Arbitration Petition No. 15 of 2019 · Orissa High Court
Case Details
Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM- SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 19-Feb-2025 17:22:45 IN THE HIGH COURT OF ORISSA AT CUTTACK ARBA No.10 of 2024 Along with ARBA No.6 of 2024 (IN ARBA No.10 of 2024) (From the Judgment dated 23.2.2024 passed by the Ld. District Judge, Cuttack in Arbitration Petition No.15 of 2019 arising out of award dated 22.5.2019 passed by the Ld. Collector & District Magistrate Cum Sole Arbitrator in ARB Misc. Case No. 1 of 2016) Project Director, NHAI, PIU, Bhubaneswar & Another …. Appellant (s) -versus- Prakash Kumar Rout …. Respondent (s) Advocates appeared in the case throughHybrid Mode: Appellant (s) Respondent (s) : : Mr.Ajit Patnaik, Adv. Mr. M. K. Mishra, Sr. Adv. Along with Mr. J. Katikia, Adv. (IN ARBA No.6 of 2024) (From the Judgment dated 23.2.2024 passed by the Ld. District Judge, Cuttack in Arbitration Petition No.16 of 2019 arising out of award dated 22.5.2019 passed by the Ld. Collector & District Magistrate Cum Sole Arbitrator in ARB Misc. Case No. 1 of 2016) Prakash Kumar Rout …. Appellant (s) -versus- National Highways Authority of India and Anr. …. Respondent (s) Page 1 of 37 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM- SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 19-Feb-2025 17:22:45 Advocates appeared in the case throughHybrid Mode: Appellant (s) Respondent (s) : : Mr. M. K. Mishra, Sr. Adv. Along with Mr. J. Katikia, Adv. Mr.Ajit Patnaik, Adv. CORAM: DR. JUSTICE S.K. PANIGRAHI DATE OF HEARING:-20.01.2025 DATE OF JUDGMENT: -14.02.2025 Dr. S.K. Panigrahi, J. 1. Both the Appeals under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‚A&C Act‛) have been filed against the common judgment dated 23.2.2024 passed by the Ld. District Judge, Cuttack in Arbitration Petition No. 15 of 2019 arising out of award dated 22.5.2019 passed by the Ld. Collector & District Magistrate Cum Sole Arbitrator in ARB Misc. Case No. 1 of 2016. As both Appeals arise out of the same impugned judgment and raise the same questions of law, it is considered prudent to deal with them together. Hereinafter, the parties are referred to as their original position in the arbitration for the sake of convenience. I. FACTUAL MATRIX OF THE CASE: 2. For the sake of brevity, the admitted facts involved in the appeals are pithily discussed herein: Page 2 of 37 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM- SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 19-Feb-2025 17:22:45 i. The Government of India, Ministry of Road Transport and Highways, New Delhi issued a Notification u/s 3A of the NH Act, 1956 vide S.O. No. 679(E) dated 13.3.2013 for the purpose of expansion of national highways expressing intention to acquire land for construction (widening/six-laning), maintenance, management and operation of N.H.16 (old N.H.5) on the stretch of land from 414 km to 419.2km (Bhubaneswar – Kolkata Section). ii. The Notification dated 13.3.2013 was also published in widely circulated local Newspapers namely, ‚the Samaj‛ and ‚the Sambad‛ on 3.4.2013 inviting objections u/s 3(C) of the NH Act, 1956 within 21 days. iii. The Claimant herein filed his Objection on 23.4.2014 requesting the authorities to exempt his plots from acquisition as he was running a cattle-feed plant on the plots belonging to him that were sought to be acquired. Upon consideration of his prayer, out of 7 plots of land originally notified to be acquired, 4 plots were exempted from acquisition on which he was running the said plant. The remaining 3 plots could not be exempted as they were found to be adjacent to the National Highways and were found to be inevitable for acquisition for the proposed expansion. The reason they were excluded was allegedly that it was found that there were no installations of plant or machinery on the non-exempted plots which would have any adverse effect on his plant/industry. iv. Thereafter, on 10.5.2014, vide S.O. No. 729(E), Notification u/s 3(D) of the NH Act, 1956 was published for final acquisition of land. Page 3 of 37
Legal Reasoning
Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM- SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 19-Feb-2025 17:22:45 Thereafter, it is asserted by NHAI that the land stood vested with the Central Government, free from all encumbrances. v. In the meanwhile, the Special Land Acquisition Officer – cum – Competent Authority, NH 5 invited applications for claim petitions which was to be filed on or before, 24.5.2014. However, the Claimant herein filed his claim petition only on 19.9.2014. A field inquiry was made through the Amin in the presence of the Claimant and also the value of the acquired land of the Claimant was assessed by the Special Land Acquisition Officer – cum – Competent Authority, NH 5. Alongwith the assistance of registered valuers i.e one M/s Harapriya Associates Private Limited. vi. After taking all relevant factors into consideration, the compensation amount was assessed and the amount was duly disbursed u/s 3(G) of the NH Act, 1956, by the Competent Authority of Land Acquisition, for a total amount of Rs.1,39,20.236/- which included Land Value, Structure Value, Solatium @30%, Addl. Market Value (Interest@12%) and Ex-gratia amount, as per law. The same was paid to the Claimant on 6.5.2015. vii. Being aggrieved by the compensation determined/awarded, the Claimant filed a representation before the Collector, Cuttack for re- determination of the compensation amount. viii. The Claimant also approached this Court in W.P.