Case BriefsSupreme Court

Supreme Court: The Division Bench of R.F. Nariman and B.R. Gavai, JJ., while addressing a significant and interesting question of law expressed that,

“If one were to include the power to modify an award in Section 34, one would be crossing the Lakshman Rekha”

Interesting Question of Law

Whether the power of a Court under Section 34 of the Arbitration and Conciliation Act, 1996 to ‘set aside’ an award of an arbitrator would include the power to modify such an award?

Madras High Court decision 

A Division Bench of the Madras High Court had 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, 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 an Arbitrator.

Factual Matrix

The crux of the matter was that the above-stated appeals concerned notifications issued under the provisions of National Highways Act and awards passed. The said notifications were of the year 2009 onwards and the awards made were based on the ‘guideline value’ of the lands in question and not on the basis of sale deeds of similar lands.

It was stated that the competent authority had granted abysmally low amounts.

In Section 34 petitions that were filed before the District and Sessions Judge, the said amounts were enhanced to Rs 645 per sq. meter and the award of the Collector was therefore modified by the District Court in exercise of jurisdiction under Section 34 of the Arbitration Act.

Further, in the appeal filed to Division Bench, the above-stated modification was upheld, with there being a remand order to fix compensation for certain trees and crops.

Analysis, Law and Decision

Section 34 of the Arbitration Act

Bench noted that far from Section 34 being in the nature of an appellate provision, it provides only for setting aside awards on very limited grounds, such grounds being contained in sub-sections (2) and (3) of Section 34.

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.

Further, the Court stated that Section 34 is modelled on the UNCITRAL Model Law on International Commercial Arbitration, 1985 under which no power to modify an award is given to a court hearing a challenge to an award.

Old v. New

Elaborating more, Bench added that 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 a power to remit the award under Section 16.

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.

In Supreme Court’s decision of MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163, it was decided that Section 34 proceeding does not contain any challenge on the merits of the award.

Adding to the above, Court stated that the point raised in the appeals stands concluded in McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181.

Delhi High Court’s decision in Cybernetics Network (P) Ltd. v. Bisquare Technologies (P) Ltd., 2012 SCC OnLine Del 1155 is also instructive.

Court’s opinion

Hence, in Court’s opinion, there cannot be a doubt that Section 24 of the Arbitration Act, 1996 cannot be held to include within it a power to modify an award.

McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181 was followed in Kinnari Mullick v. Ghanshyam Das Damani, (2018) 11 SCC 328. Also, in 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 International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181 stating that there is no power to modify an arbitral award under Section 34 as:

(f) In law, where the Court sets aside the award passed by the 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 made out. There is no power to modify an arbitral award.

Judicial Trend

Therefore, in view of the above discussed, it can be stated that this question has now been settled finally by at least 3 decisions of the Supreme Court.

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 International Commercial Arbitration, 1985.

Coming to the submission in support of the impugned judgment 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 Section 34 of the Arbitration Act, 1996. The impugned judgment is also incorrect on this score.

Lastly, the Supreme Court stated that 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.

Parliament very clearly intended that no power of modification of an award exists in Section 34 of the Arbitration Act, 1996.

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 landowners have got away with enhanced compensation given to them by the District 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.

Differential Compensation

The Court noted that 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 landowners 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 that would have reflected the proper market value of the land.

The Court was of the opinion that the said differential compensation cannot 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.

Illustration

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 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 be writ large in such cases.

However, since the NH Amendment Act, 1997 had not been challenged before the Court, it refrained from saying anything more. It was said that in the facts and circumstances of the case interference under Article 136 was not called for.[National Highways v. M. Hakeem,  2021 SCC OnLine SC 473, decided on 20-07-2021]

ADR Competition AnnouncementsLegislation UpdatesNotifications

NHAI has successfully transitioned to 100% cashless tolling at National Highways fee plazas across the country following the guidelines for mandatory payment of user fee through FASTag at the toll plazas from February 16, 2021.

In order to facilitate adoption of FASTag by highway users, it has also been decided to launch a ‘Free FASTag’ campaign till March 01, 2021, by waiving off the tag cost of Rs. 100 at over 770 toll plazas (including State Plazas) across the country.

Also, in order to provide convenience to highway users to keep a track of FASTag balance, a new feature ‘Check Balance Status’ has been added in MobileApp ‘My FASTag App’. The My FASTag App will show FASTag wallet balance status in form of color codes

  • Green for Active tag with sufficient balance;
  • Orange/Amber for tags with low balance; and
  • Red for Blacklisted tags.

