# Harish Tripathi v. Competent Auth., N.H. & Ors

- **Citation:** (2024) 1 ILRA 290
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2023-12-22
- **Bench:** Jaspreet Singh
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/harish-tripathi-v-competent-auth-n-h-ors-50916
- **Pages:** 21

## Headnote

A. Civil Law-Arbitration and Conciliation
Act, 1996-Section 37-National Highway
Act, 1956-Section 3-G(5)-Right to Fair
Compensation and Transparency in Land
Acquisition
Rehabilitation
and
Resettlement Act, 2013-Section 26-In the
instant
case,
land
was
used
for
commercial purpose-compensation of the
land has been denied at the commercial
rates-the petrol pump being commercial
enterprise, the constructions raised by the
appellant was of a commercial nature and
the
calculation
for
the
aforesaid
construction
ought
to
have
been
considered as per the Collector's rate list
and on the basis of cogent material on
record-The authorities below ought to
have
considered
the
parameters
enumerated in Section 3-G (7) (b) (c), (d)
r/w sections 28, 29 of the Act, 2013 in the
light of the evidence led by the appellant
in
respect
of
the
constructions
as
applicable to the commercial building and
shall
also
determine
whether
the
appellant is entitled to damages-Matter be
decided afresh within a period of six
months.(Para 5 to 57)

The appeal is allowed. (E-6)

List of Cases cited:

## Text

_Characters 0–39,995 of 70,057. This is a partial read: ask again with offset=39995 for what follows._

290 INDIAN LAW REPORTS ALLAHABAD SERIES
persons
who
have
gathered
when
promulgation order was in operation and
due to that some persons of public and
vehicles thereof stucked in jam.

13. In view of the above and having
regard to the dictum of Apex Court in re:
D.K. Rajendran (supra), I am in
agreement
with
the
decisions
of
Karnataka High Court and Gujarat High
Court and to that extent I am respectfully
disagreeing
with
the
decision
of
Jharkhand High Court in Re: Amitabh
Choudhary (supra).

14. In view of the above, the present
petition under Section 482 Cr.P.C. is
allowed.
The
impugned
complaint,
chargesheet
dated
24.11.2019,
summoning order dated 12.02.2020 and
the proceedings of Criminal Case No.
2355 of 2020, State Vs. Israr Ahmad and
Others, arising out of Case Crime No.
839 of 2019, under Sections 143, 188,
342 IPC, Police Station Kotwali Nagar,
District Pratapgarh, pending in the court
of learned Chief Judicial Magistrate,
Pratapgarh, are hereby quashed.

15. No order as to costs.
----------
(2024) 1 ILRA 290
APPELLATE JURISDICTION
CIVIL SIDE
DATED: LUCKNOW 22.12.2023

BEFORE

THE HON'BLE JASPREET SINGH, J.

Appeal U/s 37 of Arbitration & Conciliation Act
1996 No. 58 of 2022

Harish Tripathi ...Appellant
Versus
Competent Auth., N.H. & Ors.
 ...Respondents
Counsel for the Appellant:
Sharad Pathak, Piyush Pathak

Counsel for the Respondents:
Vimlesh Kumar

A. Civil Law-Arbitration and Conciliation
Act, 1996-Section 37-National Highway
Act, 1956-Section 3-G(5)-Right to Fair
Compensation and Transparency in Land
Acquisition
Rehabilitation
and
Resettlement Act, 2013-Section 26-In the
instant
case,
land
was
used
for
commercial purpose-compensation of the
land has been denied at the commercial
rates-the petrol pump being commercial
enterprise, the constructions raised by the
appellant was of a commercial nature and
the
calculation
for
the
aforesaid
construction
ought
to
have
been
considered as per the Collector's rate list
and on the basis of cogent material on
record-The authorities below ought to
have
considered
the
parameters
enumerated in Section 3-G (7) (b) (c), (d)
r/w sections 28, 29 of the Act, 2013 in the
light of the evidence led by the appellant
in
respect
of
the
constructions
as
applicable to the commercial building and
shall
also
determine
whether
the
appellant is entitled to damages-Matter be
decided afresh within a period of six
months.(Para 5 to 57)

The appeal is allowed. (E-6)

List of Cases cited:

1. NHAI Vs P. Nagaraju @ Cheluvaiah & anr.
(2022) SCC Online SC 864

2. Reddy Veerana Vs St. of U.P & ors.(2022)
SCC Online SC 562 UOI Vs Parimal Singh &
ors.(2009) 1 SCC 618

3. Gajanan &Ors VS St. of Mah. & anr.. (2011)
12 SCC 286

4. Chandra Kishori Vs U.O.I. & ors.(2023) AHCLKO 69836

5. NHAI Vs Pankaj Singh Arbtn. Appeal No. 1 of
2019
1 All. Harish Tripathi Vs. Competent Auth., N.H. & Ors.
291
6. UOI Vs Savitri Devi & anr. (2018) 12 SCC 545

