Holding

Section 34 of the Arbitration and Conciliation Act, 1996 provides only for setting aside an arbitral award on limited grounds and does not empower a court to modify, vary or remit the award.

Summary

The appeal concerned awards of compensation under the National Highways Act, where the amount was fixed by an arbitrator appointed by the Central Government. The petitioners argued that Section 34 of the Arbitration and Conciliation Act, 1996 should allow the court to modify such awards, especially where the award was perverse and based on guideline values rather than market values. The Supreme Court examined the statutory scheme of Section 34, the UNCITRAL Model Law, and the limited grounds for setting aside an award, concluding that the provision does not confer any power to modify, vary or remit an award. It reaffirmed that courts may only set aside an award on the limited grounds in Sections 34(2) and (3) and may remit it only under Section 34(4) to eliminate the grounds for setting aside. Consequently, the Court dismissed the appeals, upheld the district courts' interference on factual grounds, and declined to entertain a challenge to the NH Amendment Act. The Court also held that differential compensation based on differing public purposes is impermissible under the Constitution.

Issues considered

The scope of power conferred by Section 34 of the Arbitration and Conciliation Act, 1996 – whether it includes the power to modify or vary an arbitral award.
Whether an award made under the National Highways Act, appointed by the Central Government, can be challenged on its merits.
Whether differential compensation based on the public purpose of acquisition is constitutionally permissible.

Legislation cited

Arbitration and Conciliation Act, 1996s. 15, s. 16, s. 33, s. 34, s. 37, s. 4
Constitution of Indias. Article 136, s. Article 14
Land Acquisition Act, 1894s. 5A, s. 6
National Highways Authority of India Act, 1956s. 3A, s. 3C, s. 3D, s. 3G, s. 3H, s. 3J
Specific Relief Act, 1963s. 20A

Subjects

ArbitrationSection 34Award modificationNational Highways ActLand acquisitionCompensationUNCITRAL Model LawJudicial interferenceSpecific Relief ActArticle 14

Judgment

368 [2021]
SUPREME COURT 5 S.C.R. 368
REPORTS [2021] 5 S.C.R.

A THE PROJECT DIRECTOR, NATIONAL HIGHWAYS NO. 45 E
AND 220 NATIONAL HIGHWAYS AUTHORITY OF INDIA
v.
M. HAKEEM & ANR.
B (Civil Appeal No. 2756 of 2021)
JULY 20, 2021
[R. F. NARIMAN AND B. R. GAVAI, JJ.]
Arbitration and Conciliation Act, 1996: s.34 – Modification
of award by court, permissibility – Held: Power of a court under
C
s.34 of the Act, 1996 to “set aside” an award of an arbitrator would
not include the power to modify such an award – To state that the
judicial trend appears to favour an interpretation that would read
into s.34 a power to modify, revise or vary the award would be to
ignore the previous law contained in the 1940 Act; as also to ignore
D the fact that the 1996 Act was enacted based on the UNCITRAL
Model Law on International Commercial Arbitration, 1985 makes
it clear that, given the limited judicial interference on extremely
limited grounds not dealing with the merits of an award, the ‘limited
remedy’ under s.34 is co-terminus with the ‘limited right’, namely,
either to set aside an award or remand the matter under the
E
circumstances mentioned in s.34 of the Arbitration Act, 1996 –
National Highway Authority of India Act, 1956.
National Highway Authority of India Act, 1956: ss.3G, 3H –
The object of the NH Amendment Act, 1997 is to expedite the process
of acquisition – This has been achieved by cutting down the period
F
for hearing of objections from 30 days under s.5A of the Land
Acquisition Act to 21 days under s.3C of the National Highways
Act – Further, unlike the Land Acquisition Act, the moment a
notification under s.3D(2) of the National Highways Act (equivalent
to s.6 Land Acquisition Act) is made, the land vests absolutely in the
G Central Government free from all encumbrances – Thereafter, where
land has vested in the Central Government and the amount
determined by the competent authority under s.3G as compensation
has been deposited by the Central Government in accordance with
s.3H(1), the competent authority may then direct that possession be
taken within 60 days of service of notice by it. Also, injunctions
H
368
THE PROJECT DIRECTOR, NATIONAL HIGHWAYS NO. 45 E 369
AND 220 NHAI v. M. HAKEEM

against highway projects have now become impossible to obtain in A
view of s.20A of the Specific Relief Act, which has been introduced
w.e.f. 01.10.2018 – Land Acquisition Act, 1894 – ss.5A, 6.
Land Acquisition: Differential compensation – Held: Cannot
be awarded on the ground that a different public purpose is sought
to be achieved. B
Dismissing the appeals, the Court
HELD: 1. As per NHAI Act, the competent authority, as
defined, in Section 3 (a) is to first determine an amount which is
payable by way of compensation for compulsory acquisition of
land. Under Section 3G(5), if the amount determined by the said C
authority is not acceptable to either of the parties, the amount
shall, on application by either of the parties, be determined by an
arbitrator to be appointed by the Central Government. The
‘competent authority’ is a person or authority authorised by the
Central Government by notification to determine the amount of D
compensation. In the present case, a notification designating a
Special District Revenue Officer as the competent authority has
been made. The amount determined by the aforesaid authority
has then to be sent to an arbitrator, on application by either of
the parties. The said arbitration is not a consensual process with
both parties having a hand in appointing the arbitrator. As a matter E
of fact, the land owner has no say in the appointment of the
arbitrator, who is to be appointed only by the acquiring authority,
that is the Central Government. [Para 12][382-C-F]
2. Section 34 provides only for setting aside awards on very
limited grounds, such grounds being contained in sub-sections F
(2) and (3) of Section 34. Secondly, as the marginal note of Section
34 indicates, “recourse” to a court against an arbitral award may
be made only by an application for setting aside such award in
accordance with sub-sections (2) and (3). “Recourse” is defined
by P Ramanatha Aiyar’s Advanced Law Lexicon (3rd Edition) as G
the enforcement or method of enforcing a right. Where the right
is itself truncated, enforcement of such truncated right can also
be only limited in nature.What is clear from a reading of the said
provisions is that, given the limited grounds of challenge under

H
370 SUPREME COURT REPORTS [2021] 5 S.C.R.

A sub-sections (2) and (3), an application can only be made to set
aside an award. This becomes even clearer from sub-section (4)
under which, on receipt of an application under sub-section (1) of
Section 34, the court may adjourn the Section 34 proceedings
and give the arbitral tribunal an opportunity to resume the arbitral
proceedings or take such action as will eliminate the grounds for
B
setting aside the arbitral award. It is the opinion of the arbitral
tribunal which counts in order to eliminate the grounds for setting
aside the award, which may be indicated by the court hearing the
Section 34 application. [Para 14][383-C-F]
3. The statutory scheme under Section 34 of the Arbitration
C Act, 1996 is in keeping with the UNCITRAL Model Law and the
legislative policy of minimal judicial interference in arbitral awards.
By way of contrast, under Sections 15 and 16 of the Arbitration
Act, 1940, the court is given the power to modify or correct an
award in the circumstances mentioned in Section 15, apart from
D a power to remit the award under Section 16. [Paras 17 and
18][384-G-H; 385-A]
4. It is settled law that a Section 34 proceeding does not
contain any challenge on the merits of the award. [Para 21]
[386-D]
E MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163 : [2019]
3 SCR 1023 – relied on.
Numaligarh Refinery Ltd. v. Daelim Industrial Co. Ltd.
(2007) 8 SCC 466 : [2007] 9 SCR 724; DDA v. R.S.
Sharma and Co. (2008) 13 SCC 80 : [2008]
F 12 SCR 785; Royal Education Society v. LIS (India)
Construction Co. (P) Ltd. (2009) 2 SCC 261; Dakshin
Haryana Bijli Vitran Nigam Ltd. v. Navigant
Technologies Pvt. Ltd. 2021 SCC OnLine SC 157 –
held inapplicable.
G Gayatri Balaswamy v. ISG Novasoft Technologies Ltd.,
2014 SCC OnLine Mad 6568; Ssangyong Engg. &
Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 :
[2019] 7 SCR 522; Renusagar Power Co. Ltd. v.
General Electric Co., 1994 Supp (1) SCC 644 : [1993]
3 Suppl. SCR 22; Maharashtra State Electricity
H
THE PROJECT DIRECTOR, NATIONAL HIGHWAYS NO. 45 E 371
AND 220 NHAI v. M. HAKEEM

Distribution Co. Ltd. v. Datar Switchgear Ltd., (2018) A
3 SCC 133 : [2018] 1 SCR 733; McDermott
International Inc. v. Burn Standard Co. Ltd., (2006) 11
SCC 181 : [2006] 2 Suppl. SCR 409; Kinnari Mullick
v. Ghanshyam Das Damani (2018) 11 SCC 328; Dyna
Technologies (P) Ltd. v. Crompton Greaves Ltd. (2019)
B
20 SCC 1; Cybernetics Network Pvt. Ltd. v. Bisquare
Technologies Pvt. Ltd. 2012 SCC OnLine Del 1155;
Nussli Switzerland Ltd. v. Organizing Committee
Commonwealth Games 2014 SCC OnLine Del 4834;
Puri Construction P. Ltd. v. Larsen and Toubro Ltd.,
2015 SCC OnLine Del 9126; Gautam Constructions C
and Fisheries Ltd. v. National Bank for Agriculture &
Rural Development (2000) 6 SCC 519; Tata Hydro-
Electric Power Supply Co. Ltd. v. Union of India (2003)
4 SCC 172; Hindustan Zinc Ltd. v. Friends Coal
Carbonisation, (2006) 4 SCC 445; Krishna Bhagya
D
Jala Nigam Ltd. v. G. Harischandra Reddy, (2007) 2
SCC 720 : [2007] 1 SCR 698; Central Warehousing
Corpn. v. A.S.A. Transport, 2007 SCC OnLine Mad
972; ISG Novasoft Technologies Limited v. Gayatri
Balasamy 2019 SCC OnLine Mad 15819 – referred
to. E
5. To state that the judicial trend appears to favour an
interpretation that would read into Section 34 a power to modify,
revise or vary the award would be to ignore the previous law
contained in the 1940 Act; as also to ignore the fact that the 1996
Act was enacted based on the UNCITRAL Model Law on F
International Commercial Arbitration, 1985 which, as has been
pointed out in Redfern and Hunter on International Arbitration,
makes it clear that, given the limited judicial interference on
extremely limited grounds not dealing with the merits of an award,
the ‘limited remedy’ under Section 34 is co-terminus with the
‘limited right’, namely, either to set aside an award or remand G
the matter under the circumstances mentioned in Section 34 of
the Arbitration Act, 1996. [Para 40][399-D-F]
6. Coming to the submission in support of the impugned
judgment that the fact that the Central Government appoints an
H
372 SUPREME COURT REPORTS [2021] 5 S.C.R.

