An analysis of arbitration in highway land acquisition under the National Highways Act, 1956, and its interplay with the Arbitration Act
The National Highways Act, 1956 ( NH Act) constitutes a comprehensive and self-contained legislative framework enacted by Parliament for the acquisition of land and the determination and disbursement of compensation. Section 3G of the NH Act, empowers a competent authority to determine the amount of compensation. Where the compensation determined under sub-sections (1) or (2) of Section 3G is deemed unsatisfactory by any party, the matter is required to be referred to an Arbitrator appointed exclusively by the Central Government pursuant to sub-section (5) of Section 3G.
The Arbitrator, while determining the compensation, is mandated to consider the factors enumerated in sub-section (7) of Section 3G. Furthermore, if the Arbitrator determines an amount exceeding that awarded by the competent authority, sub-section (5) of Section 3H authorizes the Arbitrator to award interest at the rate of 9% per annum on the differential amount, calculated from the date of possession under Section 3D until the date of deposit.
Whether Application Under section 11 of Arbitration Act Can be Filed Seeking Appointment Of Arbitrator
As noted above, the Central Government is the sole authority empowered to appoint an Arbitrator in cases where either party is dissatisfied with the decision of the competent authority regarding the determination of compensation. However, no specific time frame is prescribed within which the Government must decide the application for such an appointment. This raises the question of whether the applicant can approach the court under Section 11 of the Arbitration Act if the Government fails to make the appointment within a reasonable period.
This issue was addressed by the Supreme Court in two of its judgments. In National Highways Authority Of India vs Sayedabad Tea Co. Ltd. And Ors1, the question before the Court was whether the High Court was justified in appointing an Arbitrator under Section 11 of the Arbitration Act after a significant delay had occurred following the submission of an application to the Government for the appointment of an Arbitrator under Section 3G(5) of the NH Act.
The Court held that the scheme of the NH Act, being a special legislation enacted specifically for its purposes, provides for the appointment of an Arbitrator exclusively by the Central Government under Section 3G(5) of the Act. Sub-section (6) of Section 3G further clarifies that, subject to the provisions of the NH Act, the provisions of the Arbitration Act, shall apply to every arbitration. This application is limited to instances where the NH Act, is silent, allowing the Arbitrator to invoke the provisions of the Arbitration Act, for specific purposes. However, with regard to the appointment of an Arbitrator, the power is explicitly and exclusively vested in the Central Government as stipulated under Section 3G(5) of the Act, 1956. Consequently, Section 11 of the Arbitration Act, 1996, has no application in such cases.
It was further emphasised that the usage of the term “subject to” in Section 3G(6) underscores the legislative intent to confer overriding authority on the provisions of the NH Act, in matters pertaining to compensation and dispute resolution under its purview. Consequently, the legislative framework of the NH Act, excludes the application of Section 11 of the Arbitration Act, for the appointment of an Arbitrator, leaving such appointments exclusively within the domain of the Central Government under the special enactment.
Similarly, the Supreme Court in General Manager (Project), National Highways and Infrastructure Development Corporation Ltd. Vs. Prakash Chand Pradhan & Ors2. after examining the interplay between the NH Act and the Arbitration Act held that the NH Act being a special enactment, provides an exclusive and inbuilt mechanism under Section 3G for the appointment of an Arbitrator by the Central Government. Accordingly, the provisions of Section 11 of the Arbitration Act, which provide for the court-appointed arbitration process, stand excluded. In instances where the Central Government fails to appoint an Arbitrator within a reasonable timeframe, the aggrieved party may seek redress either by filing a writ petition under Article 226 of the Constitution of India or through a civil suit but cannot invoke Section 11 of the Arbitration Act.
This case added another dimension to the debate that although section 11 application is not maintainable, still writ jurisdiction of the High Court can be invoked or a civil suit can be filed if the Government fails to act swiftly.
Whether Mandate Of Arbitrator Appointed Under NH Act Can Be Terminated Under Section 29A Of The Arbitration Act
It has already been discussed that the power to appoint an arbitrator under the NH Act vests with the Central Government; therefore, only the application of provisions of the Arbitration Act that deal with the appointment of arbitrators is excluded. When it comes to provisions other than those related to the constitution of the Arbitral Tribunal under the Arbitration Act, they continue to be applicable to the proceedings conducted by the Arbitrator. Section 29A of the Arbitration Act provides for arbitration proceedings to be completed within 12 months from entering the reference, which may further be extended by 6 months upon an application made in this regard.
The primary question before the Himachal Pradesh High Court in Ganga Ram v. Special Land Acquisition Officer3 was whether Section 29A of the Arbitration Act is applicable to an arbitrator appointed under the NH Act. The court, while answering in the affirmative, held that as the proceedings of the arbitrator continue to be governed by the Arbitration Act, the applicability of Section 29A cannot be excluded. This means that the mandate of the arbitrator shall stand terminated if the timeline prescribed under Section 29A is not adhered to.
Whether Limitation Act Is Applicable To Arbitration Under National Highway Act
Section 43 of the Arbitration Act provides that the Limitation Act shall apply to arbitrations in the same manner as it applies to proceedings in court. Furthermore, Section 2(4) of the Arbitration Act states that Part I, except Sections 40, 41, and 43, will apply to arbitration conducted under any other enactments. This section excludes the application of Section 43 to arbitration conducted under other enactments. This means that the Limitation Act will not be applicable to arbitration conducted under the NH Act. This view was affirmed by the Kerela High Court in National Highway Authority of India v P. V. George and Others4.
It is evident from the above judgment that the Limitation Act does not apply to arbitration proceedings under the NH Act. Additionally, the NH Act itself does not contain any provision specifying the limitation period for referring a dispute to the Arbitrator after the compensation has been determined by the competent authority. The question arises whether a dispute can be referred to arbitration even after a significant lapse of time.
This issue was considered by the Madhya Pradesh High Court in Sarvesh Rajput v. State of Madhya Pradesh5, which observed that while the application of the Limitation Act to the NH Act is excluded by virtue of Section 43 read with Section 2(4) of the Arbitration Act, the residuary provision of the Limitation Act, namely Article 137, would still be applicable. Article 137 prescribes a limitation period of three years from the date on which the cause of action arises. The court held that a dispute must be referred to the Arbitrator within three years from the date of determination of compensation by the competent authority.
Conclusion
It can be concluded that the authority to appoint an Arbitrator under the NH Act is exclusively vested in the Central Government when either party is dissatisfied with the decision of the competent authority regarding the determination of compensation. However, the other provisions of the Arbitration Act, except those relating to the appointment of the Arbitrator, remain fully applicable, as if the arbitration started pursuant to an arbitration agreement.
Furthermore, while the Limitation Act does not apply to arbitration conducted under the NH Act, the application of Article 137, a residuary provision of the Limitation Act, cannot be excluded. Article 137 applies in cases where no specific limitation period is provided under the Act, thereby filling the gap in such situations.
1CIVIL APPEAL NO(s). 69586959 OF 2009 2Civil Appeal No. 5250 of 2018 3Arb Case No. 36 of 2023 4WA NO. 1600 OF 2022 5Writ Petition No. 13266 of 2023
