Courts Cannot Grant Additional 12% Land Value Under National Highways Act: Madras HC

The Madras High Court has decisively curtailed the power of lower courts to modify arbitral awards, ruling that land losers under the National Highways Act, 1956 are strictly ineligible for the 12% additional value provided under the Land Acquisition Act, 1894. In a stern reminder of the limited scope of judicial interference in arbitration, the Bench set aside a District Court's order that had erroneously enhanced compensation by importing provisions from general land acquisition laws into special highway statutes.

A division bench comprising Justice P. Velmurugan and Justice GK. Muthukumaar heard the appeals filed by the National Highways Authority of India (NHAI) challenging the modification of arbitral awards by the Principal District Judge, Tiruppur. The appeals focused on whether a court exercising jurisdiction under Section 34 of the Arbitration and Conciliation Act, 1996 could grant additional monetary benefits not awarded by the Arbitrator.

Key Takeaways

Statutory Specificity Prevails

Benefits under Section 23(1-A) of the Land Acquisition Act, 1894 are not transferable to acquisitions made under the National Highways Act, 1956, maintaining a clear distinction between special and general laws.

Limited Judicial Interference

Courts acting under Section 34 of the Arbitration and Conciliation Act, 1996 possess no inherent power to modify or enhance an award; they can only set it aside if it suffers from patent illegality.

Finality of Solatium and Interest

While land owners are entitled to solatium and interest following constitutional invalidation of previous bars, additional percentage-based value increases remain legally barred for highway projects.

Section 23(1-A)

The Bench observed that while the exclusion of solatium and interest for highway acquisitions was previously struck down, the 12% additional value remains excluded for such projects. In the words of the Court, "While solatium and interest were mandated to be paid in respect of the acquisitions made by NHAI, the subsequent clarifications affirmed that the benefit under Section 23(1-A) i.e., the 12% additional value for the period from the date of notification till the date of award, does not apply to acquisitions under the National Highways Act. To this extent, the impugned order awarding 12% additional value as per Section 23(1-A) to the land owners in respect of the acquisition proceedings by NHAI is unsustainable..."

The Madras High Court further emphasized that the District Court exceeded its jurisdiction by modifying the award. It noted that under the Arbitration and Conciliation Act, 1996, the power to interfere is extremely limited. The Court, in its reasoning, observed: "It is also equally well settled that while exercising jurisdiction under Section 34 of the Arbitration and Conciliation Act, the Court has got limited power to interfere with an arbitral award, unless it suffers from patent illegality."

The Court accordingly directed NHAI to disburse the entire compensation amount along with solatium and interest, less the amount already paid, if any, to each of the 3rd respondent/land owner herein, within a period of sixty days from the date of receipt of a copy of this judgment.

Ratio

Land losers whose property is acquired under the National Highways Act, 1956 are entitled to solatium and interest as per the principles of the Land Acquisition Act, 1894, but they are categorically not entitled to the 12% additional value under Section 23(1-A) of the 1894 Act. Furthermore, a Court exercising power under Section 34 of the Arbitration and Conciliation Act, 1996 cannot modify an arbitral award to grant additional benefits not awarded by the Arbitrator, as such modification constitutes a 'patent illegality'.

Background

The dispute originated from the acquisition of vast land tracts in Tiruppur District for the widening of National Highway No.47 (Salem to Coimbatore Section). The Competent Authority originally fixed compensation at Rs.50.89 per square metre. Dissatisfied land owners approached the District Collector/Sole Arbitrator for enhancement. The Arbitrator rejected the enhancement of the base rate but granted 30% solatium and interest, relying on Union of India v. Tarsem Singh ( "(2019) 9 SCC 304": 2019 CaseBase(SC) 1697).

NHAI challenged these awards before the Principal District Judge, Tiruppur, under Section 34 of the Arbitration and Conciliation Act, 1996. While the District Judge confirmed the solatium and interest, he additionally granted a 12% additional value under Section 23(1-A) of the Land Acquisition Act, 1894. NHAI appealed this specific enhancement to the High Court, citing Project Director, NHAI v. Hakeem and others to argue that the Court has no power to modify an award. The Madras High Court agreed, referencing National Highways Authority of India and another v. Tehal Singh and others to clarify the inapplicability of Section 23(1-A) to highway acquisitions and NHAI v. M.Hakeem & another and Delhi Airport Metro Express Pvt. Ltd. vs. Delhi Metro Rail Corporation Ltd. ( "(2022) 1 SCC 131": 2021 CaseBase(SC) 1299) regarding the limited scope of Section 34.

Case Details:
Case No.: Arb Appeal Nos. 47 of 2025, 73, 76, 78, 80, 83, 87, 94 & 96 of 2026
Case Title: The DGM (T) and Project Director, NHAI v. The Arbitrator/District Collector, Tiruppur and Others
Appearances:
For the Petitioner(s): Mr.Su.Srinivasan
For the Respondent(s): Mr.Karthik Selvaraj (Additional Government Pleader for R1 & R2), Mr.C.Prakasam, Mr.V.Anandhamoorthy, Mr.C.Ramaraj, Mr.K.Govi Ganesan, Ms.K.Susmitha (Advocates for R3 in respective appeals)

Source: 2026 CaseBase(MAD) 20699