A arbitrator and the arbitration would therefore not be consensual,
resulting in a government servant rubber stamping an award which
then cannot be challenged on its merits, cannot possibly lead to
the conclusion that, therefore, a challenge on merits must be
provided driving a coach and four through Section 34 of the
Arbitration Act, 1996. [Para 42][400-C-D]
B
Jaishri Laxmanrao Patil v. Chief Minister 2021 SCC
OnLine SC 362; Rameshwar Prasad (VI) v. Union of
India (2006) 2 SCC 1 : [2006] 1 SCR 562; Eera v.
State (NCT of Delhi) (2017) 15 SCC 133 : [2017] 7
SCR 924 – referred to.
C
M’Culloch v. State of Maryland 17 US 316 (1819) –
referred to.
7. In interpreting a statutory provision, a Judge must put
himself in the shoes of Parliament and then ask whether
D Parliament intended this result. Parliament very clearly intended
that no power of modification of an award exists in Section 34 of
the Arbitration Act, 1996. [Para 46][402-A-B]
8. In several cases, the NHAI has not filed appeals even in
matters which are similar i.e., arising from the same Section 3A
E Notification, as a result of which certain land owners have got
away with enhanced compensation given to them by the District
Court. Also, the arbitrator has awarded compensation on a
completely perverse basis i.e., by taking into account ‘guideline
value’ which is relevant only for stamp duty purposes, and not
taking into account sale deeds which would have reflected the
F proper market value of the land. Given the fact that the awards in
all these cases are therefore perverse, the District Judge rightly
interfered with the same. [Para 47][402-C-E]
Union of India v. Tarsem Singh (2019) 9 SCC 304:
[ 2019] 13 SCR 49 – referred to.
G
9. The object of the NH Amendment Act, 1997 is to expedite
the process of acquisition. This has been achieved by cutting
down the period for hearing of objections from 30 days under
Section 5A of the Land Acquisition Act to 21 days under Section

H
THE PROJECT DIRECTOR, NATIONAL HIGHWAYS NO. 45 E 373
AND 220 NHAI v. M. HAKEEM

3C of the National Highways Act. Further, unlike the Land A
Acquisition Act, the moment a notification under Section 3D(2)
of the National Highways Act (equivalent to Section 6 Land
Acquisition Act) is made, the land vests absolutely in the Central
Government free from all encumbrances. Thereafter, where land
has vested in the Central Government and the amount determined
B
by the competent authority under Section 3G as compensation
has been deposited by the Central Government in accordance
with Section 3H(1), the competent authority may then direct that
possession be taken within 60 days of service of notice by it.
Also, injunctions against highway projects have now become
impossible to obtain in view of Section 20A of the Specific Relief C
Act, which has been introduced w.e.f. 01.10.2018. [Paras 50,
51][403-G-H; 404-A-B]
10. There can be no doubt that differential compensation
cannot be awarded on the ground that a different public purpose
is sought to be achieved. Also, the legislature cannot say that, D
however laudable the public purpose and however important it is
to expedite the process of land acquisition, differential
compensation is to be paid depending upon the public purpose
involved or the statute involved. [Para 54][405-D-E]
11. Take the case of a single owner of land who has two E
parcels of land adjacent to each other. One parcel of land abuts
the national highway, whereas the other parcel of land is at some
distance from the national highway. Can it be said that the land
which abuts the national highway, and which is acquired under
the National Highways Act, will yield a compensation much lesser
than the adjacent land which is acquired under the Land F
Acquisition Act only because in the former case, an award is by a
government servant which cannot be challenged on merits, as
opposed to an award made under Part III of the Land Acquisition
Act by the reference Court with two appeals in which the merits
of the award can be gone into? There can be no doubt that G
discrimination would be writ large in such cases. [Para 55]
[405-E-G]
Taherakhatoon v. Salambin Mohammad (1999) 2 SCC
635 : [1999] 1 SCR 901 – referred to.
H
374 SUPREME COURT REPORTS [2021] 5 S.C.R.

A 12. Given the fact that in several similar cases, the NHAI
has allowed similarly situated persons to receive compensation
at a much higher rate than awarded, and given the law laid down
in Nagpur Improvement Trust, exercise of jurisdiction under
Article 136 is declined in favour of the appellants on the facts of
these cases. Also, given the fact that most of the awards in these
B
cases were made 7-10 years ago, it would not, at this distance in
time, be fair to send back these cases for a de novo start before
the very arbitrator or some other arbitrator not consensually
appointed, but appointed by the Central Government. [Para
58][407-E-F]
C Nagpur Improvement Trust v. Vithal Rao (1973) 1 SCC
500 : [1973] 3 SCR 39 – relied on.
Case Law Reference
[2019] 3 SCR 1023 relied on Para 21
D [2019] 7 SCR 522 referred to Para 22
[1993] 3 Suppl. SCR 22 referred to Para 22
[2018] 1 SCR 733 referred to Para 22
[2006] 2 Suppl. SCR 409 referred to Para 23
E (2018) 11 SCC 328 referred to Para 24
(2019) 20 SCC 1 referred to Para 25
(2000) 6 SCC 519 referred to Para 30
(2003) 4 SCC 172 referred to Para 31
F
(2006) 4 SCC 445 referred to Para 32
[2007] 1 SCR 698 referred to Para 33
[2007] 9 SCR 724 held inapplicable Para 38
[2008] 12 SCR 785 held inapplicable Para 38
G
(2009) 2 SCC 261 held inapplicable Para 38
[2006] 1 SCR 562 referred to Para 44
[2017] 7 SCR 924 referred to Para 45
[ 2019] 13 SCR 49 referred to Para 48
H
THE PROJECT DIRECTOR, NATIONAL HIGHWAYS NO. 45 E 375
AND 220 NHAI v. M. HAKEEM

[1973] 3 SCR 39 relied on Para 56 A
[1999] 1 SCR 901 referred to Para 57
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2756
of 2021.
From the Judgment and Order dated 13.02.2020 of the High Court B
of Madurai Bench of Madras in C.M.A. (MD) No.760 of 2018.
With
Civil Appeal Nos.2797, 2757, 2758, 2759, 2760, 2761, 2762, 2763,
2764, 2765, 2766, 2767, 2768, 2769, 2770, 2771, 2772, 2773, 2774, 2775,
2776, 2777, 2778, 2779, 2780, 2781, 2782, 2783, 2784, 2785, 2786, 2787, C
2788, 2789, 2790, 2791, 2792, 2793, 2794, 2795, 2796, 2798, 2799, 2800,
2801, 2802, 2803, 2804, 2805, 2806 and 2807 of 2021.
Tushar Mehta, SG, Vikramjit Banerjee, ASG, P. V. Yogeswaran,
Su. Srinivasan, Ashish Kumar Upadhyay, Rajat Nair, Kanu Agrawal, Y.
Lokesh, Ms. V. Keerthana, Anubhav Chaturvedi, Advs. for the Appellant. D
R. Balasubramanian, Sr. Adv., V. Balaji, Chandrashekhar, C.
Kannan, Ms. Neha Singh, Rakesh K. Sharma, K.V. Jagdishvaran, Ms.
G. Indira, Advs. for the Respondents.
The Judgment of the Court was delivered by
E
R. F. NARIMAN, J.
1. Applications for substitution are allowed. Leave granted.
2. The appeals in the present case raise an interesting question of
law – as to whether the power of a court under Section 34 of the
Arbitration and Conciliation Act, 1996 [“Arbitration Act”] to “set aside” F
an award of an arbitrator would include the power to modify such an
award. A Division Bench of the Madras High Court has disposed of a
large number of appeals filed under Section 37 of the said Act laying
down as a matter of law that, at least insofar as arbitral awards made
under the National Highways Act, 1956 [“National Highways Act”], G
Section 34 of the Arbitration Act must be so read as to permit modification
of an arbitral award made under the National Highways Act so as to
enhance compensation awarded by a learned Arbitrator.
3. The facts in all these appeals concern notifications issued under
the provisions of the National Highways Act and awards passed
H
376 SUPREME COURT REPORTS [2021] 5 S.C.R.

A thereunder. These notifications are all of the years 2009 onwards and
consist of awards that have been made by the competent authority under
the Act, who is a Special District Revenue Officer. In all these cases,
awards were made based on the ‘guideline value’ of the lands in question
and not on the basis of sale deeds of similar lands. The result is, in all
these cases, that abysmally low amounts were granted by the competent
B
authority. As an example, in SLP (Civil) No.13020 of 2020, amounts
ranging from Rs.46.55 to 83.15 per square meter were awarded. In the
arbitral award made by the District Collector in all these cases, being an
appointee of the Government, no infirmity was found in the aforesaid
award, as a result of which the same amount of compensation was
C given to all the claimants. In Section 34 petitions that were filed before
the District and Sessions Judge, these amounts were enhanced to Rs.645
per square meter and the award of the Collector was therefore modified
by the District Court in exercise of jurisdiction under Section 34 Arbitration
Act to reflect these figures. In the appeal filed to the Division Bench,
the aforesaid modification was upheld, with there being a remand order
D
to fix compensation for certain trees and crops.
4. Shri Tushar Mehta, learned Solicitor General of India, has taken
us through the scheme of the National Highways Act, and has argued
that since it was necessary to speed up the acquisition process for a
very important public purpose, that is construction of national highways,
E the National Highways Act was amended in 1997 by the National
Highway Laws (Amendment) Act, 1997 [“NH Amendment Act”], to
include Sections 3 to 3J under which, notifications were issued under
Sections 3A to 3D. Before vesting takes place of the land acquired
under Section 3E, compensation is determined under Section 3G of the
F Act, which is an amount determined by the competent authority who is
set up under Section 3(a) of the Act. Unlike the Land Acquisition Act,
1984 [“Land Acquisition Act”], if the amount determined by the
competent authority is not acceptable to either the National Highways
Authority of India [“NHAI”] or the land-owner, on application by either
of the parties, the amount of compensation will be determined by an
G arbitrator who is appointed only by the Central Government. Then, subject
to the provisions of the National Highways Act, the provisions of the
Arbitration Act apply. The competent authority and the arbitrator, while
determining the amount of compensation, must take into account, under
Section 3G(7), the market value of the land on the date of publication of
H the notification under Section 3A, damage sustained and various other
THE PROJECT DIRECTOR, NATIONAL HIGHWAYS NO. 45 E 377
AND 220 NHAI v. M. HAKEEM [R. F. NARIMAN, J.]

