
reasoning of the learned single Judge, we are in complete
agreement with the ultimate order of the learned single
Judge in setting aside the award. However, the further
direction given by the learned single Judge directing the
appellant to appoint an arbitrator at Chennai and for
conducting the arbitration are to be set aside as it cannot be
given as an order of the Court. Useful reference can be had
to the judgment of the Supreme Court in the case
of Mcdermott International Inc. v. Burn Standard co.
Ltd., (2006) 11 SCC 181, wherein it was held that the 1996
Act makes provisions for supervisory role of courts, for the
review of the arbitral award only to ensure fairness.
Intervention of the court is envisaged in few circumstances
only, like, in case of fraud or bias by the arbitrators, violation
of natural justice, etc. It can only quash the award leaving
the parties free to begin the arbitration again if it is desired.
Hence, in an application taken out under section 34 of the
Act, the Court can set aside the award leaving the parties
free to begin the arbitration again if it is desired. 19.
Therefore, the order of the learned single judge setting
aside the award is confirmed for the reasons given by us.
However, the other observations of the learned single Judge
are set aside. The issue is left open to the parties to
proceed further. The appeal is disposed of in the above
terms. However, there is no order as to costs. The
connected miscellaneous petition is closed.
35. This judgment was not cited before the learned Single Judge,
being a binding Division Bench judgment, which specifically
decided, following McDermott’s case (supra), that the power of
modification is not available under Section 34 of the Arbitration Act,
37
1996. Even otherwise therefore, the learned Single Judge’s
judgment was rendered per incuriam.
36. However, a later Division Bench of the High Court of Madras vide
judgment dated August 8th, 2019 reported in ISG Novasoft
Technologies Limited v. Gayatri Balasamy, 2019 SCC OnLine
Mad 15819 agreed with the learned Single Judge, without adverting
to the earlier Division Bench judgment of the same court, as follows:
41. It is no doubt true that the legislators did not intend to
use the word “modify” anywhere in Section 34 of the Act but
what was contemplated is only to “set aside” an award
passed by the Arbitrator if it falls within the realm of Section
34 of the Act. It is trite that an arbitrator being a Judge
chosen by the parties, his decision would ordinarily be final
unless one or the other conditions contained in Section 34
of the Act is satisfied for the purpose of setting aside his
award. The Court's jurisdiction in this behalf is to see
whether the arbitrator has exceed his jurisdiction or not and
therefore, the scope of judicial review of the arbitral award is
a narrow one.
42. In order to arrive at a conclusion as to whether the
Court, in exercise of power under Section 34 of the Act is
entitled to modify or vary the award passed by the Arbitrator,
the learned single Judge relied on several decisions. In para
No. 30 of the order passed by the learned single Judge,
reliance was placed on the decision of the Honourable
Supreme court in Gautam Constructions and Fisheries
Limited v. National Bank for Agriculture and Rural
Development reported in (2000) 6 SCC 519. In that case, a
single Judge of this Court upheld the claim for award of Rs.
38
400/- per square feet which was modified by the Division
Bench of this Court and reduced it to Rs. 150/-. When the
matter reached the Honourable Supreme Court, the rate
was modified further to Rs. 250/- per square feet. By placing
reliance on this decision, the learned single Judge held that
the Court exercising jurisdiction under Section 34 of the Act
has power to modify or vary the award passed by the
Arbitrator. Similarly, reference was made in para No. 32 of
the order of the learned single Judge to the decision of the
Honourable Supreme Court in Tata Hydero Electric Power
Supply Co. Ltd. v. Union of India, (2003) 4 SCC 172 in
which also the Honourable Supreme Court, while reversing
the judgment of the High Court, interfered with the award
passed by the arbitrator in so far as it relates to payment of
interest. For the very same proposition that the Court is
empowered to modify or vary the award passed by the
arbitrator, reliance was placed on the decision of the
Honourable Supreme Court in Hindustan Zinc Limited v.