Case BriefsSupreme Court

Supreme Court: The 3-judge bench of L. Nageswara Rao*, Hemant Gupta and Ajay Rastogi, jj has directed the Ministry of Environment, Forest and Climate Change, Government of India to constitute an Expert Committee to examine whether segmentation is permissible for National Highway projects beyond a distance of 100 kms and, if permissible, under what circumstances.

Background

The said direction came in the case relating to the environmental clearance for expansion of National Highway 45-A between Villuppuram to Nagapattinam for a distance of 179.555 kms as a part of the Bharatmala Pariyojana project. Admittedly, no environmental impact assessment was undertaken. The National Highway Authority of India had challenged the Madras High Court decision holding that the environmental clearance for the said project was necessary.

Environmental clearance under the Notifications dated 14.09.2006 and 22.08.2013 is required only if the additional right of way or land acquisition is greater than 40 meters on existing alignments and 60 meters on realignments or bypasses. It was NHAI’s case that environmental clearance is not required as the additional right of way or land acquisition was not greater than the limits specified in the Notification even if the expansion of the National Highways is beyond 100 km. In view of the bifurcation of the National Highway 45-A into four packages and each package being less than 100 km, NHAI contended that the Notifications dated 14.09.2006 and 22.08.2013 are not applicable.

What does the Notification state?

As per Item 7 (f) to the Notification dated 22.08.2013, expansion of a National Highway project needs prior environmental clearance in case

(a) expansion of the National Highway project is greater than 100 km. and

(b) it involves additional right of way or land acquisition greater than 40 meters on existing alignments and 60 meters on realignments or bypasses.

If the project involves expansion of a National Highway greater than 100 km, prior environmental clearance would be required only if it involves additional right of way or land acquisition greater than 40 meters on existing alignments and 60 meters on realignments or by passes.

A statutory rule or Notification is to be treated as a part of the statute. Rules made under a statute must be treated for all purposes of construction or obligation exactly as if they were in the Act, are to be of the same effect as if they are contained in the Act, and are to be judicially noticed for all purposes of construction or obligation. The principles of interpretation of subordinate legislation are applicable to the interpretation of statutory Notifications.

“If the words of the statute are in themselves precise and unambiguous, then no more can be necessary than to expound those words in their natural and ordinary sense. The words themselves do alone in such cases best declare the intent of the law-giver.”

In the current case, there is no ambiguity or scope for two interpretations. Hence, adopting the golden rule of interpretation the Court that there is no requirement of prior environmental clearance for expansion of a National Highway project merely because the distance is greater than 100 km.

“It is a cardinal principle of interpretation that full effect has to be given to every word of the Notification . Interpreting the Notification dated 22.08.2013 to mean that every expansion of National Highway which is greater than 100 km requires prior environmental clearance would be making the other words in Item 7 (f) redundant and otiose.”

Segmentation of National Highway projects beyond a distance of 100 kms

The Court agreed with the High Court that segmentation as a strategy is not permissible for evading environmental clearance as per Notifications dated 14.09.2006 and 22.08.2013 and was hence, of the opinion that an expert committee should examine the permissibility of segregation.

“As the question of permissibility of the segmentation of a National Highway beyond a distance of 100 kms is a matter to be considered by experts, it would be necessary for a committee to be constituted by the Government of India to decide whether segmentation of a National Highway project beyond a distance of 100 kms is permissible. If it is permissible, the circumstances under which segmentation can be done also requires to be examined by the expert committee.”

Conclusion

  • There is no requirement for obtaining environmental clearances for NH 45-A Villuppuram-Nagapattinam Highway as land acquisition is not more than 40 meters on existing alignments and 60 meters on realignments or by passes.
  • NHAI has to strictly conform to the Notification dated 14.09.2006 as amended by the Notification dated 22.08.2013 in the matter of acquisition of land being restricted to 40 meters on the existing alignments and 60 meters on realignments.
  • Ministry of Environment, Forest and Climate Change, Government of India to constitute an Expert Committee to examine whether segmentation is permissible for National Highway projects beyond a distance of 100 kms and, if permissible, under what circumstances
  • NHAI has to fulfil the requirement of reafforestation in accordance with the existing legal regime. There is an obligation on the part of the Appellant to plant ten trees for each felled tree.

[National Highway Authority of India v. Pandarinathan Govindarajulu,  2021 SCC OnLine SC 28, decided on 19.01.2021]


*Justice L. Nageswara Rao has penned this judgment

Case BriefsHigh Courts

Delhi High Court: Vibhu Bakhru, J. held that an order of the arbitrators terminating the arbitral proceedings under Section 32(2)(c) of the Arbitration and Conciliation Act, 1996 (“A&C Act”) is NOT an “award”; and therefore a challenge to such order under Section 14(1)(a) is maintainable.