factors mentioned in the sub-section. Importantly, under Section 3J, the A
Land Acquisition Act does not apply to such acquisitions. The learned
Solicitor General argued that, given the object sought to be achieved by
the Act, a speedy procedure was provided by which a challenge to the
arbitrator’s award is then made only under Section 34 of the Arbitration
Act, which, as has been held by a catena of judgments, is not a challenge
B
on the merits of the award. The court’s limited power under the said
Section is wholly unlike the power of an appellate court under the Land
Acquisition Act, and hence such power is only limited to either setting
aside the award or remitting the award to the arbitrator under Section
34(4) so as to eliminate any ground of challenge under Section 34. He
argued that this was in contrast to the Arbitration Act, 1940 which C
contained a specific provision to remit an award under Section 15, and
further argued that the Arbitration Act, 1996, being based on the
UNCITRAL Model Law on International Commercial Arbitration, 1985,
has specifically restricted the grounds of challenge and the consequent
remedy, which is only to set aside or remit in limited circumstances. He
D
argued, based on a reading of Section 34 itself as well as a number of
judgments of this Court and High Courts that this well settled position
cannot possibly be given a go-by when it comes to arbitration under the
National Highways Act, in which either party can ask for the appointment
of an arbitrator who is then appointed not by the parties, but by the
Central Government. He attacked the Division Bench judgment, arguing E
that the fact that either party could approach the Central Government to
appoint an arbitrator, unlike the Land Acquisition Act, and that it is the
Central Government who appoints the arbitrator, the arbitration thus not
being consensual in nature, would make no difference to the interpretation
of Section 34 of the Arbitration Act in its application to the National
F
Highways Act. He therefore argued that the impugned judgment was
wrong on law and equally wrong in following an earlier Single Judge
judgment of the Madras High Court in which it was held, in a situation
not under the National Highways Act but under the Arbitration Act itself
(arising from a consensual arbitration), that the court, under Section 34,
can modify the arbitral award. He attacked the learned Single Judge’s G
judgment in Gayatri Balaswamy v. ISG Novasoft Technologies Ltd.,
2014 SCC OnLine Mad 6568 arguing that once the Supreme Court
had laid down as a matter of law that no modification of an award is
possible, it was not open to a single judge to differ from such view. He
also argued that under Section 34, post setting aside of an award, a fresh
H
378 SUPREME COURT REPORTS [2021] 5 S.C.R.

A arbitration could ensue as a matter of law, and it was not open to his
client or anybody to thwart a fresh arbitration in case an award is set
aside under Section 34.
5. Col. R. Balasubramanian, learned senior advocate appearing
on behalf of the respondent in SLP (Civil) No. 12987 of 2020, raised by
B way of a preliminary point, that in at least three cases arising out of the
same notification for the same village and the same purpose as in his
case, the NHAI had deposited the compensation before the learned
court concerned and the same was received by the claimants. The
judgment of the learned District Judge was thus complied with. He also
pointed out that in two other cases being, AROP No. 9,10,11 of 2014 and
C CMA No.650 to 680 of 2013, the NHAI had deposited the entire award
amount with the accrued interest before the District Judge in accordance
with the District Judge’s judgment, no appeal being filed therefrom. He
therefore argued that the NHAI being ‘State’ under Article 12 of the
Constitution of India, cannot pick and choose as to when it will file appeals
D against certain District Judge judgments and not against others. On this
ground alone, according to the learned senior advocate, all these appeals
ought to be dismissed. On merits, he pointed out the facts of his case
and the fact that an abysmally low sum had been given as compensation
which was then raised by the District Judge, having regard to the relevant
sale deeds in the vicinity. He then copiously read from the learned Single
E Judge’s judgment of the Madras High Court in Gayatri Balaswamy’s
case and supported this line of reasoning. He also supported the impugned
judgment to argue that even if the learned Single Judge in Gayatri
Balaswamy had not laid down the law correctly so far as matters arising
under the Arbitration Act are concerned, yet the impugned judgment
F correctly makes the distinction between consensual arbitration and an
arbitrator appointed by the Central Government, who is none other than
some government servant who merely rubber stamps awards that are
passed by yet another government servant. He argued that if Section 34
were to be construed in the manner suggested by the learned Solicitor
General, then for a very grievous wrong there would be no remedy as all
G that the District Judge could then do in the Section 34 jurisdiction is to
set aside the award, resulting in a fresh arbitration before either the self-
same bureaucrat or another bureaucrat appointed by the Central
Government. This being the case, these appeals even on merits ought to
be dismissed.
H
THE PROJECT DIRECTOR, NATIONAL HIGHWAYS NO. 45 E 379
AND 220 NHAI v. M. HAKEEM [R. F. NARIMAN, J.]

6. Having heard learned counsel appearing on both sides, it is A
important to first set out the relevant sections under the National
Highways Act. As has been argued by the learned Solicitor General, the
National Highways Act was amended in 1997. Para 2 of the Statement
of Objects and Reasons for this amendment is set out hereunder: -
“STATEMENT OF OBJECTS AND REASONS B
One of the impediments in the speedy implementation of highways
projects has been inordinate delay in the acquisition of land. In
order to expedite the process of land acquisition, it is proposed
that once the Central Government declares that the land is required
for public purposes for development of a highway, that land will C
vest in the Government and only the amount by way of
compensation is to be paid and any dispute relating to compensation
will be subject to adjudication through the process of arbitration.”
7. The “competent authority” under the National Highways Act
is defined in Section 3(a) as follows: D
3. Definitions. — In this Act, unless the context otherwise
requires, —
(a) “competent authority” means any person or authority authorised
by the Central Government, by notification in the Official Gazette,
to perform the functions of the competent authority for such area E
as may be specified in the notification;
8. Section 3A of the Act states: -
3A. Power to acquire land, etc.—
(1) Where the Central Government is satisfied that for a public F
purpose any land is required for the building, maintenance,
management or operation of a national highway or part thereof, it
may, by notification in the Official Gazette, declare its intention to
acquire such land.
(2) Every notification under sub-section (1) shall give a brief G
description of the land.
(3) The competent authority shall cause the substance of the
notification to be published in two local newspapers, one of which
will be in a vernacular language.
H
380 SUPREME COURT REPORTS [2021] 5 S.C.R.

A 9. After objections are then heard under Section 3C, the requisite
declaration is made under Section 3D which reads as follows: -
3D. Declaration of acquisition. —
(1) Where no objection under sub-section (1) of section 3C has
been made to the competent authority within the period specified
B therein or where the competent authority has disallowed the
objection under subsection (2) of that section, the competent
authority shall, as soon as may be, submit a report accordingly to
the Central Government and on receipt of such report, the Central
Government shall declare, by notification in the Official Gazette,
C that the land should be acquired for the purpose or purposes
mentioned in sub-section (1) of section 3A.
(2) On the publication of the declaration under sub-section (1),
the land shall vest absolutely in the Central Government free from
all encumbrances.
D (3) Where in respect of any land, a notification has been published
under sub-section (1) of section 3A for its acquisition but no
declaration under sub-section (1) has been published within a
period of one year from the date of publication of that notification,
the said notification shall cease to have any effect:
E Provided that in computing the said period of one year, the period
or periods during which any action or proceedings to be taken in
pursuance of the notification issued under sub-section (1) of section
3A is stayed by an order of a court shall be excluded.
(4) A declaration made by the Central Government under sub-
F section (1) shall not be called in question in any court or by any
other authority.
10. Section 3G with which we are directly concerned and which
speaks of the determination of an amount payable as compensation reads
as follows: -
G 3G. Determination of amount payable as compensation.
(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.

H
THE PROJECT DIRECTOR, NATIONAL HIGHWAYS NO. 45 E 381
AND 220 NHAI v. M. HAKEEM [R. F. NARIMAN, J.]

(2) Where the right of user or any right in the nature of an easement A
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),
B
for that land.
(3) Before proceeding to determine the amount under sub-section
(1) or sub-section (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. C

(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 sub-section (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. D

(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— E

(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 F
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 G
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
H
382 SUPREME COURT REPORTS [2021] 5 S.C.R.