Friends Coal Carbonisation, (2006) 4 SCC 445 to drive
home the point that the Court has power under Section 34
to modify the award passed by the Arbitrator. We are also in
entire agreement with the reasoning of the learned single
Judge that merely because the word “modify” or “vary” is not
indicated in Section 34 of the Act, it will not take away the
jurisdiction of the Court exercising under jurisdiction Section
34 of the Act to interfere with the award passed by an
arbitrator partially. If such a power is not vested with the
Court, it will only lead to multiplicity of proceedings, which is
not intended by the legislature while framing Section 34 of
the Act. A reasonable interpretation to Section 34 would only
lead to an irresistible conclusion that the Court can modify
or vary the award of the arbitrator if it is contrary to the
material evidence adduced by the parties. Even otherwise,
as contemplated under Section 34(2)(v)(b)(ii) of the Act,
when the award passed by the Arbitrator is in conflict with
the public policy in our Country, reversal or modification of
such award passed by the arbitrator is well within the
provisions contained under Section 34 of the Act itself. In
39
the present case, as rightly observed by the learned single
Judge, the non-constitution of a committee as per the
direction of the Honourable Supreme Court in Vishaka case
is to be regarded as a statutory violation and contravention
of public policy prevailing in India and therefore, the
appellant is entitled for a just and fair compensation.
37. This judgement suffers from the same infirmities as the learned
Single Judge’s judgement which it affirms.
38. Col. Balasubramanian also referred to three other judgments to
buttress the very same submission, namely, Numaligarh Refinery
Ltd. v. Daelim Industrial Co. Ltd., (2007) 8 SCC 466; DDA v. R.S.
Sharma and Co., (2008) 13 SCC 80 and Royal Education
Society v. LIS (India) Construction Co. (P) Ltd., (2009) 2 SCC
261. Each of these judgments also does not carry the matter further
in that, orders that are passed under Article 142 of the Constitution
do not constitute the ratio decidendi of a judgment. Admittedly, there
was no discussion on whether, as a matter of law, a power to vary
an award can be found in Section 34 of the Arbitration, 1996.
39. As has been pointed out by us hereinabove, McDermott (supra)
has been followed by this Court in Kinnari Mullick (supra). Also, in
Dakshin Haryana Bijli Vitran Nigam Ltd. v. Navigant
Technologies Pvt. Ltd., 2021 SCC OnLine SC 157, a recent
judgment of this Court also followed McDermott (supra) stating that
40
there is no power to modify an arbitral award under Section 34 as
follows: -
(f) In law, where the Court sets aside the award passed by
the majority members of the tribunal, the underlying
disputes would require to be decided afresh in an
appropriate proceeding.
Under Section 34 of the Arbitration Act, the Court may either
dismiss the objections filed, and uphold the award, or set
aside the award if the grounds contained in sub-sections (2)
and (2A) are made out. There is no power to modify an
arbitral award.
40. It can therefore be said that this question has now been settled
finally by at least 3 decisions of this Court. Even otherwise, to state
that the judicial trend appears to favour an interpretation that would
read into Section 34 a power to modify, revise or vary the award
would be to ignore the previous law contained in the 1940 Act; as
also to ignore the fact that the 1996 Act was enacted based on the
UNCITRAL Model Law on International Commercial Arbitration,
1985 which, as has been pointed out in Redfern and Hunter on
International Arbitration, makes it clear that, given the limited judicial
interference on extremely limited grounds not dealing with the
merits of an award, the ‘limited remedy’ under Section 34 is coterminus with the ‘limited right’, namely, either to set aside an award
41
or remand the matter under the circumstances mentioned in Section
34 of the Arbitration Act, 1996.
41. A look at the Arbitration Acts of England, the United States,
Canada, Australia and Singapore also lead to the same conclusion.