Facts and Issue

The petitioner, a Joint Venture constituted by Progressive Construction Ltd. and SUNCON Construction Berhard, Malaysia,  filed the present petition, inter alia, impugning an order passed by the two arbitrators terminating the arbitral proceedings under Section 32(2)(c) of the Arbitration and Conciliation Act, 1996. The present application was filed under Section 14(1)(a) read with Section 15 of the Act.

The arbitral proceedings were terminated because the arbitrator nominated by the petitioner had resigned and the petitioner had not taken steps to nominate another arbitrator in his place. Consequently, the arbitral proceedings could not proceed and the remaining two arbitrators constituting the Arbitral Tribunal concluded that it was impossible to continue the proceedings and, accordingly, terminated the same. The petitioner claimed that there was a communication gap and the petitioner was not aware that the arbitrator appointed by it had resigned. The Arbitral Tribunal had not issued any notice to the petitioner in this regard prior to terminating the arbitral proceedings.

The respondent, National Highways Authority of India (“NHAI”), contests the maintainability of the present petition as well as contends that the impugned order cannot be faulted.

Analysis

The foremost question addressed by the High Court was: Whether the impugned order constitutes an award?

The contention of the NHAI that the present petition was not maintainable and the only recourse available to the petitioner was to file an application under Section 34 of the A&C Act was founded on the assumption that the impugned order is an award. Notably, recourse to a Court against an award is available only under Section 34 of the A&C Act.

The High Court analysed that the term “award” is defined under clause (c) of sub-section (1) of Section 2 of the A&C Act and noted that”

It is now well settled that an award constitutes a final determination of a particular issue or a claim in arbitration.

It was also noted that Section 32 of the A&C Act also draws a clear distinction between a final arbitral award and orders passed by an Arbitral Tribunal. In terms of Sub-section (1) of Section 32 of the A&C Act, arbitral proceedings stand terminated by a final award or by such orders as are specified under Sub-section (2) of the said A&C Act.

The Court made reference to its earlier decision in Rhiti Sports Management (P) Ltd. v. Power Play Sports & Events Ltd, 2018 SCC OnLine Del 8678 wherein the Court had noted various decisions on the question as to what constitutes an award.

Relying on the Supreme Court decision in IFFCO Ltd. v. Bhadra Products, (2018) 2 SCC 534, the High Court noted that in order for a decision of the Arbitral Tribunal to qualify as an award, the same must finally decide a point at which the parties are at issue. In cases where the same is dispositive of the entire dispute referred to the Arbitral Tribunal, the said award would be a final award, which would result in termination of the arbitral proceedings.

Viewed in this context, the Court concluded:

“It is clear that an order, which terminates the arbitral proceedings as the Arbitral Tribunal finds it impossible or unnecessary to continue the arbitral proceedings, would not be an award. This is so because it does not answer any issue in dispute in arbitration between the parties; but is an expression of the decision of the Arbitral Tribunal not to proceed with the proceedings.”

The Court also stated that an order terminating the proceedings on failure of the claimant to file its Statement of Claims within the stipulated time, is also in the nature of an order under Sub-section (2) of Section 32 of the A&C Act and not an arbitral award because such an order does not decide any of the points on which the parties are in issue in the arbitration.

Decision

In the present case, the impugned order passed by the arbitrators expressly stated that the arbitral proceedings were terminated under Section 32(2)(c) as in their view, it had become impossible to continue the said proceedings. Indisputably, an order terminating the proceedings under Section 32(2)(c) can be impugned under Section 14(2) of the A&C Act.

It was contended on behalf of NHAI that even though an application under Section 14(2) may be filed, the present application which was under Section 14(1)(a) and Section 15 was not maintainable. This contention, according to the High Court, was unpersuasive:

“A plain reading of sub-section (2) of Section 14 of the A&C Act indicates that unless otherwise agreed by parties, a party could apply to a Court to decide on the question of termination of the mandate if a controversy remains concerning any of the grounds referred to in Sub-section 14(1)(a) of the A&C Act.”

It was also noted that the impugned order was an expression of the view of the arbitrators that they were unable to continue with the proceedings on account of the default on the part of the petitioner to fill the vacancy caused by the resignation of their arbitrator. Even though NHAI had preferred certain counterclaims, it too did not take any steps to ensure that the said vacancy was filled. It was also open for NHAI to apply to the Court for the appointment of an arbitrator, however, NHAI also chose not to do so.