A 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
B change.
11. Section 3J then states:
3J. Land Acquisition Act 1 of 1894 not to apply. —
Nothing in the Land Acquisition Act, 1894 shall apply to an
C acquisition under this Act.
12. It will be seen that the competent authority, as defined, is to
first determine an amount which is payable by way of compensation for
compulsory acquisition of land. Under Section 3G(5), if the amount
determined by the said authority is not acceptable to either of the parties,
D the amount shall, on application by either of the parties, be determined
by an arbitrator to be appointed by the Central Government. What is of
importance is that the ‘competent authority’ is a person or authority
authorised by the Central Government by notification to determine the
amount of compensation. In the present case, a notification designating
a Special District Revenue Officer as the competent authority has been
E made. The amount determined by the aforesaid authority has then to be
sent to an arbitrator, on application by either of the parties. What is
important to remember is that the aforesaid arbitration is not a consensual
process with both parties having a hand in appointing the arbitrator. As a
matter of fact, the land owner has no say in the appointment of the
F arbitrator, who is to be appointed only by the acquiring authority, that is
the Central Government.
13. Section 34 of the Arbitration Act, 1996 occurs in Chapter VII
under the title “Recourse against arbitral award”. We are directly
concerned with sub-sections (1) and (4) of Section 34 which are set out
hereunder.
G
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 sub-section (2) and sub-section (3).
H
THE PROJECT DIRECTOR, NATIONAL HIGHWAYS NO. 45 E 383
AND 220 NHAI v. M. HAKEEM [R. F. NARIMAN, J.]

xxx xxx xxx A
(4) On receipt of an application under sub-section (1), the Court
may, where it is appropriate and it is so requested by a 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 B
of arbitral tribunal will eliminate the grounds for setting aside the
arbitral award.
xxx xxx xxx
14. What is important to note is that, far from Section 34 being in
the nature of an appellate provision, it provides only for setting aside C
awards on very limited grounds, such grounds being contained in sub-
sections (2) and (3) of Section 34. Secondly, as the marginal note of
Section 34 indicates, “recourse” to a court against an arbitral award
may be made only by an application for setting aside such award in
accordance with sub-sections (2) and (3). “Recourse” is defined by P D
Ramanatha Aiyar’s Advanced Law Lexicon (3 rd Edition) as the
enforcement or method of enforcing a right. Where the right is itself
truncated, enforcement of such truncated right can also be only limited
in nature.What is clear from a reading of the said provisions is that,
given the limited grounds of challenge under sub-sections (2) and (3), an
application can only be made to set aside an award. This becomes even E
clearer when we see sub-section (4) under which, on receipt of an
application under sub-section (1) of Section 34, the court may adjourn
the Section 34 proceedings and give the arbitral tribunal an opportunity
to resume the arbitral proceedings or take such action as will eliminate
the grounds for setting aside the arbitral award. Here again, it is important F
to note that it is the opinion of the arbitral tribunal which counts in order
to eliminate the grounds for setting aside the award, which may be
indicated by the court hearing the Section 34 application.
15. It is important to remember that Section 34 is modelled on the
UNCITRAL Model Law on International Commercial Arbitration, 1985, G
under which no power to modify an award is given to a court hearing a
challenge to an award. The relevant portion of the Model Law reads as
follows:
Article 34. Application for setting aside as exclusive
recourse against arbitral award
H
384 SUPREME COURT REPORTS [2021] 5 S.C.R.

A (1) Recourse to a court against an arbitral award may be made
only by an application for setting aside in accordance with
paragraphs (2) and (2) of this article.
xxx xxx xxx
(4) The court, when asked to set aside an award, may, where
B appropriate and so requested by a party, suspend the setting aside
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 arbitral tribunal’s
opinion will eliminate the grounds for setting aside.
C 16. Redfern and Hunter on International Arbitration (6 th
edition), states that the Model Law does not permit modification of an
award by the reviewing court (at page 570) as follows:
“10.06 The purpose of challenging an award before a national
court at the seat of arbitration is to have that court declare all, or
D part, of the award null and void. If an award is set aside or annulled
by the relevant court, it will usually be treated as invalid, and
accordingly unenforceable, not only by the courts of the seat of
arbitration, but also by national courts elsewhere. This is because,
under both the New York Convention and the Model Law, a
E competent court may refuse to grant recognition and enforcement
of an award that has been set aside by a court of the seat of
arbitration. It is important to note that, following complete
annulment, the claimant can recommence proceedings because
the award simply does not exist-that is, the status quo ante is
restored. The reviewing court cannot alter the terms of an award
F nor can it decide the dispute based on its own vision of the merits.
Unless the reviewing court has a power to remit the fault to the
original tribunal, any new submission of the dispute to arbitration
after annulment has to be undertaken by commencement of a
new arbitration with a new arbitral tribunal.”
G 17. The statutory scheme under Section 34 of the Arbitration Act,
1996 is in keeping with the UNCITRAL Model Law and the legislative
policy of minimal judicial interference in arbitral awards.
18. By way of contrast, under Sections 15 and 16 of the Arbitration
Act, 1940, the court is given the power to modify or correct an award in
H
THE PROJECT DIRECTOR, NATIONAL HIGHWAYS NO. 45 E 385
AND 220 NHAI v. M. HAKEEM [R. F. NARIMAN, J.]

the circumstances mentioned in Section 15, apart from a power to remit A
the award under Section 16 as follows: -
15. Power of Court to modify award.
The Court may by order modify or correct an award-
(a) where it appears that a part of, the award is upon a matter not B
referred to arbitration and such part can be separated from the
other part and does not affect the decision on the matter referred;
or
(b) where the award is imperfect in form, or contains any obvious
error which can be amended without affecting such decision; or C
(c) where the award contains a clerical mistake or an error arising
from an accidental slip or omission.
16. Power to remit award.
(1) The Court may from time to time remit the award or any
D
matter referred to arbitration to the arbitrators or umpire for
reconsideration upon such terms as it thinks fit-
(a) where- the award has left undetermined any of the matters
referred to arbitration, or where it determines any matter not
referred to arbitration and such matter cannot be separated
without affecting the determination of the matters referred; or E

(b) where the award is so indefinite as to be incapable of
execution; or
(c) where an objection to the legality of the award is apparent
upon the face of it., F
(2) Where an award is remitted under sub- section (1) the Court
shall fix the time within which the arbitrator or umpire shall submit
his decision to the Court: Provided that any time so fixed may be
extended by subsequent order of the Court.
(3) An award remitted under sub- section (1) shall become void G
on the failure of the arbitrator or umpire to reconsider it and submit
his decision within the time fixed.
19. As a result therefore, a judgment in terms of the award is
given under Section 17 of the 1940 Act which reads as follows: -
H
386 SUPREME COURT REPORTS [2021] 5 S.C.R.

A 17. Judgment in terms of award.
Where the Court sees no cause to remit the award or any of the
matters referred to arbitration for reconsideration or to set aside
the award, the Court shall, after the time for making an application
to set aside the award has expired, or such application having
B been made, after refusing it, proceed to pronounce judgment
according to the award, and upon the judgment so pronounced a
decree shall follow and no appeal shall lie from such decree except
on the ground that it is in excess of, or not otherwise in accordance
with, the award.
C 20. Thus, under the scheme of the old Act, an award may be
remitted, modified or otherwise set aside given the grounds contained in
Section 30 of the 1940 Act, which are broader than the grounds contained
in Section 34 of the 1996 Act.
21. It is settled law that a Section 34 proceeding does not contain
D any challenge on the merits of the award. This has been decided in
MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163, at 167 as follows: -
14. 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
E 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 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
F Section 37, this Court must be extremely cautious and slow to
disturb such concurrent findings.
22. Likewise, in Ssangyong Engg. & Construction Co. Ltd. v.
NHAI, (2019) 15 SCC 131, this Court under the caption “Section
34(2)(a) does not entail a challenge to an arbitral award on merits”
G referred to this Court’s judgment in Renusagar Power Co. Ltd. v.
General Electric Co., 1994 Supp (1) SCC 644, the Convention on
the Recognition and Enforcement of Foreign Arbitral Awards, 1958 [the
“New York Convention”] and various other authorities to conclude
that there could be no challenge on merits under the grounds mentioned
in Section 34 - (see paras 34 to 48). This Court also held, in Maharashtra
H
THE PROJECT DIRECTOR, NATIONAL HIGHWAYS NO. 45 E 387
AND 220 NHAI v. M. HAKEEM [R. F. NARIMAN, J.]

State Electricity Distribution Co. Ltd. v. Datar Switchgear Ltd., A
(2018) 3 SCC 133 (at 170), that the court hearing a Section 34 petition
does not sit in appeal (see para 51).
23. As a matter of fact, the point raised in the appeals stands
concluded in McDermott International Inc. v. Burn Standard Co.
Ltd., (2006) 11 SCC 181, where this Court held: - B
51. After the 1996 Act came into force, under Section 16 of the
Act the party questioning the jurisdiction of the arbitrator has an
obligation to raise the said question before the arbitrator. Such a
question of jurisdiction could be raised if it is beyond the scope of
his authority. It was required to be raised during arbitration C
proceedings or soon after initiation thereof. The jurisdictional
question is required to be determined as a preliminary ground. A
decision taken thereupon by the arbitrator would be the subject-
matter of challenge under Section 34 of the Act. In the event the
arbitrator opined that he had no jurisdiction in relation thereto an
appeal thereagainst was provided for under Section 37 of the Act. D

52. The 1996 Act makes provision for the supervisory role of
courts, for the review of the arbitral award only to ensure fairness.
Intervention of the court is envisaged in few circumstances only,
like, in case of fraud or bias by the arbitrators, violation of natural
justice, etc. The court cannot correct errors of the arbitrators. It E
can only quash the award leaving the parties free to begin the
arbitration again if it is desired. So, the scheme of the provision
aims at keeping the supervisory role of the court at minimum level
and this can be justified as parties to the agreement make a
conscious decision to exclude the court’s jurisdiction by opting for F
arbitration as they prefer the expediency and finality offered by
it.
24. This statement of the law was followed in Kinnari Mullick v.
Ghanshyam Das Damani, (2018) 11 SCC 328 at page 334 (see para
15). G
25. Also, in Dyna Technologies (P) Ltd. v. Crompton Greaves
Ltd., (2019) 20 SCC 1, this Court held: -
36. At this juncture it must be noted that the legislative intention
of providing Section 34(4) in the Arbitration Act was to make the
H
388 SUPREME COURT REPORTS [2021] 5 S.C.R.

A award enforceable, after giving an opportunity to the Tribunal to
undo the curable defects. This provision cannot be brushed aside
and the High Court could not have proceeded further to determine
the issue on merits.
37. In case of absence of reasoning the utility has been provided
B under Section 34(4) of the Arbitration Act to cure such defects.
When there is complete perversity in the reasoning then only it
can be challenged under the provisions of Section 34 of the
Arbitration Act. The power vested under Section 34(4) of the
Arbitration Act to cure defects can be utilised in cases where the
arbitral award does not provide any reasoning or if the award has
C some gap in the reasoning or otherwise and that can be cured so
as to avoid a challenge based on the aforesaid curable defects
under Section 34 of the Arbitration Act. However, in this case
such remand to the Tribunal would not be beneficial as this case
has taken more than 25 years for its adjudication. It is in this state
D of affairs that we lament that the purpose of arbitration as an
effective and expeditious forum itself stands effaced.
26. Some of the judgments of the High Courts are also instructive.
A learned Single Judge of the Delhi High Court in Cybernetics Network
Pvt. Ltd. v. Bisquare Technologies Pvt. Ltd., 2012 SCC OnLine
E Del 1155, held:
47. The next question that arises is whether the above claims as
mentioned in para 44 that have been erroneously rejected by the
learned Arbitrator can be allowed by this Court in exercise of its
powers under Section 34(4) of the Act?
F 48. Under Section 34(4) of the Act, the Court while deciding a
challenge to an arbitral award, can either “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 the arbitral tribunal will
G eliminate the grounds for setting aside the arbitral award”. This
necessarily envisages the Court having to remit the matter to the
Arbitral Tribunal. This is subject to the Court finding it appropriate
to do so and a party requesting it to do so.
49. In Union of India v. Arctic India 2007 (4) Arb LR 524 (Bom),
a learned Single Judge of the Bombay High Court opined that the
H
THE PROJECT DIRECTOR, NATIONAL HIGHWAYS NO. 45 E 389
AND 220 NHAI v. M. HAKEEM [R. F. NARIMAN, J.]