7. MMTC Vs Ltd Vs Vedanta Ltd (2019) 4 SCC
163

8. Batliboi Environmental Engineers Ltd VS HPCL
& anr. (2023) SCC online SC 1208

9. ONGC Ltd Vs Saw Pipes Ltd (2023) 5 SCC 705

10. Asso. Builder Vs DDA (2015) 3 SCC 49

11. NHAI Vs M. Hakeem & anr.(2021) 9 SCC 1

(Delivered by Hon'ble Jaspreet Singh, J.)

1. The Court has heard Sri Sharad
Pathak, learned counsel for the appellant and
Sri Vimlesh Kumar for the National
Highway Authority of India.

2. The instant appeal has been
preferred under Section 37 of the Arbitration
and Conciliation Act, 1996 (hereinafter
referred to as the "Act of 1996) against the
order dated 03.11.2022 in Civil Misc. Case
No. 156 of 2018 whereby the petition of the
appellant under Section 34 of the Arbitration
and Conciliation Act, 1996 was partly
allowed as a consequence the award dated
23.03.2018 passed by the Arbitrator/the
Collector was set aside only in respect of the
compensation relating to the cost of
construction upon the acquired land.

3. Briefly, the facts giving rise to the
instant appeal are being noticed hereinafter,
first:-

4. That the appellant was the recorded
owner of Khasra Plot No. 108 measuring
0.1032 hectares situate in Village Bikahar
Pargana Chanda, Tehsil Lambhua, District
Sultanpur.

5. In the year 2012, the National
Highway Authority had acquired the land
for the purpose of widening the National
Highway-56, Lucknow to Varanasi and for
the aforesaid purpose, the land of the
appellant was also acquired and in lieu
thereof the appellant was granted a
compensation of Rs. 2,07,81,620/-.

6. The petitioner filed a petition before
the Collector who acts as a Statutory
Arbitrator under Section 3-G (5) of the
National Highway Act, 1956 (hereinafter
referred to as the "Act of 1956"). The
Arbitrator rejected the petition of the
appellants vide its award dated 23.03.2018.
This was challenged by the appellant before
the District Judge, Sultanpur by filing a
petition under Section 34 of the Act of 1956
which has been decided by means of order
dated 03.11.2022 whereby the award dated
23.03.2018 has been partly set aside only on
one ground and the matter was remitted to
the Arbitrator for passing a fresh award.

7. The contention of learned counsel
for the appellant is that the Arbitrator as well
as the Court in exercise of powers under
Section 34 of the Act of 1996 committed an
error of law in failing to consider that the
appellant was utilizing the land acquired for
commercial purposes as admittedly a petrol
pump was running on the said land.

8. It is further urged that the provisions
of Section 3 -G of the Act of 1956 are to be
read with Section 26 of the Right to Fair
Compensation and Transparency in Land
Acquisition Rehabilitation and Resettlement
Act, 2013 (hereinafter referred to as the
"LARA Act of 2013") and this has not been
appropriately considered.

9. From a conjoint reading of Section
3-G of the Act of 1956 with Section 26 of
the LARA Act, 2013, it would indicate that
there are certain factors which have to be
292 INDIAN LAW REPORTS ALLAHABAD SERIES
taken note of while determining the
compensation which has not been done.

10. It is also urged that the reasoning
given by the Court while rejecting the
petition under Section 34 of the Act of
1996 is also erroneous, inasmuch as, it has
been noticed by the Court below that even
though the appellant was running a petrol
pump but since that petrol pump was only
the commercial activity being done in the
area, hence, it cannot be said that the said
land is commercial to attract rates as
applicable to commercial lands.

11. It is further submitted that the
Court while rejecting the application under
Section 34 of the Act 1996 further erred in
stating that had there been other members
of the Society doing commercial activity
only then the said land could have been
treated to be commercial, which is not quite
correct and the reasoning is flawed.

12. It is submitted that under law once
the land is declared as non-agricultural, it
can be utilized for residential, commercial
or even industrial purposes but the fact
remains that it is the activity which is being
done on the said land which will determine
as to what rate is applicable for the grant of
compensation.

13. It is further submitted that there is
no provision in law which declares a land
as
non-agricultural
with
a
further
classification of declaring it as commercial.
In the instant case, since the land
admittedly was used for commercial
purposes where the appellant had got
himself registered under the U.P. Shop and
Commercial Establishment Act, 1962 and
the activity being run was definitely
commercial in nature, hence, by denying
the compensation of the land at the
commercial rates, the Arbitrator as well as
the Court has committed an error.

