The Madhya Pradesh High Court at Gwalior, in a significant judgment by Justice Milind Ramesh Phadke, held that appointing an arbitrator under Section 3(G)(5) of the National Highways Act, 1956 does not determine the seat of arbitration. Instead, it is considered a convenient venue. The ruling emphasized that courts where a part of the cause of action arose retain jurisdiction over such arbitration proceedings.
The decision came in response to several appeals filed by the National Highways Authority of India (NHAI) challenging the order of the 4th Additional District Judge, Shivpuri, which had set aside an arbitral award passed by the Commissioner, Gwalior Division, who was appointed as the arbitrator.
Background of the Case
Lands belonging to the respondents were acquired for the expansion of National Highway No. 3. The acquisition process began with a Gazette Notification issued on 15 October 2011. Compensation was determined and awarded on 15 January 2013. Dissatisfied with the compensation, the landowners filed an application under Section 3(G)(5) of the NH Act seeking enhancement. However, their application was rejected by the arbitrator on 5 December 2016.
The respondents then moved a petition under Section 34 of the Arbitration and Conciliation Act, 1996 before the District Judge, Shivpuri. The matter was later transferred to the 4th Additional District Judge, Shivpuri, who allowed the application and set aside the arbitral award. NHAI appealed, contending that only the courts in Gwalior had jurisdiction since the arbitrator sat there.
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NHAI argued that since the Central Government appointed the Divisional Commissioner of Gwalior as the arbitrator and the arbitration proceedings were held in Gwalior, that location should be considered the seat of arbitration. They contended that only Gwalior courts had jurisdiction to hear challenges under Section 34 of the Act.
Arguments by the Landowners
The respondents maintained that the arbitration was statutory, not contractual. Since there was no arbitration agreement between the parties, the seat or venue was never mutually decided. They emphasized that just because the Commissioner, Gwalior Division conducted the arbitration there, it doesn't automatically make Gwalior the seat of arbitration. They further pointed out that the cause of action arose in Shivpuri where the land was located and where the first legal application was filed, giving jurisdiction to Shivpuri courts.
Court’s Observations
The High Court drew attention to the statutory nature of arbitration under the NH Act. It reiterated the principle established by the Supreme Court in BGS SGS Soma JV v. NHPC Ltd. that when no specific seat is designated by agreement, the venue does not become the seat by default.
"When there is no express designation of the venue as the seat, and the arbitration arises out of statute, the venue only serves as a place of convenience."
The Court also emphasized that:
“Under the NH Act, arbitration is for determining just compensation and is not based on mutual contractual obligations.”
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Therefore, the appointment of the Commissioner, Gwalior Division as arbitrator does not designate Gwalior as the seat. Since the land in dispute lies in Shivpuri and the first application was filed there, the Shivpuri court rightfully had jurisdiction under Section 42 of the Arbitration Act.
The High Court upheld the lower court's decision to set aside the award. However, recognizing that the respondents would be left without remedy if a fresh arbitrator couldn't be appointed under Section 11, the Court relied on the Supreme Court’s ruling in P. Nagaraju alias Cheluvaiah v. NHAI. It held that in such statutory arbitrations, the court has the power to remand the matter back for re-arbitration.
Case Title – National Highways Authority of India v. Dinesh Singh & Others
Case No. – Arbitration Appeal Nos. 99, 100, 101, 103, 105, 106, 107 of 2021
Appearance-
For Petitioner - Shri Ashish Saraswat
For Respondent - Shri Deependra Singh Raghuvanshi