Court can modify the Award even if there is no express provision A
in the Act permitting it. The Court followed the decision of the
Supreme Court in Krishna Bhagya Jala Nigam
Ltd. v. Harischandra Reddy (2007) 2 SCC 720. A similar view
has been taken by a learned Single Judge of this Court in Union
of India v. Modern Laminators2008 (3) Arb LR 489 (Del). There
B
the question was whether in light of the arbitrator having failed to
decide the counter claim of the respondent in that case the Court
could itself decide the counter claim. After discussing the case
law, the Court concluded that it could modify the award but only
to a limited extent. It held (Arb LR p. 496):
“Such modification of award will be a species of ‘setting aside’ C
only and would be ‘setting aside to a limited extent’. However,
if the courts were to find that they cannot within the confines
of interference permissible or on the material before the
arbitrator are unable to modify and if the same would include
further fact finding or adjudication of intricate questions of law D
the parties ought to be left to the forum of their choice i.e. to
be relegated under Section 34(4) of the Act to further arbitration
or other civil remedies.”
50. However, none of the above decisions categorically hold that
where certain claims have been erroneously rejected by the E
Arbitrator, the Court can in exercise of its powers under Section
34(4) of the Act itself decide those claims. The Allahabad High
Court has in Managing Director v. Asha Talwar2009 (5) ALJ
397, held that while exercising the powers to set aside an Award
under Section 34 of the Act the Court does not have the jurisdiction
to grant the original relief which was prayed for before the F
Arbitrator. The Allahabad High Court referred to the decision of
the Supreme Court in McDermott International Inc. v. Burn
Standard Co. Ltd.(2006) 11 SCC 181, where it was observed
(SCC @ p. 208):
xxx xxx xxx G
51. The view of the Allahabad High Court in Managing
Director v. Asha Talwar appears to be consistent with the scheme
of the Act, and in particular Section 34 thereof which is a departure
from the scheme of Section 16 of the 1940 Act which perhaps
H
390 SUPREME COURT REPORTS [2021] 5 S.C.R.

A gave the Court a wider amplitude of powers. Under Section 34(2)
of the Act, the Court is empowered to set aside an arbitral award
on the grounds specified therein. The remand to the Arbitrator
under Section 34(4) is to a limited extent of requiring the Arbitral
Tribunal “to eliminate the grounds for setting aside the arbitral
award”. There is no specific power granted to the Court to itself
B
allow the claims originally made before the Arbitral Tribunal where
it finds the Arbitral Tribunal erred in rejecting such claims. If such
a power is recognised as falling within the ambit of Section 34(4)
of the Act, then the Court will be acting no different from an
appellate court which would be contrary to the legislative intent
C behind Section 34 of the Act. Accordingly, this Court declines to
itself decide the claims of CNPL that have been wrongly rejected
by the learned Arbitrator.
27. The Delhi High Court in Nussli Switzerland Ltd. v.
Organizing Committee Commonwealth Games, 2014 SCC OnLine
D Del 4834, held: -
34. A party like the Organizing Committee which has its claims
rejected, except a part, but which subsumes into the larger amount
awarded in favour of the opposite party, even if succeeds in the
objections to the award would at best have the award set aside
E for the reason the Arbitration and Conciliation Act, 1996 as distinct
from the power of the Court under the Arbitration Act, 1940, does
not empower the Court to modify an award. If a claim which has
been rejected by an Arbitral Tribunal is found to be faulty, the
Court seized of the objections under Section 34 of the Arbitration
and Conciliation Act, 1996 has to set aside the award and leave
F the matter at that. It would be open to the party concerned to
commence fresh proceedings (including arbitration) and for this
view one may for purposes of convenience refer to sub-Section
(4) of Section 43 of the Arbitration and Conciliation Act, 1996. It
reads: -
G “43. Limitations-
(1) xxxxx
(2) xxxxx
(3) xxxxx
H
THE PROJECT DIRECTOR, NATIONAL HIGHWAYS NO. 45 E 391
AND 220 NHAI v. M. HAKEEM [R. F. NARIMAN, J.]

(4) Where the Court orders that an arbitral award be set aside, A
the period between the commencement of the arbitration and
the date of the order of the Court shall be excluded in computing
the time prescribed by the Limitation Act, 1963, for the
commencement of the proceedings (including arbitration) with
respect to the dispute so submitted.”
B
28. An instructive judgment of the Delhi High Court in Puri
Construction P. Ltd. v. Larsen and Toubro Ltd., 2015 SCC OnLine
Del 9126 deals with the authorities of the Madras and Calcutta High
Courts on the one hand and the other High Courts dealing with this
problem as follows: -
C
115. In these circumstances, this Court holds that the reliefs granted
by the Tribunal cannot be sustained and are hereby set aside. The
question that follows is whether this Court, exercising jurisdiction
under Section 37 read with Section 34 of the Act, can modify,
vary or remit the award. At the outset, it is noticed that there are
divergent views on this issue. Here, the Court notices a somewhat D
divergent approach of various High Courts. The case law is
discussed in the following part of the judgment.
Authorities in Favour of the Power to Modify, Vary or Remit
the award
E
116. A learned Single Judge of this Court in Bhasin
Associates v. NBCC, (2005) ILR 2 Delhi 88 held that “the power
to set aside an award when exercised by the Court would leave a
vacuum if the said power was not understood to include the power
to remand the matter back to the arbitrator”. This view was
subsequently adopted in Single Bench decisions in Union of F
India v. Modern Laminators Ltd., 2008 (3) ARB LR 489 (Delhi) (in
the context of modification of the award), IFFCO Tokio General
Insurance Co. Ltd. v. Indo Rama Synthetics Ltd. (decided on
20.01.2015) and Canara Bank v. Bharat Sanchar Nigam
Ltd. (decided on 26.03.2015). In Modern Laminators, the Court G
relied upon the Supreme Court’s decision in Numaligarh Refinery
Ltd. v. Daelim Industrial Company Ltd., (2007) 8 SCC 466, noting
that the Court therein had modified the award in terms of its
findings; and the decision in Krishna Bhagya Jala Nigam Ltd. v. G.
Harischandra Reddy, AIR 2007 SC 817, where the interest rate
H
392 SUPREME COURT REPORTS [2021] 5 S.C.R.

A awarded by the arbitrator was modified. The learned Single Judge
in Canara Bank relied upon a decision of a Single Judge of the
Madras High Court in Gayatri Balaswamy v. ISG Novasoft
Technologies Ltd., (2015) 1 MLJ 5. The Court in Gayatri
Balaswamy examined the issue in significant [sic] and held as
follows:
B
“Therefore, in my considered view, the expression ‘recourse
to a Court against an arbitral award’ appearing in Section 34(1)
cannot be construed to mean only a right to seek the setting
aside of an award. Recourse against an arbitral award could
be either for setting aside or for modifying or for enhancing or
C for varying or for revising an award. The expression ‘application
for setting aside such an award’ appearing in Section 34(2)
and (3) merely prescribes the form, in which, a person can
seek recourse against an arbitral award. The form, in which
an application has to be made, cannot curtail the substantial
D right conferred by the statute. In other words, the right to have
recourse to a Court, is a substantial right and that right is not
liable to be curtailed, by the form in which the right has to be
enforced or exercised. Hence, in my considered view, the
power under Section 34(1) includes, within its ambit, the power
to modify, vary or revise.”
E
The same view had been adopted earlier by Single Bench decisions
of the Bombay High Court in Axios Navigation Co. Ltd. v. Indian
Oil Corporation Limited, 2012 (114) BOM LR 392
and Angerlehner Structurals and Civil Engineering
Co. v. Municipal Corporation of Greater Mumbai, 2013 (7)
F Bom CR 83 and a Division Bench of the Calcutta High Court
in West Bengal Electronics Industries Development
Corporation Ltd. v. Snehasis Bhowmick (in A.P.O. No. 240 of
2012).
Authorities holding there is no power to Modify, Vary or Remit
G the award
xxx xxx xxx
118. This Court is inclined to follow the decisions in Central
Warehousing Corporation, Delhi Development Authority, State
Trading Corporation of India Ltd., Bharti Cellular Limited, Cybernetics
H
THE PROJECT DIRECTOR, NATIONAL HIGHWAYS NO. 45 E 393
AND 220 NHAI v. M. HAKEEM [R. F. NARIMAN, J.]

