, having allowed the application Order 7 Rule 11(d), was not justified in granting to the appellant-plaintiff liberty to amend the plaint by seeking appropriate reliefs and paying the court fee.

having allowed the application Order 7 Rule 11(d), was not justified in granting to the appellant-plaintiff liberty to amend the plaint by seeking appropriate reliefs and paying the court fee.

1

Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

Civil Appeal Nos 2401-2402 of 2021

@ SLP (C) Nos. 29975-29976 of 2018

Sayyed Ayaz Ali .... Appellant

Versus

Prakash G Goyal & Ors. .... Respondents

J U D G M E N T

Dr Dhananjaya Y Chandrachud, J

1 These appeals arise from a judgment of a Single Judge at the Nagpur Bench

of the High Court of Judicature at Bombay.

2 The appellant is the plaintiff in a suit instituted before the Civil Judge, Senior

Division at Nagpur. The first respondent filed an application at Exhibit-50 for the

rejection of the plaint on the ground that it was barred under clauses (b) and (d) of 

2

Order 7 Rule 11 of the Code of Civil Procedure 1908 (“CPC”). The Fifth Joint Civil

Judge, Junior Division, Nagpur allowed the application. However, while doing so, the

appellant was “directed to seek proper relief and pay court fee thereon within 15

days, otherwise appropriate order will be passed”. This order of the Trial Judge,

insofar as it permitted the appellant to carry out an amendment for seeking

appropriate reliefs was assailed before the High Court in a Civil Revision Application

No 124 of 2017 by Defendants 1A to D and Defendant No 2 (Respondent Nos 1 to 5

to these proceedings). The appellant instituted a Writ Petition1 under Article 227 of

the Constitution for challenging the order of the Trial Judge allowing the application

under Order 7 Rule 11 of the CPC. The High Court decided both the civil revision

application and the writ petition by a common judgment. The Single Judge held that

since the plaint was rejected under Order 7 Rule 11(d) there was no occasion to

direct that an amendment be made to the plaint. The civil revision was allowed on

this basis. The writ petition filed by the appellant was held to be an “after thought

and belated” and no relief was granted to the appellant in the writ proceedings. That

is how the proceedings have reached this Court. The appellant is essentially

aggrieved by the decision of the Trial Court and the High Court to allow the

application under Order 7 Rule 11(d) of the CPC.

3 Since the controversies in the present case arise out of the application under

Order 7 Rule 11, it would be necessary to set out in brief the contents of the plaint.

Parties would be referred to on the basis of their respective positions in the suit. The

 1 (WP No 4508 of 2018)

3

plaintiff claims that he came into contact with the third defendant who is a financial

broker. The third defendant is alleged to have arranged a loan of Rs 7 lacs with

interest at 5 per cent month subject on the plaintiff executing an agreement and

blank documents as security for the loan. Against the loan of Rs 7 lacs, the plaintiff

is alleged to have executed an agreement dated 3 April 2012 in favour of the

nominees of the third defendant and executed documents which were blank.

Thereafter, it is alleged that the plaintiff needed an additional finance of Rs 22 lacs

and the third defendant took the plaintiff to the first defendant. The first defendant is

alleged to have agreed to give a loan of Rs 22 lacs on the condition that the plaintiff

executed a sale deed in respect of land of Mauza: Kanholi towards security for

repayment of the loan. The amount was paid over on 11 May 2012 and was to carry

interest of 5 per cent per month and in consideration, the plaintiff is alleged to have

executed documents including a sale deed dated 11 May 2012. In the meantime, the

fourth defendant is alleged to have expressed the desire to sell plot Nos 23-A, 29,