In each of those legislative measures, there are express provisions
which permit the varying of an award, unlike Section 34 of the
present Act. In para 51, the learned Single Judge then refers to
recourse to a court against an arbitral award, and argues that a
statute cannot be interpreted in such manner as to make the
remedy worse than the disease. As has been pointed out by us, the
“disease” can only be cured in very limited circumstances thus
limiting the remedy as well. Also, to assimilate the Section 34
jurisdiction with the revisional jurisdiction under Section 115 of the
Code of Civil Procedure, 1908 [the “CPC”], is again fallacious.
Section 115 of the CPC expressly sets out the three grounds on
which a revision may be entertained and then states that the High
Court may make ‘such order as it thinks fit’. These latter words are
missing in Section 34, given the legislative scheme of the Arbitration
Act, 1996. For all the aforesaid reasons, with great respect to the
learned Single Judge, it is not correct in law and therefore stands
42
overruled.
42. Coming to the submission in support of the impugned judgment
that the fact that the Central Government appoints an arbitrator and
the arbitration would therefore not be consensual, resulting in a
government servant rubber stamping an award which then cannot
be challenged on its merits, cannot possibly lead to the conclusion
that, therefore, a challenge on merits must be provided driving a
coach and four through Section 34 of the Arbitration Act, 1996. The
impugned judgment is also incorrect on this score.
43. Col. Balasubramanian, however referred to a passage in Jaishri
Laxmanrao Patil v. Chief Minister, 2021 SCC OnLine SC 362 (at
paras 412 to 415). He argued that ‘purposive construction’ referred
to by Bennion in his classic on Statutory Interpretation must be
applied by us on the facts of this case as in legislations dealing with
land acquisition, a pragmatic view is required to be taken and the
law must be interpreted purposefully and realistically so that the
benefit reaches the masses. We may only add that the judgment
cited by Col. Balasubramanian is a judgment dealing with a
constitutional provision – Article 342A of the Constitution. We must
never forget the famous statement of Chief Justice Marshall in
43
M'Culloch v. State of Maryland, 17 US 316 (1819) that “it is a
constitution we are expounding” – and the Constitution is a living
document governing the lives of millions of people, which is required
to be interpreted in a flexible evolutionary manner to provide for the
demands and compulsions of changing times and needs.
44. The distinction between constitutional and statutory interpretation
was felicitously put by Justice Aharon Barak, President of the
Supreme Court of Israel thus:
“The task of expounding a Constitution is crucially different
from that of construing a statute. A statute defines present
rights and obligations. It is easily enacted and as easily
repealed. A Constitution, by contrast, is drafted with an eye
to the future. Its function is to provide a continuing
framework for the legitimate exercise of governmental
power and, when joined by a Bill or Charter of Rights, for the
unremitting protection of individual rights and liberties. Once
enacted, its provisions cannot easily be repealed or
amended. It must, therefore, be capable of growth and
development over time to meet new social, political and
historical realities often unimagined by its framers. The
judiciary is the guardian of the Constitution and must, in
interpreting its provisions, bear these considerations in
mind.”
This quote has been cited in Rameshwar Prasad (VI) v. Union of
India, (2006) 2 SCC 1 (at pages 91,92).
45. “Purposive construction” of statutes, relevant in the present
context, is referred to in a recent concurring judgment by Nariman,
44
J. in Eera v. State (NCT of Delhi), (2017) 15 SCC 133, as the
theory of “creative interpretation”. However, even “creative
interpretation” has its limits, which have been laid down in the
aforesaid judgment as follows: -
139. A reading of the Act as a whole in the light of the
Statement of Objects and Reasons thus makes it clear that
the intention of the legislator was to focus on children, as
commonly understood i.e. persons who are physically under
the age of 18 years. The golden rule in determining whether
the judiciary has crossed the Lakshman Rekha in the guise
of interpreting a statute is really whether a Judge has only
ironed out the creases that he found in a statute in the light
of its object, or whether he has altered the material of which
the Act is woven. In short, the difference is the well-known
philosophical difference between “is” and “ought”. Does the
Judge put himself in the place of the legislator and ask
himself whether the legislator intended a certain result, or
does he state that this must have been the intent of the
legislator and infuse what he thinks should have been done
had he been the legislator. If the latter, it is clear that the
Judge then would add something more than what there is in
the statute by way of a supposed intention of the legislator
and would go beyond creative interpretation of legislation to
legislating itself. It is at this point that the Judge crosses the
Lakshman Rekha and becomes a legislator, stating what the
law ought to be instead of what the law is.
