Notifications Changing Arbitrators Under National Highways Act Operate Prospectively: Patna HC

The Patna High Court has barred the retrospective application of administrative notifications changing arbitrators, ruling that proceedings initiated under a prior valid appointment must be concluded by the same authority unless explicitly superseded. The court further clarified that compensation for land acquired prior to 2015 under the National Highways Act, 1956 must include solatium and interest as per the Land Acquisition Act, 1894.

In a letters patent appeal challenging a single judge's order, a bench of Justice Bibek Chaudhuri and Justice Rana Vikram Singh examined the jurisdictional validity of an arbitral award passed after a new arbitrator had been notified by the Central Government.

Key Takeaways

Prospective Application of Notifications

Administrative notifications issued under Section 3G(5) of the National Highways Act, 1956 to appoint new arbitrators do not automatically invalidate or transfer pending proceedings unless retrospective effect is stated.

Finality of Arbitral Awards

An arbitral award remains valid and cannot be set aside by administrative letters; the only legal recourse for aggrieved parties is a challenge under Section 34 of the Arbitration and Conciliation Act, 1996.

Statutory Compensation Framework

For land acquisitions initiated prior to January 1, 2015, the calculation of solatium and interest must strictly follow the provisions of the Land Acquisition Act, 1894 rather than the 2013 Act.

Validity of Pending Arbitral Proceedings

The court addressed the conflict arising from a June 2018 notification appointing the Divisional Commissioner as arbitrator while proceedings were already pending before the Additional Collector. The bench noted that the subsequent notification was not published in supersession of the October 2017 notification.

The Court, in its reasoning, observed: "On careful consideration of the language of the notification, it appears that the aforesaid notification was not published in supersession of the notification, dated 10.10.2017. It is needless to say that an administrative notification operates prospectively. There is no retrospective operation of the notification, dated 21.06.2018. Therefore, the pending proceedings before the Additional Collector is required to be adjudicated/settled by him only."

Furthermore, the Court emphasized that a Deputy General Manager did not possess the authority to cancel an arbitral award via a letter. Any grievance regarding the arbitrator's failure to consider factors under Section 3G(7) of the National Highways Act, 1956 must be raised before a Civil Court under the Arbitration and Conciliation Act, 1996.

Mandatory Directions for Reassessment

The Court issued the following directions:

"Accordingly, we direct the competent authority to reassess the amount of compensation of acquisition of land in Khesra No. 3243 along with solatium, interest and interest on solatium on compensation as per the Land Acquisition Act of 1894, within a period of three months from the date of communication of this order."

Ratio

An administrative notification appointing a new arbitrator under Section 3G(5) of the National Highways Act, 1956, operates prospectively and does not divest a previously appointed arbitrator of jurisdiction over pending cases. Furthermore, for acquisitions notified before January 1, 2015, the land losers are entitled to solatium and interest in accordance with the Land Acquisition Act, 1894, as per the principles laid down in Union of India v. Tarsem Singh ( "2025 SCCOnLine SC 235": 2025 CaseBase(SC) 231) and Manav Bhanot v. National Highway Authority of India ( "2026 INSC 973": 2026 CaseBase(SC) 6709).

Background

The dispute originated from the acquisition of 2.8676 acres of land in Gaya for the widening of NH-82. The landowners challenged the compensation, leading the Central Government to appoint the Additional Collector as Arbitrator in 2017. While the proceedings were pending, a 2018 notification appointed the Divisional Commissioner for the same jurisdiction. After the Additional Collector passed an award in August 2018, the Bihar State Road Development Corporation issued a letter attempting to quash the award, citing the new notification.

The landowners filed a writ petition, which was allowed by a Single Judge who also granted 12% interest. On appeal, the Division Bench relied on P.K. Palanisamy v. N. Arumugham & Anr. to affirm that jurisdictional errors do not render an order a nullity unless set aside by a competent court. The court also referenced Commercial Tax Officer, Rajasthan v. Binani Cements Limited & Anr. regarding statutory construction and Neena Aneja & Anr. v. Jai Prakash Associates Limited ( "(2022) 2 SCC 161": 2021 CaseBase(SC) 970) concerning the effect of repealing acts on pending proceedings. Ultimately, the court set aside the interest rate fixed by the Single Judge but directed a fresh assessment of compensation including statutory solatium based on J. Mohapatra and Co. & Anr. v. State of Orissa and Anr. ( "(1984) 4 SCC 103": 1984 CaseBase(SC) 121) and Poornima Advani v. State (NCT of Delhi) & Another.

Case Details:
Case No.: Letters Patent Appeal No.924 of 2024
Case Title: Bihar State Road Development Corporation vs. Shiv Shankar Prasad & Ors.
Appearances:
For the Petitioner(s): Mr. P.K. Shahi, Sr. Advocate, Mr. Manish Dhari Singh, Advocate
For the Respondent(s): Mr. Jitendra Singh, Sr. Advocate, Mr. Yash Singh, Advocate, Dr. Maurya Vijay Chandra, Advocate

Source: 2026 CaseBase(PAT) 3294