Wednesday, 28 August 2019

Whether court has jurisdiction to appoint Arbitrator in dispute relating to National Highways Act, 1956?

The moot question which arises before us is whether the
application under Section 11 of the Arbitration and Conciliation
Act, 1996(hereinafter being referred to as “Act 1996”) is
maintainable in view of Section 3G(5) of the National Highways
Act, 1956 (hereinafter being referred to as “Act 1956”) which
provides for appointment of an Arbitrator by the Central
Government.


 We are also of the considered opinion that in view of the
power being vested exclusively with the Central Government to
appoint an Arbitrator under Section 3G(5) of the Act 1956, being
a special enactment, the application filed under Section 11(6) of
the Act 1996 for appointment of an Arbitrator was not
maintainable and provisions of the Act, 1996 could not be
invoked for the purpose.

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(s). 6958-6959
OF 2009

NATIONAL HIGHWAYS AUTHORITY
OF INDIA Vs  SAYEDABAD TEA COMPANY LTD.

Rastogi, J.
Dated:AUGUST 27, 2019.

1. The moot question which arises before us is whether the
application under Section 11 of the Arbitration and Conciliation
Act, 1996(hereinafter being referred to as “Act 1996”) is
maintainable in view of Section 3G(5) of the National Highways
Act, 1956 (hereinafter being referred to as “Act 1956”) which
provides for appointment of an Arbitrator by the Central
Government.

2. The relevant seminal facts are that the subject land
comprised in “Sayedabad Tea Estate” situated at Mouza Purba
Madati, J.L. No. 108, Police Station Phansidewa, Dist. Darjeeling
measuring 5.08 acres was acquired by the appellant (National
Highways Authority of India) in exercise of its powers under
Section 3(D) of the Act 1956 vide notification dated 22nd
November, 2005 under L.A.P. Case No. 4/200405
for the
purpose of construction of the highways.
3. The Act, 1956 is a comprehensive code in itself and a
special legislation enacted by the Parliament for acquisition and
for determining compensation and its disbursement where there
are several claimants over the amount deposited towards
compensation determined by the competent authority in
accordance with the mechanism provided under Section 3G of
the Act, 1956. If the amount so determined by the competent
authority under subsection(
1) or subsection
(2) of Section 3G is
not acceptable to either of the parties, the amount shall, on an
application by either of the parties, be determined by the
Arbitrator to be appointed by the Central Government under

Section 3G(5) of the Act. While determining the amount of
compensation under subsection(
1) or subsection(
5), it is the
duty of the Arbitrator to take into consideration the relevant
pointers envisaged under subsection(
7) of Section 3G of the Act,
1956. Where the amount determined by the Arbitrator is in
excess of the amount determined by the competent authority
under Section 3G of the Act, 1956, the Arbitrator may, at its
discretion, award interest at nine per cent per annum on the
excess amount under subsection
(5) of Section 3H from the date
of taking possession under Section 3D till the date of actual
deposit.
4. The extract of the sections of the Act 1956 relevant for the
purpose are as under:“
3G. Determination of amount payable as
compensation.—
(1) ………
(2) ………
(3) ………
(4) ………
(5) If the amount determined by the competent authority
under subsection
(1) or subsection
(2) is not
acceptable to either of the parties, the amount shall,
on an application by either of the parties, be

determined by the arbitrator to be appointed by the
Central Government.
(6) Subject to the provisions of this Act, the provisions of
the Arbitration and Conciliation Act, 1996 (26 of 1996)
shall apply to every arbitration under this Act.
(7) The competent authority or the arbitrator while
determining the amount under subsection
(1) or subsection
(5), as the case may be, shall take into
consideration—
(a) the market value of the land on the date
of publication of the notification under
section 3A;
(b) the damage, if any, sustained by the
person interested at the time of taking
possession of the land, by reason of the
severing of such land from other land;
(c) the damage, if any, sustained by the
person interested at the time of taking
possession of the land, by reason of the
acquisition injuriously affecting his
other immovable property in any
manner, or his earnings;
(d) if, in consequences of the acquisition of
the land, the person interested is
compelled to change his residence or
place of business, the reasonable
expenses, if any, incidental to such
change.
3H. Deposit and payment of amount.—
(1)…….
(2) …….
(3)…….
(4)…….
(5) Where the amount determined under section 3G by
the arbitrator is in excess of the amount determined by
the competent authority, the arbitrator may award
interest at nine per cent, per annum on such excess