14. It is further submitted that as per
the
Collector's
rate
list
which
was
applicable to the case in hand dated 07th
July, 2012 whereas the notification under
Section 3-A was made on 12th December,
2012, hence, the Collector's rate list has
also been ignored which clearly provides
the rates regarding non-agricultural land
and for the aforesaid reasons, the order
turning down the contentions of the
appellant and partly allowing the petition
only on the ground relating to computation
of compensation relating to construction
has caused injustice to the appellant, hence
the appeal.

15. It is further urged that the the
Authorities have failed to consider the
interest on delayed payment as the
petitioner was entitled to get the interest
from the date the possession was taken and
this aspect has also not been properly
considered.

16. The learned counsel for the
appellant has relied upon the decision of
the Apex Court in National Highways
Authority of India Vs. P. Nagaraju alias
Cheluvaiah and Another; 2022 SCC
Online SC 864, Reddy Veerana Vs. State
of U.P. and Others; 2022 SCC Online SC
562, Union of India Vs. Parimal Singh
and Others; 2009 (1) SCC 618 and
Gajanan
and
Others
Vs.
State
of
Maharashtra and Another; (2011) 12 SCC
286 and also on a decision of this Court in
Chandra Kishori Vs. Union of India and
Others; 2023:AHC-LKO:69836.

17. Sri Vimlesh Kumar, learned
counsel
appearing
for
the
National
Highway Authority has submitted that from
1 All. Harish Tripathi Vs. Competent Auth., N.H. & Ors.
293
the bare perusal of the provisions contained
in the National Highway Act, 1956, it
would reveal that the compensation is
granted for the land and for determining the
compensation it is the date on which the
notification under Section 3-A is issued is
important. The nature of the land as
recorded in the revenue records on the date
of notification under Section 3-A of the Act
of 1956 is to be seen. Once the
compensation
of
land
is
determined
thereafter but simultaneously recourse is
taken to other provisions for the purposes
of calculating the value of constructions,
trees or other improvements made on the
land which is the subject matter of
acquisition as per the provisions of the Act
of 1956 read with LARA Act of 2013.

18. Sri Vimlesh Kumar further
submits that in the instant case, the land
apparently was recorded as non-agricultural
and the Competent Authority has rightly
computed the compensation as per the nonagricultural rate of Rs. 4,000/- per square
meter which is in consonance with the rates
as mentioned in the Collector's rate list and
therefore it cannot be said that the appellant
has suffered any prejudice. This aspect has
also been noticed by the Competent
Authority, the Arbitrator as well as the
Court in exercise of powers under Section
34 of the Act of 1996 and it cannot be said
that there is any error therein.

19. The further submission of learned
counsel for the respondents is that the issue
has already been considered by this Court
in Arbitration Appeal No. 1 of 2019;
National Highway Authority of India Vs.
Pankaj Singh decided on 22.01.2020 and
thus it is no more open for the appellant to
urge that appropriate rates have not been
awarded to the appellant insofar as the land
is concerned.

20. It is further submitted that
regarding the interest, the Competent
Authority has appropriately calculated the
interest and it shall be evident that the same
has been calculated in accordance with the
rules from the date of the notification till
the date of the award and to that extent the
submission made by learned counsel for the
appellant does not stand to reason.

21. It is further submitted that in so
far as the calculation regarding the
compensation for construction is concerned
this issue, has already been remitted for a
fresh determination by the order passed by
the Court on 03.11.2022 and as such the
same has to be recalculated, hence, at
present, the contention of learned counsel
for the appellant is not tenable and is liable
to be turned down and the appeal deserves
to be dismissed.

22. Sri Vimlesh Kumar, learned
counsel for the respondent has relied upon
the decisions of the Apex Court in Union
of India Vs. Savitri Devi and Another;
2018 (12) SCC 545, MMTC Vs. Ltd. Vs.
Vedanta Ltd. 2019 (4) SCC 163 as well as
a decision of this Court in Arbitration
Appeal No. 1 of 2019 National Highway
Authority of India Vs. Pankaj Singh
decided on 22.01.2020.

23. This Court at the outset is of the
view that in order to test the submissions of
the respective parties, it will be relevant
first to notice the statutory provisions
applicable to the controversy at hand.

24. In this regard, Section 3-G of the
National Highway Act, 1956 is being
reproduced as under:-

"Section 3 G:- Determination of
amount payable as compensation.-
294 INDIAN LAW REPORTS ALLAHABAD SERIES

1) Where any land is acquired under
this Act, there shall be paid an amount
which shall be determined by an order of
the competent authority.

