Allahabad High Court: Arbitrator Cannot Set Aside the Order of Compensation Passed by Competent Authority under Highways Act

Allahabad High Court: Arbitrator Cannot Set Aside the Order of Compensation Passed by Competent Authority under Highways Act

The Allahabad High Court (HC) held in the case of Bhartiya Rashtriya Rajmarg Pradhikaran (Appellant) v. Rajesh Kaushik (Respondent) that the Arbitrator cannot set aside the order of compensation passed by the competent authority under The National Highways Act, 1956 (Act).

The HC ruled that an arbitrator is bound to act within the scope of his reference. It held that arbitration under Section 3-G (5) of the Actis limited to the determination of the fair amount of compensation.

Justice Saumitra Dayal Singh passed the said order and stated that "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 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."

The background of the litigation, in this case, is that the competent authority under the Act had determined the compensation payable to the Respondents for their land.

The respondent being unsatisfied with the said order of the National Highways Authority of India (NHAI), had invoked arbitration under Section 3-G (1) of the Act for seeking reconsideration of the compensation amount.

The arbitrator in the award gave directions to the competent authority to re-determine the amount of compensation.

Later, a plea was filed by the NHAI under Section 34 of the Arbitration and Conciliation Act, 1996 before the District Judge. However, the Trial Court rejected the arguments of the NHAI and it had then moved to the HC in appeal.

The NHAI submitted before the HC while referring to Section 3-G (7) of the Act that the arbitrator acted without jurisdiction in remitting the matter to the competent authority for re-determination. It was further contended by the NHAI that the arbitrator had no power to act as an Appellate Court or to pass such an order wherein it set aside the order of the competent authority.

On behalf of the respondents, it was submitted before the Court that nothing remained to be done by the competent authority and as they had already become entitled to payment at the enhanced rate.

The HC after hearing the submissions of both parties and reviewing the material on record, opined that there could be 'no two opinions' regarding the ambit of proceedings before the arbitrator under Section 3-G (5) of the Act.

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."

It further added that "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.

The HC concluded that "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."

It further stated that '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 held that the directions given by the arbitrator to remit the matter to the competent authority fell foul with Section 3-G (5) of the Act and was contrary to the public policy of India.

The Court said, "The award was open to challenge in terms of Section 34(2)(a)(iv) of the Arbitration Act being beyond the scope of reference to arbitration and also under Section 34(2)(b)(ii) of the Arbitration Act, being contrary to be the public policy of India." It ruled that the Trial Court was in error wherein it rejected the objections raised by NHAI.

The HC set aside the award of the arbitrator with leave to the Respondent to seek a fresh arbitration.