amount from the date of taking possession under
section 3D till the date of the actual deposit thereof.
(6)……
……
12…………”
5. In the instant case, the respondentapplicant
being
dissatisfied with the award of compensation determined by the
competent authority under subsection(
1) of Section 3G of the
Act, 1956 filed application for appointment of an Arbitrator in
terms of Section 3G(5) to the Central Government on 8th
December, 2006. As alleged, since the Central Government has
not responded to his request for appointment of an Arbitrator in
terms of letter dated 8th December, 2006 within a period of 30
days from receipt of the request, application was filed on 7th
March, 2007 to the Chief Justice/his designate for appointment
of an Arbitrator invoking Section 11(6) of the Act, 1996. It
reveals that the Arbitrator was appointed by the Central
Government sometime in April 2007.
6. The High Court of Calcutta taking note of the fact that the
Arbitrator has been appointed by the Central Government under
Section 3G(5) of the Act, 1956 after the respondentapplicant
had

moved an application to the Chief Justice/his Designate invoking
its power under Section 11(6) of the Act, 1996 held that right of
appointment of the Arbitrator by the Central Government stands
forfeited as it failed to appoint the Arbitrator until filing of the
application under Section 11(6) of the Act, 1996 before the High
Court of Calcutta and appointment of Arbitrator during the
pendency of proceedings, cannot be said to be a valid
appointment and hence referred the matter to be placed before
the Chief Justice for naming an Arbitrator vide its Order dated 6th
July, 2007.
7. Immediately after passing of the order dated 6th July, 2007,
the appellant moved an application for review and it was brought
to the notice of the High Court that the Act, 1956 being a special
enactment laying down a procedure for appointment of an
Arbitrator where the power is being exclusively vested with the
Central Government under Section 3G(5) of the Act, 1956, the
application made under Section 11(6) of the Act, 1996 is not
maintainable but this was not considered to be a valid reason for
invoking review jurisdiction by the High Court as envisaged
under Order 47 Rule 1 read with Section 114 of Code of Civil

Procedure and the review application was dismissed vide Order
dated August 27, 2007.
8. It may be relevant to note that the sole Arbitrator (Justice
P.N. Sinha) who was appointed by the High Court of Calcutta
pursuant to Order dated 6th July, 2007 under Section 11 of the
Act, 1996 before initiation of the proceedings, sent the letter of
his recusal dated 25th January, 2008 (Annexure P12).
9. It is informed to this Court that the Arbitrator who was
appointed by the Central Government under Section 3G(5) of the
Act, 1956 in April, 2007 could not have proceeded after the
intervention was made by the High Court of Calcutta in
appointing the sole Arbitrator under Section 11(6) of the Act,
1996. That for all practical purposes, the dispute raised by the
respondentapplicant
aggrieved by the compensation awarded
under subsections(
1) or (2) of Section 3G of the Act, 1956 has so
far not been adjudicated because of the competence of the
authority in appointing the Arbitrator remain pending decision as
to whether it would be under the Act, 1956 or Act, 1996 as

invoked by the High Court of Calcutta under the order impugned
before us.
10. Mr. Vikas Goel, learned counsel for the appellant submits
that the Act 1956 being a special enactment is a code in itself
provide not only the procedure of acquisition but also the mode of
determining compensation by the competent authority and any
person, if aggrieved by the compensation determined under subsections(
1) or (2) of Section 3G of Act 1956 can certainly move an
application for appointment of an Arbitrator to which a Central
Government is under obligation to appoint under Section 3G(5) of
the Act 1956. But before the matter could be proceeded, the
respondentapplicant
approached the High Court by filing an
application under Section 11(6) of the Act 1996 which was not
maintainable and this being the settled principles of law that the
special law prevail over the general law, the provisions of Act
1996 could not have been invoked at least for the appointment of
an Arbitrator in abrogating the power of the Central Government
in appointing the Arbitrator as contemplated under Section 3G(5)
of Act 1956 and this being an apparent error in law committed by
the High Court needs to be interfered by this Court.

11. In support of his submission, learned counsel for the
appellant has placed reliance on the recent judgment of two
Judges’ Bench of this Court in General Manager (Project),
National Highways and Infrastructure Development
Corporation Ltd. Vs. Prakash Chand Pradhan & Ors. passed
in Civil Appeal No. 5250 of 2018 decided on 16th May, 2018 and
taking assistance thereof submits that the order passed by the
High Court of Calcutta in the appointment of an Arbitrator under
Section 11(6) of Act 1996 is not legally sustainable and both the
Orders passed by the High Court, i.e. 6th July, 2007 and 27th
August, 2007 deserves to be quashed and set aside.
12. Per contra, Mr. Prashant Bhushan, learned counsel for the
respondents, while supporting the order passed by the High
Court of Calcutta impugned in the instant proceedings submits
that subsection(
6) of Section 3G clearly postulates that subject
to the provisions of the Act 1956, the provisions of Act 1996 shall
apply to every arbitration under the Act, 1956. If the authority to
whom application was filed for appointment of an Arbitrator