(2) Where the right of user or any
right in the nature of an easement on, any
land is acquired under this Act, there shall
be paid an amount to the owner and any
other person whose right of enjoyment in
that land has been affected in any manner
whatsoever by reason of such acquisition
an amount calculated at ten per cent, of
the amount determined under sub-section
(1), for that land.

(3) Before proceeding to determine
the amount under sub-section (1) or subsection (2), the competent authority shall
give a public notice published in two local
newspapers, one of which will be in a
vernacular language inviting claims from
all persons interested in the land to be
acquired.

(4) Such notice shall state the
particulars of the land and shall require
all persons interested in such land to
appear in person or by an agent or by a
legal practitioner referred to in subsection (2) of section 3C, before the
competent authority, at a time and place
and to state the nature of their respective
interest in such land.

(5) If the amount determined by the
competent authority under sub-section (1)
or sub-section (2) is not acceptable to
either of the parties, the amount shall, on
an application by either of the parties, be
determined by the arbitrator to be
appointed by the Central Government--

(6) Subject to the provisions of this
Act, the provisions of the Arbitration and
Conciliation Act, 1996 (26 of 1996) shall
apply to every arbitration under this Act.

(7) The competent authority or the
arbitrator while determining the amount
under sub-section (1) or sub-section (5), as
the
case
may
be,
shall
take
into
consideration-

(a) the market value of the land on the
date of publication of the notification under
section 3A;

(b) the damage, if any, sustained by
the person interested at the time of taking
possession of the land, by reason of the
severing of such land from other land;

(c) the damage, if any, sustained by the
person interested at the time of taking
possession of the land, by reason of the
acquisition injuriously affecting his other
immovable property in any manner, or his
earnings;

(d)
if,
in
consequences
of
the
acquisition of the land, the person
interested is compelled to change his
residence or place of business, the
reasonable expenses, if any, incidental to
such change.]"

25. Simultaneously it will also be
relevant to notice Section 26, 27 to 30 of
the Right to Fair Compensation and
Transparency
in
Land
Acquisition
Rehabilitation and Resettlement Act, 2013,
which reads as under:-

"26. Determination of market value of
land by Collector.

(1) The Collector shall adopt the
following
criteria
in
assessing
and
determining the market value of the land,
namely:-

(a) the market value, if any, specified
in the Indian Stamp Act, 1899 (2 of 1899)
for the registration of sale deeds or
agreements to sell, as the case may be, in
the area, where the land is situated; or

(b) the average sale price for similar
type of land situated in the nearest village
or nearest vicinity area; or

(c) consented amount of compensation
as agreed upon under sub-section (2) of
1 All. Harish Tripathi Vs. Competent Auth., N.H. & Ors.
295
section 2 in case of acquisition of lands for
private companies or for public private
partnership projects, whichever is higher:

Provided
that
the
date
for
determination of market value shall be the
date on which the notification has been
issued under section 11.

Explanation 1.-The average sale price
referred to in clause (b) shall be determined
taking into account the sale deeds or the
agreements to sell registered for similar type
of area in the near village or near vicinity
area during immediately preceding three
years of the year in which such acquisition
of land is proposed to be made.

Explanation 2.-For determining the
average
sale
price
referred
to
in
Explanation 1, one-half of the total number
of sale deeds or the agreements to sell in
which the highest sale price has been
mentioned shall be taken into account.

Explanation 3.-While determining the
market value under this section and the
average
sale
price
referred
to
in
Explanation 1 or Explanation 2, any price
paid as compensation for land acquired
under the provisions of this Act on an earlier
occasion in the district shall not be taken
into consideration.

Explanation 4.-While determining the
market value under this section and the
average
sale
price
referred
to
in
Explanation 1 or Explanation 2, any price
paid, which in the opinion of the Collector is
not indicative of actual prevailing market
value may be discounted for the purposes of
calculating market value.

(2) The market value calculated as per
sub-section (1) shall be multiplied by a
factor to be specified in the First Schedule.

