Sanchayita Lahkar

The High Court of Kerala Division Bench of Justice A. Muhamed Mustaque and Justice P. Krishna Kumar stayed all arbitration proceedings currently pending before District Collectors in the State under the National Highways Act, 1956. The Court directed that these references shall not be disposed of until further orders and instructed the Chief Secretary of Kerala to communicate this directive to all District Collectors. Additionally, the Court asked the Union Government to explore alternatives for the conduct of such arbitration proceedings, including the Kerala High Court Arbitration Centre.

The matter arose from a batch of petitions including Writ Appeal No. 1784 of 2023 and connected Writ Petitions (Civil) Nos. 28555 of 2021, 789, 22779, and 25045 of 2022. The appellants were landowners whose properties were acquired under the National Highways Act, 1956, and disputes had arisen regarding the quantum of compensation. The statutory scheme under the Act provides for arbitration in such matters, typically conducted by the District Collector designated as Arbitrator.

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The appellants challenged the manner in which these arbitration proceedings were being conducted, contending that District Collectors were summarily disposing of references without providing parties an opportunity to lead evidence or be heard fully. Citing instances where large volumes of references—amounting to approximately 20,213 pending cases—were pending before District Collectors, the appellants argued that this mechanism failed to comply with the principles of natural justice and could not ensure meaningful adjudication.

The petitioners also questioned the statutory validity of appointing District Collectors as Arbitrators under the National Highways Act, in light of evolving jurisprudence under the Arbitration and Conciliation Act, 1996. They relied on paragraph 169(e) of the judgment of the Supreme Court in Central Organization for Railway Electrification v. ECI SPIC SMO MCML (JV) [2024 SCC Online SC 3219], which discussed the impermissibility of appointing government officials as arbitrators in matters involving potential conflict of interest.

The respondents included the Union of India, the National Highways Authority of India (NHAI), the Project Director of NHAI, the District Collector, the Special Deputy Collector for Land Acquisition, and the State of Kerala through the Secretary, Public Works Department. The respondents were represented by Central Government Counsel and the Senior Government Pleader.

The State did not contest the fact that a large number of references had been pending for several years. Nor did it dispute that many references were being disposed of without recording evidence or granting a personal hearing to the claimants. It was also not contested that the District Collector, tasked with other administrative responsibilities, would find it logistically difficult to adjudicate such a high volume of arbitration claims in a timely or judicially satisfactory manner.

“Considering the sheer volume of arbitration references pending before the District Collector totaling around 20,213, we are certain that the District Collector, who discharges other functions, will not be in a position to attend each of these cases.”

The Court recorded concern over procedural lapses in the arbitration proceedings. “We also note the submission made by the learned counsels that a substantial number of cases have been disposed of by the District Collector without giving parties an opportunity to adduce evidence, etc.”

Referring to the legislative intent behind the arbitration provision in the National Highways Act, the Court stated: “The intention of the lawmaker is to provide an opportunity for the landowners to raise their grievances and redress their grievances in a judicial manner.”

The Court discussed the incompatibility of continuing with the existing arbitration arrangement under the National Highways Act. “By appointing the District Collector as an Arbitrator, we are sure that the District Collector will not be in a position to give a proper audience and ensure adherence to the principles of natural justice while disposing those references.”

The Bench addressed the legal challenge concerning the appointment of the District Collector as Arbitrator in light of recent Supreme Court jurisprudence. “There is a serious challenge raised in regard to the appointment of the District Collector as Arbitrator in the light of the Arbitration and Conciliation Act and clause 'e' in paragraph 169 of the Judgment of the Apex Court in Central Organization for Railway Electrification v. ECI SPIC SMO MCML (JV).”

Noting that proceeding with such arbitrations could cause irreparable prejudice to landowners, the Court stated: “We consider that if the proceedings before the District Collector are not stayed, grave injustice will be caused to the landowners, who will be deprived of raising their genuine grievances in regard to valuation and compensation.”

The Court also observed the availability of institutional arbitration mechanisms. “In the State of Kerala, the Kerala High Court had established the Kerala High Court Arbitration Centre, and there is a provision for reserved arbitration to adjudicate disputes in which the State or Central Government is a party.”

Referring to this framework, the Court noted: “In the reserved arbitration, there is a complete waiver of the arbitration fee except for paying a nominal administrative fee. Those Arbitrators are drawn from the State Judicial Service in the rank of senior civil judge and will be acting as deputy directors of the Kerala Arbitration Centre.”

The Court issued the following binding directions:

“We direct that all the District Collectors of the State who have been appointed as an Arbitrator invoking the National Highway Act shall not dispose of the pending reference until further orders are passed by this Court.”

To ensure statewide compliance, the Court stated: “We direct the Chief Secretary of the State of Kerala to communicate this Order to all the District Collectors in the State.”

The Court also directed the Central Government to consider alternative arbitration avenues: “We also direct the Union Government to explore the possibility of any other alternative, if possible.”

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The Court made a specific reference to institutional arbitration options: “We also direct the Central Government to consider the possibility of referring the arbitration to the Kerala High Court Arbitration Centre.”

The Bench provided a caveat for litigants who preferred to proceed before the District Collector:

“However, we make it clear that if any of the litigants insist that the District Collector shall act as Arbitrator and conclude the proceedings; they are free to take up the matter before the District Collector and proceed for the conclusion of the same.”

The matter was posted for further proceedings on 21 May 2025.

Advocates Representing the Parties

For the Petitioners: M/s. P. Sathisan, Dona Augustine, Javed Haider, Gopika Anil, Abhiram Sunish, Biju P. Paul, and Shibu B.S., Advocates
For the Respondents: Sri Vishnu Pradeep, Central Government Counsel

Case Title: Chandramohanan K.C. & Others v. Union of India & Others
Case Number: Writ Appeal No. 1784 of 2023
Bench: Justice A. Muhamed Mustaque, Justice P. Krishna Kumar

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