34, 35-A, 24, 25, 26, 27 and 28 admeasuring 25.009 sq. ft. out of land bearing

Khasra No 82/3 Mauza: Gorewada. P.R. No 9, Tah: and District Nagpur. This

property has been referred to as the suit property. The fourth defendant is alleged

to have shown an agreement dated 22 March 2011 in his favour. The plaintiff is

alleged to have been shown certain documents between Shoab Asad, Murtuja Khan

and Shashikant Grihanirman Sahakari Sanstha. After negotiation, it is stated that the

plaintiff agreed to purchase the suit property at Rs 1950 per sq. ft., out of which the

plaintiff agreed to pay Rs 1400 per sq. ft. to Shashikant Grihanirman Sahakari

Sanstha and Rs 550 per sq. ft. to the fourth defendant. Since the plaintiff did not 

4

have funds for the purchase of the property, it is alleged that he met the first

defendant through the third defendant and sought a loan for the amount. The third

defendant is alleged to have agreed to a loan of Rs 1.5 crores subject to the

deduction of the earlier loans of Rs 7 lacs and Rs 22 lacs together with interest.

According to the plaintiff, it was however a condition that the sale deed of Plot No

23A and 24 would be executed directly in the name of the first defendant and

second defendant towards security for the repayment of the loan and the sale deed

for Plot Nos 25 to 29, 34 and 34A would be executed in the joint names of the first

and second defendants and the plaintiff. The plaintiff is alleged to have entered into

an agreement for the purchase of the suit property on 15 June 2012. The amount

alleged to have been paid for the loan was obtained by the plaintiff from the first

defendant. The sale deed for plot Nos 23A and 24 was executed and registered on

27 June 2012 in the names of the first and second defendants, while the sale deed

for the remaining plots was executed in the joint names of the first and second

defendants and the plaintiff. The plaintiff claims to have been placed in exclusive

possession of the entire suit property and it is his case that the names of the first

and second defendants were incorporated in the sale deed only for security for the

repayment of the loan.

4 The plaintiff claims to have commenced development on the land and to have

purchased an adjoining plot bearing no 9A on 28 September 2012. According to the

plaintiff, on 26 September 2012, the first and third defendants came to the suit

property and demanded the repayment of the interest on the loan of Rs 1.5 crores. 

5

The plaintiff is alleged to have made certain payments on 8 September 2012 and to

have furnished postdated cheques towards the interest for the months of November

and December 2012. The plaintiff alleged that he completed the work of leveling the

plots. On 24 November 2012, the third, fourth and fifth defendants are alleged to

have entered the suit property along with thirty unknown persons and to have

demanded the payment of Rs. 1.50 crores within two days. The police, it is alleged,

did not take any action on the complaint registered by the plaintiff.

5 The first and second defendants are alleged to have conspired with

Defendants 3 to 5 to commit criminal acts against the plaintiff with the help of the

local police. Crime No 475 of 2012 was registered on 28 November 2012 under

Sections 143, 147, 447 and 427 of the Indian Penal Code. According to the plaintiff,

during the pendency of the suit, a compromise was arrived with the first and second

defendants. It has been alleged that though certain amounts were paid to the first

and second defendants pursuant to the compromise, they have refused to execute

a sale deed in return and have recovered an amount of Rs. 50 lacs from the plaintiff

under the garb of a compromise.

The reliefs which have been sought in the suit are as follows:

“1. declare that the acts of the defendants no.3 to 5 to enter

into the suit property on 24-11-2012 and to beat/assault and

to interfere with the peaceful possession of the plaintiff is

criminal, illegal, arbitrary and without any authority.

2. Pass decree for permanent perpetual injunction against

defendants, their agents servants and the person acting on

their behalf, thereby restraining them from interfering with the

peaceful possession of the plaintiff over the suit property and 

6

from dispossessing the plaintiff from the suit property in any

manner of whatsoever nature permanently in the interest of

justice.”

6 After the institution of the suit on 26 November 2012, an application was filed

on behalf of the second defendant for the rejection of the plaint under clauses b and

d of Rule 11 of Order 7 of the CPC. The rejection was sought on the ground that the

plaintiff has admitted the execution of sale deeds in favour of the first and second

defendants. Despite this, no declaration of invalidity has been sought in regard to

the sale deeds. The submission was that the plaintiff did not seek the cancellation of

the sale deeds on the ground that they were executed only as a security for the loan

transaction. Further, no declaration was sought by the plaintiff to the effect that the

sale deeds did not confer any right, title or interest on the defendants. As a result of

this, the suit would be barred by Section 34 of the Specific Relief Act 1963.