(3) Where the market value under subsection (1) or sub-section (2) cannot be
determined for the reason that-

(a) the land is situated in such area
where the transactions in land are
restricted by or under any other law for the
time being in force in that area; or

(b) the registered sale deeds or
agreements to sell as mentioned in clause
(a) of sub-section (1) for similar land are
not available for the immediately preceding
three years; or

(c) the market value has not been
specified under the Indian Stamp Act, 1899
(2 of 1899) by the appropriate authority,
the State Government concerned shall
specify the floor price or minimum price
per unit area of the said land based on the
price calculated in the manner specified in
sub-section (1) in respect of similar types of
land situated in the immediate adjoining
areas:

Provided that in a case where the
Requiring Body offers its shares to the
owners of the lands (whose lands have been
acquired) as a part compensation, for
acquisition of land, such shares in no case
shall exceed twenty-five per cent, of the
value so calculated under sub-section (1)
or sub-section (2) or sub-section (3) as the
case may be:

Provided further that the Requiring
Body shall in no case compel any owner of
the land (whose land has been acquired) to
take its shares, the value of which is
deductible in the value of the land
calculated under sub-section (1):

Provided also that the Collector shall,
before initiation of any land acquisition
proceedings in any area, take all necessary
steps to revise and update the market value
of the land on the basis of the prevalent
market rate in that area:

Provided also that the appropriate
Government shall ensure that the market
value determined for acquisition of any
land or property of an educational
institution established and administered by
a religious or linguistic minority shall be
such as would not restrict or abrogate the
296 INDIAN LAW REPORTS ALLAHABAD SERIES
right
to
establish
and
administer
educational institutions of their choice.

27.Determination
of
amount
of
compensation.-The
Collector
having
determined the market value of the land to
be acquired shall calculate the total
amount of compensation to be paid to the
land owner (whose land has been acquired)
by including all assets attached to the land.

28. Parameters to be considered by
Collector in determination of award:- In
determining the amount of compensation to
be awarded for land acquired under this
Act,
the
Collector
shall
take
into
consideration-

firstly, the market value as determined
under section 26 and the award amount in
accordance with the First and Second
Schedules;

secondly, the damage sustained by the
person interested, by reason of the taking of
any standing crops and trees which may be
on the land at the time of the Collector's
taking possession thereof;

thirdly, the damage (if any) sustained
by the person interested, at the time of the
Collector's taking possession of the land,
by reason of severing such land from his
other land;

fourthly, the damage (if any) sustained
by the person interested, at the time of the
Collector's taking possession of the land,
by reason of the acquisition injuriously
affecting his other property, movable or
immovable, in any other manner, or his
earnings;
fifthly, in consequence of the
acquisition of the land by the Collector, the
person interested is compelled to change
his residence or place of business, the
reasonable expenses (if any) incidental to
such change;

sixthly, the damage (if any) bona fide
resulting from diminution of the profits of
the land between the time of the publication
of the declaration under section 19 and the
time of the Collector's taking possession of
the land; and

seventhly, any other ground which
may be in the interest of equity, justice
and beneficial to the affected families.

29. Determination of value of things
attached to land or building.-(1) The
Collector in determining the market value
of the building and other immovable
property or assets attached to the land or
building which are to be acquired, use the
services of a competent engineer or any
other specialist in the relevant field, as
may be considered necessary by him.

(2) The Collector for the purpose of
determining the value of trees and plants
attached to the land acquired, use the
services of experienced persons in the
field of agriculture, forestry, horticulture,
sericulture, or any other field, as may be
considered necessary by him.

(3) The Collector for the purpose of
assessing the value of the standing crops
damaged during the process of land
acquisition, may use the services of
experienced persons in the field of
agriculture
as
may
be
considered
necessary by him.

30. Award of Solatium:- (1) The
Collector having determined the total
compensation to be paid, shall, to arrive
at the final award, impose a "Solatium"
amount equivalent to one hundred per
cent of the compensation amount.

Explanation.---For the removal of
doubts it is hereby declared that solatium
amount shall be in addition to the
compensation payable to any person
whose land has been acquired.

(2)
The
Collector
shall
issue
individual
awards
detailing
the
particulars of compensation payable and
the
details
of
payment
of
the
compensation as specified in the First
Schedule.
1 All. Harish Tripathi Vs. Competent Auth., N.H. & Ors.
297
(3) In addition to the market value of the
land provided under section 26, the
Collector shall, in every case, award an
amount calculated at the rate of twelve per
cent. per annum on such market value for
the period commencing on and from the
date of the publication of the notification of
the Social Impact Assessment study under
sub-section (2) of section 4, in respect of
such land, till the date of the award of the
Collector or the date of taking possession
of the land, whichever is earlier.

26. Upon taking a look at the
aforesaid provisions, this Court finds that
while determining the compensation, the
authority is required to take into account
the market value of the land on the date of
publication of the notification under
Section 3-A of the NHAI Act, 1956. In
order to determine the market value, it will
have to be seen as to what was the nature of
the land and how and under what category
was it recorded in the revenue records. It
will also be relevant to notice that wherever
the Collector makes or publishes a rate list
regarding ascertaining the market value for
the purposes of stamp duty, the same also
becomes applicable as provided under
Section
26
of
the
Right
to
Fair
Compensation and Transparency in Land
Acquisition,
Rehabilitation
and
Resettlement Act, 2013.

