- 1 - HC-KAR NC: 2025:KHC:48711-DB MFA No. 1631 of 2025 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 25TH DAY OF NOVEMBER, 2025 PRESENT THE HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE AND THE HON'BLE MR. JUSTICE C.M. POONACHA MISCELLANEOUS FIRST APPEAL NO. 1631 OF 2025 (AA) BETWEEN: 1. SRI APPANNA S/O ANNAYAPPA AGED ABOUT 75 YEARS R/AT KONEDASAPURA POST BIDARAHALLI HOBLI, BENGALURU NORTH TALUK BENGALURU 560 047 …APPELLANT (BY SRI. VISHWANATHA M S.,ADVOCATE) AND: 1. NATIONAL HIGHWAYS AUTHORITY OF INDIA PROJECT IMPLEMENTATION UNIT-BANGALORE SY.NO.13, 14TH KM, NAGASANDRA, BANGALORE-TUMKUR ROAD (NH-4), BENGALURU-560073 REPRESENTED BY ITS PROJECT DIRECTOR 2. THE ARBITRATOR AND SPECIAL DEPUTY COMMISSIONER-I, BENGALURU URBAN DISTRICT, MULABAGILU - KOLAR - BENGALURU SECTION (NH-4), KG ROAD, 1ST FLOOR, BENGALURU-560 009 Digitally signed by SUMATHY KANNAN Location: High Court of Karnataka - 2 - HC-KAR NC: 2025:KHC:48711-DB MFA No. 1631 of 2025 3. THE SPECIAL LAND ACQUISITION OFFICER AND COMPETENT AUTHORITY NATIONAL HIGHWAYS AUTHORITY OF INDIA MULBAGILU - KOLAR - BENGALURU SECTION NH-(4) NO. 678/3, NEERUBHAVI KEMPANNA LAYOUT, HEBBAL, BENGALURU-560 024 REPRESENTED BY THE SPECIAL LAND ACQUISITION OFFICER …RESPONDENTS (BY SRI. S SUDHARSAN.,ADVOCATE FOR R1 & R3, R2 SERVED & UNREPRESENTED) THIS MFA IS FILED UNDER SECTION 37(1)(C) OF THE ARBITRATION AND CONCILIATION ACT, AGAINST THE ORDER DATED 03.12.2024 PASSED IN A.P.NO.39/2022 ON THE FILE OF THE II ADDITIONAL SENIOR CITY CIVIL AND SESSIONS JUDGE, BENGALURU (CCH.NO. 17), ALLOWING THE PETITION. THIS APPEAL, COMING ON FOR ADMISSION, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE and HON'BLE MR. JUSTICE C.M. POONACHA ORAL JUDGMENT (PER: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE) 1. The appellant has filed the present appeal under Section 37(1)(c) of the Arbitration and Conciliation Act, 1996 ['A&C Act'] impugning an order dated 03.12.2024 passed by the - 3 - HC-KAR NC: 2025:KHC:48711-DB MFA No. 1631 of 2025 learned II Additional City Civil and Sessions Judge, Bengaluru (CCH-17) [District Court] in A.P. No.39/2022 [impugned order]. 2. The said petition was filed by the respondent No.1 [NHAI], impugning an arbitral award dated 26.10.2021 [impugned award] passed by respondent No.2 [Arbitral Tribunal] enhancing the compensation awarded to the appellant by respondent No.3 [SLAO] in respect of acquisition of land measuring 1,440 square meters falling in Survey No.24/1 of Konadasanapura village, Bidarahalli Hobli, Bangalore East Taluk [subject land]. 3. The subject land was acquired by the NHAI for the purpose of widening of National Highway No.4 (Mulabagilu - Kolar - Bangalore from KM 237 to 318). The SLAO had published an award fixing the compensation for the subject land at ₹1,77,912/- at the rate of ₹123.55 per square meter. The appellant being aggrieved by the determination of the said value of the subject land, preferred a reference under Section 3G(5) of the National Highways Act, 1956 [NH Act] before the Arbitral Tribunal. The said proceedings culminated in the arbitral award dated 26.10.2021 - 4 - HC-KAR NC: 2025:KHC:48711-DB MFA No. 1631 of 2025 thereby fixing the compensation for the subject land at ₹1,483/- per square meter. 4. As noted above, the impugned award was assailed by the NHAI before the learned District Court by filing an application under Section 34 of the A&C Act, which was allowed in terms of the impugned order. 5. The learned District Court had faulted the Arbitral Tribunal for enhancing the compensation as awarded on the basis of the guidance value of land fixed in terms of the notification dated 17.04.2007. The preliminary notification under Section 3A of the NH Act for acquisition of the subject land was published on 18.12.2006. Thus, it held that the value of the subject land was required to be determined as on that date. The learned District Court reasoned that since the Arbitral Tribunal had referred to the notification dated 17.04.2007, which was issued subsequent to the preliminary notification, the determination of the compensation on the basis of the said notification, is unsustainable. The learned District Court found that the impugned award was vitiated by patent illegality and accordingly set aside the impugned award. - 5 - HC-KAR NC: 2025:KHC:48711-DB MFA No. 1631 of 2025 6. The notification dated 17.04.2007 provided the guidance value of the land, in the vicinity where the subject land, was located at ₹1483/- per square meter. Thus, there is no dispute that in terms of the said guidance value, the appellant was entitled to the compensation for a sum of ₹19,56,960/- for the subject land, to an extent of 1440 square meters. 