Further, although the arbitrators had passed the impugned order, it was not disputed that a notice that they were contemplating the termination of the proceedings was not issued to the petitioner, prior to passing of the impugned order.

However, said the Court that, it could not be denied that the petitioner was responsible for the delay in the proceedings as it had inordinately delayed the appointment of an arbitrator. Whilst the Court was of the view that the petitioner ought not be rendered remediless to urge its claims, NHAI‘s contention that the petitioner must be visited with costs was merited.

Accordingly, the High Court set aside the impugned order, albeit, subject to payment of costs of Rs 25000 by the petitioner.

Further, now the petitioner had already nominated an arbitrator. It was directed that the Arbitral Tribunal will resume the arbitration proceedings at the stage obtaining on the date on which the arbitral proceedings were terminated. [PCL Suncon v. NHAI, 2021 SCC OnLine Del 313, dated 12-1-2020]

Case BriefsSupreme Court

Supreme Court: Dealing with the question whether the Parliament was competent to enact the National Highways Act, 1956 and the National Highway Authority of India Act, 1988 for construction of new roads traversing through the open green-fields, the 3-judge bench of AM Khanwilkar*, BR Gavai and Krishna Murari, JJ has held that

“… there is nothing in the Constitution which constricts the power of the Parliament to make a law for declaring any stretch/section within the State not being a road or an existing highway, to be a national highway. Whereas, the provisions in the Constitution unambiguously indicate that the legislative as well as executive power regarding all matters concerning and connected with a highway to be designated as a national highway, vests in the Parliament and the laws to be made by it in that regard.”

The 1956 Act and the 1988 Act were made in reference to Entry 23 of List I of the Seventh Schedule.  The Court noticed that the fact that Entry 13 of List II bestows exclusive power upon the legislature of any State concerning subject “roads”, cannot be the basis to give restricted meaning to Entry 23 in List I, dealing with all matters concerning “national highways”.

“It is well-established position that if the law made by the Parliament is in respect of subject falling under Union List, then the incidental encroachment by the law under the State list, per se, would not render it invalid.  The doctrine of pith and substance is well-established in India. The doctrine is invoked upon ascertaining the true character of the legislation.”

Adverting to Article 248 of the Constitution that bestows legislative powers on the Parliament to make a law with respect to any matter not enumerated in the Concurrent List or the State List, the Court noticed that the expression “highways” as such, is not mentioned either in the State List or the Concurrent list. While making law on the subject falling under the Union List in terms of Entry 97 thereof, it is open to the Parliament to make law on any other matter not enumerated in List II or List III including any tax not mentioned in either of those lists.

It was further stated that the entries in the legislative lists are not sources of legislative powers, but are merely topics or fields in respect of which concerned legislative body is free to make a law. The entries must receive a liberal and expansive construction, reckoning the wide spirit thereof and not in a narrow pedantic sense.

“Entry 23 in List I refers generally to “highways” declared or to be declared by the Parliament as national highways and all matters connected therewith.  This empowers the Parliament to declare any stretch/section across any State as a highway for being designated as a national highway.  There is no indication in the Constitution to limit the exercise of that power of the Parliament only in respect of an existing “highway”.”

The Court further enunciated that whenever and wherever the question of legislative competence is raised, the test is whether the law enacted, examined as a whole, is substantially with respect to the particular topic of legislation falling under the concerned list.

“If the law made by the Parliament or the legislature of any State has a substantial and not merely a remote connection with the Entry under which it is made, there is nothing to preclude the concerned legislature to make law on all matters concerning the topic covered under the Union List or the State List, as the case may be.”

The Court also highlighted Central Government’s obligations under Part IV of the Constitution for securing a social order and promotion of welfare of the people in the concerned region, to provide them adequate means of livelihood, distribute material resources as best to subserve the common good, create new opportunities, so as to empower the people of that area including provisioning new economic opportunities in the area through which the national highway would pass and the country’s economy as a whole.

“The availability of a highway in any part of the State paves way for sustainable development and for overall enhancement of human well-being including to facilitate the habitants thereat to enjoy a decent quality of life, creation of assets (due to natural increase in market value of their properties) and to fulfil their aspirations of good life by provisioning access to newer and present-day opportunities.”

Hence, having said that the Parliament has exclusive legislative competence to make a law in respect of national highways and all matters connected therewith, which includes declaring any stretch/section within the State (not being existing roads/highways) as a national highway, it must follow that the Central Government alone has the executive powers to construct/build a new national highway in any State and to issue directions to the Government of any State for carrying out the purposes of the 1956 Act.