27. From the provisions of Section 3G(7) of the Act, 1956 read with Section 26
to Section 29 of the Right to Fair
Compensation and Transparency in Land
Acquisition,
Rehabilitation
and
Resettlement Act, 2013, it would be clear
that compensation is made in respect of the
land which is acquired and the status of the
land is to be seen in context with the nature
and the category in which it is recorded on
the date of notification under Section 3-A
of the Act, 1956. The provisions which
have been noticed here-in-above also
indicates that construction, trees or other
improvements made on the said land has to
be considered and while determining the
final compensation various factors such as
(a) the average sale price for same type of
land situate in the nearest village or
vicinity; (b) the damages sustained by the
person interested by reason of taking of any
standing crop or trees, which may be on the
land at the time of taking possession; (c)
the damages, if any, sustained by a person
interested at the time of Collector's taking
possession
which
affects
his
other
immovable property; (d) damages in case,
if suffered relating to the acquisition by
virtue of which the person interested is
compelled to change his residence or place
of business and reasonable expenses
incidental to such change and any other
ground which in the interest of equity
justice and is beneficial to the affected
families, is also to be taken into account.

28. After having noticed the aforesaid
provisions regarding the determination of
compensation, at this very stage, it will be
relevant to notice the scope of an appeal
under Section 37 of the Act of 1996 and in
this regard the decision of the Apex Court
in NMTC Vs. Vedanta Ltd. 2019 (4) SCC
163 can be gainfully referred wherein the
Apex Court has held as under:-

"10. Before proceeding further, we
find it necessary to briefly revisit the
existing position of law with respect to the
scope of interference with an arbitral
award in India, though we do not wish to
burden this judgment by discussing the
principles regarding the same in detail.
Such interference may be undertaken in
terms of Section 34 or Section 37 of the
Arbitration and Conciliation Act, 1996 (for
298 INDIAN LAW REPORTS ALLAHABAD SERIES
short ?the 1996 Act?). While the former
deals with challenges to an arbitral award
itself, the latter, inter alia, deals with
appeals against an order made under
Section 34 setting aside or refusing to set
aside an arbitral award.

11. As far as Section 34 is concerned,
the position is well-settled by now that the
Court does not sit in appeal over the
arbitral award and may interfere on merits
on the limited ground provided under
Section 34(2)(b)(ii) i.e. if the award is
against the public policy of India. As per
the
legal
position
clarified
through
decisions of this Court prior to the
amendments to the 1996 Act in 2015, a
violation of Indian public policy, in turn,
includes a violation of the fundamental
policy of Indian law, a violation of the
interest of India, conflict with justice or
morality, and the existence of patent
illegality
in
the
arbitral
award.
Additionally,
the
concept
of
the
?fundamental policy of Indian law? would
cover compliance with statutes and judicial
precedents, adopting a judicial approach,
compliance with the principles of natural
justice,
and
Wednesbury
[Associated
Provincial Picture Houses v. Wednesbury
Corpn.,
(1948)
1
KB
223
(CA)]
reasonableness.
Furthermore,
?patent
illegality? itself has been held to mean
contravention of the substantive law of
India, contravention of the 1996 Act, and
contravention of the terms of the contract.

12. It is only if one of these conditions
is met that the Court may interfere with an
arbitral
award
in
terms
of
Section
34(2)(b)(ii), but such interference does not
entail a review of the merits of the dispute,
and is limited to situations where the
findings of the arbitrator are arbitrary,
capricious or perverse, or when the
conscience of the Court is shocked, or
when the illegality is not trivial but goes to
the root of the matter. An arbitral award
may not be interfered with if the view taken
by the arbitrator is a possible view based
on facts. (See Associate Builders v. DDA
[Associate Builders v. DDA, (2015) 3 SCC
49 : (2015) 2 SCC (Civ) 204] . Also see
ONGC Ltd. v. Saw Pipes Ltd. [ONGC Ltd.
v. Saw Pipes Ltd., (2003) 5 SCC 705] ;
Hindustan Zinc Ltd. v. Friends Coal
Carbonisation [Hindustan Zinc Ltd. v.
Friends Coal Carbonisation, (2006) 4 SCC
445] ; and McDermott International Inc. v.
Burn Standard Co. Ltd. [McDermott
International Inc. v. Burn Standard Co.
Ltd., (2006) 11 SCC 181] )
13. It is relevant to note that after the 2015
Amendment to Section 34, the above
position
stands
somewhat
modified.
Pursuant to the insertion of Explanation 1
to Section 34(2), the scope of contravention
of Indian public policy has been modified
to the extent that it now means fraud or
corruption in the making of the award,
violation of Section 75 or Section 81 of the
Act, contravention of the fundamental
policy of Indian law, and conflict with the
most basic notions of justice or morality.
Additionally, sub-section (2-A) has been
inserted in Section 34, which provides that
in case of domestic arbitrations, violation
of Indian public policy also includes patent
illegality appearing on the face of the
award. The proviso to the same states that
an award shall not be set aside merely on
the ground of an erroneous application of
the law or by re appreciation of evidence.

