No power to fix compensation: Karnataka high court on the limits of section 34 in NH act land acquisition awards
Case: P. Nagaraju v. Special Land Acquisition Officer and Competent Authority and Ors. Bench: Chief Justice Vibhu Bakhru and Justice C.M. Poonacha, High Court of Karnataka
Background
The appellant, P. Nagaraju, owned lands measuring 631 sq. mtrs. in Survey No. 42/1 and 50 sq. mtrs. in Survey No. 92/2 of Mayaganahalli Village, Bidadi Hobli, Ramanagara Taluk and District. These lands were acquired for the expansion and widening of Mysuru-Bengaluru National Highway No. 25. A preliminary notification under Section 3A of the National Highways Act, 1956 was issued on February 1, 2016 and the final notification under Section 3D followed on September 23, 2016.
The Special Land Acquisition Officer determined compensation for the lands in Survey No. 42/1 at Rs. 7,833 per sq. mtr., classifying them as converted residential land, and for the lands in Survey No. 92/2 at Rs. 2,026 per sq. mtr., classifying them as dry agricultural land. Compensation was fixed on the basis of the guidance value. Dissatisfied, the appellant filed a claim for enhancement under Section 3G(5) of the National Highways Act before the Arbitral Tribunal.
The Long Road to the Present Appeal
The Arbitral Tribunal, by its first award dated August 13, 2019, enhanced the compensation to Rs. 15,400 per sq. mtr. The appellant challenged this before the District Court under Section 34 of the Arbitration and Conciliation Act, 1996, which dismissed the application on February 26, 2021. An appeal under Section 37(1)(c) before the Karnataka High Court was also dismissed on July 26, 2021.
The appellant then approached the Supreme Court, which, by its order dated July 11, 2022 in Civil Appeal No. 4671 of 2022, disposed of the appeal with specific directions, remanded the matter to the Arbitral Tribunal for reconsideration of the appellant's claim, and granted liberty to the appellant to produce relevant documents relating to the market value of the subject lands.
Pursuant to these directions, the Arbitral Tribunal reconsidered the claim. The appellant had also sought and obtained amendment of his claim, now seeking compensation at Rs. 32,340 per sq. mtr. The Arbitral Tribunal passed the fresh award on July 4, 2023, fixing compensation for Survey No. 42/1 at Rs. 8,300 per sq. mtr. and for Survey No. 92/2 at Rs. 2,236 per sq. mtr. The Arbitral Tribunal also held that a multiplication factor of 1.5 was applicable and that the appellant was entitled to solatium, interest, and other benefits under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.
Before the District Court
The appellant again challenged the award under Section 34 before the Principal District and Sessions Judge, Ramanagara. The District Court found that the Arbitral Tribunal had not complied with the Supreme Court's directions of July 11, 2022, had not considered the higher compensation in respect of the land in Survey No. 92/2, and had not considered the documents produced by the appellant. Accordingly, by order dated November 29, 2025, the District Court set aside the award and remanded the matter to the Arbitral Tribunal for fresh disposal in accordance with law.
Before the High Court
The appellant challenged this remand order before the Karnataka High Court under Section 37(1)(c) of the Arbitration Act. The challenge was confined entirely to the direction of remand. The appellant argued, through his Senior Counsel, that the District Court ought to have itself decided the quantum of compensation and determined it without sending the matter back for yet another round of proceedings before the Arbitral Tribunal. It was also submitted that the Arbitral Tribunal was a government official and therefore not eligible to act as an arbitral tribunal, and that the Punjab and Haryana High Court had passed an order setting aside the provisions of Section 3G(5) of the National Highways Act, though that order had been stayed by the Supreme Court.
What the High Court Held
The High Court dismissed the appeal. On the principal contention that the District Court should have adjudicated and fixed compensation itself, the Court held that this argument was directly contrary to settled law on the scope of Section 34 of the Arbitration Act.
The Court referred to the Supreme Court's decision in McDermott International Inc. v. Burn Standard Co. Ltd., where it was held that a court exercising Section 34 jurisdiction cannot correct errors of the arbitrators and can only quash the award, leaving the parties free to recommence arbitration. The scheme of Section 34 is designed to keep the supervisory role of the court at a minimum.
The Court also referred to NHAI v. M. Hakeem, where the Supreme Court held in clear terms that Parliament very clearly intended that no power of modification of an award exists in Section 34 of the Arbitration Act. It is only for Parliament to amend the provision; a court cannot read a power of modification into Section 34.
The Court further noted the Constitution Bench decision in Gayatri Balasamy v. ISG Novasoft Technologies Limited, which held by a majority that an arbitral award could be modified only to a limited extent to rectify computable, clerical, or typographical errors and other manifest errors, subject to such modification not necessitating a merits-based evaluation. The Court exercising powers under Section 34 cannot re-adjudicate disputes and substitute its own opinion on the merits in place of the award of the arbitral tribunal.
Specifically on the National Highways Act, the Court quoted the Supreme Court's observation in Gayatri Balasamy that an argument seeking expansive modification of arbitral awards under the National Highways Act, including modification of the quantum of compensation, is untenable. The jurisdiction under Section 34 does not distinguish between statutory and non-statutory arbitration in terms of the scope of courts' power of review.
The Court also noted that a court has no power to remand a matter to the Arbitral Tribunal except in accordance with Section 34(4) of the Arbitration Act, but since this was not an issue raised by the appellant, the Court did not examine it in detail.
On the arguments relating to the validity of the provisions of the National Highways Act and the eligibility of a government official to act as Arbitral Tribunal, the Court declined to examine these issues. The present proceedings raised no challenge to the provisions of the NH Act or to the constitution of the Arbitral Tribunal. Further, the impugned award had been passed pursuant to specific directions issued by the Supreme Court itself in Civil Appeal No. 4671 of 2022.
The Court clarified that its order did not decide whether the District Court had been right to set aside the impugned award, and that the respondents retained the liberty to avail any remedies in that regard if so advised.














