Supreme Court Upholds Compensation Award in Bengaluru-Mysuru Highway Land Acquisition Dispute

The Supreme Court of India has delivered a significant ruling in the case of National Highways Authority of India (NHAI) v. Sri P. Nagaraju @ Cheluvaiah & Anr. regarding the determination of compensation for land acquired for the Bengaluru-Mysuru Highway (NH-275). The case involved multiple appeals filed by NHAI against the compensation awarded to landowners by the Arbitrator, which was later upheld by the High Court of Karnataka.

The dispute centered on the method of compensation determination, the valuation of acquired land, and whether the Arbitrator had overstepped its jurisdiction in enhancing compensation beyond what was initially set by the Special Land Acquisition Officer (SLAO). The judgment has far-reaching implications for land acquisition under the National Highways Act and compensation calculations.

Background of the Case

The National Highways Authority of India (NHAI) initiated land acquisition for widening NH-275 under the National Highways Act. The land in question, located in Ramanagara and Bengaluru Rural Districts, was acquired through notifications issued on February 1, 2016, and February 2, 2016.

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The Special Land Acquisition Officer (SLAO) had initially awarded compensation at Rs.2,026 per square meter and Rs.17,200 per square meter, based on government-issued guidance values. However, landowners contested these valuations and sought arbitration under Section 3G(5) of the National Highways Act, leading to a revised award of Rs.15,400 per square meter and Rs.25,800 per square meter, respectively.

Petitioner’s Arguments (NHAI)

NHAI challenged the compensation awards on the following grounds:

• Misapplication of Market Value: The Arbitrator relied on a later guidance value notification dated March 28, 2016, instead of the relevant value applicable at the time of acquisition.
• Violation of Legal Provisions: Under Section 3G(7)(a) of the National Highways Act, compensation should be based on the market value prevailing on the date of acquisition notification (February 1, 2016), making the reliance on a later notification incorrect.
• Arbitrary Enhancement: The Arbitrator adopted a higher rate applicable to residential layouts (City Greens and Zunadu) without establishing comparability to the acquired land.
• Patent Illegality: The award lacked sufficient reasoning and was contrary to Section 31(3) of the Arbitration and Conciliation Act, 1996, which mandates well-reasoned awards.
• Denial of Opportunity: NHAI argued that it was not given a fair opportunity to contest the new valuation figures introduced by the Arbitrator.

Respondent’s Arguments (Landowners)

The landowners justified the increased compensation based on the following claims:

• Revised Market Value: The notification dated March 28, 2016, better reflected the fair market price of their converted residential and commercial lands.
• Guidance Value Application: The Arbitrator correctly relied on government-approved guidance values applicable to comparable lands.
• Equity and Fair Compensation: The principles laid down under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation, and Resettlement Act, 2013 (RFCTLARR Act) must be considered.
• Limited Judicial Review: Courts should not interfere with Arbitrator’s findings unless there is gross procedural irregularity.

Supreme Court’s Observations

The Supreme Court evaluated the arguments and made the following key observations:

• The National Highways Act is included in the Fourth Schedule of the RFCTLARR Act, making it subject to fair compensation principles.
• While the Arbitrator had the discretion to adopt a reasonable methodology, it failed to provide adequate reasoning for applying the residential layout rates to the acquired land.
• The use of the later guidance value notification (March 28, 2016) was found to be reasonable since its process began before the acquisition notification.
• The Arbitrator should have provided clearer justification for adopting higher rates applicable to other residential layouts.

Final Judgment

The Supreme Court ruled as follows:

• The compensation at Rs.15,400 per square meter for most of the acquired land was upheld.
• The award of Rs.25,800 per square meter for industrial land was set aside due to improper methodology in applying a 50% enhancement from an unrelated notification.
• The matter was remanded back to the Arbitrator for reconsideration of industrial land compensation with proper reasoning.
• The principles of fair compensation under the RFCTLARR Act were reaffirmed as applicable to acquisitions under the National Highways Act.

This ruling clarifies the legal standards for compensation in highway projects and reinforces the importance of reasoned awards in arbitration proceedings.

Petitioner Name: National Highways Authority of India.
Respondent Name: Sri P. Nagaraju @ Cheluvaiah & Anr..
Judgment By: Justice Indira Banerjee, Justice A.S. Bopanna.
Place Of Incident: Bengaluru-Mysuru Highway, Karnataka.
Judgment Date: 10-07-2022.

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