As far as interference with an order
made under Section 34, as per Section 37,
is concerned, it cannot be disputed that
such interference under Section 37 cannot
travel beyond the restrictions laid down
under Section 34. In other words, the court
cannot
undertake
an
independent
assessment of the merits of the award, and
must only ascertain that the exercise of
1 All. Harish Tripathi Vs. Competent Auth., N.H. & Ors.
299
power by the court under Section 34 has
not exceeded the scope of the provision.
Thus, it is evident that in case an arbitral
award has been confirmed by the court
under Section 34 and by the court in an
appeal under Section 37, this Court must
be extremely cautious and slow to disturb
such concurrent findings."

29. At this juncture, in order to
examine whether an award is bad or against
the public policy or it suffers from patent
illegality, it will be worthwhile to notice a
recent pronouncement of the Apex Court in
Batliboi
Environmental
Engineers
Limited Vs. HPCL and another [2023
SCC online SC 1208 and the relevant
paragraphs 31, 32, 34 to 38, 41, 42 and 44
read as under:-

"31. ... The foundation of arbitration
is party autonomy. Parties have the
freedom to enter into an agreement to settle
their
disputes/claims
by
an
arbitral
tribunal, whose decision is binding on the
parties. 23 It is argued that the purpose of
arbitration is fast and quick one-stop
adjudication as an alternative to court
adjudication, and therefore, post award
interference by the courts is unwarranted,
and an anathema that undermines the
fundamental edifice of arbitration, which is
consensual and voluntary departure from
the right of a party to have its claim or
dispute adjudicated by the judiciary. The
process is informal, and need not be
legalistic. Per contra, it is argued that
party autonomy should not be treated as an
absolute defence, as a party despite
agreeing to refer the disputes/claims to a
private tribunal consensually, does not
barter away the constitutional and basic
human right to have a fair and just
resolution of the disputes. The court must
exercise its powers when the award is
unfair, arbitrary, perverse, or otherwise
infirm in law. While arbitration is a private
form of dispute resolution, the conduct of
arbitral proceedings must meet the juristic
requirements of due process and procedural
fairness and reasonableness, to achieve a
'judicially' sound and objective outcome. If
these requirements, which are equally
fundamental to all forms of adjudication
including arbitration, are not sufficiently
accommodated in the arbitral proceedings
and the outcome is marred, then the award
should invite intervention by the court.

32. To disentangle and balance the
competing principles, the degree and scope
of intervention of courts when an award is
challenged by one or both parties needs to
be stated. Reconciliation as a statement of
law and in particular application in a
particular case has not been an easy
exercise. We begin by first referring to the
views
expressed
by
this
Court
in
interpreting the width and scope of the post
award interference by the courts under
Section 34 of the A&C Act.

34. Sub-section (1) to Section 34 of the
A&C Act requires that the recourse to a
court against an arbitral award is to be
made by a party filing an application for
setting aside of an award in accordance
with sub-sections (2) and (3) of Section 34.
Sub-section (2) to Section 34 of the A&C
Act stipulates seven grounds on which a
court may set aside an arbitral award. Subsection (2) consists of two clauses, (a) and
(b). Clause (b) consists of two sub-clauses,
namely, sub-clause (i) which states that
when the subject matter of the dispute is
not capable of settlement by arbitration
under the law for the time being in force,
and sub-clause (ii), which states that the
court can set aside an arbitral award when
the award is 'in conflict with public policy
of India'. We shall subsequently examine
the decisions of this Court interpreting 'in
300 INDIAN LAW REPORTS ALLAHABAD SERIES
conflict with public policy of India' and the
explanation.