[Project Director, Project Implementation Unit v. P.V. Krishnamoorthy,  2020 SCC OnLine SC 1005, decided on 08.12.2020]


Justice AM Khanwilkar has penned this judgment. Read more about him here.

Counsels heard: Solicitor General of India Tushra Mehta, Senior Counsels S. Nagamuthu, Sanjay Parikh, Nikhil Nayyar, Anita Shenoy, Counsels Kabilan Manoharan advocate, P. Soma Sundaram, T.V.S. Raghavendra Sreyas and  S. Thananjayan

Also read: Prior environmental clearance required before commencement of actual construction of a National Highway, not at the planning stage: SC

Case BriefsSupreme Court

Supreme Court: The 3-judge bench of AM Khanwilkar*, BR Gavai and Krishna Murari, JJ has held that it is not necessary for the Central Government or NHAI to apply for prior environmental/forest clearances or permissions before issuing notification under Section 2(2) declaring the stretch/section to be a national highway or Section 3A of the National Highways Act, 1956 to express intention to acquire land for the purpose of building, maintenance, management or operation of a national highway, as the case may be.

“Environmental/forest clearance is always site specific and, therefore, until the site is identified for construction of national highways manifested vide Section 3A notification, the question of making any application for permission under the environmental/forest laws would not arise.”

Scope of Central Government’s power under Section 2(2) of the National Highways Act, 1956

Explaining the scope of Section 2(2) of the National Highways Act, 1956, the Court said that the power bestowed upon the Central Government under Section 2(2) of the 1956 Act is not constricted or circumscribed by any other inhibition, such as to declare only an existing road or highway within the State as a national highway.  The requirement of a national highway within the country as a whole and State-wise, in particular, is to alleviate evolving socio-economic dynamics, for which such a wide power has been bestowed upon the Central Government. The Central Government is obliged to do so to facilitate it to discharge its obligations under Part IV of the Constitution.

“There is nothing in the Constitution of India or for that matter, the 1956 Act to limit that power of the Central Government only in respect of existing roads/highways within the State. To say so would be counter¬productive and would entail in a piquant situation that the Central   Government cannot effectively discharge its obligations under Part IV of the Constitution unto the remote inaccessible parts of the country until the concerned State Government constructs a road/highway within the State. (…) By its very nomenclature, a national highway is to link the entire country and provide  access to all in every remote corner of the country for interaction and to promote commerce and trade, employment and education including health related services.”

Hence, the Central Government is fully competent to notify “any land” (not necessarily an existing road/highway) for acquisition, to construct a highway to be a national highway.

Prior permission before issuing notification under Section 3A of the 1956 Act

The Court noticed that neither the 1956 Act, the Rules framed thereunder nor the National Highway Authority of India Act, 1988 and the Rules made thereunder specify any express condition requiring Central Government to obtain prior environmental/forest clearance before issuing notification under Section 2(2) declaring the stretch/section to be a national highway or Section 3A of the 1956 Act to express intention to acquire land for the purpose of building, maintenance, management or operation of a national highway, as the case may be.

“It is not necessary for the Central Government or for that matter, NHAI, to apply for prior environmental/forest clearances or permissions, as the case may be, at the stage of planning or taking an in­principle decision to formalize the Project of constructing a new national highway manifested in notification under Section 2(2), including until the stage of issuing notification under Section 3A of the 1956 Act.”

Even the notification issued by the MoEF dated 14.9.2006, does not constrict the power of Central Government to issue notification under Section 2(2) or Section 3A of the 1956 Act.

The prior environmental clearance in terms of 2006 notification issued under Section 3 of the Environment (Protection) Act, 1986 Act read with Rule 5 of the Environment (Protection) Rules, 1986, is required to be taken before commencement of the “actual construction or building work” of the national highway by the executing agency (NHAI). That will happen only after the acquisition proceedings are taken to its logical end until the land finally vests in the NHAI or is entrusted to it by the Central Government for building/management of the national highway. The land would vest in the Central Government under the 1956 Act only after publication of declaration of acquisition under Section 3D. Until then, the question of Central Government vesting it in favour of NHAI under Section 11 of the 1988 Act would not arise. However, until the vesting of the land, the Central Government and its authorised officer can undertake surveys of the notified lands by entering upon it in terms of Section 3B of the Act.

“Pertinently, the activities predicated in Section 3B are of exploration for verifying the feasibility and viability of land for construction of a national highway. These are one-time activities and not in the nature of exploitation of the land for continuous commercial/industrial activities as such. There is remote possibility of irretrievable wide-spread environmental impact due to carrying out activities referred to in Section 3B for assessing the worthiness of the land for using it as a national highway. Thus, the question of applying notification of 2006 at this stage does not arise, much less obligate the Central Government to follow directives thereunder.”