7 The application under Order 7 Rule 11 was rejected by the Trial Judge on 1

August 2017. The Trial Judge observed that the plaintiff has claimed a declaration

simpliciter that the act of the defendants in entering upon the suit property on 24

November 2012 is illegal, besides which a permanent injunction has been sought to

protect the possession of the plaintiff. The Trial Judge held that the plaintiff having

failed to seek a declaration that the sale deeds were executed only as a security for

the loan transaction, the suit is not maintainable in view of the provisions of the

Section 34 of the Specific Relief Act. The Trial Judge held:

“14 …as discussed above, the plaintiff neither sought relief of

cancellation of alleged sale deeds nor for declaration that the 

7

alleged sale deeds were executed for security purpose and

not its real sense. Therefore, I am of the view that present

application deserves to be allowed. However, as discussed

above, the plaintiff is ready to pay the requisite court fee

thereon. Therefore, I give my finding point No. l affirmative

and so far as, point No.2 is concerned, I pass following order.

ORDER

1] Application is allowed.

2] The plaintiff is directed to seek proper relief and pay court

fee thereon within 15 days, otherwise, appropriate order will

be passed.”

8 Aggrieved by the order of the Trial Judge, granting liberty to the plaintiff –

appellant to amend the plaint despite allowing the application under Order 7 Rule

11, Defendant Nos 1-a to 1-d and Defendant No 2 (Respondent Nos 2-5 and

Respondent No 1 before this Court) filed a civil revision application before the High

Court. On 11 September 2017 and 23 July 2018, the appellant instituted a writ

petition challenging the order of the Trial Judge allowing the application (Exhibit 50)

of Defendant No 2 under Order 7 Rule 11. The High Court by its judgment and order

dated 14 September 2018 held that:

(i) On a reading of the plaint, it is clear that the sale deeds were executed in

the names of the first and second defendants with regard to plot Nos 23A

and 24;

(ii) Sale deeds were executed in respect of the plot Nos 25 to 29, 34 and 34A

in the joint names of the plaintiffs together with the first and second

defendants;

(iii) According to the plaintiff, these sale deeds in the name of the first and

second defendants were a security for the repayment of the loan;

8

(iv) It was necessary for the plaintiff to seek a declaration that the sale deeds

were executed merely as a security for the repayment of the loan and a

failure to seek such a declaration would come within the purview of the

proviso to Section 34 of the Specific Relief Act 1963;

(v) The Trial Court having allowed the application under Order 7 Rule 11(d) of

the CPC committed an error in granting time to the plaintiff to amend the

plaint to seek proper relief and pay court fees. Where the rejection of the

plaint takes place under Order 7 Rule 11(d), there would be no question of

granting time to the plaintiff to rectify the defects in the plaint. Where the

suit appears from the statements in the plaint to be barred by any law, the

defects are not curable; and

(vi) The challenge by the plaintiff to the order rejecting the plaint under Order 7

Rule 11(d) is without substance. The order on Exhibit-50 was passed on 1

August 2017. On the basis of the order, the plaintiff sought an amendment

of the plaint under Order 6 Rule 17 on 14 August 2017 by seeking a

declaration in respect of the sale deeds. The order under Exhibit- 50 was

challenged in a civil revision application on 12 September 2017 and the

plaintiff was served by substituted service in April 2018 and it was only on

24 July 2018 that the plaintiff sought to challenge the order under Exhibit50. Consequently, the challenge is belated and is an afterthought.

