In a significant move, the Kerala High Court has directed that all arbitration proceedings under the National Highways Act, 1956, currently pending before the District Collectors, must be kept on hold until further orders. However, the Court made it clear that if any litigant wishes to continue with the proceedings before the District Collector, they are free to do so.
“In the interest of justice, we are of the view that the proceedings now pending before the District Collector have to be kept on hold till a further decision is taken in this matter,”
— Kerala High Court
This order came from a division bench comprising Justice A. Muhamed Mustaque and Justice P. Krishna Kumar in W.A. No.1784 of 2023, which also involved a batch of related petitions.
The Court noted several critical concerns:
- Heavy Caseload on District Collectors:
With over 20,213 arbitration references currently pending, the bench found it unrealistic for District Collectors—who are already burdened with other administrative responsibilities—to handle each case effectively. - Denial of Fair Hearing:
The Court observed that many cases were disposed of without allowing parties to present evidence, violating principles of natural justice. - Limited Scope for Appeal:
Under Section 34 of the Arbitration and Conciliation Act, 1996, the scope for challenging an arbitration award is limited. This puts landowners in a difficult position if they feel their grievances about valuation or compensation were not adequately addressed. - Conflict with Apex Court Ruling:
A serious challenge was also raised against appointing District Collectors as arbitrators in light of the Supreme Court's judgment in Central Organization for Railway Electrification v. ECI SPIC SMO MCML (JV) [2024 SCC Online SC 3219]. “There is a serious challenge raised in regard to the appointment of the District Collector as Arbitrator in the light of the Arbitration and Conciliation Act and clause 'e' in paragraph 169 of the Judgment of the Apex Court.”
— Kerala High Court
Read also: Kerala High Court Stays Proceedings on SFIO Report Against CMRL for Two Months
Recognizing the gravity of the issue, the Court directed the Chief Secretary of Kerala to inform all District Collectors of the order. Additionally, it instructed the Central Government to explore alternate arbitration mechanisms.
Specifically, the Court highlighted the Kerala High Court Arbitration Centre as a viable option for handling such disputes. This centre has a provision for reserved arbitration in cases where the State or Central Government is a party.
“In the reserved arbitration, there is a complete waiver of the arbitration fee except for paying a nominal administrative fee.”
— Kerala High Court
These reserved arbitrations are handled by officers from the State Judicial Service, ranked as Senior Civil Judges, who serve as Deputy Directors of the Kerala Arbitration Centre.
Read also: Compensation for Compulsory Acquisition of Land is Taxable Under 'Capital Gains': Kerala High Court
Despite the stay, the Court left the door open for those who prefer to proceed with the existing system.
“However, we make it clear that if any of the litigants insist that the District Collector shall act as Arbitrator and conclude the proceedings; they are free to take up the matter before the District Collector and proceed for the conclusion of the same.”
— Kerala High Court
The matter is scheduled for the next hearing on May 21, 2025. Until then, all arbitration proceedings under the National Highways Act before District Collectors will remain paused unless the parties involved explicitly wish to continue.
Case Title: Chandramohanan K. C. and Others v Union of India and Others
Case No: WA 1704 of 2023