Deemed lapsing

The Court noticed that it is essential to issue a declaration under Section 3D of the 1956 Act within a period of one year from the date of publication of the notification under Section 3A in respect of the notified land, failing which notification under Section 3A ceases to have any effect.  However, time spent for obtaining environmental clearance or permission under the forest laws has not been explicitly excluded from the period of one year to be reckoned under Section 3D(3) of the Act. The extension of time or so to say suspension of time is only in respect of period during which the action of the proceedings to be taken in pursuance of notification under Section 3A(1) is stayed by an order of Court.

Noticing that there is no express provision in the 1956 Act, which excludes the time spent by the Central Government or the executing agency in obtaining prior environmental clearance or permission under forest laws, as the case may be, the Court directed that the dictum in Karnataka Industrial Areas Development Board vs. C. Kenchappa, (2006) 6 SCC 371, shall operate as a stay by an order of the Court for the purposes of Section 3D(3) in respect of all projects under the 1956 Act, in particular for excluding the time spent after issue of Section 3A notification, in obtaining the environmental clearance as well as for permissions under the forest laws.

“Thus, the acquisition process set in motion upon issue of Section 3A notification can go on in parallel until the stage of publication of notification under Section 3D, which can be issued after grant of clearances/permissions by the competent authority under the environment/forest laws and attaining finality thereof.”

[Project Director, Project Implementation Unit v. P.V. Krishnamoorthy, 2020 SCC OnLine SC 1005, decided on 08.12.2020]


*Justice AM Khanwilkar has penned this judgment. Read more about him here.

Counsels heard: Solicitor General of India Tushra Mehta, Senior Counsels S. Nagamuthu, Sanjay Parikh, Nikhil Nayyar, Anita Shenoy, Counsels Kabilan Manoharan advocate, P. Soma Sundaram, T.V.S. Raghavendra Sreyas and  S. Thananjayan

Also read: Centre versus State| Who has the power to make law declaring any land within a State as a national highway? Supreme Court answers

Case BriefsHigh Courts

Kerala High Court: Raja Vijayaraghavan V J., allowing the present writ petition, held that the provisions for compensation and payment of interest under the Land Acquisition Act shall also be attracted in the cases of acquisition by the National Highway Authority of India (NHAI).

 Brief Facts

The property owned by the petitioners herein were acquired for the development of Mannuthy-Wadukkumcherry section National Highway 47 invoking the provisions of the National Highways Act, 1956. Aggrieved by the amount of compensation fixed by the Land Acquisition Officer, the petitioners challenged the same before the Arbitrator. Though the amount of compensation was modified, no sum was granted towards solatium and interest on solatium. The present Writ Petition is filed to seek a writ of mandamus against the concerned authorities, in order to acknowledge the pending claim over solatium.

Issue

Whether the claim raised by the petitioner sustainable in the eyes of law?

 Observation

The Court placed reliance over the following cases pursuant to its decision;

  1. Union of India v. Tarsem Singh, (2019) 9 SCC 304; “We, therefore, declare that the provisions of the Land Acquisition Act relating to solatium and interest contained in Section 23(1A) 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 3J is, to this extent, violative of Article 14 of the Constitution of India and therefore, declared to be Unconstitutional”.
  2. Special Deputy Collector, Thrissur v. Vinod Kumar, 2020 (2) KLT 399; “Para In the light of the aforesaid judgment of the Hon’ble Apex Court which struck down Section 3-J of the Act and the judgment of the Madras High Court, the provisions of the Land Acquisition Act, 1894 relating to the payment of solatium and interest will apply to the acquisitions made under the Act. In so far as the directions in the impugned judgment to make payment of solatium and interest are concerned, we observe that the statutory authorities are bound to compute the compensation in terms of Section 3-G of the Act and grant all benefits provided under the Land Acquisition Act, 1894. The benefits shall be given within a period of two months from the date of receipt of a copy of this judgment.

 Decision

While allowing the present petition the Court directed the concerned authorities to duly consider the representations made, and further act upon as expeditiously as possible.[K.B. Bhami v. Arbitrator (NH), Thrissur, 2020 SCC OnLine Ker 4505, decided on 15-10-2020]


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Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal (SAT): Justice Tarun Agarwal allowed the appeal and substituted the penalty imposed by the impugned order with a warning.