9 Mr Vinay Navare, learned Senior Counsel appearing on behalf of the

appellant-plaintiff submitted that the High Court has erroneously upheld the finding 

9

of the Trial Judge that the application under Order 7 Rule 11 of the CPC had to be

allowed. Under Order 7 Rule 11(d), a plaint shall be rejected “where the suit appears

from the statements in the plaint to be barred by any law”. The appellant has sought

a declaration against the third, fourth and fifth defendants in regard to their act of

entering upon the property on 24 November 2012 and interfering with the peaceful

possession of the plaintiff. An injunction has been sought against all the defendants

restraining them from interfering with the peaceful possession of the plaintiff over

the suit property. Section 342 of the Specific Relief Act indicates that

(i) A person entitled to any legal character or to any right as to any property

may institute a suit against any person denying or interested to deny his

title to such character or right;

(ii) The court may in its discretion make a declaration that the plaintiff is so

entitled and the plaintiff need not in such a suit ask for further relief; and

(iii) Under the proviso, no court shall make any such declaration where the

plaintiff being able to seek further relief than a mere declaration of title

omits to do so.

It has been urged that the proviso to Section 34 applies to a situation where a

plaintiff has sought a mere declaration of title but omits to seek further or

 2 “34. Discretion of court as to declaration of status or right-Any person entitled to any legal character, or to any right

as to any property, may institute a suit against any person denying, or interested to deny, his title to such character or

right, and the court may in its discretion make therein a declaration that he is so entitled, and the plaintiff need not in

such suit ask for any further relief: Provided that no court shall make any such declaration where the plaintiff, being

able to seek further relief than a mere declaration of title, omits to do so.

Explanation.-A trustee of property is a "person interested to deny" a title adverse to the title of someone who is not

inexistence, and for whom, if in existence, he would be a trustee.”

10

consequential relief. The submission is that in the present case, the suit has been

instituted to protect the possession of the plaintiff simpliciter without claiming a

declaration of title. Seeking a declaration of title is, according to the submission, not

mandatory: what the proviso to Section 34 provides is that seeking a mere

declaration of title without seeking further relief is impermissible. On these grounds,

it is urged that the suit could not be held to be barred by Section 34 of the Specific

Relief Act. Learned counsel urged that whether the suit would be maintainable in the

absence of the plaintiff – appellant seeking a declaration of title is a distinct question,

but it cannot be held to be barred by any law within the meaning of Order 7 Rule

11(d).

The appellant instituted a writ petition before the High Court on 23 July 2018, to

challenge the order of the Trial Court allowing the application (Exhibit -50) for

rejecting the plaint under Order 7 Rule 11. For clarity, it is necessary to extract the

reliefs which were claimed before the High Court in the writ petition:

“1. …quash and set aside the order passed below Exh: 50

(ANNEXURE-F) on 01/08/2017 in RCS No.4990/2012

(Sayyad -Vs.-Om Mittal and others) by the 5th Joint Civil

Judge, Junior Division, Nagpur…

2. Reject the application at Exh: 50 filed RCS No.4990/2012

(Sayyad -Vs.-Om Mittal and others) pending on the file of 5th

Joint Civil Judge, Junior Division, in the interest of justice.”

10 The High Court has, in the course of its judgment, rejected the writ petition on

the ground that it was “by way of an afterthought and belated”. This was on the

premise that after the order of the Trial Judge dated 1 August 2017, the appellant 

11

filed an application under Order 6 Rule 17 on 14 August 2017 in terms of the liberty

granted by the Trial Judge for amending the plaint to seek a declaration in regard to

the sale deeds in question. The first and second defendants to the suit challenged

the grant of the liberty by the Trial Judge by filing a revision application on 12

September 2017 and it was only on 24 July 2018 that the appellant – plaintiff sought

to challenge the order rejecting the plaint under Order 7 Rule 11(d).

11 Mr Pankaj Kothari, learned Counsel appearing on behalf of the respondents -

defendants raised a preliminary objection to the maintainability of the writ petition on

the ground that against the rejection of the plaint, the remedy of the appellant was to

file a regular first appeal since an order of rejection operates as a decree. It has

been urged that the appellant, after having complied with the order of the Trial Court,

deliberately filed a writ petition, instead of an appeal, to avoid the issue of limitation

in filing an appeal. Mr Navare, learned Senior Counsel contested the submission by

urging that since a civil revision application had been filed by the first and second

defendants before the High Court, the appellant- plaintiff was justified in seeking

recourse to the writ jurisdiction of the High Court. Moreover, he submitted that the

availability of a remedy of a first appeal under Section 96 of the CPC would not ipso

facto bar a recourse to the writ jurisdiction.

