Open Access Research Article
Should Section 34 Be Construed Liberally As Permitting The Courts To Enhance Compensation In Land Acquisition Matters? (By- Raghav Khetan)
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Article Details
Should Section 34 Be Construed
Liberally As Permitting The Courts To Enhance Compensation In Land Acquisition
Matters?
Authored By- Raghav
Khetan
Recently, in Project Director NHAI
v. M. Hakeem (NHAI case), the Supreme Court held that courts, while
exercising their jurisdiction under Section 34 of the Arbitration and
Conciliation Act, 1996 (Arbitration Act) do not possess the power to modify an
arbitral award.
Such matters relating to the setting
aside and modification of arbitral awards, have always been a long-standing
question in Indian courts and with their recent judgement, the Supreme Court
cleared the air surrounding it.
This decision by the apex court
however, raises a question over the lack of due process and a fair mechanism
for compensation in land acquisition matters, as an aggrieved individual can
now only expect the courts to either set aside the award or remit the matter
back to the arbitrator, instead of modifying it. The judgement can be looked at
as a missed opportunity to lay down principles[1] to
enhance ‘unjust’ compensation under Section 34 of the Arbitration Act, which is
only a “truncated remedy on technical grounds.”[2]
Factual
Background Of The NHAI Case
Several notifications were made by
the National Highway Authority of India (NHAI) under the National Highway Act,
1964 (NHA) to acquire land from individuals, for the purpose of constructing
national highways.
The competent authority passed awards
for the said acquisition under the NHA, which were found to be abysmally lower
than the market value of the acquired lands. As a result, these awards were not
accepted by aggrieved landowners. Thus, in accordance with Section 3G(5) of
the NHA, an arbitrator was appointed
who agreed with the compensation awarded by the competent authority and found
no infirmity with the amounts.
Petitions were then filed in the
district courts under Section 34, wherein the court enhanced the compensation
in favour of the landowners. On subsequent appeal, the High Court upheld the
decision made by the lower court. The impugned judgement of the High Court was
then challenged in the Supreme Court.
Where Did
The Problem Arise?
Under the NHA, the Government can
acquire land for public purpose from individuals in lieu of just or fair
compensation. Aggrieved individuals, like M. Hakeem, who feel dissatisfied with
the compensation awarded, can seek for the settlement of the dispute through an
arbitrator. Section 3G (5) of the NHA provides for an arbitrator to be
appointed in such cases. However, the main contention of individuals like M.
Hakeem is that the arbitrator is to be appointed unilaterally by the Central
Government, without the landowner’s consent. This makes the arbitration one
sided and the arbitrator simply ‘rubber-stamps’ the inadequate compensation
instead of independently judging it.
In the present case, awards made by
the competent authority were based on the ‘guideline value’ of the land and not
on the sale deeds that would’ve reflected the true market value of these lands.
Further, Section 3G (7)(a) of the NHA provides for taking into consideration
the “market value of the land on the date of publication of the notification.”
As a result, abysmally low amount of compensation was awarded to M. Hakeem on
basis of the guideline value of the land, which was far lower than the market
value of such land. It was found from the sale deeds of similar lands, that the
compensation awarded to Hakeem was almost one-tenth the value of his land[3].
The only remedy remaining for M. Hakeem
was to file a Section 34 petition against such unjust compensation. The
District Court and the High Court had taken cognizance of the peculiar facts of
the case, and instead of remitting the matter back to an arbitrator, construed
Section 34 in a more liberal sense to allow the enhancement of the inadequate
compensation. The lower courts recognized the grave injustice done at hand and
allowed the modifying of awards in the definition of “setting aside” under
Section 34. However, the Supreme Court ruled that Section 34 does not give
courts the authority to modify an arbitral award and denied the
enhancement of the compensation in
question. It left the question to be legislated on by the parliament and
refused to provide Hakeem with the compensation he sought.
Conclusion
And The Way Forward
While the Supreme Court also
recognized that grave injustice had been done in the present case and that the
NHA favoured the Government, it failed to provide the aggrieved individual with
any relief. The Government got what they sought i.e., land for the construction
of the National Highways, without essentially compensating Hakeem, who would
have to again apply for de novo arbitration. Hakeem’s only relief was
bound to a non-consensual arbitrator who failed to correct the insufficient
compensation and his eventual remedy under Section 34 was dismissed by the
Supreme Court, leaving lower courts as mere spectators who can only set an
unjust award aside or remit it back to the arbitrator.
On the other hand, had the Supreme
Court (which recognized the ‘perverse’ and ‘abysmally low’ amount of
compensation) construed Section 34 in a more liberal sense like the courts
below it, Hakeem would’ve got the compensation he deserved. Such an approach is
also followed by other jurisdictions like England, Australia, and Singapore
whose statutes “empower their courts to modify an award.”[4] In
the United States for example, Section 11 of the United States Federal
Arbitration Act 1925, provides that courts can modify an arbitral award based
on certain conditions, including evident miscalculation of figures. Even in
India, the Madras High Court had held that courts should have the competence to
modify an award under Section 34, as the mere setting aside of an award would “leave
the parties in a position much worse than what they contemplated or deserved
before the commencement of the arbitral proceeding.”[5]
Further, relegating parties to de
novo arbitration after setting aside an award and not having the power to
modify it, does not serve any purpose and only costs the courts and parties
valuable time and resources. Parties would be better off litigating in court rather
than opting for arbitration in the first place. The Supreme Court while failing
to provide Hakeem with any relief in this regard however, made a suggestion to
the Parliament to amend the legislation and
bring it in line with legislations
around the world,[6]
permitting the courts to modify an arbitral award.
Under the NHA, there is only a
limited appeal to the arbitrator’s award provided by Section 3G read with
Section 34 of the Arbitration Act, replacing the wholesome regime of appeals
under the Land Acquisition Act. This invites the scope for discrimination based
on the different principles of compensation given, which was evident even in
Hakeem’s case. The Supreme Court in Nagpur Improvement Trust v. Vithal Rao had
held that “different principles of compensation cannot be formulated for lands
acquired on the basis…of unreasonable classification.”[7] A
similar scenario was created in this case by the principles of awarding
compensation under the NHA. Hakeem received far lower and unjust compensation
as compared to other landowners with similar lands, creating a different class
of people based on an unreasonable classification with no proper justification.
Further, the Supreme Court had recently held Section 3J of the NHA violative of
Article 14, as the principles regarding solatium and interest did not conform
with that of the Land Acquisition Act[8]. Hence,
a challenge under Article 14 is also an alternative route if the compensation
given creates different classes of people by virtue of being unreasonable and
unjust.
Thus, there is a need for a balance
to be struck between the court’s authority and the scope of Section 34, to
modify unjust compensation in land acquisition matters.
Article Information
Should Section 34 Be Construed Liberally As Permitting The Courts To Enhance Compensation In Land Acquisition Matters? (By- Raghav Khetan)
Authors: Raghav Khetan
- Journal IJLRA
- ISSN 2582-6433
- Published 2022/07/12
- Volume 2
- Issue 7
About Journal
International Journal for Legal Research and Analysis
- Abbreviation IJLRA
- ISSN 2582-6433
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