Tenfold NH-206 compensation gap unacceptable, says Karnataka High Court, but landowners must start again
Justices Anu Sivaraman and T. P. Vivekananda set aside both the Deputy Commissioner arbitral award that raised compensation for Ramashettihalli land to the Edenahalli rate and the District Court order that quashed it, holding that neither could stand and that Section 37 does not let the court fix the value itself.
When the National Highways Authority of India widened the Tumkur-Shivamogga stretch of NH-206 to four lanes, it took land from two villages in Tiptur taluk that sit on opposite sides of the same road. Landowners in Edenahalli were offered Rs 17,33,166 an acre. Landowners in Ramashettihalli, across the carriageway, were offered Rs 1,58,220. The Deputy Commissioner, sitting as arbitrator, levelled the two; the District Court at Tiptur set his award aside. On 17 October 2026 a division bench of the Karnataka High Court, Justice Anu Sivaraman and Justice T. P. Vivekananda, held that a tenfold gap between adjoining lands on either verge of a highway cannot be justified, but also that the arbitrator's award rested on too little, and sent the landowners back to begin again under Section 3G(5) of the National Highways Act.
Two awards, one notification
The appellants, Smt Gangamma, aged about 73, and the legal heirs of Shri Kumaraiah, who died on 9 November 2024, owned 304 square metres in Survey No. 88/1 and 10,117 square metres in Survey No. 88/2 of Ramashettihalli village. The land was notified on 19 January 2018 for the four-laning of NH-206 between kilometre 66.540 and kilometre 119.790. On 13 November 2018 the Special Land Acquisition Officer and competent authority fixed the market value at Rs 1,58,220 per acre, taking sale instances from 2015-16 to 2017-18 and averaging the two highest, registered on 7 June 2017 and 1 August 2017. The award recorded the 2017 guidance value for Ramashettihalli at Rs 1,29,000 per acre.
Edenahalli, the next village, was acquired under the same preliminary notification but received its award later, on 18 December 2019. There the guidance value was Rs 5,82,000 per acre, the guidance value for land abutting NH-206 was Rs 8,80,000 per acre, and the market value fixed from average sales statistics came to Rs 17,33,166 per acre, a figure the Ramashettihalli owners put at Rs 43,000 per gunta.
The Ramashettihalli owners went to the Deputy Commissioner, Tumkur, as arbitrator under Section 3G(5) of the National Highways Act, 1956, and asked for the Edenahalli rate. NHAI opposed the claim, saying no documents showed the land was worth more than the SLAO had found and the award complied with the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. The arbitrator inspected the site with the SLAO, the Tahsildar and a surveyor, found that the two villages lie on the left and right of NH-206 with both sets of land abutting it, noted that the main carriageway runs through Edenahalli land and the service road of the same highway through Ramashettihalli land, called the lower valuation unscientific, and on 25 January 2023 fixed the market value at Rs 43,329 per gunta. He included a diagram of the highway and the two parcels in the award.
What NHAI argued under Section 34
NHAI petitioned the District Court under Section 34(2) of the Arbitration and Conciliation Act, 1996. Its grounds, as the High Court summarised them: the arbitrator never considered the value as on the date of the preliminary notification and relied only on proximity; the SLAO had already taken account of guidance value and three years of sale instances in both villages; the Edenahalli award post-dated the Ramashettihalli award by more than a year, so the SLAO could not have considered it; the guidance value notification could be challenged only before the Central Valuation Committee; the spot inspection was conducted without notice to NHAI and without any report on record, in breach of natural justice; and Edenahalli is one kilometre from the municipal limits of Tiptur town while Ramashettihalli is 3.2 kilometres away, which explained the difference.
The landowners filed cross-objections asking for Rs 428.27 per square metre and for the fact that the acquisition had split their land into two parts to be reflected under Section 26 of the 2013 Act. NHAI replied that cross-objections were not maintainable, that the only route was a separate Section 34 petition, and that a Section 34 court can neither modify an award nor remand it, citing National Highways Authority of India v. M. Hakeem, (2021) 9 SCC 1. The V Additional District and Sessions Judge, Tumkur, sitting at Tiptur, allowed the petition on 23 August 2024 in A.S. No. 10004 of 2024 and set the award aside.
The appeal: location of the land, not of the village
Smt Maithreyi Krishnan, for the landowners, argued that none of the Section 34(2)(b)(ii) grounds existed. The arbitrator had rightly held that land on either side of the same highway could not differ in value by ten times. The District Court's finding that the two villages were acquired under different notifications was a patent error on the face of the record. Where adjacent villages show such a gap, fixing a uniform rate is the law, and the SLAO's reliance on 2015-18 sale deeds was untenable because Section 26 of the 2013 Act makes the guidance value on the date of the notification the guiding factor. The spot inspection had been conducted in the presence of the SLAO, who represents NHAI, so no fault could be found with it. And the distance of each village from the Tiptur municipal limits was irrelevant, because it is the location of the acquired land, not the gramathana, that matters.