35. Under sub-clause (a) to subsection (2) to Section 34 of the A&C Act, a
court can set aside an award on the
grounds in sub-clauses (i) to (v) namely,
when a party being under some incapacity;
arbitration agreement is not valid under the
law for the time being in force; when the
party making an application under Section
34 is not given a proper notice of
appointment of the arbitrator or the
arbitration proceedings, or was unable to
present its case; and when the composition
of the arbitral tribunal or the arbitral
procedure was not in accordance with the
agreement between the parties, unless such
agreement was in conflict with the
mandatory and binding non-derogable
provision, or was not in accordance with
Part I of the A&C Act. Sub-clause (iv)
states that the arbitral award can be set
aside when it deals with a dispute not
contemplated by, or not falling within the
terms of submission of arbitration, or it
contains a decision on matters beyond the
scope
of
submission
to
arbitration.
However, the proviso states that the
decision in the matters submitted to
arbitration can be separated from those not
submitted, then that part of the arbitral
award which contains the decision on the
matter not submitted to arbitration can be
set aside. In the present case, we are not
required to examine sub-clauses to clause
(a) to sub-section (2) to Section 34 of the
A&C Act in detail. Hence, this decision
should not be read as making any
observation, even as obiter dicta on the said
clauses.

36. Explanation to sub-clause (ii) to
clause (b) to Section 34(2) of the A&C Act,
as quoted above and before its substitution
by Act No.3 of 2016, had postulated and
declared for avoidance of doubt that an
award is 'in conflict with the public policy
of India', if the making of the award is
induced or affected by fraud or corruption,
or was in violation of Sections 75 or 81 of
the A&C Act. Both Sections 75 and 81 of
the A&C Act fall under Part III of the A&C
Act,
which
deal
with
conciliation
proceedings. Section 75 of the A&C Act
relates to confidentiality of the settlement
proceedings and Section 81 deals with
admissibility of evidence in conciliation
proceedings. Suffice it is to note at this
stage that while 'fraud' and 'corruption'
are two specific grounds under 'public
policy', these are not the sole and only
grounds on which an award can be set
aside on the ground of 'public policy'.

37.
Act
No.
3
of
2016
with
retrospective effect from 23.10.2015 has
substituted the explanation referred to
above, by two new explanations that are
differently worded.25 Sub-section (2-A) to
Section 34 of the A&C Act, which was
instituted by Act No. 3 of 2016 with
retrospective effect from 23.10.2015, states
that the arbitral award arising out of
arbitrations
other
than
international
commercial arbitrations can be set aside by
the court, if it is vitiated by patent illegality
appearing on the face of the award. The
proviso to sub-section (2-A) to Section 34
of the A&C Act also states that the award
shall not be set aside merely on the ground
of erroneous application of law or by
reappreciation of evidence. The aforesaid
sub-section need not be examined in the
facts of the present case, as we are not
required to interpret and apply the
substituted explanations to (ii) to subclause (b) to 34(2) of the A & C Act in the
present case.

38. The expression 'public policy'
under Section 34 of the A&C Act is capable
of both wide and narrow interpretation.
Taking a broader interpretation, this Court
1 All. Harish Tripathi Vs. Competent Auth., N.H. & Ors.
301
in ONGC Limited. v. Saw Pipes Limited.,
held that the legislative intent was not to
uphold an award if it is in contravention of
provisions of an enactment, since it would
be contrary to the basic concept of justice.
The concept of 'public policy' connotes a
matter which concerns public good and
public interest. An award which is patently
in violation of statutory provisions cannot
be held to be in public interest. Thus,
expanding on the scope and expanse of the
jurisdiction of the court under Section 34 of
the A&C Act, it was held that an award can
be set aside if it is contrary to:

(a) fundamental policy of Indian law;
or

b) the interest of India; or

(c) justice or morality, or

(d) in addition, if it is patently illegal.

Nevertheless, the decision holds that
mere error of fact or law in reaching the
conclusion on the disputed question will
not give jurisdiction to the court to
interfere. However, this will depend on
three aspects: (a) whether the reference
was made in general terms for deciding the
contractual dispute, in which case the
award can be set aside if the award is
based upon erroneous legal position; (b)
this proposition will also hold good in case
of a reasoned award, which on the face of it
is erroneous on the legal proposition of law
and/or its application; and (c) where a
specific question of law is submitted to an
arbitrator, erroneous decision on the point
of law does not make the award bad, unless
the court is satisfied that arbitrator had
proceeded illegally. In the said case, the
court set aside the award on the ground
that the award had not taken into
consideration the terms of the contract
before arriving at the conclusion as to
whether the party claiming the damages is
entitled to the same. Reference was made to
the provisions of Sections 73 and 74 of the
Contract Act, which relate to liquidated
damages, general damages and penalty
stipulations. This view had held the field
for a long time and was applied in
subsequent judgments of this Court in
Hindustan Zinc Ltd. v. Friends Coal
Carbonisation27 , Centrotrade Minerals
and Metals Inc. v. Hindustan Copper
Limited28 , Delhi Development Authority
v.