under Section 3G(5) of Act, 1956 has failed to discharge its
obligations within 30 days of presentation of the application
which indisputedly was December, 2006 or until filing of the
application for appointment of an Arbitrator to the Chief
Justice/his Designate under Section 11(6) of the Act, 1996 i.e. 7th
March, 2007, the respondent was justified in taking recourse to
subsection(
6) of Section 3G of Act, 1956 for appointment of an
Arbitrator under Section 11(6) of Act, 1996.
13. Learned counsel further submits that the appellant under
the Act, 1956 has forfeited its right to appoint an Arbitrator after
presentation of the application under the Act, 1996 before the
High Court of Calcutta and in the given circumstances, there was
no legal impediment before the High Court of Calcutta in
appointment of an Arbitrator invoking Section 11(6) of Act 1996
and in support of his submission placed reliance on the
judgment of this Court in Deep Trading Company Vs. Indian
Oil Corporation and Others 1.
1 2013(4) SCC 35

14. We have heard learned counsel for the parties and with
their assistance perused the material available on record.
15. At the very outset, we may notice that the two Judge Bench
of this Court in the recent judgment in General Manager
(Project), National Highways and Infrastructure
Development Corporation Ltd. case(supra), while dealing with
the scope of subsections
(5) and (6) of Section 3G of the Act
1956 with reference to Section 11 of the Act, 1996 has held that
the Act 1956 being a special enactment and Section 3G in
particular provides an inbuilt mechanism for appointment of an
Arbitrator by the Central Government. Hence Section 11 of the
Act, 1996 has no application and the power is exclusively vested
with the Central Government under Section 3G(5) of the Act,
1956 for appointment of an Arbitrator and if the Central
Government does not appoint an Arbitrator within a reasonable
time, it is open for the party to avail the remedy either by filing a
writ petition under Article 226 of the Constitution of India or a
suit for the purpose but the remedy of Section 11 of Act 1996 is
not available for appointment of an Arbitrator.

16. We are in full agreement with the legal position stated by a
two Judge Bench of this Court in General Manager (Project),
National Highways and Infrastructure Development
Corporation Ltd. case(supra) but like to add further that the
Act, 1956 has been enacted under Entry 23 of the Union List of
the Seventh Schedule of the Constitution with the exclusive
power to legislate with respect to highways, which are declared to
be national highways by or under law by the Parliament. It is a
comprehensive code and a special enactment which provides an
inbuilt mechanism not only in initiating acquisition until
culmination of the proceedings in determining the compensation
and its adjudication by the Arbitrator to be appointed by the
Central Government and if still remain dissatisfied, by the Court
of law.
17. In compliance of the mandate of Sections 3A to 3F of the
Act, 1956, after the land is acquired, there shall be paid an
amount of compensation which shall be determined by an order
of the competent authority under subsections
(1) or (2) of

Section 3G of the Act, 1956 and any person who is aggrieved by
the amount so determined by the competent authority or what
being determined is not acceptable to either of the parties, on an
application being filed by either of the parties, has to be
determined by the Arbitrator to be appointed by the Central
Government in terms of subsection
(5) of Section 3G of the Act,
1956.
18. After analysing the scheme, it can be assumed that the
legislature intended the Act, 1956 to act as a complete code in
itself for the purpose of acquisition until culmination including
disbursement and for settlement of disputes and this conclusion
is further strengthened in view of Section 3J of the Act which
eliminates the application of the Land Acquisition Act, 1894, to
an acquisition under the Act, 1956.
19. It is settled principles of law that when the special law sets
out a selfcontained
code, the application of general law would
impliedly be excluded. In the instant case, the scheme of Act,
1956 being a special law enacted for the purpose and for
appointment of an arbitrator by the Central Government under

Section 3G(5) of Act, 1956 and subsection
(6) of Section 3G itself
clarifies that subject to the provisions of the Act 1956, the
provisions of Act 1996 shall apply to every arbitration obviously
to the extent where the Act 1956 is silent, the Arbitrator may
take recourse in adjudicating the dispute invoking the provisions
of Act, 1996 for the limited purpose. But so far as the
appointment of an Arbitrator is concerned, the power being
exclusively vested with the Central Government as envisaged
under subsection
(5) of Section 3G of Act 1956, Section 11 of the
Act 1996 has no application.
20. The plea of the respondents that they have rightly taken
recourse in the facts and circumstances of Section 11 of the Act,
1996 cannot be accepted for the reason that Section 3G(6) of the
Act, 1956 clearly stipulates that the provisions of the Act, 1996
will apply subject to the provisions of the Act, 1956. The usage of
the expression “subject to” clearly indicates that the legislature
intended to give overriding effect to the provisions of the Act,
1956 where it relates to the disputes pertaining to determination
of the amount of compensation under the Act. The irresistible
conclusion is that the legislature in its wisdom intended to