12 Section 2(2) of the CPC defines the expression ‘decree’ in the following

terms:

“(2) “decree” means the formal expression of an adjudication

which, so far as regards the Court expressing it, conclusively

determines the rights of the parties with regard to all or any of 

12

the matters in controversy in the suit and may be either

preliminary or final. It shall be deemed to include the rejection

of a plaint and the determination of any question within

section 144, but shall not include—

(a) any adjudication from which an appeal lies as an appeal

from an order, or

(b) any order of dismissal for default.

Explanation.—A decree is preliminary when further

proceedings have to be taken before the suit can be

completely disposed of. It is final when such adjudication

completely disposes of the suit. It may be partly preliminary

and partly final;”

Order 7 Rule 13 provides that the rejection of the plaint “on any of the grounds

hereinbefore mentioned shall not of its own force preclude the plaintiff from

presenting a fresh plaint in respect of the same cause of action”.

The definition of “decree” in Section 2(2) “shall be deemed to include the rejection of

a plaint”. Hence, the order of the Trial Court rejecting the plaint is subject to a first

appeal under Section 96 of the CPC. The writ petition filed by the appellant was

liable to be rejected on that ground. We therefore affirm the judgment of the High

Court rejecting the writ petition, though for the above reason leave it open to the

appellant to pursue the remedy available in law.

13 The High Court while exercising its revisional jurisdiction accepted the plea of

the first and second defendants that the Trial Judge, having allowed the application

Order 7 Rule 11(d), was not justified in granting to the appellant-plaintiff liberty to

amend the plaint by seeking appropriate reliefs and paying the court fee. In this

context, it is necessary to advert to Order 7 Rule 11 which provides as follows:

13

“11. Rejection of plaint.— The plaint shall be rejected in the

following cases:—

(a) where it does not disclose a cause of action;

(b) where the relief claimed is undervalued, and the plaintiff,

on being required by the Court to correct the valuation within

a time to be fixed by the Court, fails to do so;

(c) where the relief claimed is properly valued, but the plaint is

returned upon paper insufficiently stamped, and the plaintiff,

on being required by the Court to supply the requisite stamppaper within a time to be fixed by the Court, fails to do so;

(d) where the suit appears from the statement in the plaint to

be barred by any law;

(e) where it is not filed in duplicate;

(f) where the plaintiff fails to comply with the provisions of rule

9

[Provided that the time fixed by the Court for the correction of

the valuation or supplying of the requisite stamp-paper shall

not be extended unless the Court, for reasons to be recorded,

is satisfied that the plaintiff was prevented by any cause of an

exceptional nature from correcting the valuation or supplying

the requisite stamp-paper, as the case may be, within the

time fixed by the Court and that refusal to extend such time

would cause grave injustice to the plaintiff.]”

The proviso quoted above deals with a situation where time has been fixed by the

Court for the correction of the valuation or for supplying of the requisite stamp paper.

Under the proviso, the time so fixed shall not be extended unless the court, for

reasons to be recorded, is satisfied that the plaintiff was prevented by a cause of an

exceptional nature from complying within the time fixed by the court and that a

refusal to extend time would cause grave injustice to the plaintiff. The proviso

evidently covers the cases falling within the ambit of clauses (b) and (c) and has no

application to a rejection of a plaint under Order 7 Rule 11(d). In the circumstances, 

14

the High Court was justified in coming to the conclusion that the further direction

that was issued by the Trial Judge was not in consonance with law.

14 For the above reasons, we affirm the judgment of the Single Judge of the

High Court:

(i) allowing the revision application filed by the first and second defendants;

and

(ii) dismissing the writ petition filed by the appellant-plaintiff.

