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The Project Director, National Highways No. 45E and 220, National Highways Authority of India v. M. Hakeem

Civil Appeal · 2021 INSC 344Decided 20 Jul 2021
Civil Appeal No. 2797 of 2021
Justice Rohinton Fali Nariman · Justice B.R. Gavai

Background

Landowners whose land was acquired for national highway projects were dissatisfied with the compensation fixed by the competent authority and referred their disputes to arbitration under the National Highways Act, 1956. When they challenged the arbitral awards under Section 34 of the Arbitration Act seeking higher compensation, some High Courts (and in one instance a civil court) went further than simply setting aside the awards: they actually enhanced the compensation themselves. The National Highways Authority of India (NHAI) challenged this practice, arguing that courts have no power to modify an arbitral award under Section 34; they can only set it aside.

Decision Breakdown

The Supreme Court held that Section 34 of the Arbitration Act only allows a court to set aside an arbitral award on limited grounds: it does not give the court power to modify, vary, or enhance the award itself, since the provision is modelled on the UNCITRAL Model Law, which deliberately omits any power of modification (unlike the earlier Arbitration Act, 1940). Allowing courts to "modify" awards under the guise of "setting aside" would amount to the court exercising appellate powers over an arbitrator's decision, which defeats the object of minimal judicial interference in arbitration. However, despite declaring this point of law in NHAI's favour, the Court declined to actually disturb the specific enhanced-compensation orders in these particular appeals, noting that similarly placed landowners had already received the higher amounts from NHAI in other cases, the awards were 7-10 years old, and it would be unfair at this late stage to send the matter back for a fresh arbitration.

Lesson Learnt

If you lose an arbitration case and go to court to challenge the award, the court can only cancel (set aside) a flawed award: it cannot rewrite the award or award you a different amount itself; a flawed award, once set aside, generally has to go back to fresh arbitration, not be substituted by the court's own figure.

Official source (sci.gov.in)View Judgment (PDF)

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