Project Director, National Highways Authority of Indiav.Alfa Remidis Ltd and Others

Legal Analysis: Project Director, National Highways Authority of India vs. Alfa Remidis Ltd. and Others

Citation: 2026 INSC 480
Court: Supreme Court of India
Bench: Justice Sanjay Kumar (Division Bench)
Date of Decision: May 12, 2026
Nature of Judgment: Civil Appeal under Article 136 of the Constitution of India against the judgment of the High Court of Judicature at Bombay, Nagpur Bench, in Arbitration Appeal No. 39 of 2023.

Synopsis of the Judgment

The National Highways Authority of India (NHAI) appealed against the enhancement of compensation awarded to a landowner for land acquired for four‑laning of National Highway No. 547‑E. The competent authority initially classified the land as agricultural and awarded compensation at ₹161.63 per square metre. On arbitration under Section 3G(5) of the National Highways Act, 1956, the Arbitrator (Additional Commissioner) held that the land was being used for industrial purposes (manufacturing paracetamol) and relied on a single sale deed of a residential plot in a nearby village to enhance compensation to ₹3,588 per square metre. The District Judge set aside the arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996, holding that the Arbitrator had violated Section 26 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. The High Court, in appeal under Section 37, restored the arbitral award. The Supreme Court set aside the High Court’s judgment and the arbitral award, holding that the Arbitrator had committed a patent illegality by (i) relying on a sale deed of a dissimilar type of land (residential) when the acquired land was industrial, and (ii) using a single sale exemplar instead of determining the average sale price from multiple sale deeds as mandated by Section 26(1)(b) read with Explanations 1 to 4. The Court directed that compensation be determined under Section 26(1)(a) using the ready reckoner rate of ₹2,020 per square metre.

1. Basic Information of the Judgment

• Case Title: Project Director, National Highways Authority of India vs. Alfa Remidis Ltd. and others

• Civil Appeal No.: Arising out of Special Leave Petition (C) No. 33773 of 2025

• Bench: Justice Sanjay Kumar (Division Bench)

• Date of Decision: May 12, 2026

• Citation: 2026 INSC 480

• Appeal From: Judgment dated 05.06.2025 of the High Court of Judicature at Bombay, Nagpur Bench, in Arbitration Appeal No. 39 of 2023

2. Legal Framework

Laws and Provisions Involved

• National Highways Act, 1956 (NH Act): Section 3A(1) (acquisition notification), Section 3G(1) (determination of compensation by competent authority), Section 3G(5) (appeal/arbitration)

• Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (2013 LA Act): Section 26 (determination of market value of land by Collector – clauses (a), (b), (c); Explanations 1 to 4), Section 28 (additional benefits), First Schedule, Fourth Schedule (NH Act at Serial No. 6)

• Arbitration and Conciliation Act, 1996: Section 34 (setting aside arbitral award), Section 34(2A) (patent illegality), Section 37 (appeal against order under Section 34)

• Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Removal of Difficulties) Order, 2015: Clarified that the 2013 LA Act applies to acquisitions under enactments specified in the Fourth Schedule (including the NH Act).

Key Precedents Cited

1. National Highways Authority of India vs. P. Nagaraju alias Cheluvaih and another (not fully cited) – Held that all aspects contained in Sections 26 to 28 of the 2013 LA Act for determination of compensation are applicable to land acquisition under the NH Act.

2. Madhya Pradesh Road Development Corporation vs. Vincent Daniel and others (2022) (citation not fully provided) – Interpreted Section 26(1) of the 2013 LA Act; held that the language implies that there should be multiple sale deeds available for reference, as singular deals may not supply adequate and reliable data.

What the Judgment is About

The judgment addresses the proper method of determining compensation for land acquired under the NH Act, in light of the mandatory applicability of Section 26 of the 2013 LA Act. It clarifies that an arbitral award under Section 3G(5) of the NH Act can be set aside under Section 34 of the Arbitration Act for patent illegality if the Arbitrator ignores the statutory framework, uses a single sale exemplar of a dissimilar type of land, or fails to choose the higher of the options under Section 26(1)(a) and (b). The Court also emphasises that the “patent illegality” ground under Section 34(2A) applies even if the proviso to that section prohibits mere reappreciation of evidence – a fundamental contravention of the statute is a patent illegality.