46. Quite obviously if one were to include the power to modify an
award in Section 34, one would be crossing the Lakshman Rekha
and doing what, according to the justice of a case, ought to be
45
done. In interpreting a statutory provision, a Judge must put himself
in the shoes of Parliament and then ask whether Parliament
intended this result. Parliament very clearly intended that no power
of modification of an award exists in Section 34 of the Arbitration
Act, 1996. It is only for Parliament to amend the aforesaid provision
in the light of the experience of the courts in the working of the
Arbitration Act, 1996, and bring it in line with other legislations the
world over.
47. However, this does not end the matter, as has rightly been pointed
out by Col. Balasubramanian, learned senior advocate appearing on
behalf of the respondent. In several cases, the NHAI has not filed
appeals even in matters which are similar i.e., arising from the same
Section 3A Notification, as a result of which certain land owners
have got away with enhanced compensation given to them by the
District Court. Also, we cannot shut our eyes to the fact the
arbitrator has awarded compensation on a completely perverse
basis i.e., by taking into account ‘guideline value’ which is relevant
only for stamp duty purposes, and not taking into account sale
deeds which would have reflected the proper market value of the
land. Given the fact that the awards in all these cases are therefore
46
perverse, the District Judge rightly interfered with the same.
48. There is no doubt that, as argued by Col. Balasubramanian, the
arbitral award in these cases is given by a government servant
appointed by the Central Government, the result being the rubber
stamping of compensation awarded on a completely perverse basis.
Given the fact that, in these petitions at least, the constitutional
validity of the NH Amendment Act, 1997 has not been challenged,
we must proceed on the basis that grave injustice would be done if
we were to interfere on facts, set aside the awards and remand the
matter to the very government servant who took into account
depressed land values which were relevant for purposes of stamp
duty only. It may be mentioned at this juncture that a limited
challenge was made to Section 3J of the National Highways Act
when it excluded the provisions of the Land Acquisition Act in the
context of solatium and interest not being granted under the
National Highways Act. Thus, in Union of India v. Tarsem Singh,
(2019) 9 SCC 304, this Court dealt with a batch of appeals in which
the question was set out thus: -
1. … A batch of appeals before us by the Union of India
question the view of the Punjab and Haryana High Court
which is that the non-grant of solatium and interest to lands
47
acquired under the National Highways Act, which is
available if lands are acquired under the Land Acquisition
Act, is bad in law, and consequently that Section 3-J of the
National Highways Act, 1956 be struck down as being
violative of Article 14 of the Constitution of India to this
extent.
49. This question was then answered stating:
52. There is no doubt that the learned Solicitor General, in
the aforesaid two orders, has conceded the issue raised in
these cases. This assumes importance in view of the plea of
Shri Divan that the impugned judgments should be set aside
on the ground that when the arbitral awards did not provide
for solatium or interest, no Section 34 petition having been
filed by the landowners on this score, the Division Bench
judgments that are impugned before us ought not to have
allowed solatium and/or interest. Ordinarily, we would have
acceded to this plea, but given the fact that the Government
itself is of the view that solatium and interest should be
granted even in cases that arise between 1997 and 2015, in
the interest of justice we decline to interfere with such
orders, given our discretionary jurisdiction under Article 136
of the Constitution of India. We therefore declare that the
provisions of the Land Acquisition Act relating to solatium
and interest contained in Sections 23(1-A) and (2) and
interest payable in terms of Section 28 proviso will apply to
acquisitions made under the National Highways Act.
