Introduction 

• This is a landmark judgment where the Supreme Court laid down under Section 34 of the Act the Court only has the power to either uphold or set aside the award, it does not have the power to modify the award. 
• The Judgment was delivered by a 2- judge Bench consisting of Justice RF Nariman and Justice BR Gavai.   

Facts   

• The appeals concern notifications issued and awards passed under the National Highways Act for land acquisition from 2009 onwards. 
• The compensation awards were issued by the competent authority, a Special District Revenue Officer, based on the guideline value of the land and not on comparable sale deeds. 
• As a result, the compensation amounts were extremely low—for example, in one case, between Rs. 46.55 and Rs. 83.15 per square meter. 
• The arbitral awards, issued by the District Collector (appointed by the Government), upheld the same compensation values without modification. 
• Landowners challenged these awards under Section 34 of the Arbitration and Conciliation Act, 1996 (A & C Act), before the District and Sessions Judge. 
• The District Court modified the awards and increased compensation to Rs. 645 per square meter, citing fair market value. 
• The Division Bench of the High Court upheld this modification and remanded the matter to determine compensation for trees and crops. 
• The Solicitor General argued that the National Highways Act, amended in 1997, provides for a speedy acquisition process distinct from the Land Acquisition Act. 
• Under this Act, if the compensation is disputed, an arbitrator appointed by the Central Government determines the final amount, and any challenge lies only under Section 34, which does not allow modification, only setting aside or remitting the award. 
• He contended that allowing courts to modify awards under Section 34 would violate the limited scope of judicial intervention intended by the UNCITRAL Model Law-based Arbitration Act, 1996. 
• The Solicitor General also opposed the High Court’s reliance on the Gayatri Balaswamy case, arguing that Supreme Court precedent bars such modification. 
• On the other side, counsel for landowners highlighted inconsistencies in NHAI's conduct, where in similar cases, it accepted the District Judge’s modified awards and did not appeal. 
• He argued that since NHAI is ‘State’ under Article 12, it cannot selectively file appeals and must act consistently. 
• The respondent’s counsel also supported the view that arbitration under the National Highways Act is not consensual and that such arbitrators merely rubber-stamp the earlier low compensation, providing no effective remedy if courts cannot modify awards. 
• He concluded that both on procedural fairness and merits, the District Court’s modifications were justified, and the appeals should be dismissed.

Issues Involved

• Whether Courts have the powers of the Court under Section 34 of the A & C Act to set aside an award would include the power to modify the award? 

Observations 

• Section 34 of the A & C Act, does not function as an appellate provision; it only allows for the setting aside of arbitral awards on very limited grounds, as listed in sub-sections (2) and (3). 
• The term “recourse” used in Section 34 refers to a limited legal remedy for enforcing a truncated right, and not a full review or appeal. 
• Even under sub-section (4) of Section 34, the court may only adjourn proceedings and allow the arbitral tribunal to take steps to remove the grounds for setting aside the award; the court itself cannot alter the award. 
• Once an arbitral award has been upheld by a court under Section 34 and again under appeal in Section 37, higher courts must be cautious and slow to interfere with such concurrent findings. 
• Under Section 34, the court can only either uphold the award or set it aside if specific grounds are met; it does not have the power to modify the award. 
• A comparison with arbitration laws of other countries (England, the U.S., Canada, Australia, and Singapore) shows that those jurisdictions have express provisions for modifying awards, unlike India’s Arbitration Act. 
• Allowing courts to modify arbitral awards under Section 34 would violate legislative intent and overstep judicial boundaries, amounting to judicial legislation. 
• Only Parliament has the authority to amend Section 34 to allow modification powers, similar to other international statutes. 
• The 1997 National Highways Amendment Act was intended to expedite land acquisition for highways by reducing procedural timelines and restricting legal challenges. 
• Under the National Highways Act, once a Section 3D(2) notification is issued, land vests absolutely in the Central Government without encumbrances, and possession can be taken swiftly once compensation is deposited. 
• Section 20A of the Specific Relief Act, introduced in 2018, has made it nearly impossible to obtain injunctions against highway projects, further facilitating speedy acquisition. 
• The arbitral process under the National Highways Act is not consensual—the arbitrator is appointed solely by the Central Government, and challenges to the award are limited to procedural grounds under Section 34. 
• This creates a disparity between landowners whose land is acquired under the National Highways Act (limited recourse) versus those under the Land Acquisition Act (with full appeal rights), potentially leading to discrimination. 
• Despite the legal flaws identified in the High Court's judgment, the Supreme Court declined to interfere under Article 136 of the Constitution, as doing so would not serve justice given the long delay and precedent of higher compensation paid in similar cases. 
• The Court emphasized that many awards were issued 7–10 years ago, and restarting the process before a non-consensually appointed arbitrator would be unfair at this point. 
• Therefore, the Supreme Court dismissed the appeals, holding that while the law does not permit modification of arbitral awards under Section 34, the facts of these cases do not justify reversal of the enhanced compensation. 

Conclusion 

• The Supreme Court in this case held that the Courts do not possess the power to modify an arbitral award under Section 34 of the A & C Act.