Case Note & Summary
The Supreme Court allowed the appeal filed by the National Highways Authority of India (NHAI) against the judgment of the Bombay High Court (Nagpur Bench) which had restored an arbitral award enhancing compensation for land acquired under the National Highways Act, 1956. The land in question, measuring 1,394 square meters in Mouza Pardi (Rithi), Nagpur, was acquired for four-laning of National Highway No. 547-E. The competent authority initially classified the land as agricultural and awarded compensation at ₹161.63 per square meter. The landowner, Alfa Remidis Ltd., challenged this before the Arbitrator, claiming the land was used for industrial purposes (manufacturing paracetamol). The Arbitrator accepted this and, relying on a single sale deed of a residential plot in a nearby village (Mouza Saoner) at ₹3,588 per square meter, enhanced compensation to that rate. NHAI and the Government of India filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, which was allowed by the District Judge, who set aside the award on the ground that it contravened Section 26 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (2013 LA Act). The High Court, in appeal under Section 37 of the Arbitration Act, reversed the District Judge's order and restored the arbitral award. The Supreme Court held that the Arbitrator and the High Court had erred in applying Section 26(1) of the 2013 LA Act. The Court noted that Section 26(1) mandates the Collector to adopt the higher of three options: (a) market value specified for stamp duty in the area, (b) average sale price for similar type of land in the nearest village or vicinity, or (c) consented amount. The Arbitrator relied on a single sale deed of a residential plot, which was not 'similar type' land to the acquired industrial land, and failed to compute the average sale price using multiple deeds as required by Explanations 1 to 4. The Court also noted that the landowner itself had cited the Ready Reckoner rate of ₹2,020 per square meter for lands on the highway in Zone 4, which should have been applied under clause (a). Consequently, the Court set aside the High Court's judgment and the arbitral award, and directed that compensation be paid at ₹2,020 per square meter, with all consequential statutory benefits. The amount of ₹50,00,000 already withdrawn by the landowner was to be adjusted against the final compensation. The appeal was allowed with no order as to costs.
Headnote
A) Land Acquisition - Compensation Determination - Section 26(1) of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 - Market Value - The Collector must adopt the higher of the options under clauses (a), (b), and (c) of Section 26(1). Clause (a) refers to the market value specified for stamp duty in the area; clause (b) refers to the average sale price for similar type of land in the nearest village or vicinity. The Arbitrator erred by relying on a single sale deed of a residential plot in an adjoining village to value industrial land, which is not 'similar type' land. Held that the statutory mandate requires multiple deeds and similarity of land type (Paras 10-11). B) Land Acquisition - Compensation - Section 26(1)(b) of the 2013 LA Act - Average Sale Price - The methodology under Section 26(1)(b) read with Explanations 1 to 4 requires consideration of multiple sale deeds to determine average sale price; reliance on a single sale deed is impermissible. Held that the Arbitrator's adoption of a single sale exemplar was contrary to the statutory scheme (Paras 10-11). C) Arbitration - Setting Aside Award - Section 34(2A) of the Arbitration and Conciliation Act, 1996 - Patent Illegality - An arbitral award that ignores the statutory mandate under Section 26(1) of the 2013 LA Act is vitiated by patent illegality. The proviso to Section 34(2A) does not protect such an award. Held that the High Court erred in restoring the award without considering the statutory provisions (Paras 11-12). D) Land Acquisition - Compensation - Section 26(1)(a) of the 2013 LA Act - Ready Reckoner Rate - Where the landowner itself cited the Government rate in the Ready Reckoner (₹2,020 per sq m) for lands on the highway in Zone 4, that rate should have been applied under clause (a) as it is the market value specified for stamp duty. Held that the compensation should be at ₹2,020 per sq m instead of ₹3,588 per sq m (Paras 12-13).
Issue of Consideration
Whether the Arbitrator and the High Court correctly applied Section 26(1) of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, in enhancing compensation for land acquired under the National Highways Act, 1956.
Final Decision
The Supreme Court allowed the appeal, set aside the High Court's judgment dated 05.06.2025 and the Arbitrator's Award dated 22.11.2021. It directed that compensation be paid to Alfa Remidis Ltd. at ₹2,020 per square meter (the Ready Reckoner rate under Section 26(1)(a) of the 2013 LA Act) for the acquired extent of 1,394 square meters, along with all consequential statutory benefits. The sum of ₹50,00,000 already withdrawn by the landowner shall be adjusted against the final compensation. Parties to bear their own costs.
Law Points
- Determination of market value under Section 26(1) of the Right to Fair Compensation and Transparency in Land Acquisition
- Rehabilitation and Resettlement Act
- 2013
- must follow the hierarchy of options
- reliance on a single sale deed of dissimilar land is impermissible
- the proviso to Section 34(2A) of the Arbitration and Conciliation Act
- 1996 does not protect an award that ignores statutory mandates.