Network Pvt. Ltd. and Asha Talwar. The guiding principle on this A
issue was laid down by the Supreme Court in McDermott
International Inc. (supra), where the Court held:
“The 1996 Act makes provision for the supervisory role of
courts, for the review of the arbitral award only to ensure
fairness. Intervention of the court is envisaged in few B
circumstances only, like, in case of fraud or bias by the
arbitrators, violation of natural justice, etc. The court cannot
correct errors of the arbitrators. It can only quash the award
leaving the parties free to begin the arbitration again if it is
desired. So, scheme of the provision aims at keeping the
supervisory role of the court at minimum level and this can be C
justified as parties to the agreement make a conscious decision
to exclude the court’s jurisdiction by opting for arbitration as
they prefer the expediency and finality offered by it.”
Although the Madras High Court in Gayatri Balaswamy (supra)
appropriately noted that these observations in McDermott D
International Inc. were not in the context of the specific issue
being dealt herewith, this Court is of the opinion that it is
determinative of the Court’s approach in an enquiry under Section
34 of the Act. Indeed, a Court, while modifying or varying the
award would be doing nothing else but “correct[ing] the errors of E
the arbitrators”. This is expressly against the dictat of McDermott
International Inc. Further, if the power to remit the matter to the
arbitrator is read into Section 34, it would render inexplicable the
deliberate omission by Parliament of a provision analogous to
Section 16 of the Arbitration Act, 1940 in the present Act. Section
16 of the 1940 Act specifically armed courts with the power to F
remit the matter to arbitration. Noticeably, the scope of remission
under the present Act is confined to that prescribed in sub-section
(4) of Section 34. Besides the Division Bench rulings of this Court
in Delhi Development Authority, State Trading Corporation of India
Ltd., this was also noted by a Full Bench of the Bombay High G
Court in R.S. Jiwani v. Ircon International Ltd., 2010 (1) Bom CR
529, where the Court held:
“An award can only be set aside under the provisions of Section
34 as there is no other provision except Section 33 which permits
the arbitral tribunal to correct or interpret the award or pass H
394 SUPREME COURT REPORTS [2021] 5 S.C.R.

A additional award, that too, on limited grounds stated in Section
33… It is also true that there are no parimateria provisions like
Sections 15 and 16 of the Act of 1940 in the 1996 Act but still
the provisions of Section 34 read together, sufficiently indicate
vesting of vast powers in the court to set aside an award and
even to adjourn a matter and such acts and deeds by the Arbitral
B
Tribunal at the instance of the party which would help in
removing the grounds of attack for setting aside the arbitral
award.”
On the other hand, the Calcutta High Court in Snehasis
Bhowmick did not analyse this distinction, or the specific
C observations of the Supreme Court in McDermott International
Inc. quoted above. Further, the decisions in Numaligarh
Refinery and Harishchandra Reddy (supra) did not discuss the
Court’s power to modify, vary or remit the award under Section
34 of the Act. Therefore, in light of the dictum in McDermott
D International Inc. and the difference in provisions of the 1940 Act
and the present Act, this Court holds that the power to modify,
vary or remit the award does not exist under Section 34 of the
Act.
29. Thus, there can be no doubt that given the law laid down by
E this Court, Section 34 of the Arbitration Act, 1996 cannot be held to
include within it a power to modify an award. The sheet anchor of the
argument of the respondents is the judgment of the learned Single Judge
in Gayatri Balaswamy (supra). This matter arose out of a claim for
damages by an employee on account of sexual harassment at the
workplace. The learned Single Judge referred to the power to modify or
F correct an award under Section 15 of the Arbitration Act, 1940 in para
29 of the judgment. Thereafter, a number of judgments of this Court
were referred to in which awards were modified by this Court,
presumably under the powers of this Court under Article 142 of the
Constitution of India. In para 34, the learned Single Judge referred to
G para 52 in McDermott’s case (supra) and then concluded that since the
observations made in the said para were not given in answer to a pointed
question as to whether the court had the power under Section 34 to
modify or vary an award, this judgment cannot be said to have settled
the answer to the question raised finally.

H
THE PROJECT DIRECTOR, NATIONAL HIGHWAYS NO. 45 E 395
AND 220 NHAI v. M. HAKEEM [R. F. NARIMAN, J.]

30. The first judgment of this Court referred to by the learned A
Single Judge is the judgment in Gautam Constructions and Fisheries
Ltd. v. National Bank for Agriculture & Rural Development, (2000)
6 SCC 519. The learned Single Judge correctly pointed out that this
judgment was under the Arbitration Act, 1940. In para 31, the learned
Single Judge then went on to state that modifications were made in the
B
award by the Supreme Court outside the provisions of Section 15 of the
Arbitration Act, 1940 and that, therefore, the Supreme Court took the
power of the Court to modify an Award for granted. The comment made
in para 31 does not appear to be justified. Obviously, the power used
was the power to do complete justice between the parties, which is a
power relatable to the Constitution vested only in the Supreme Court of C
India as a final court of last resort under Article 142 of the Constitution
of India.
31. The next judgment referred to in para 32 is the judgment in
Tata Hydro-Electric Power Supply Co. Ltd. v. Union of India, (2003)
4 SCC 172. In para 21, this Court modified the award qua interest, D
granting interest at the same rate but with reference to a different period
from that stated in the award. There is no doubt that the award was in
fact “modified” by the Supreme Court – again referable to Article 142
of the Constitution of India.
32. Likew ise, in Hindustan Zinc Ltd. v. Friends Coal E
Carbonisation, (2006) 4 SCC 445, the learned Single Judge correctly
observed that the Supreme Court did not specifically address the issue
as to whether the court has the power under Section 34 to modify the
Award. In stating that the Supreme Court affixed a seal of approval on
the decision of the trial court modifying the award would not be wholly
correct. In para 12 only one ground was argued in the appeal, which F
ground found favour with this Court. In any case, a modification of an
award upheld on facts without any discussion on the law does not carry
the matter very much further.
33. In Krishna Bhagya Jala Nigam Ltd. v. G. Harischandra
Reddy, (2007) 2 SCC 720, a judgment of this Court referred to in para G
36, this Court reduced the rate of interest for the pre-arbitration period,
pendente lite and future interest. It also referred to a suggestion that a
certain amount be reduced from the awarded amount from Rs.1.47
crores to Rs.1 crore, which the learned counsel for the respondent therein
fairly accepted. Obviously, these orders were also made under Article H
396 SUPREME COURT REPORTS [2021] 5 S.C.R.

A 142 of the Constitution of India and do not carry the matter very much
further. From these judgments, to deduce, in para 39, that the judicial
trend appears to favour an interpretation which would read into Section
34 a power to modify, revise or vary an award is wholly incorrect. The
observation found in McDermott’s decision clearly bound the learned
Single Judge and any decision to the contrary would be incorrect.
B
34. At this juncture, it is important to point out that an earlier
Division Bench of the Madras High Court reported in Central
Warehousing Corpn. v. A.S.A. Transport,2007 SCC OnLine Mad
972 had specifically considered the judgment of this Court in McDermott
(supra) and held: -
C
18. Though we are not in a position to concur with the reasoning
of the learned single Judge, we are in complete agreement with
the ultimate order of the learned single Judge in setting aside the
award. However, the further direction given by the learned single
Judge directing the appellant to appoint an arbitrator at Chennai
D and for conducting the arbitration are to be set aside as it cannot
be given as an order of the Court. Useful reference can be had to
the judgment of the Supreme Court in the case of Mcdermott
International Inc. v. Burn Standard co. Ltd., (2006) 11 SCC
181, wherein it was held that the 1996 Act makes provisions for
E supervisory role of courts, for the review of the arbitral award
only to ensure fairness. Intervention of the court is envisaged in
few circumstances only, like, in case of fraud or bias by the
arbitrators, violation of natural justice, etc. It can only quash the
award leaving the parties free to begin the arbitration again if it is
desired. Hence, in an application taken out under section 34 of
F the Act, the Court can set aside the award leaving the parties free
to begin the arbitration again if it is desired. 19. Therefore, the
order of the learned single judge setting aside the award is
confirmed for the reasons given by us. However, the other
observations of the learned single Judge are set aside. The issue
G is left open to the parties to proceed further. The appeal is disposed
of in the above terms. However, there is no order as to costs. The
connected miscellaneous petition is closed.
35. This judgment was not cited before the learned Single Judge,
being a binding Division Bench judgment, which specifically decided,
H following McDermott’s case (supra), that the power of modification is
THE PROJECT DIRECTOR, NATIONAL HIGHWAYS NO. 45 E 397
AND 220 NHAI v. M. HAKEEM [R. F. NARIMAN, J.]

not available under Section 34 of the Arbitration Act, 1996. Even otherwise A
therefore, the learned Single Judge’s judgment was rendered per
incuriam.
36. However, a later Division Bench of the High Court of Madras
vide judgment dated August 8 th , 2019 reported in ISG Novasoft
Technologies Limited v. Gayatri Balasamy,2019 SCC OnLine Mad B
15819 agreed with the learned Single Judge, without adverting to the
earlier Division Bench judgment of the same court, as follows:
41. It is no doubt true that the legislators did not intend to use the
word “modify” anywhere in Section 34 of the Act but what was
contemplated is only to “set aside” an award passed by the C
Arbitrator if it falls within the realm of Section 34 of the Act. It is
trite that an arbitrator being a Judge chosen by the parties, his
decision would ordinarily be final unless one or the other conditions
contained in Section 34 of the Act is satisfied for the purpose of
setting aside his award. The Court’s jurisdiction in this behalf is to
see whether the arbitrator has exceed his jurisdiction or not and D
therefore, the scope of judicial review of the arbitral award is a
narrow one.
42. In order to arrive at a conclusion as to whether the Court, in
exercise of power under Section 34 of the Act is entitled to modify
or vary the award passed by the Arbitrator, the learned single E
Judge relied on several decisions. In para No. 30 of the order
passed by the learned single Judge, reliance was placed on the
decision of the Honourable Supreme court in Gautam Constructions
and Fisheries Limited v. National Bank for Agriculture and Rural
Development reported in (2000) 6 SCC 519. In that case, a single F
Judge of this Court upheld the claim for award of Rs. 400/- per
square feet which was modified by the Division Bench of this
Court and reduced it to Rs. 150/-. When the matter reached the
Honourable Supreme Court, the rate was modified further to Rs.
250/- per square feet. By placing reliance on this decision, the
learned single Judge held that the Court exercising jurisdiction G
under Section 34 of the Act has power to modify or vary the
award passed by the Arbitrator. Similarly, reference was made in
para No. 32 of the order of the learned single Judge to the decision
of the Honourable Supreme Court in Tata Hydero Electric Power
Supply Co. Ltd. v. Union of India, (2003) 4 SCC 172 in which also H
398 SUPREME COURT REPORTS [2021] 5 S.C.R.