The facts of the case are such that the appellant in the instant case is National Highway Authority of India i.e. NHAI an autonomous body set up by the Parliament under ‘NHAI Act’. It is also listed on the Bombay Stock Exchange and National Stock Exchange and is subject to the provisions of the (Listing Obligations and Disclosure Requirements) Regulations, 2015 i.e. LODR Regulations, 2015. Regulation 52(1) of the LODR Regulations, 2015 mandates filing of the unaudited half-yearly financial results within 45 days from the end of the half financial year. An extension application under Regulation 102 of LODR Regulation 2015 was filed on two occasions with a  procedural fee of Rs 1 lakh pursuant to which SEBI asked for certain clarification which were given therewith yet the request was rejected. The appellants failing which, as there was a delay in filing the half-yearly financial results for the period ending 30-09- 2018 and 31-03-2019, has been slapped with a penalty of Rs 7 lakh by SEBI Board vide order dated 26-05-2020. Being aggrieved by the said order present appeal has been filed.

Counsel for the petitioners Rajesh Ranjan and Neeraj Matta submitted that the delay was a procedural delay which was beyond the control of the officers of NHAI as the NHAI body constituted under the NHAI Act mandates the composition to be from among the high level secretaries from the Union Ministries which makes it difficult for regular meetings to be convened due to lack of adequate quorum and it is also mandated under Regulation 4 of NHAI (Transaction of Business) Regulations, 1997 that no meeting of the Board would be legal or valid unless it was approved by two-third of the members failing which even after the financial results being ready on time it could not been signed and submitted/ furnished. It was further submitted that in view of Section 27 of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the ‘SEBI Act’) no proceedings could have been initiated for imposing penalty under Section 15A of the SEBI Act unless and until the Officers in default were identified and prosecuted under Section 27 of the Act. It was also submitted that the extension application was rejected without giving proper reasons for doing so and hence is against principles of natural justice and Section 15 J was not taken into consideration before imposing penalty.

Counsel for the respondents Abhiraj Arora and Rashi Dalmia opposed the submissions by petitioners stating that the penalty has been imposed as per Regulation 52 of the LODR Regulations and there being no provision for relaxation, relaxation has not been granted and penalty imposed keeping in mind that such callousness has been shown by NHAI on previous 7 instances and thereby 7 Lakh has been imposed.

Regulation 52(1) “Financial Results.

52(1) The listed entity shall prepare and submit un-audited or audited financial results on a half yearly basis in the format as specified by the Board within forty five days from the end of the half year to the recognised stock exchange(s).”

 Regulation 102 “Power to relax strict enforcement of the regulations. 102.The Board may in the interest of investors and securities market and for the development of the securities market, relax the strict enforcement of any requirement of these regulations, if the Board is satisfied that: (a) any provision of Act(s), Rule(s), regulation(s) under which the listed entity is established or is governed by, is required to be given precedence to; or (b) the requirement may cause undue hardship to investors; or (c) the disclosure requirement is not relevant for a particular industry or class of listed entities; or (d) the requirement is technical in nature; or (e) the non-compliance is caused due to factors affecting a class of entities but being beyond the control of the entities.”

 The Tribunal stated that in the instant case penalty became leviable under Section 15A (b) of the SEBI Act as the unaudited half-yearly financial results were not filed within the stipulated period. The Tribunal observed that prosecution under Section 27 of the SEBI Act can be initiated against the Company and its Directors/Officers and persons responsible for the default but penalty proceedings can be initiated under Section 15A for non-filing of the financial results without taking recourse to Sec. 27 of the Act. However, there is an exception to the rule and exemption can be granted by extending the time to comply with the provisions Regulation 102 of the LODR Regulations. It was further observed that the Appellate Authority consists of senior government functionaries who are entrusted with multifarious functions in the Union Government and hence strict compliance must be subject to consideration for the extension of time under Regulation 102 of the LODR Regulations.

The Tribunal held that imposing 7 lakh as penalty without assigning reasons as well as the reason cited by the authorities that the amount so fined is due to his default 7 times is wholly arbitrary as not filing the financial results for the financial years 2015-2016 to 2018-2019 cannot be taken into consideration as a ground for imposition as the violation was only for non-filing of the unaudited half-yearly financial results for the year ending 30-09-2018 and 31-03-2019. The delay in the filing of the returns for the earlier financial years stood exempted and condoned by the respondent themselves which cannot be taken as a mitigating circumstance for the imposition of penalty.

The Tribunal also relied on judgment titled Adjudicating Officer, SEBI v. Bhavesh Pabari, (2019) 5 SCC 90 which held that the conditions stipulated in clause (a), (b), and (c) of Section 15-J SEBI Act, 1992 are not exhaustive and, in a given case, the AO can take note of other factors which are not specified in clause (a), (b), and (c) of Section 15-J of the Act. The Adjudicating Officer also could have taken into consideration the mitigating circumstances in addition to the factors mentioned under Section 15J while considering the imposition of penalty.

