Arbitrator Cannot Ignore Statutory Mandate for Market Value Determination: SC

The Supreme Court has clarified that an Arbitrator, while determining land compensation under the National Highways Act, 1956, cannot disregard the specific criteria laid down in Section 26 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. The Court emphasized that adopting a single sale exemplar of a dissimilar land type constitutes a patent illegality that warrants judicial interference.

A bench comprising Justice Sanjay Kumar and Justice K. Vinod Chandran set aside a Bombay High Court judgment that had restored an Arbitrator's award. The Bench noted that the Arbitrator had erroneously relied on a single sale deed of a small residential plot to determine the value of a larger industrial plot, violating the methodology prescribed under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.

Adherence to Section 26 of the 2013 LA Act Mandatory

The Court observed that for land acquisition under the National Highways Act, 1956, the determination of compensation must strictly follow Sections 26 to 28 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. This position was solidified by the Court's reliance on National Highways Authority of India vs. P. Nagaraju alias Cheluvaiah and another. The Court, in its reasoning, observed: "The Arbitrator completely ignored the directives of Section 26(1)(b) of the 2013 LA Act and the Explanations thereunder, by adopting a sale exemplar of a totally dissimilar type of land and, at that, a single sale exemplar, which was contrary to the statutory mandate."

Furthermore, citing Madhya Pradesh Road Development Corporation vs. Vincent Daniel and others ( "(2025) 7 SCC 798": 2025 CaseBase(SC) 223), the Court highlighted that the language of Section 26(1) implies the necessity of multiple deeds for reference, as singular deals may not provide reliable data for calculating average sale prices.

Scope of Interference Under Section 34 of the Arbitration Act

While acknowledging the restricted scope of interference in arbitral awards under Section 34 of the Arbitration and Conciliation Act, 1996, the Court held that the "cloak of protection" does not extend to awards vitiated by patent illegality. By ignoring the higher Ready Reckoner rate of ₹2,020/- per square meter in favor of an inapplicable residential sale deed, the Arbitrator had committed a fundamental legal error.

The Court has the following directions:

"Respondent No. 1 would, therefore, be entitled to compensation for its acquired extent of 1394 square meters @ ₹2,020/- per square meter and not @ ₹3,588/- per square meter, as decided by the Arbitrator and confirmed by the High Court. Needless to state, respondent No. 1 would also be entitled to all consequential statutory benefits under the 2013 LA Act. The sum of ₹50,00,000/- already withdrawn by respondent No. 1 shall be taken into account while disbursing the balance compensation due and payable to respondent No. 1 pursuant to this order."

Background:

The dispute originated from the acquisition of 1,394 square meters of land in Nagpur District for the widening of National Highway No. 547-E. The competent authority initially classified the land as agricultural, awarding ₹161.63 per square meter. The landowner, Alfa Remidis Ltd., challenged this before an Arbitrator, claiming the land was used for industrial purposes (a paracetamol production unit) and sought compensation based on a residential sale deed valued at ₹3,588/- per square meter.

The Arbitrator enhanced the compensation to ₹3,588/-. NHAI challenged this under Section 34 of the Arbitration and Conciliation Act, 1996, and the District Court set aside the award for violating Section 26 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. However, the Bombay High Court later restored the Arbitrator's award. The Supreme Court eventually modified the compensation to match the Ready Reckoner rate of ₹2,020/- per square meter, which was the appropriate statutory benchmark under Section 26(1)(a) of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.

Case Details:
Case No.: Civil Appeal No. _____________ of 2026 (@SLP (C) No. 33773 of 2025)
NeutralCitation: 2026 INSC 480
Case Title: Project Director, National Highways Authority of India v. Alfa Remidis Ltd. and others

Source: 2026 CaseBase(SC) 11