3. Relevant Facts

• Acquisition: Land in Survey No. 66, Mouza Pardi (Rithi), Tahsil Saoner, Nagpur District, admeasuring 1,394 square metres, was acquired for four‑laning of NH‑547‑E vide notification dated 09.05.2017 under Section 3A(1) of the NH Act.

• Competent Authority’s award (27.03.2018): The Deputy Collector classified the land as fallow/agricultural/dry crop land and awarded compensation at ₹161.63 per square metre based on three sale deeds of agricultural land.

• Arbitration under Section 3G(5) (Award dated 22.11.2021): Landowner (Alfa Remidis Ltd.) asserted that the land was being used for industrial purpose (manufacturing paracetamol). The Arbitrator (Additional Commissioner, Nagpur Division) accepted this and applied the rate of ₹3,588 per square metre from a registered sale deed dated 29.03.2017 relating to a small residential plot in Mouza Saoner (a nearby village). The Arbitrator did not consider the ready reckoner rate of ₹2,020 per square metre.

• Section 34 petition (judgment dated 11.09.2023): NHAI and the Government of India filed an application under Section 34 before the District Judge‑10, Nagpur, challenging the award. The District Judge set aside the award, holding that the Arbitrator had violated Section 26 of the 2013 LA Act.

• Section 37 appeal (impugned High Court judgment dated 05.06.2025): The landowner appealed. The High Court restored the arbitral award, holding that the land was non‑agricultural and that the Arbitrator had correctly relied on the sale deed of a nearby village.

• Supreme Court appeal: NHAI appealed.

4. Issues

1. Whether the Arbitrator (and the High Court in appeal) correctly applied Section 26 of the 2013 LA Act in determining the market value of the acquired land.

2. Whether reliance on a single sale deed of a residential plot in a nearby village, when the acquired land was used for an industrial purpose, violated the requirement under Section 26(1)(b) that the land must be of a “similar type”.

3. Whether the arbitral award was liable to be set aside under Section 34(2A) of the Arbitration Act for patent illegality.

5. Ratio Decidendi

A. Applicability of the 2013 LA Act to NH Act acquisitions (Para 8):

The Court affirmed that the 2013 LA Act (Sections 26 to 28) applies to land acquisition under the NH Act. This was already settled in NHAI vs. P. Nagaraju and by the Removal of Difficulties Order, 2015, which lists the NH Act at Serial No. 6 of the Fourth Schedule.

B. The three options under Section 26(1) – which is higher (Para 10-12):

Section 26(1) mandates the Collector (or the Arbitrator in appeal) to adopt the higher of the three options:

• Clause (a): the market value specified in the Indian Stamp Act for registration of sale deeds / agreements to sell in the area where the land is situated (i.e., the ready reckoner rate).

• Clause (b): the average sale price for similar type of land situated in the nearest village or nearest vicinity area, determined by taking into account sale deeds registered during the immediate three preceding years, and using the methodology of averaging the highest one‑half of the sale prices.

• Clause (c): consented amount (not relevant).

C. Error in relying on a single sale deed of dissimilar land (Para 11-12):

The Arbitrator relied on a single sale deed dated 29.03.2017 relating to a residential plot in Mouza Saoner. The acquired land was being used for an industrial purpose (manufacturing paracetamol). The two lands were not of a “similar type” as required under Section 26(1)(b). Therefore, the Arbitrator could not have adopted that sale exemplar. Moreover, the statutory scheme requires multiple sale deeds to determine the average sale price; a single sale deed does not supply adequate and reliable data (following MP Road Development Corp. vs. Vincent Daniel).

D. The correct method – ready reckoner under Section 26(1)(a) (Para 12):

The landowner itself had cited the ready reckoner rate of ₹2,020 per square metre, which was the government rate for stamp duty purposes for lands on the highway in Zone 4 (in which Mouza Pardi (Rithi) fell). That being the rate under Section 26(1)(a), and there being no challenge to its applicability, that is the rate that should have been adopted. The Court held that the landowner would be entitled to compensation at ₹2,020 per square metre, not ₹3,588 per square metre.

E. Patent illegality under Section 34(2A) (Para 12):

The Arbitrator completely ignored the directives of Section 26(1)(b) and the Explanations. This constituted a patent illegality appearing on the face of the award. The High Court erred in restoring the award under Section 37 without addressing this fundamental violation. The “erroneous application of law” is not protected by the proviso to Section 34(2A) when the error is so fundamental that it goes to the root of the determination.