(C) No. 15266 of 2015 with the prayer to direct the Collector, Cuttack to consider his representation as an application u/s 3(G)(5) of the NH Act, 1956. Further, a request was made to accord permission to the Claimant to Page 4 of 37 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM- SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 19-Feb-2025 17:22:45 file an Application before the Collector for re-measurement of the structure existing on the acquired area. This Court vide order dated 17.11.2015, was pleased to direct for disposal of the Claimant’s representation in accordance with law. ix. Therefore, ARB Misc. Case No. 1 of 2016 was instituted by the Claimant before the Ld. Collector & District Magistrate Cum Sole Arbitrator. x. An enquiry was conducted as per the directions of Ld. Arbitrator for joint re-measurement / reassessment of structure and Industrial Unit under Land Acquisition on the Plot Nos.421 /423 /424 of Mouza- Karapari in the presence of both the parties, GM DIC and Executive Engineer. xi. On 25.1.2017, the Ld. Arbitrator also ordered the Executive Engineer, NH Division to convene a meeting, coordinating with all officers and conduct a thorough inquiry after which a joint inquiry report was directed to be submitted. The joint inspection report was submitted on 24.8.2017. xii. The Ld. Arbitrator in ARB Misc. Case No. 1 of 2016 vide award dated 22.5.2019 was pleased to enhance the compensation to Rs.23,92,20,307/- with interest. xiii. The NHAI challenged the award dated 22.5.2019 before the Ld. District Judge, Cuttack in ARBP 15 of 2019 and the Claimant challenged the award dated 22.5.2019 before the Ld. District Judge, Cuttack in ARBP 16 of 2019. The impugned award was confirmed by the Ld. District Judge vide common judgment dated 23.2.2024. This Page 5 of 37 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM- SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 19-Feb-2025 17:22:45 judgment confirming the award is challenged herein by both the parties. 3. Now that the facts leading up to the instant Appeals have been laid down, this Court shall endeavour to summarise the contentions of the Parties and the broad grounds that have been raised to seek the exercise of this Court’s limited jurisdiction available under S. 37 of the A&C Act. II. CLAIMANT’S SUBMISSIONS: 4. The Ld. Counsel for the Claimant assails the judgment of the Ld. District Judge mainly on the ground that the Ld. District Judge has failed to note that the Ld. Arbitrator has not correctly calculated the compensation due to the Claimant and erroneously rejected a part of the claim of the Claimant. According to the Ld. Counsel for the Claimant, the Ld. Arbitrator ought to have passed an award of Rs.90,79,63,700/- towards additional compensation but has wrongly directed NHAI to only pay additional compensation of Rs. 23,92,20,307/- and, therefore, the award is bad in law and liable to be set aside. III. NHAI’s SUBMISSIONS: 5. Per contra, Ld. Counsel for the NHAI submits that the arbitral award passed by the Ld. Collector and Arbitrator is against the evidence on record and ought to be set aside in its entirety. The Ld. Counsel strenuously argued that the land of the Claimant was ‚Gharabari‛ kisam of land. However, the Ld. Arbitrator has wrongly awarded additional compensation upon erroneously holding that there was industry/factory over the acquired land. The Ld. Counsel submits that Page 6 of 37 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM- SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 19-Feb-2025 17:22:45 as the Ld. Arbitrator has passed an award without properly applying its mind, the same ought to shock the conscience of the court apart from being perverse and unsustainable in law. IV. ISSUE FOR CONSIDERATION 6. Having heard the parties and perused the materials available on record, this court here has identified the following solitary issue to be determined: A. Whether the order of the Ld. District Judge warrants interference keeping in mind the limitations of this court’s powers under Section 37 of the A&C Act? V. ISSUE A: WHETHER THE ORDER OF THE LD. DISTRICT JUDGE WARRANTS ANY INTERFERENCE KEEPING IN MIND THE LIMITATIONS OF THIS COURT’S POWERS UNDER SECTION 37 OF THE A&C ACT? 7. This Court has given its thoughtful consideration to the submissions advanced by the learned counsel for the parties at the bar and I have also perused the relevant record of the case. 8. First things first, it would be apposite to refer to the provisions of Section 34 & 37 of the Act, which provisions read as under: ‚34. Application for setting aside arbitral award. -(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with subsection (2) and sub-section (3). (2) An arbitral award may be set aside by the Court only if- Page 7 of 37 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM- SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 19-Feb-2025 17:22:45 (a) the party making the application establishes on the basis of the record of the arbitral tribunal that- (i) a party was under some incapacity; or (ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or (v.) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, in accordance with this Part; or failing such agreement, was not (b) the Court finds that— (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii) the arbitral award is in conflict with the public policy of India. Page 8 of 37 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM- SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 19-Feb-2025 17:22:45 Explanation 1.—For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,- (i) the making of the award was induced or affected by fraud in violation of Section 75 corruption or was or or Section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice. Explanation 2.—For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute. (2-A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the court, if the court finds that the award is vitiated by patent illegality appearing on the face of the award: Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.