Smt Shilpa Ghanshyambhai Shah, for NHAI and the SLAO, said the District Court had committed no illegality. The SLAO had considered guidance value and three years of sale exemplars for both villages, the Edenahalli award came later and could not have been taken into account, and there was no occasion for the arbitrator to reach a different conclusion by relying on it. Sri Byregowda N, Additional Government Advocate, appeared for the Deputy Commissioner.
Why the District Court's reasoning failed
The bench framed two questions: whether the arbitrator was justified in re-determining compensation solely on the Edenahalli award, and whether the District Court was justified in setting the award aside. It noted at the outset that the District Court had set the award aside without recording under which limb of Section 34 it did so.
On the facts, the bench found that both villages were notified on the same date, that the SLAO's awards disclosed guidance values of Rs 1,29,000 for Ramashettihalli and Rs 5,82,000 for Edenahalli as on that date, and that while the Edenahalli award applied the guidance value for highway-abutting land, the Ramashettihalli award, though it recorded the guidance value, did not make clear how far it was used; the final figure came from averaging two sale deeds. With the lands abutting the same existing highway, one carrying the main carriageway and the other the service road, a tenfold difference was unacceptable. The District Court's distance finding was rejected in terms: the relevant consideration was the location of the acquired land, not of the village settlements, and since both parcels lie on either side of the road being widened, the distance between them, in all probability, “may not be more than 100 meters”. The arbitrator had visited the site and drawn a diagram that NHAI never disputed before the District Court or the High Court; neither the SLAO nor the District Court had considered it.
The bench accepted the landowners' reliance on Krishna Kumar v. State of Haryana, 2025 SCC OnLine SC 1043, extracting the Supreme Court's holding, built on Land Acquisition Officer v. Karigowda and Kanwar Singh v. Union of India, that adjacent lands or villages with similar potential and advantages must be compensated equitably unless distinctions are clearly and substantially justified, that an isolated sale deed cannot ground a widely divergent rate, and that compensation cannot be assessed in a mechanical or formulaic way. It also set out paragraphs 52, 53, 71 and 72 of National Highways Authority of India v. P. Nagaraju alias Cheluvaiah, (2022) 15 SCC 1, which treat an SLAO award under the Highways Act as no more than an offer of compensation, allow the arbitrator to rely on additional material that aids a just determination, but require that such material be brought on record with opportunity to the other side and that the arbitrator give sufficient reasons, failing which the award is patently illegal; where a Section 34 or Section 37 court cannot modify the award, the course is to set it aside and remit.
Why the award could not survive either
The landowners had also cited Chimanlal Hargovinddas v. Special Land Acquisition Officer, Poona, (1988) 3 SCC 751, for the rule that a court deciding a reference cannot use material the Land Acquisition Officer relied on unless it is produced and proved before the court. The bench accepted that principle as a guide for the arbitrator under the Highways Act, but not for a District Court sitting under Section 34, whose powers differ from a reference court's under the 1894 Act.
Drawing the threads together, the bench held that neither the award nor the District Court's judgment could be sustained. The arbitrator had rightly noticed the disparity and the location and proximity of the acquired lands. The District Court had wrongly relied on distance from the municipal limits. But compensation must rest on relevant material and cogent reasons, with the parties given an opportunity to address that material, and the disparity the arbitrator identified warranted a fresh determination in accordance with law rather than a figure lifted from the neighbouring award. Given the limits on Section 34 and Section 37 jurisdiction, the bench said, it could not substitute its own assessment of compensation for that of the competent forum “merely because a different valuation appears equitable”. Citing M. Hakeem and Gayatri Balasamy v. ISG Novasoft Technologies Ltd., (2025) 7 SCC 1, it held that it could not prefer another valuation, since that would amount to modifying the award. Both the award and the Section 34 order were therefore set at naught on the ground of patent illegality noticed in the judgment, and the parties left to fresh proceedings under Section 3G(5).
Order
The Miscellaneous First Appeal, filed under Section 37(1)(c) of the Arbitration and Conciliation Act, was allowed. The award dated 25 January 2023 in No. LAQ:ARB:206:CR/230/2020 of the Deputy Commissioner and Arbitrator, Tumkur District, and the judgment dated 23 August 2024 in A.S. No. 10004 of 2024 of the V Additional District and Sessions Judge, Tumkur, sitting at Tiptur, were both set aside. The landowners were left free to pursue such remedy as is available to them under Section 3G(5) of the National Highways Act, 1956, read with Section 43(4) of the Arbitration and Conciliation Act, 1996. The judgment was reserved on 17 September 2026 and pronounced on 17 October 2026, authored by Justice T. P. Vivekananda.