F. Consequential benefits (Para 13):

The landowner would also be entitled to all consequential statutory benefits under the 2013 LA Act (solatium, interest, etc.). The sum of ₹50,00,000 already withdrawn by the landowner pursuant to the interim order of the Supreme Court was to be adjusted against the compensation now payable.

6. New Legal Principles Established / Reiterated

• A single sale deed cannot be relied upon to determine the “average sale price” under Section 26(1)(b) of the 2013 LA Act. The statutory scheme (Explanations 1 to 4) contemplates multiple sale deeds, and the average is to be calculated taking one‑half of the total number of sale deeds with the highest sale price. A singular exemplar does not supply adequate or reliable data.

• The land used for the acquired property must be of a “similar type” as the land in the sale deeds relied upon. Residential land cannot be treated as similar to industrial or non‑agricultural land for the purpose of determining compensation.

• Even in arbitral proceedings under Section 3G(5) of the NH Act, the Arbitrator is bound by the statutory framework of Section 26 of the 2013 LA Act. Ignoring this framework constitutes a patent illegality under Section 34(2A) of the Arbitration Act, and the award is liable to be set aside.

7. Court’s Analysis and Examination of Concepts

The Court first reaffirmed that the 2013 LA Act applies to acquisitions under the NH Act. It then examined Section 26(1) in detail, noting the three options and the mandatory requirement to adopt the higher.

The Court noted that the landowner had produced evidence of industrial use (paracetamol manufacturing unit). The ready reckoner rate of ₹2,020 per square metre was available as the stamp duty valuation for the area. The Arbitrator, however, ignored that option and instead relied on a single sale deed of a residential plot.

The Court analysed the concept of “similar type of land”. It held that a residential plot is not “similar” to an industrial plot. The purpose of the land, its zoning, and its permitted use are relevant factors. The Arbitrator’s reliance on a sale deed of a dissimilar land was a clear error.

The Court also observed that the statutory scheme under Explanation 1 to 4 requires the Collector to consider multiple sale deeds (all sale deeds registered in the preceding three years) and then take the average of the highest one‑half of those sale prices. A single sale deed cannot represent an “average sale price”. The Arbitrator’s approach was contrary to the plain language of the statute.

The Court then addressed the standard of review under Section 34 of the Arbitration Act. While the proviso to Section 34(2A) prohibits setting aside an award merely on the ground of erroneous application of law or reappreciation of evidence, a fundamental contravention of a statutory provision – especially a mandatory provision like Section 26 – constitutes a patent illegality that vitiates the award. The High Court, in its Section 37 appellate jurisdiction, erred by not correcting this error.

The Court concluded that the correct compensation should be determined under Section 26(1)(a) using the ready reckoner rate of ₹2,020 per square metre. The NHAI’s appeal was allowed, and the impugned High Court judgment was set aside along with the arbitral award.

8. Critical Analysis

Strengths: The judgment provides a clear, step‑by‑step application of Section 26 of the 2013 LA Act to acquisitions under the NH Act. It corrects a common mistake where arbitrators and courts rely on a single sale exemplar without regard to the statutory methodology. The emphasis on “similar type of land” prevents the adoption of rates from wholly dissimilar transactions (e.g., residential for industrial land). The holding that Section 26(1)(a) (ready reckoner) is a legitimate and often higher option will be useful for acquiring authorities.

Potential concerns: The judgment does not discuss the situation where the ready reckoner rate itself may not reflect the true market value, especially for industrial land. However, the Court held that the landowner itself had cited the ready reckoner rate, and it was the higher of the two options available (since the other option was based on a dissimilar land). The judgment also leaves open the question of what if the ready reckoner rate is lower than the actual market value – in such a case, the landowner could argue under clause (b) by producing multiple sale deeds of similar industrial land. That issue was not before the Court.

Practical impact: This judgment will be cited in all land acquisition references under the NH Act and other Acts listed in the Fourth Schedule. It will compel the competent authorities and arbitrators to strictly adhere to the methodology of Section 26, including the use of multiple sale deeds and the “similar type” requirement. It also clarifies that a Section 34 challenge can succeed on the ground of patent illegality if the arbitrator ignores the statutory framework.

9. Final Outcome

• Civil Appeal allowed.

• The impugned judgment of the High Court dated 05.06.2025 in Arbitration Appeal No. 39 of 2023 is set aside.