Since the dismissal of the writ petition has been upheld on the ground that the order

rejecting the plaint operates as a decree within the meaning of Section 2(2) of the

CPC, the appellant is at liberty to take recourse to the remedy against the rejection

of the plaint as prescribed by the CPC.

15 The appeals shall stand disposed of in the above terms.

16 Pending application(s), if any, stand disposed of

.

 ……….….....................................................J.

[Dr Dhananjaya Y Chandrachud]

…..….….....................................................J.

 [M R Shah]

New Delhi;

July 20, 2021

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.

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]

CIVIL APPEAL NO. 2757 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.12987 OF 2020]

CIVIL APPEAL NO. 2758 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.12982 OF 2020]

CIVIL APPEAL NO. 2759 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.12986 OF 2020]

CIVIL APPEAL NO. 2760 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13011 OF 2020]

CIVIL APPEAL NO. 2761 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13017 OF 2020]

1

CIVIL APPEAL NO. 2762 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13004 OF 2020]

CIVIL APPEAL NO. 2763 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13505 OF 2020]

CIVIL APPEAL NO. 2764 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13015 OF 2020]

CIVIL APPEAL NO. 2765 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13372 OF 2020]

CIVIL APPEAL NO. 2766 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13431 OF 2020]

CIVIL APPEAL NO. 2767 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13410 OF 2020]

CIVIL APPEAL NO. 2768 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13363 OF 2020]

CIVIL APPEAL NO. 2769 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13502 OF 2020]

CIVIL APPEAL NO. 2770 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13373 OF 2020]

CIVIL APPEAL NO. 2771 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13371 OF 2020]

CIVIL APPEAL NO. 2772 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13494 OF 2020]

CIVIL APPEAL NO. 2773 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13382 OF 2020]

CIVIL APPEAL NO. 2774 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13366 OF 2020]

2

CIVIL APPEAL NO. 2775 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13303 OF 2020]

CIVIL APPEAL NO. 2776 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13477 OF 2020]

CIVIL APPEAL NO. 2777 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13235 OF 2020]

CIVIL APPEAL NO. 2778 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13354 OF 2020]

CIVIL APPEAL NO. 2779 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13408 OF 2020]

CIVIL APPEAL NO. 2780 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13292 OF 2020]

CIVIL APPEAL NO. 2781 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13236 OF 2020]

CIVIL APPEAL NO. 2782 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13632 OF 2020]

CIVIL APPEAL NO. 2783 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13269 OF 2020]

CIVIL APPEAL NO. 2784 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.14905 OF 2020]

CIVIL APPEAL NO. 2785 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.12988 OF 2020]

CIVIL APPEAL NO. 2786 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13936 OF 2020]

3

CIVIL APPEAL NO. 2787 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13232 OF 2020]

CIVIL APPEAL NO. 2788 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13002 OF 2020]

CIVIL APPEAL NO. 2789 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13013 OF 2020]

CIVIL APPEAL NO. 2790 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13231 OF 2020]

CIVIL APPEAL NO. 2791 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13330 OF 2020]

CIVIL APPEAL NO. 2792 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13234 OF 2020]

CIVIL APPEAL NO. 2793 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.12991 OF 2020]

CIVIL APPEAL NO. 2794 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13023 OF 2020]

CIVIL APPEAL NO. 2795 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.12995 OF 2020]

CIVIL APPEAL NO. 2796 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13451 OF 2020]

CIVIL APPEAL NO. 2798 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13369 OF 2020]

CIVIL APPEAL NO. 2799 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13359 OF 2020]

CIVIL APPEAL NO. 2800 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13291 OF 2020]

4

CIVIL APPEAL NO. 2801 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13459 OF 2020]

CIVIL APPEAL NO. 2802 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13425 OF 2020]

CIVIL APPEAL NO. 2803 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13563 OF 2020]

CIVIL APPEAL NO. 2804 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.14257 OF 2020]

CIVIL APPEAL NO. 2805 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13448 OF 2020]

CIVIL APPEAL NO. 2806 OF 2021

[ARISING OUT OF SLP (CIVIL) NO.13379 OF 2020]

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

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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

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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.

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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

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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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