7. The only question that falls for consideration is whether the impugned award could be set aside on the ground that it was vitiated on account of patent illegality for the reason that the Arbitral Tribunal had determined the compensation on the basis of the guidance value as indicated in the Notification dated 17.04.2007. 8. There is no dispute that the value of the subject land was to be determined on the basis of the market value of the land as on the date of the preliminary notification, that is, as on 18.12.2006. 9. However, we are unable to agree that the notification dated 17.04.2007 could not have been considered by the Arbitral Tribunal for such determination. And, the impugned award is vitiated by patent illegality on that ground. It is obvious that the market value of the land would not increase instantaneously on the notification - 6 - HC-KAR NC: 2025:KHC:48711-DB MFA No. 1631 of 2025 indicating the guidance value, being issued. Further, it is also apparent that the guidance value as published in the notification dated 17.04.2007 would be based on the material including transactions in the subject land that had been consummated prior to the date of the issuance of the said notification. The NHAI had also not produced any other notification, which is closer than the notification dated 17.04.2007 to the date of the preliminary notification, that is, 18.12.2006. It is also well-settled that determination of market value of the land is not an exact science and therefore, the valuer is required to take into account various factors for such determination. Using a guidance value as published in the notification issued a little over three months after the date of the preliminary notification, cannot be faulted. In the aforesaid circumstances, the determination made by the Arbitral Tribunal could not be considered as being patently erroneous. 10. It is trite law that patent illegality referred to under Section 34(2A) of the A&C Act is patent illegality that goes to the root of the matter. Further, mere erroneous application of law is not subsumed in the said ground. The Arbitral Tribunal’s view would prevail unless it is so unreasonable that no reasonable person would accept it. - 7 - HC-KAR NC: 2025:KHC:48711-DB MFA No. 1631 of 2025 11. We are unable to agree with the view of the Learned District Court that the guidance value as set out in the notification dated 17.04.2007 to determine the market value of the subject land as on 18.12.2006, could not be used. 12. The learned counsel appearing for the appellant had also referred to a decision of this Court in Miscellaneous First Appeal No.3581 of 2024 (AA) C/w. Miscellaneous First Appeal No.3301 of 2024 (AA). In the said decision, this Court had dismissed a challenge to the arbitral award, which was premised on the ground that the learned Arbitrator relied on the notification dated 17.04.2007 for determining the value of the land acquired pursuant to a preliminary notification dated 14.12.2006. The relevant extract of the said decision is set out below: "I have already pointed out that preliminary notification was in the verge of end of the year 2006 and final notification was passed on 14.11.2007 and guidance notification was issued within a span of three months of preliminary notification that is in the month of April 2007 i.e., in between preliminary notification and final notification in the case on hand and when the Arbitrator relied upon the said notification and taken note of the potentiality of the property and land is abutting to the National Highway, it cannot be termed as arbitrary and not followed the substantive law and the same is contrary to Sections 24, 28, 31(3) of the Act of 1996 cannot be accepted since the acquisition of land is for purpose of widening the road to a small extent i.e., to the extent of 550 square meter and 154 square meter. Hence, I - 8 - HC-KAR NC: 2025:KHC:48711-DB MFA No. 1631 of 2025 do not find any merit in the appeals to accept the contention of the appellant's counsel and it does not requires any interference when reason was given while enhancing and confirming the order of the Arbitrator by the Civil Court. Accordingly, I answer the above point as negative." 13. In view of the above, the impugned award cannot be sustained. 14. The present appeal is allowed and the impugned order is set aside. Sd/- (VIBHU BAKHRU) CHIEF JUSTICE Sd/- (C.M. POONACHA) JUDGE KS List No.: 2 Sl No.: 21