• The arbitral award dated 22.11.2021 is set aside.

• The compensation payable to respondent No. 1 (Alfa Remidis Ltd.) for the acquired land (1,394 square metres) is determined at the rate of ₹2,020 per square metre under Section 26(1)(a) of the 2013 LA Act (ready reckoner rate).

• The landowner shall be entitled to all consequential statutory benefits under the 2013 LA Act.

• The sum of ₹50,00,000 already withdrawn by respondent No. 1 pursuant to the interim order of this Court shall be adjusted against the compensation now payable.

• No order as to costs.

10. Practical Application (Use in Court)

• For landowners/claimants: When filing an arbitration or reference under the NH Act (or other Acts listed in the Fourth Schedule), produce multiple sale deeds of similar type of land (same zoning/use) from the nearest village or vicinity, covering the preceding three years. Also, always cite the ready reckoner (stamp duty) rate under Section 26(1)(a) – it may be higher than the average sale price. Do not rely on a single sale deed.

• For acquiring authorities (NHAI, etc.): If the arbitrator or court relies on a single sale deed of a dissimilar land (e.g., residential for industrial), file a Section 34 petition citing patent illegality under Section 34(2A). Argue that the arbitrator has violated the mandatory statutory regime under Section 26 of the 2013 LA Act. Cite this judgment to challenge any award based on a single exemplar or dissimilar land.

• For courts/arbitrators: When determining compensation under Section 26 of the 2013 LA Act, strictly follow the three‑option hierarchy – choose the higher of (a), (b), or (c). For option (b), collect all sale deeds of similar type of land in the nearest village/vicinity for the preceding three years, then calculate the average of the highest one‑half of those prices. Do not rely on a single sale deed. If the land is industrial, do not use residential sale deeds.

11. Court Lines

“The Arbitrator demonstrably erred in relying upon the sale deed dated 29.03.2017 relating to residential land in an adjoining village to determine the market value of respondent No. 1's land, which was being used for an industrial purpose. Clearly, the two lands were not of a ‘similar type’ for the purposes of Section 26(1)(b) of the 2013 LA Act.” (Para 11)

“The language used in Section 26(1)(b) read with Explanations 1 to 4 implies that there should be multiple deeds available for reference, as singular deals may not supply adequate and reliable data.” (Para 11, quoting Madhya Pradesh Road Development Corporation vs. Vincent Daniel)

“The cloak of protection afforded by the proviso to Section 34(2A) cannot be extended to the present arbitral award. The Arbitrator completely ignored the directives of Section 26(1)(b) of the 2013 LA Act and the Explanations thereunder, by adopting a sale exemplar of a totally dissimilar type of land and, at that, a single sale exemplar, which was contrary to the statutory mandate.” (Para 12)

“Respondent No. 1 would, therefore, be entitled to compensation for its acquired extent of 1394 square meters @ 2,020/- per square meter and not @ 3,588/- per square meter.” (Para 13)

12. Legal Strategy Insight

• For landowners/claimants: At the reference stage (Section 3G(5) of NH Act or arbitration under other statutes), gather and file all registered sale deeds of similar land (same zone/use) from the nearest village for the three years preceding the year of the notification. Compute the average of the highest one‑half of the prices. Also, obtain the ready reckoner (stamp duty) rate for the area. Compare both and claim the higher. If the ready reckoner rate is higher, you need not produce multiple sale deeds. This judgment confirms that the ready reckoner rate under Section 26(1)(a) is a valid independent option.

• For acquiring authorities (NHAI, government): If the landowner produces sale deeds of dissimilar land (e.g., residential land for agricultural or industrial acquisition), object that the land is not “similar type”. Also object if only one sale deed is produced. Argue that the arbitrator must compute the average from multiple deeds. If the arbitrator ignores these objections and passes an award, challenge it under Section 34 on the ground of patent illegality. In the Section 34 petition, quote Section 26(1)(b) and Explanations 1‑4, and cite this judgment.

• For arbitrators: When determining compensation, first call upon both parties to produce all sale deeds of similar type of land in the nearest village/vicinity for the preceding three years. Prepare a table of sale prices, discard the lowest half, take the average of the highest half. Compare that average with the ready reckoner rate under Section 26(1)(a). Adopt the higher. Record reasons for your conclusion, including a finding on what constitutes “similar type”. This will make the award less vulnerable to challenge.