HC quashes mandatory arbitration in highway land acquisition

In a significant ruling with far-reaching implications for land acquisition cases across the country, the Punjab and Haryana High Court has struck down, among other things, mandatory arbitration proceedings under Sections 3G and 3J of the National Highways Act, 1956, declaring them unconstitutional.

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The existing provisions allowed an application under Section 3G (5) if the compensation determined by the competent authority was unacceptable to either the NHAI or the landowner. It empowered an arbitrator to decide the compensation, but the arbitrator—unilaterally appointed by the Centre—was usually a government employee. These provisions also enabled the government to acquire land for highways without granting landowners additional compensation benefits, such as solatium and interest provided under other land acquisition laws.

The Division Bench of Justices Sureshwar Thakur and Vikas Suri ruled that the provisions unfairly deprived landowners of fair compensation and a proper legal remedy. The provisions created an arbitrary and discriminatory mechanism for compensating landowners, violating their fundamental rights under Article 14 of the Constitution.

The petitions were filed by landowners after their properties were acquired under the 1956 Act. They challenged the validity of Sections 3G and 3J on the grounds that the provisions unfairly denied them benefits under the Land Acquisition Act, 1984, and the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation, and Resettlement Act, 2013.

The petitioners contended they were deprived of solatium—an additional compensation of 30%, and interest, provided under Sections 23(2) and 28 of the 1984 Act. They were represented by senior advocate Shailendra Jain, and counsel Abhilaksh Grover, Richa Sharma and Nandini Gupta. Legal assistance was provided by amicus curiae Ankur Mittal.

The court held that the compensation framework under the 1956 Act was unconstitutional. Landowners whose properties were acquired for national highways received lower compensation compared to ones whose land was acquired under the 1984 and 2013 Acts. The Bench found the exclusion of solatium and additional interest to be a violation of Article 14. The court ruled such arbitrary classification could not be sustained under the constitutional framework.

Relying on a Supreme Court’s judgment, the Bench asserted that landowners under the 1956 Act were also entitled to solatium and interest, while stressing the need for a uniform compensation standard for all land acquisition cases, irrespective of the statute under which the acquisition was made.

The court also held that the arbitration mechanism prescribed under Section 3G was fundamentally flawed. Arbitration was a consensual dispute resolution mechanism. But it was imposed unilaterally on landowners without their consent.

Allowing the petitions, the Bench directed the Union of India and other respondents to award solatium at 30%, interest at 9% and 15% in accordance with the 1984 Act. All pending arbitration petitions under these Sections were deemed ineffective and fresh awards were to be issued based on fair compensation principles.