A the Honourable Supreme Court, while reversing the judgment of
the High Court, interfered with the award passed by the arbitrator
in so far as it relates to payment of interest. For the very same
proposition that the Court is empowered to modify or vary the
award passed by the arbitrator, reliance was placed on the decision
of the Honourable Supreme Court in Hindustan Zinc Limited v.
B
Friends Coal Carbonisation, (2006) 4 SCC 445 to drive home the
point that the Court has power under Section 34 to modify the
award passed by the Arbitrator. We are also in entire agreement
with the reasoning of the learned single Judge that merely because
the word “modify” or “vary” is not indicated in Section 34 of the
C Act, it will not take away the jurisdiction of the Court exercising
under jurisdiction Section 34 of the Act to interfere with the award
passed by an arbitrator partially. If such a power is not vested
with the Court, it will only lead to multiplicity of proceedings, which
is not intended by the legislature while framing Section 34 of the
Act. A reasonable interpretation to Section 34 would only lead to
D
an irresistible conclusion that the Court can modify or vary the
award of the arbitrator if it is contrary to the material evidence
adduced by the parties. Even otherwise, as contemplated under
Section 34(2)(v)(b)(ii) of the Act, when the award passed by the
Arbitrator is in conflict with the public policy in our Country, reversal
E or modification of such award passed by the arbitrator is well
within the provisions contained under Section 34 of the Act itself.
In the present case, as rightly observed by the learned single Judge,
the non-constitution of a committee as per the direction of the
Honourable Supreme Court in Vishaka case is to be regarded as
a statutory violation and contravention of public policy prevailing
F
in India and therefore, the appellant is entitled for a just and fair
compensation.
37. This judgement suffers from the same infirmities as the learned
Single Judge’s judgement which it affirms.
G 38. Col. Balasubramanian also referred to three other judgments
to buttress the very same submission, namely, Numaligarh Refinery
Ltd. v. Daelim Industrial Co. Ltd., (2007) 8 SCC 466; DDA v. R.S.
Sharma and Co., (2008) 13 SCC 80 and Royal Education Society
v. LIS (India) Construction Co. (P) Ltd., (2009) 2 SCC 261. Each of
these judgments also does not carry the matter further in that, orders
H
THE PROJECT DIRECTOR, NATIONAL HIGHWAYS NO. 45 E 399
AND 220 NHAI v. M. HAKEEM [R. F. NARIMAN, J.]

that are passed under Article 142 of the Constitution do not constitute A
the ratio decidendi of a judgment. Admittedly, there was no discussion
on whether, as a matter of law, a power to vary an award can be found
in Section 34 of the Arbitration, 1996.
39. As has been pointed out by us hereinabove, McDermott (supra)
has been followed by this Court in Kinnari Mullick (supra). Also, in B
Dakshin Haryana Bijli Vitran Nigam Ltd. v. Navigant Technologies
Pvt. Ltd., 2021 SCC OnLine SC 157, a recent judgment of this Court
also followed McDermott (supra) stating that there is no power to modify
an arbitral award under Section 34 as follows: -
(f) In law, where the Court sets aside the award passed by the C
majority members of the tribunal, the underlying disputes would
require to be decided afresh in an appropriate proceeding.
Under Section 34 of the Arbitration Act, the Court may either
dismiss the objections filed, and uphold the award, or set aside the
award if the grounds contained in sub-sections (2) and (2A) are D
made out. There is no power to modify an arbitral award.
40. It can therefore be said that this question has now been settled
finally by at least 3 decisions of this Court. Even otherwise, to state that
the judicial trend appears to favour an interpretation that would read into
Section 34 a power to modify, revise or vary the award would be to E
ignore the previous law contained in the 1940 Act; as also to ignore the
fact that the 1996 Act was enacted based on the UNCITRAL Model
Law on International Commercial Arbitration, 1985 which, as has been
pointed out in Redfern and Hunter on International Arbitration, makes
it clear that, given the limited judicial interference on extremely limited
grounds not dealing with the merits of an award, the ‘limited remedy’ F
under Section 34 is co-terminus with the ‘limited right’, namely, either to
set aside an award or remand the matter under the circumstances
mentioned in Section 34 of the Arbitration Act, 1996.
41. A look at the Arbitration Acts of England, the United States,
Canada, Australia and Singapore also lead to the same conclusion. In G
each of those legislative measures, there are express provisions which
permit the varying of an award, unlike Section 34 of the present Act. In
para 51, the learned Single Judge then refers to recourse to a court
against an arbitral award, and argues that a statute cannot be interpreted
in such manner as to make the remedy worse than the disease. As has
H
400 SUPREME COURT REPORTS [2021] 5 S.C.R.

A been pointed out by us, the “disease” can only be cured in very limited
circumstances thus limiting the remedy as well. Also, to assimilate the
Section 34 jurisdiction with the revisional jurisdiction under Section 115
of the Code of Civil Procedure, 1908 [the “CPC”], is again fallacious.
Section 115 of the CPC expressly sets out the three grounds on which a
revision may be entertained and then states that the High Court may
B
make ‘such order as it thinks fit’. These latter words are missing in
Section 34, given the legislative scheme of the Arbitration Act, 1996. For
all the aforesaid reasons, with great respect to the learned Single Judge,
it is not correct in law and therefore stands overruled.
42. Coming to the submission in support of the impugned judgment
C that the fact that the Central Government appoints an arbitrator and the
arbitration would therefore not be consensual, resulting in a government
servant rubber stamping an award which then cannot be challenged on
its merits, cannot possibly lead to the conclusion that, therefore, a
challenge on merits must be provided driving a coach and four through
D Section 34 of the Arbitration Act, 1996. The impugned judgment is also
incorrect on this score.
43. Col. Balasubramanian, however referred to a passage in
Jaishri Laxmanrao Patil v. Chief Minister, 2021 SCC OnLine SC
362 (at paras 412 to 415). He argued that ‘purposive construction’
E referred to by Bennion in his classic on Statutory Interpretation must
be applied by us on the facts of this case as in legislations dealing with
land acquisition, a pragmatic view is required to be taken and the law
must be interpreted purposefully and realistically so that the benefit
reaches the masses. We may only add that the judgment cited by Col.
Balasubramanian is a judgment dealing with a constitutional provision –
F Article 342A of the Constitution. We must never forget the famous
statement of Chief Justice Marshall in M’Culloch v. State of Maryland,
17 US 316 (1819) that “it is a constitution we are expounding” – and
the Constitution is a living document governing the lives of millions of
people, which is required to be interpreted in a flexible evolutionary manner
G to provide for the demands and compulsions of changing times and needs.
44. The distinction between constitutional and statutory
interpretation was felicitously put by Justice Aharon Barak, President of
the Supreme Court of Israel thus:
“The task of expounding a Constitution is crucially different from
H that of construing a statute. A statute defines present rights and
THE PROJECT DIRECTOR, NATIONAL HIGHWAYS NO. 45 E 401
AND 220 NHAI v. M. HAKEEM [R. F. NARIMAN, J.]

obligations. It is easily enacted and as easily repealed. A A
Constitution, by contrast, is drafted with an eye to the future. Its
function is to provide a continuing framework for the legitimate
exercise of governmental power and, when joined by a Bill or
Charter of Rights, for the unremitting protection of individual rights
and liberties. Once enacted, its provisions cannot easily be repealed
B
or amended. It must, therefore, be capable of growth and
development over time to meet new social, political and historical
realities often unimagined by its framers. The judiciary is the
guardian of the Constitution and must, in interpreting its provisions,
bear these considerations in mind.”
This quote has been cited in Rameshwar Prasad (VI) v. Union C
of India, (2006) 2 SCC 1 (at pages 91,92).
45. “Purposive construction” of statutes, relevant in the present
context, is referred to in a recent concurring judgment by Nariman, J. in
Eera v. State (NCT of Delhi), (2017) 15 SCC 133, as the theory of
“creative interpretation”. However, even “creative interpretation” has D
its limits, which have been laid down in the aforesaid judgment as follows:-
139. A reading of the Act as a whole in the light of the Statement
of Objects and Reasons thus makes it clear that the intention of
the legislator was to focus on children, as commonly understood
i.e. persons who are physically under the age of 18 years. The E
golden rule in determining whether the judiciary has crossed the
Lakshman Rekha in the guise of interpreting a statute is really
whether a Judge has only ironed out the creases that he found in
a statute in the light of its object, or whether he has altered the
material of which the Act is woven. In short, the difference is the F
well-known philosophical difference between “is” and “ought”.
Does the Judge put himself in the place of the legislator and ask
himself whether the legislator intended a certain result, or does he
state that this must have been the intent of the legislator and infuse
what he thinks should have been done had he been the legislator.
If the latter, it is clear that the Judge then would add something G
more than what there is in the statute by way of a supposed intention
of the legislator and would go beyond creative interpretation of
legislation to legislating itself. It is at this point that the Judge crosses
the Lakshman Rekha and becomes a legislator, stating what the
law ought to be instead of what the law is. H
402 SUPREME COURT REPORTS [2021] 5 S.C.R.

A 46. Quite obviously if one were to include the power to modify an
award in Section 34, one would be crossing the Lakshman Rekha and
doing what, according to the justice of a case, ought to be done. In
interpreting a statutory provision, a Judge must put himself in the shoes
of Parliament and then ask whether Parliament intended this result.
Parliament very clearly intended that no power of modification of an
B
award exists in Section 34 of the Arbitration Act, 1996. It is only for
Parliament to amend the aforesaid provision in the light of the experience
of the courts in the working of the Arbitration Act, 1996, and bring it in
line with other legislations the world over.
47. However, this does not end the matter, as has rightly been
C pointed out by Col. Balasubramanian, learned senior advocate appearing
on behalf of the respondent. In several cases, the NHAI has not filed
appeals even in matters which are similar i.e., arising from the same
Section 3A Notification, as a result of which certain land owners have
got away with enhanced compensation given to them by the District
D Court. Also, we cannot shut our eyes to the fact the arbitrator has
awarded compensation on a completely perverse basis i.e., by taking
into account ‘guideline value’ which is relevant only for stamp duty
purposes, and not taking into account sale deeds which would have
reflected the proper market value of the land. Given the fact that the
awards in all these cases are therefore perverse, the District Judge rightly
E interfered with the same.
48. There is no doubt that, as argued by Col. Balasubramanian,
the arbitral award in these cases is given by a government servant
appointed by the Central Government, the result being the rubber stamping
of compensation awarded on a completely perverse basis. Given the
F fact that, in these petitions at least, the constitutional validity of the NH
Amendment Act, 1997 has not been challenged, we must proceed on
the basis that grave injustice would be done if we were to interfere on
facts, set aside the awards and remand the matter to the very government
servant who took into account depressed land values which were relevant
for purposes of stamp duty only. It may be mentioned at this juncture
G
that a limited challenge was made to Section 3J of the National Highways
Act when it excluded the provisions of the Land Acquisition Act in the
context of solatium and interest not being granted under the National
Highways Act. Thus, in Union of India v. Tarsem Singh, (2019) 9
SCC 304, this Court dealt with a batch of appeals in which the question
H was set out thus: -
THE PROJECT DIRECTOR, NATIONAL HIGHWAYS NO. 45 E 403
AND 220 NHAI v. M. HAKEEM [R. F. NARIMAN, J.]