abrogate the power for appointment of an Arbitrator under the
provisions of the Act, 1996.
21. In our considered view, the High Court of Calcutta was not
holding its competence to appoint an Arbitrator invoking Section
11 of Act, 1996.
22. This very question earlier arose before this Court whether
the application under Section 11(6) of the Act 1996 is
maintainable in view of statutory provisions of Electricity Act,
2003 adjudicating the dispute between the licencees and the
generating companies of the special enactment and Section 86(1)
of the Electricity Act, 2003 in particular, this Court in Gujarat
Urja Vikash Nigam Ltd. Vs. Essar Power Limited 2in para 28
observed as under:28.
Section 86(1)(f) is a special provision and hence will
override the general provision in Section 11 of the
Arbitration and Conciliation Act, 1996 for arbitration of
disputes between the licensee and generating
companies. It is well settled that the special law
overrides the general law. Hence, in our
opinion, Section 11 of the Arbitration and Conciliation
Act, 1996 has no application to the question who can
adjudicate/arbitrate disputes between licensees and
2 2008(4) SCC 755

generating companies, and only Section 86(1)(f) shall
apply in such a situation.
23. We are also of the considered opinion that in view of the
power being vested exclusively with the Central Government to
appoint an Arbitrator under Section 3G(5) of the Act 1956, being
a special enactment, the application filed under Section 11(6) of
the Act 1996 for appointment of an Arbitrator was not
maintainable and provisions of the Act, 1996 could not be
invoked for the purpose.
24. The submission of learned counsel for the respondents that
as the appellant failed to make an appointment of the Arbitrator
pursuant to a letter dated 8th December, 2006 in terms of Section
3G(5) of the Act, 1956 within a period of 30 days, the High Court
of Calcutta alone was holding its competence to appoint an
Arbitrator and application was submitted by the respondentapplicant
on 7th March, 2007 the right of appointment of an
Arbitrator by the Central Government stands forfeited and has
relied on the Judgment of this Court in Deep Trading Company
case(supra) is of without substance for the reason that there is
no statutory limitation provided under subsection
(5) of Section

3G of Act 1956 for the Central Government to appoint an
Arbitrator but that may not give an unguided discretion to the
authority and in the absence of any statutory limitation, it must
be within the reasonable time and if the Central Government fails
in discharge of its statutory duty in appointing an Arbitrator on a
request being made by either of the party aggrieved, it will be
open to the party to invoke either the writ jurisdiction of the High
Court under Article 226 of the Constitution of India or the Civil
Court for the purpose. But as long as the power is exclusively
vested with the Central Government for appointment of an
Arbitrator under Section 3G(5) of the Act 1956, the provision of
Section 11 of Act 1996 has no application. The judgment in
Deep Trading Company case(supra) on which learned counsel
has placed reliance is of no assistance for the reason firstly that
controversy there was not in reference to the appointment of an
Arbitrator under the special enactment as in the instant case
under Act 1956 and secondly, if one party fails to exercise its
power of appointment in terms of Clause 29 of the agreement in
vogue, the provisions of Act 1996 would apply and the question
for consideration was whether the rights of the party stand
forfeited to appoint an Arbitrator after the party has invoked

Section 11(6) of the Act 1996 which, as already observed by us, is
not the question for consideration in the instant case.
25. It is indeed true that the Arbitrator who was appointed by
the Central Government subsequent to the filing of an application
under Section 11 of the Act 1996 in April, 2007 could not
proceed after the Arbitrator was appointed pursuant to the Order
impugned in the instant proceedings, who too has later recused
and almost 12 years have rolled by now, we deem it appropriate
to observe that there is no need to file any application by the
respondentapplicant
and the Central Government shall consider
and appoint an Arbitrator in terms of Section 3G(5) of the Act
1956 within a period of 30 days with prior intimation to the
respondents. As the litigation has consumed a sufficient long
time, we consider it appropriate to further observe that the
Arbitrator so appointed by the Central Government may
adjudicate and decide the dispute within a reasonable time but in
no case later than six months after the respondentapplicant
record its presence in the proceedings.

26. The appeals accordingly succeed and are allowed. The
orders passed by the High Court dated 6th July, 2007 and 27th
August, 2007 are hereby set aside. The Arbitrator may be
appointed by the appellants in terms indicated above. No costs.
27. Pending application(s), if any, stand disposed of.
…………….…………………………J.
(N.V. RAMANA)
……..……..………………………….J.
(MOHAN M. SHANTANAGOUDAR)
……………………………………….J.
(AJAY RASTOGI)
NEW DELHI
AUGUST 27, 2019

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