Arbitration under Highways Act limited to independent determination of compensation: Allahabad High Court

An arbitrator cannot act outside the scope of his reference, the Allahabad High Court ruled on January 12 holding that arbitration under section 3-G (5) of The National Highways Act, 1956 is limited to the determination of the fair amount of compensation, and is not a proceeding to judge the correctness of the compensation determined by the competent authority (Bhartiya Rashtriya Rajmarg Pradhikaran vs Rajesh Kaushik)..The order passed by Justice Saumitra Dayal Singh states,."While it may be true that in the conduct of such an arbitration proceeding, the order passed by the competent authority may come to be read in evidence, however, the subject matter of the arbitral proceedings under section 3- G (5) of the Highways Act would never be to uphold or to set-aside the existing order passed by the competent authority but to independently determine the amount of compensation payable to the claimant.".In the present case, the competent authority under The National Highways Act, 1956 had determined the compensation payable to the Respondents for their land..Unsatisfied, the Respondent, National Highways Authority of India (NHAI), had invoked arbitration under Section 3-G (1) of the Highways Act to re-determine the amount of compensation..In the award, the arbitrator inter alia directed the 'competent authority' to re-determine the amount of compensation..Thereafter, the NHAI filed a plea under Section 34 of the Arbitration and Conciliation Act, 1996 before the District Judge concerned. .The objections raised by NHAI were, however, rejected and the NHAI moved the High Court in appeal. .Referring to Section 3-G (7) of the Highways Act, NHAI argued that the arbitrator acted without jurisdiction in remitting the matter to the competent authority for redetermination. .It was, inter alia, contended that the arbitrator had no power to act as an appellate court or to even otherwise pass an order to set aside the order of the competent authority. .The respondents, on the other hand, submitted that nothing remained to be done by the competent authority and as they had already become entitled to payment at the enhanced rate. .In view of the submissions made by the parties and the material on record, the Court opined that there could be "no two opinions" about the scope of the proceedings before the arbitrator under of Section 3-G (5) of the Highways Act. .The Court said that arbitral proceeding were not intended to judge the correctness of the order already passed by the competent authority..The Court observed,."There is no provision or general principle in law, that may allow an arbitrator to act outside the scope or terms of his reference. An arbitrator to a dispute comes into existence upon an agreement between the parties to the dispute and his jurisdiction is confined to adjudicate the dispute brought by them. Arbitration under section 3-G (5) of the Highways Act is a proceeding to resolve the dispute between the parties to determine the fair amount of compensation, by the arbitrator.".The Court clarified that irrespective of the fate of the arbitration proceedings, the order of the competent authority would not merge in the award. .Rather it would continue to exist, though its enforceability may be eclipsed by the arbitral award, it wad added. ."Thus, in no event, the arbitrator may set aside the order passed by the competent authority and he may never remit the matter to the original/competent authority to pass a fresh order. Typically, that power is a power of a Court or Tribunal sitting in appeal or revision that too, if specifically granted by statute, and not implied. In absence of any such power given to the arbitrator either under the Highways Act or the Act, the direction issued by the arbitrator is a nullity in law.", the Court concluded. .In view of the above, the Court ruled that the direction remitting the matter to the competent authority clearly fell foul with Section 3-G (5) of the Highways Act and was contrary to the public policy of India..The Coiurt also ruled that the District Judge erred in rejecting the objections raised by NHAI. .Accordingly, the entire award of the arbitrator was set aside with leave to the claimant/Respondent to seek a fresh arbitration. .Advocate Pranjal Mehrotra appeared for NHAI..Advocates Shesh Kumar Srivastava,Gaurav Pundir appeared for the respondents. .Read the Judgement: