Safiya Malik

The High Court of Bombay Single Bench of Justice Somasekhar Sundaresan disposed of thirty arbitration appeals challenging a common judgment upholding compensation awards for land acquired under the National Highways Act, 1956. The court held that while land-losers were "indisputably entitled" to solatium under Section 23(2) of the Land Acquisition Act, 1894, it could not grant such relief within the narrow appellate jurisdiction under Section 37 of the Arbitration and Conciliation Act, 1996. The judgment directed that the appellants may pursue separate legal recourse for enforcement of this entitlement and expressed hope that the National Highways Authority of India (NHAI) would avoid further litigation by voluntarily settling the matter.

The matter concerns thirty arbitration appeals filed under Section 37 of the Arbitration and Conciliation Act, 1996, challenging a common judgment dated May 4, 2023, of the District Court, Nashik. The judgment in question dismissed petitions under Section 34 of the Arbitration Act challenging arbitral awards passed in land acquisition proceedings under Section 3G(5) of the National Highways Act, 1956. The affected lands were located in Mouje Wake and Saundane, Taluka Malegaon, District Nashik, and were compulsorily acquired for the purpose of widening National Highway No. 3.

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The compensation was originally awarded in 2008 by the Competent Authority at rates ranging from Rs. 95 to Rs. 154 per square metre. Dissatisfied with the computation, the landowners-initiated arbitration under Section 3G (5) of the Highways Act, claiming that the compensation did not reflect the true market value of the land and was erroneously based on Ready Reckoner rates. The arbitral tribunal awarded significantly enhanced compensation values after examining market evidence. However, neither the Original Award nor the Arbitral Award accounted for solatium under Section 23(2) of the Land Acquisition Act.

Subsequently, the landowners challenged the arbitral awards under Section 34 of the Arbitration Act before the District Court, Nashik, primarily on the ground that the awards were erroneous in failing to account for solatium. They relied upon the Supreme Court decision in Union of India v. Tarsem Singh, (2019) 9 SCC 304, which declared Section 3J of the Highways Act (excluding the applicability of the Land Acquisition Act) unconstitutional. As a result, acquisitions between 1997 and 2015 under the Highways Act were held to be governed by the Land Acquisition Act, thereby entitling land-losers to solatium.

In the District Court proceedings, even NHAI conceded that solatium was payable. However, the District Court held that it lacked the power under Section 34 to modify an arbitral award and hence dismissed the petitions. Aggrieved, the landowners approached the High Court under Section 37 of the Arbitration Act.

The appellants, represented by Mr. Vivek M. Punjabi along with Mr. Priyansh R. Jain, argued that the District Court had erred in failing to include solatium despite NHAI's concession and the binding precedent of Tarsem Singh. They contended that solatium was a statutory entitlement and that its exclusion amounted to denial of a legal right. They relied on the decision in Sarjuprasad s/o Sangmlal Gupta v. NHAI, 2022 (1) Mh.L.J. 290, wherein the court permitted inclusion of solatium in a similar context.

The respondents, represented by Ms. Siddhi Kothari, Mr. Sagar Ladda, Mr. Vaibhav Shaha, Mr. Sambhaji Kharatmol, and Mr. Suhas Urgunde, argued that the power to modify an arbitral award did not lie within the scope of Section 34 or 37 of the Arbitration Act, relying on the Supreme Court’s decision in NHAI v. M. Hakeem, (2021) 9 SCC 1.

The High Court reviewed the matrix of legal provisions, starting with the original intent of Section 3J of the Highways Act, which excluded the applicability of the Land Acquisition Act. This section was later declared unconstitutional in Tarsem Singh, where the Supreme Court held that provisions related to solatium and interest under Sections 23(1-A), 23(2), and 28 of the Land Acquisition Act must apply to acquisitions under the Highways Act as well. The High Court also referred to Rishabhkumar v. Secretary to the Government of India, 2021 SCC OnLine Bom 4561, where it was held that courts exercising powers under Sections 34 and 37 of the Arbitration Act cannot modify an arbitral award to add solatium.

The Court recorded that "solatium is indeed payable on compensation computed under the Highways Act for land acquisition after 1997 and before 2015 in view of the law declared in Tarsem Singh". It noted that the land acquisitions in question occurred in 2008, falling squarely within the period covered by Tarsem Singh, thereby entitling the petitioners to solatium.

However, the Court stated: "The learned Arbitral Tribunal cannot be said to have erred in not granting the solatium so payable—the facet of solatium was not even in the frame of reference of the Learned Arbitral Tribunal since at all times relevant to the arbitration, Section 3J was validly in existence on the statute book."

Referring to Rishabhkumar, the Court held: "Recognition of the entitlement to statutory amounts flowing consequent upon determination of market value would not permit modification of an award already passed so as to grant additional statutory relief in proceedings under Section 34 or Section 37 of the Act of 1996."

On the argument that the inclusion of solatium would not constitute a modification, the Court observed: "The jurisdiction in appeal under Section 37 is limited to what has been conferred under Section 34 of the Act of 1996."

It was further stated: "Had the Original Award been passed after Tarsem Singh, and had it rejected the grant of solatium, there would have been a case to argue that the Arbitral Award was in conflict with the fundamental policy of Indian law governing land acquisition."

Justice Sundaresan noted that although the petitioners' entitlement to solatium is undisputed, "this Court, being the Section 37 Court, too cannot go outside the frame of reference in its jurisdiction… Any step to do so would constitute writing a new component into the Arbitral Award".

The Court acknowledged the submissions of NHAI before the District Court and remarked: "NHAI could still consider resolving the issue outside the scope of these proceedings to put an end to wasteful expenditure of public resources in more litigation… Expensive litigation to simply get what is admittedly due to the land-losers is not appropriate."

The High Court held that the impugned judgment of the District Court, Nashik, dated May 4, 2023, was not liable to be interfered with under Section 37 of the Arbitration Act. The Court concluded: "Although the computation of solatium is purely a percentage calculation on the respective awarded amounts, since it was not even part of the legal framework when the Arbitral Award was passed, it would not constitute a computational error forming part of the Arbitral Award for it to be rectified."

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Accordingly, the petitions were disposed of. The Court clarified: "The Petitioners are free to seek enforcement of their statutory entitlement to solatium in such manner as advised."

The judgment further observed: "It is hoped the NHAI will resolve the issue of its obligation to pay solatium to the land-loser Petitioners without further wasteful expenditure of public resources in more litigation."

It concluded: "The only reason the NHAI is not being directed to pay the solatium in these proceedings, is the inherent limitation of jurisdiction of this Court under Section 37 of the Arbitration Act."

No order was passed as to costs. All interim applications, if any, were disposed of.

Advocates Representing the Parties:

For the Petitioners: Mr. Vivek M. Punjabi, Advocate with Mr. Priyansh R. Jain, Advocate

For the Respondents: Ms. Siddhi Kothari, Advocate with Mr. Sagar Ladda, Advocate; Mr. Vaibhav Shaha, Advocate with Mr. Sambhaji Kharatmol and Mr. Suhas Urgunde, Advocates

Case Title: Sumanbai Shantaram Bachchav v. Arbitrator & Additional Commissioner, NHAI & Ors. and connected matters

Neutral Citation: 2025: BHC-AS:22588

Case Number: Arbitration Appeal (St) No. 22121 of 2023 and batch

Bench: Justice Somasekhar Sundaresan

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