National Highways Act, 1956 – Section 3(J) Declared Unconstitutional – Arbitral Award Remitted for Solatium Consideration – Writ Petition Dismissed

The High Court dismissed the writ petition, upholding the District Judge’s order to remit the matter to the Arbitrator for reconsideration of solatium. The Court held that Section 3(J) of the NH Act, which excluded solatium, was unconstitutional and had retrospective effect. The Court found no error in the District Judge’s exercise of discretion under Section 34(4) of the A&C Act to remand the matter.

Major Acts:

1. Constitution of India (COI) – Article 14, Article 136

2. Arbitration and Conciliation Act, 1996 (A&C Act) – Sections 2(1)(e), 2(4), 34(1), 34(4), 34(2A)

3. National Highways Act, 1956 (NH Act) – Sections 3(G)(5), 3(G)(7), 3(J), 3(D), 3-A

4. Land Acquisition Act, 1894 – Sections 23(1A), 23(2), 28

Subjects:

• Arbitral Award – Solatium – Retrospective Effect – Judicial Discretion – Section 34(4) A&C Act – Unconstitutional Provisions – Remission to Arbitral Tribunal – Compensation Enhancement

Facts:

1. Nature of the Litigation:

   • The petitioners, National Highways Authority of India (NHAI), challenged an arbitral award dated 04.09.2015, which enhanced compensation for land acquisition under the National Highways Act, 1956. The respondents (landowners) sought solatium, which was not granted in the original award.

   • The District Judge, Yavatmal, remitted the matter to the Arbitrator under Section 34(4) of the A&C Act to reconsider the solatium claim.

2. Who is Asking the Court and for What Remedy?

   • The petitioners (NHAI) filed a writ petition challenging the District Judge’s order, arguing that the remand under Section 34(4) was improper as the original award was based on the law prevailing at the time, which excluded solatium under Section 3(J) of the NH Act.

   • The respondents (landowners) supported the remand, seeking solatium and interest on the enhanced compensation.

3. Reason for Filing the Case:

   • The petitioners contended that the District Judge erred in remitting the matter to the Arbitrator, as Section 3(J) of the NH Act, which excluded solatium, was in force at the time of the award. They argued that the remand was not permissible under Section 34(4) of the A&C Act.

   • The respondents argued that the Supreme Court’s judgment in Union of India vs. Tarsem Singh (2019) declared Section 3(J) unconstitutional, making solatium applicable retrospectively.

4. What Has Already Been Decided Until Now?

   • The Arbitrator had awarded enhanced compensation but did not grant solatium, citing Section 3(J) of the NH Act.

   • The District Judge remitted the matter to the Arbitrator to reconsider the solatium claim under Section 34(4) of the A&C Act.

Issues:

1. Whether the District Judge was correct in remitting the matter to the Arbitrator under Section 34(4) of the A&C Act for reconsideration of solatium?

2. Whether Section 3(J) of the NH Act, which excluded solatium, was unconstitutional, and if so, whether it had retrospective effect?

3. Whether the Arbitral Award could be modified to include solatium after the Supreme Court’s judgment in Union of India vs. Tarsem Singh (2019)?

Submissions/Arguments:

• Petitioners (NHAI):
  a. The remand under Section 34(4) was improper as the original award was based on the law prevailing at the time, which excluded solatium under Section 3(J) of the NH Act.
  b. Section 34(4) does not allow for a remand to reconsider issues not raised in the original arbitration.
  c. The Supreme Court’s judgment in Union of India vs. Tarsem Singh (2019) should not apply retrospectively to concluded cases.

• Respondents (Landowners):
  a. The Supreme Court’s judgment in Union of India vs. Tarsem Singh (2019) declared Section 3(J) unconstitutional, making solatium applicable retrospectively.
  b. The District Judge correctly exercised discretion under Section 34(4) to remand the matter for reconsideration of solatium.
  c. The Arbitral Tribunal should be given an opportunity to cure the defect in the award by considering solatium.

Ratio:

1. Retrospective Effect of Unconstitutional Provisions:

   • When a provision is declared unconstitutional, it is treated as non est (non-existent) from its inception, and its effects are nullified retrospectively. (Para 29)

   • However, concluded cases should not be reopened, and the retrospective effect applies only to pending proceedings. (Para 24)

2. Judicial Discretion Under Section 34(4) of the A&C Act:

   • Section 34(4) allows the court to adjourn proceedings and remit the matter to the Arbitral Tribunal to cure defects in the award, such as inadequate reasoning or gaps in the reasoning. (Para 17)

   • The court’s discretion under Section 34(4) is not obligatory and should be exercised only when it is appropriate to preserve the finality of the arbitral award. (Para 18)

3. Solatium in Land Acquisition Cases:

   • Solatium is an integral part of compensation under the Land Acquisition Act, 1894, and its exclusion under Section 3(J) of the NH Act was unconstitutional. (Para 23)

   • The Arbitral Tribunal must consider solatium when determining compensation for land acquisition under the NH Act. (Para 31)