Decision
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under Section 33, from the date on which that request had been disposed of by the arbitral tribunal: Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter. (4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a Page 9 of 37 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM- SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 19-Feb-2025 17:22:45 party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award. 37. Appealable orders.—(1) (Notwithstanding anything contained in any other law for the time being in force, an appeal) shall lie from the following orders (and from no others) to the court authorised by law to hear appeals from original decrees of the Court passing the order, namely:— ((a) refusing to refer the parties to arbitration under Section 8; (b) granting or under Section 9; refusing to grant any measure (c) setting aside or refusing to set aside an arbitral award under Section 34.) (2) An appeal shall also lie to a court from an order of the arbitral tribunal— (a) accepting the plea referred to in sub-section (2) or sub- section(3) of Section 16; or (b) granting or refusing to grant an interim measure under Section17. (3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court.‛ 9. On a careful perusal of Section 34 of the Act, it is clear that an arbitral award can only be set aside by moving an application on grounds mentioned under sub-section (2) and sub-section (3) of Section 34 of the Act. An award can be interfered with, where it is in conflict with the public policy of India, i.e., if the award is induced or affected by fraud or Page 10 of 37 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM- SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 19-Feb-2025 17:22:45 corruption or is in contravention of the fundamental policy of Indian law, or if it is in conflict with basic notions of morality and justice. 10. A plain reading of Section 34 reveals that the scope of interference by the Court with the arbitral award under Section 34 is very limited, and the Court is not supposed to travel beyond the aforesaid scope to determine whether the award is good or bad. Even an award that may not be reasonable or is non-speaking to some extent cannot ordinarily be interfered with by the Courts. 11. It is also a well settled proposition in law that the jurisdiction of the Court under Section 34 of the Act is neither in the nature of an appellate remedy or akin to the power of revision. It is also well ordained in law that an award cannot be challenged on merits except on the limited grounds that have been spelt out in sub-sections (2), (2-A) and (3) of Section 34 of the Act, by way of filing an appropriate application. 12. In the instant case, there is no allegation that the making of the award was induced or affected by fraud or corruption, or was in violation of Section 75 or Section 81. Therefore, we shall confine our exercise in assessing as to whether the arbitral award is in contravention with the fundamental policy of Indian law, and/or whether it conflicts with the most basic notions of morality or justice. Additionally, in the light of the provisions of sub-section (2-A) of Section 34, this Court shall examine whether there is any patent illegality on the face of the award. 13. Before undertaking the aforesaid exercise, it would be apposite to consider as to how the expressions (a) ‚in contravention with the Page 11 of 37 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM- SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 19-Feb-2025 17:22:45 fundamental policy of Indian law‛; (b) ‚in conflict with the most basic notions of morality or justice‛; and (c) ‚patent illegality‛ have been construed. (a) In contravention with the fundamental policy of Indian law 14. Till the Amendment, 2015 the expression ‚in contravention with the fundamental policy of Indian law‛ was not found in the 1996 Act. Yet, in Renusagar Power Co. Ltd. v. General Electric Co.1, in the context of enforcement of a foreign award, while construing the phrase ‚contrary to the public policy‛, this Court held that for a foreign award to be contrary to public policy mere contravention of law would not be enough rather it should be contrary to: (a) the fundamental policy of Indian law; and/or (b) the interest of India; and/or (c) justice or morality. 15. In the judicial pronouncements that followed Renusagar (supra), the domain of what could be considered contrary to the ‘public policy of India’/‘fundamental policy of Indian law’ expanded, resulting in much greater interference with arbitral awards than what the lawmakers intended. This led to the Amendment2015 to the 1996 Act. 16. In Ssangyong Engineering & Construction Co. Ltd. v. NHAI2, this Court dealt with the effect of the Amendment, 2015. While doing so, it took note of a supplementary report of February 2015 of the Law Commission of India made in the context of the proposed 2015 amendments. The said supplementary report has been extracted in