Consequently, the provision of Section 3-J is, to this extent,
violative of Article 14 of the Constitution of India and,
therefore, declared to be unconstitutional. Accordingly,
appeal arising out of SLP (C) No. 9599 of 2019 is
dismissed.
50. As has been stated by us, the object of the NH Amendment Act,
1997 is to expedite the process of acquisition. This has been
48
achieved by cutting down the period for hearing of objections from
30 days under Section 5A of the Land Acquisition Act to 21 days
under Section 3C of the National Highways Act. Further, unlike the
Land Acquisition Act, the moment a notification under Section 3D(2)
of the National Highways Act (equivalent to Section 6 Land
Acquisition Act) is made, the land vests absolutely in the Central
Government free from all encumbrances. Thereafter, where land
has vested in the Central Government and the amount determined
by the competent authority under Section 3G as compensation has
been deposited by the Central Government in accordance with
Section 3H(1), the competent authority may then direct that
possession be taken within 60 days of service of notice by it.
51. Also, injunctions against highway projects have now become
impossible to obtain in view of Section 20A of the Specific Relief
Act, which has been introduced w.e.f. 01.10.2018. The said
provision reads as follows:
20A. Special provisions for contract relating to
infrastructure project. —
49
(1) No injunction shall be granted by a court in a suit under
this Act involving a contract relating to an infrastructure
project specified in the Schedule, where granting injunction
would cause impediment or delay in the progress or
completion of such infrastructure project.
Explanation. —For the purposes of this section, section 20B
and clause (ha) of section 41, the expression “infrastructure
project” means the category of projects and infrastructure
Sub-Sectors specified in the Schedule.
(2) The Central Government may, depending upon the
requirement for development of infrastructure projects, and
if it considers necessary or expedient to do so, by
notification in the Official Gazette, amend the Schedule
relating to any Category of projects or Infrastructure SubSectors.
(3) Every notification issued under this Act by the Central
Government shall be laid, as soon as may be after it is
issued, before each House of Parliament, while it is in
session, for a total period of thirty days which may be
comprised in one session or in two or more successive
sessions, and if, before the expiry of the session
immediately following the session or the successive
sessions aforesaid, both Houses agree in making any
modification in the notification or both Houses agree that the
notification should not be made, the notification shall
thereafter have effect only in such modified form or be of no
effect, as the case may be; so, however, that any such
modification or annulment shall be without prejudice to the
validity of anything previously done under that notification.
52. Under the Schedule, Category No. 1 deals with ‘Transport’ and
under ‘Infrastructure Sub-Sectors’ listed in this category, clause (a)
reads ‘Road and Bridges’.
53. It can be seen from the aforesaid provisions that the speeding up
50
of acquisition of land needed for national highways has been
achieved. The challenge process to an award passed will, of
necessity, take its own time, both under Section 3G of this Act as
well as under the provisions of the Land Acquisition Act. This being
the case, it is a little difficult to appreciate as to why the wholesome
regime of appeals under the Land Acquisition Act has been replaced
by a regime in which an award passed by an Arbitrator, who is not
consensually appointed but appointed by the Central Government,
can only be challenged not on merits, but on the limited grounds
contained in Section 34 of the Arbitration Act, 1996.
54. There can be no doubt that differential compensation cannot be
awarded on the ground that a different public purpose is sought to
be achieved. Also, the legislature cannot say that, however
laudable the public purpose and however important it is to expedite
the process of land acquisition, differential compensation is to be
paid depending upon the public purpose involved or the statute
involved.
55. Take the case of a single owner of land who has two parcels of
land adjacent to each other. One parcel of land abuts the national
highway, whereas the other parcel of land is at some distance from
51
the national highway. Can it be said that the land which abuts the
national highway, and which is acquired under the National
Highways Act, will yield a compensation much lesser than the
adjacent land which is acquired under the Land Acquisition Act only
because in the former case, an award is by a government servant
which cannot be challenged on merits, as opposed to an award
made under Part III of the Land Acquisition Act by the reference
Court with two appeals in which the merits of the award can be
gone into? There can be no doubt that discrimination would be writ
large in such cases.