The Tribunal held that the Adjudicating Officer failed to take into consideration the mitigating circumstances as a factor under Section 15-J while considering the imposition of penalty.

In view of the above, the Court allowed the appeal and found the imposition of Rs 7 lakhs as unsustainable.[National Highway Authority of India v. Securities Exchange Board of India, 2020 SCC OnLine SAT 158, decided on 27-08-2020]


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Case BriefsHigh Courts

Delhi High Court: C. Hari Shankar, J., addressed three different petitions between the same parties arising out of the award passed by Arbitral Tribunal, out of which, first petition was rejected, the second was passed and third stayed.

GMR and NHAI were under a concession agreement to build a six-lane, 555 km Kishangarh-Udaipur-Ahmedabad Highway, which was terminated by GMR on the ground that there had been a “change in law”, during the period of the agreement.

GMR claimed that it was entitled to compensation, under Clauses 41.1 and 41.3 of the Concession Agreement. The learned Arbitral Tribunal held that there was a “change in law” and that, GMR was entitled to compensation under Clauses 41.1 and 41.3. The majority award, however, permitted NHAI to take a fresh decision, on the claims of GMR, and assess the compensation to which it would be entitled. While the majority Award directed GMR to establish, before NHAI, its entitlement to compensation, under Clause 41.1 and 41.3 of the Concession Agreement, the dissenting Award(minority) opined that, instead of allowing NHAI to adjudicate thereon, the exercise ought to be delegated to an independent authority, such as a reputed firm of Chartered Accountants, or the like. The petitions, O.M.P. (COMM.) 426/2020, and O.M.P. (COMM.) 425/2020, were filed by NHAI and  GMR respectively and were preferred under Section 34 of the Arbitration and Conciliation Act, 1996, to set aside the award by the Tribunal. O.M.P. (I) (COMM.) 92/2020, was filed by GMR under Section 9 of Arbitration and Conciliation Act, 1996 essentially for the interim stay of operation of a letter demanding premium and, further, restraining GMR from taking any coercive steps, under the Concession Agreement.

NHAI claimed to be aggrieved by the decision, of the Arbitral Tribunal, holding GMR to be entitled to compensation, and contended, in its petition [O.M.P. (COMM.) 426/2020] that GMR was not entitled to any compensation on the ground of “change in law”. GMR challenged [in O.M.P. (COMM.) 425/2020] the majority Award, to the extent, it delegated the decision-making power, qua the claim, of GMR, to compensation, to NHAI. In other words, GMR sought to contend that the minority Award of Nayar, J., ought to be accepted.

The Court first decided the petition,O.M.P. (COMM.) 426/2020, and found the Arbitral Tribunal’s Judgment to be in order. Court found that the tribunal’s decision that change of circumstance did result in “change of law” under Clause 48 of the Concession Agreement, the claim of GMR had to be assessed under Clauses 48.1 and 48.3 and GMR had to establish the “financial burden” to claim this compensation.

Therefore, Court disposed of this petition. In O.M.P. (COMM.) 426/2020, the court sided with the minority judgment of the Arbitral tribunal and assigned a new arbitrator who would be taking up the task from where the learned Arbitral Tribunal passed its Award. The Court decided that the Sole Arbitrator would have a time of six months from the date of presentation GMR’s claims for compensation. Therefore, the petition was accepted. The remaining petition, O.M.P. (I) (COMM) 92/2020, was on the issue of the premium to be paid to NHAI, which was stayed by the court in the “the interests of justice”.  Therefore, the third petition stayed.[GMR Hyderabad Vijayawada Expressways (P) Ltd. v. NHAI, 2020 SCC OnLine Del 923, decided on 4-08-2020].

Hot Off The PressNews

Madras High Court: As reported by media, the bench comprising of Huluvadi G Ramesh and M.V. Muralidharan, JJ., directed NHAI to establish separate lane for the VIPs at the toll plazas across the country.

In order to implement the direction of the Court, the High Court bench passed interim orders to NHAI to issue circulars at all the toll plazas to provide a separate lane for all the VIPs and sitting judges. The VIP lane would only permit access to judges, top-ministers and emergency vehicles like ambulances.

Concluding the order, the bench stated that, “It is disheartening to note that the vehicles of VIPs and sitting judges are stopped at toll plazas and they are compelled to wait in the toll plazas for 10 to 15 minutes.” The Court also stated that if the present order won’t be complied with, then the consequence would be of a show cause notice to the authorities concerned.

[Source: Financial Express]