1. … A batch of appeals before us by the Union of India question A
the view of the Punjab and Haryana High Court which is that the
non-grant of solatium and interest to lands acquired under the
National Highways Act, which is available if lands are acquired
under the Land Acquisition Act, is bad in law, and consequently
that Section 3-J of the National Highways Act, 1956 be struck
B
down as being violative of Article 14 of the Constitution of India
to this extent.
49. This question was then answered stating:
52. There is no doubt that the learned Solicitor General, in the
aforesaid two orders, has conceded the issue raised in these cases. C
This assumes importance in view of the plea of Shri Divan that
the impugned judgments should be set aside on the ground that
when the arbitral awards did not provide for solatium or interest,
no Section 34 petition having been filed by the landowners on this
score, the Division Bench judgments that are impugned before us
ought not to have allowed solatium and/or interest. Ordinarily, we D
would have acceded to this plea, but given the fact that the
Government itself is of the view that solatium and interest should
be granted even in cases that arise between 1997 and 2015, in the
interest of justice we decline to interfere with such orders, given
our discretionary jurisdiction under Article 136 of the Constitution E
of India. We therefore declare that the provisions of the Land
Acquisition Act relating to solatium and interest contained in
Sections 23(1-A) and (2) and interest payable in terms of Section
28 proviso will apply to acquisitions made under the National
Highways Act. Consequently, the provision of Section 3-J is, to
this extent, violative of Article 14 of the Constitution of India and, F
therefore, declared to be unconstitutional. Accordingly, appeal
arising out of SLP (C) No. 9599 of 2019 is dismissed.
50. As has been stated by us, the object of the NH Amendment
Act, 1997 is to expedite the process of acquisition. This has been achieved
by cutting down the period for hearing of objections from 30 days under G
Section 5A of the Land Acquisition Act to 21 days under Section 3C of
the National Highways Act. Further, unlike the Land Acquisition Act,
the moment a notification under Section 3D(2) of the National Highways
Act (equivalent to Section 6 Land Acquisition Act) is made, the land
vests absolutely in the Central Government free from all encumbrances. H
404 SUPREME COURT REPORTS [2021] 5 S.C.R.

A Thereafter, where land has vested in the Central Government and the
amount determined by the competent authority under Section 3G as
compensation has been deposited by the Central Government in
accordance with Section 3H(1), the competent authority may then direct
that possession be taken within 60 days of service of notice by it.
B 51. Also, injunctions against highway projects have now become
impossible to obtain in view of Section 20A of the Specific Relief Act,
which has been introduced w.e.f. 01.10.2018. The said provision reads
as follows:
20A. Special provisions for contract relating to
C infrastructure project. —
(1) No injunction shall be granted by a court in a suit under this
Act involving a contract relating to an infrastructure project
specified in the Schedule, where granting injunction would cause
impediment or delay in the progress or completion of such
D infrastructure project.
Explanation. —For the purposes of this section, section 20B and
clause (ha) of section 41, the expression “infrastructure project”
means the category of projects and infrastructure Sub-Sectors
specified in the Schedule.
E (2) The Central Government may, depending upon the requirement
for development of infrastructure projects, and if it considers
necessary or expedient to do so, by notification in the Official
Gazette, amend the Schedule relating to any Category of projects
or Infrastructure Sub-Sectors.
F (3) Every notification issued under this Act by the Central
Government shall be laid, as soon as may be after it is issued,
before each House of Parliament, while it is in session, for a total
period of thirty days which may be comprised in one session or in
two or more successive sessions, and if, before the expiry of the
session immediately following the session or the successive
G
sessions aforesaid, both Houses agree in making any modification
in the notification or both Houses agree that the notification should
not be made, the notification shall thereafter have effect only in
such modified form or be of no effect, as the case may be; so,
however, that any such modification or annulment shall be without
H
THE PROJECT DIRECTOR, NATIONAL HIGHWAYS NO. 45 E 405
AND 220 NHAI v. M. HAKEEM [R. F. NARIMAN, J.]

prejudice to the validity of anything previously done under that A
notification.
52. Under the Schedule, Category No. 1 deals with ‘Transport’
and under ‘Infrastructure Sub-Sectors’ listed in this category, clause (a)
reads ‘Road and Bridges’.
53. It can be seen from the aforesaid provisions that the speeding B
up of acquisition of land needed for national highways has been achieved.
The challenge process to an award passed will, of necessity, take its
own time, both under Section 3G of this Act as well as under the provisions
of the Land Acquisition Act. This being the case, it is a little difficult to
appreciate as to why the wholesome regime of appeals under the Land C
Acquisition Act has been replaced by a regime in which an award passed
by an Arbitrator, who is not consensually appointed but appointed by the
Central Government, can only be challenged not on merits, but on the
limited grounds contained in Section 34 of the Arbitration Act, 1996.
54. There can be no doubt that differential compensation cannot D
be awarded on the ground that a different public purpose is sought to be
achieved. Also, the legislature cannot say that, however laudable the
public purpose and however important it is to expedite the process of
land acquisition, differential compensation is to be paid depending upon
the public purpose involved or the statute involved.
E
55. Take the case of a single owner of land who has two parcels
of land adjacent to each other. One parcel of land abuts the national
highway, whereas the other parcel of land is at some distance from the
national highway. Can it be said that the land which abuts the national
highway, and which is acquired under the National Highways Act, will
yield a compensation much lesser than the adjacent land which is acquired F
under the Land Acquisition Act only because in the former case, an
award is by a government servant which cannot be challenged on merits,
as opposed to an award made under Part III of the Land Acquisition Act
by the reference Court with two appeals in which the merits of the
award can be gone into? There can be no doubt that discrimination would G
be writ large in such cases.
56. As a matter of fact, 7 learned Judges of this Court in Nagpur
Improvement Trust v. Vithal Rao, (1973) 1 SCC 500 held as follows:-
26. It is now well-settled that the State can make a reasonable
classification for the purpose of legislation. It is equally well-settled H
406 SUPREME COURT REPORTS [2021] 5 S.C.R.

A that the classification in order to be reasonable must satisfy two
tests: (i) the classification must be founded on intelligible differentia
and (ii) the differentia must have a rational relation with the object
sought to be achieved by the legislation in question. In this
connection it must be borne in mind that the object itself should be
lawful. The object itself cannot be discriminatory, for otherwise,
B
for instance, if the object is to discriminate against one section of
the minority the discrimination cannot be justified on the ground
that there is a reasonable classification because it has rational
relation to the object sought to be achieved.
27. What can be reasonable classification for the purpose of
C determining compensation if the object of the legislation is to
compulsorily acquire land for public purposes?
28. It would not be disputed that different principles of
compensation cannot be formulated for lands acquired on the basis
that the owner is old or young, healthy or ill, tall or short, or whether
D the owner has inherited the property or built it with his own efforts,
or whether the owner is politician or an advocate. Why is this sort
of classification not sustainable? Because the object being to
compulsorily acquire for a public purpose, the object is equally
achieved whether the land belongs to one type of owner or another
E type.
29. Can classification be made on the basis of the public purpose
for the purpose of compensation for which land is acquired? In
other words can the Legislature lay down different principles of
compensation for lands acquired say for a hospital or a school or
F a Government building? Can the Legislature say that for a hospital
land will be acquired at 50% of the market value, for a school at
60% of the value and for a Government building at 70% of the
market value? All three objects are public purposes and as far as
the owner is concerned it does not matter to him whether it is one
public purpose or the other. Article 14 confers an individual right
G and in order to justify a classification there should be something
which justifies a different treatment to this individual right. It seems
to us that ordinarily a classification based on the public purpose is
not permissible under Article 14 for the purpose of determining
compensation. The position is different when the owner of the
H land himself is the recipient of benefits from an improvement
THE PROJECT DIRECTOR, NATIONAL HIGHWAYS NO. 45 E 407
AND 220 NHAI v. M. HAKEEM [R. F. NARIMAN, J.]

scheme, and the benefit to him is taken into consideration in fixing A
compensation. Can classification be made on the basis of the
authority acquiring the land? In other words can different principles
of compensation be laid if the land is acquired for or by an
Improvement Trust or Municipal Corporation or the Government?
It seems to us that the answer is in the negative because as far as
B
the owner is concerned it does not matter to him whether the land
is acquired by one authority or the other.
30. It is equally immaterial whether it is one Acquisition Act or
another Acquisition Act under which the land is acquired. If the
existence of two Acts could enable the State to give one owner
different treatment from another equally situated the owner who C
is discriminated against, can claim the protection of Article 14.
57. Given the fact that the NH Amendment Act, 1997 has not
been challenged before us, we refrain from saying anything more. Suffice
it to say that, as has been held in Taherakhatoon v. Salambin
Mohammad, (1999) 2 SCC 635 (at para 20), even after we declare D
the law and set aside the High Court judgment on law, we need not
interfere with the judgment on facts, if the justice of the case does not
require interference under Article 136 of the Constitution of India.
58. Given the fact that in several similar cases, the NHAI has
allowed similarly situated persons to receive compensation at a much E
higher rate than awarded, and given the law laid down in Nagpur
Improvement Trust (supra), we decline to exercise our jurisdiction under
Article 136 in favour of the appellants on the facts of these cases. Also,
given the fact that most of the awards in these cases were made 7-10
years ago, it would not, at this distance in time, be fair to send back these F
cases for a de novo start before the very arbitrator or some other
arbitrator not consensually appointed, but appointed by the Central
Government. The appeals are, therefore, dismissed on facts with no
order as to costs.

Devika Gujral Appeals dismissed. G

H