In yet another recent matter, where the land of a person was acquired under the National Highways Act, 1956 (“NH Act”) for widening and maintenance of NH-7, Nagpur-Hyderabad National Highway, the Court faced a similar situation. The competent authority had awarded a compensation of ₹8,14,000 to the landowner for his land. Feeling dissatisfied with the quantum of compensation, he invoked arbitration in terms of Section 3G(5) of the NH Act for the determination of the compensation by the arbitrator appointed by the Central government. The arbitrator concluded the hearing on April 22, 2015 and passed an award on May 20, 2015, whereby the compensation was enhanced to ₹85,55,800. The GOI and the NHAI challenged the said award under Section 34 of the Act before the District Judge, Nagpur. The landowner also filed an application, seeking a modification of award dated May 20, 2015 and an enhancement of the awarded amount.

The District Judge rejected the challenge made by GOI and NHAI but partly allowed the landowner’s application and modified the award to increase the amount payable to the landowner. Feeling aggrieved, the GOI and NHAI preferred appeals under Section 37 of the Act before the Division Bench of Bombay High Court (Nagpur bench).

Two issues for determination were framed by the Division Bench:

(i) whether the award rendered by the arbitrator is liable to be set aside under Section 34 of the Act; and

(ii) whether recourse can be taken under Section 34(4) of the Act to allow the arbitral tribunal to resume the arbitration 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?

While considering the first issue, it was observed that the arbitral award enhancing the compensation was solely based on the photocopies of two sale deeds. The aforesaid documents were placed on record on May 6, 2015, that is, after the conclusion of the hearing, behind the back of NHAI. The above were the only documentary evidence considered by the Tribunal. The NHAI never got the opportunity to respond to such documents. Thus, the same amounted to patent illegality. The Division Bench, thus, held that the award was in contravention of Section 24 and Section 28 of the Act. While Section 24 makes it mandatory for each party to communicate to the other party every statement, document, or information being supplied to the arbitral tribunal, Section 28 provides that in a domestic arbitration, the dispute has to be decided in accordance with the substantive law for the time being in force in India. Hence, the arbitral award was held to be in contravention of the fundamental policy of Indian law and in conflict with the basic notions of morality and justice. The Court took a serious view of the manner in which the aforesaid sale deeds were taken on record by the arbitrator.

With respect to the second issue, it was contended by the landowner that till the time an award is set aside, the defects in an arbitral award were curable under Section 34(4) of the Act. He further contended that defect of not granting NHAI the opportunity to respond to the sale deeds was merely procedural in nature. Thus, he argued that the award should be remanded back to the arbitral tribunal to cure such procedural defect. The Division Bench, however, observed that the use of the expression “where it is appropriate” in Section 34(4) of the Act conveys that the power is discretionary and not mandatorily available to every party. The Court relied upon the decision of the Apex Court in the case of “I-Pay Clearing Services Pvt. Ltd. vs ICICI Bank Ltd.“ whereby it was held that merely because an application is filed under Section 34(4) of the Act by a party, it is not always obligatory for the Court to remit the matter to Arbitral Tribunal. The discretionary powers conferred under Section 34(4) of the Act is to be exercised where there is inadequate reasoning or to fill up the gaps in the reasoning in support of the findings which are already recorded in the award. Hence, the Division Bench held that such power had to be exercised in an appropriate case and there could not be a cut and dry or a straight jacket formula for exercise of such powers. Accordingly, even this issue was decided against the landowner.

The award was thus, set aside by the Court.


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