56. As a matter of fact, 7 learned Judges of this Court in Nagpur
Improvement Trust v. Vithal Rao, (1973) 1 SCC 500 held as
follows: -
26. It is now well-settled that the State can make a
reasonable classification for the purpose of legislation. It is
equally well-settled that the classification in order to be
reasonable must satisfy two tests: (i) the classification must
be founded on intelligible differentia and (ii) the differentia
must have a rational relation with the object sought to be
achieved by the legislation in question. In this connection it
must be borne in mind that the object itself should be lawful.
The object itself cannot be discriminatory, for otherwise, for
instance, if the object is to discriminate against one section
of the minority the discrimination cannot be justified on the
ground that there is a reasonable classification because it
has rational relation to the object sought to be achieved.
52
27. What can be reasonable classification for the purpose of
determining compensation if the object of the legislation is to
compulsorily acquire land for public purposes?
28. It would not be disputed that different principles of
compensation cannot be formulated for lands acquired on
the basis that the owner is old or young, healthy or ill, tall or
short, or whether the owner has inherited the property or
built it with his own efforts, or whether the owner is politician
or an advocate. Why is this sort of classification not
sustainable? Because the object being to compulsorily
acquire for a public purpose, the object is equally achieved
whether the land belongs to one type of owner or another
type.
29. Can classification be made on the basis of the public
purpose for the purpose of compensation for which land is
acquired? In other words can the Legislature lay down
different principles of compensation for lands acquired say
for a hospital or a school or a Government building? Can the
Legislature say that for a hospital land will be acquired at
50% of the market value, for a school at 60% of the value
and for a Government building at 70% of the market value?
All three objects are public purposes and as far as the
owner is concerned it does not matter to him whether it is
one public purpose or the other. Article 14 confers an
individual right and in order to justify a classification there
should be something which justifies a different treatment to
this individual right. It seems to us that ordinarily a
classification based on the public purpose is not permissible
under Article 14 for the purpose of determining
compensation. The position is different when the owner of
the land himself is the recipient of benefits from an
improvement scheme, and the benefit to him is taken into
consideration in fixing compensation. Can classification be
made on the basis of the authority acquiring the land? In
other words can different principles of compensation be laid
if the land is acquired for or by an Improvement Trust or
53
Municipal Corporation or the Government? It seems to us
that the answer is in the negative because as far as the
owner is concerned it does not matter to him whether the
land is acquired by one authority or the other.
30. It is equally immaterial whether it is one Acquisition Act
or another Acquisition Act under which the land is acquired.
If the existence of two Acts could enable the State to give
one owner different treatment from another equally situated
the owner who is discriminated against, can claim the
protection of Article 14.
57. Given the fact that the NH Amendment Act, 1997 has not been
challenged before us, we refrain from saying anything more. Suffice
it to say that, as has been held in Taherakhatoon v. Salambin
Mohammad, (1999) 2 SCC 635 (at para 20), even after we declare
the law and set aside the High Court judgment on law, we need not
interfere with the judgment on facts, if the justice of the case does
not require interference under Article 136 of the Constitution of
India.
58. Given the fact that in several similar cases, the NHAI has allowed
similarly situated persons to receive compensation at a much higher
rate than awarded, and given the law laid down in Nagpur
Improvement Trust (supra), we decline to exercise our jurisdiction
under Article 136 in favour of the appellants on the facts of these
cases. Also, given the fact that most of the awards in these cases
54
were made 7-10 years ago, it would not, at this distance in time, be
fair to send back these cases for a de novo start before the very
arbitrator or some other arbitrator not consensually appointed, but
appointed by the Central Government. The appeals are, therefore,
dismissed on facts with no order as to costs.
…………………..………………J.
(R. F. Nariman)
……………..……………………J.
(B.R. Gavai)
New Delhi,
July 20, 2021.
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