- 1 - HC-KAR NC: 2025:KHC:31776-DB MFA No. 4061 of 2025 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 18TH DAY OF AUGUST, 2025 PRESENT THE HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE AND THE HON'BLE MR. JUSTICE C M JOSHI MISCELLANEOUS FIRST APPEAL NO. 4061 OF 2025 (AA) BETWEEN: NATIONAL HIGHWAY AUTHORITY OF INDIA, PIU-MANGALORE, DOOR NO.3-29, BETHEL, THARETHOTA, NEAR PUMPWELL (NH-66), MANGALORE-575 005. REP. BY ITS DGM (TECH) & PROJECT DIRECTOR. …APPELLANT (BY SRI SHOBHITH N SHETTY, ADVOCATE) AND: 1. SMT. SUNAINA S RAI, W/O. DR. B. K. SHIVAPRASAD RAI, #2-19-1585/28, SHOURYA, MARTIN PAIS ROAD, HATHILL, BIJAI, MANGALORE-575 004. 2. SMT. SUHANA RAI, W/O DR. SANDEEP RAI, 102, BIRCHWOOD APARTMENT, OPP. PLAMA GARDENIA, KAPRIGUDDA, MANGALORE-575 001. 3. SMT. SUSMEETHA HEGDE, W/O SURESH B V, #15-12-690/31, 703, CASTLE APARTMENT, KADRI ROAD, INSPECTION BUNGLOW, MANGALORE-575 002. 4. THE COMPETENT AUTHORITY AND SPECIAL LAND ACQUISITION OFFICER, Digitally signed by NANDINI R Location: HIGH COURT OF KARNATAKA - 2 - HC-KAR NC: 2025:KHC:31776-DB MFA No. 4061 of 2025 NATIONAL HIGHWAY-66, NGO BUILDING, NEAR CLOCK TOWER, MANGALURU, D.K. DISTRICT-575 001. 5. THE DEPUTY COMMISSIONER AND ARBITRATOR, DAKSHINA KANNADA DISTRICT, MANGALURU-575 008. …RESPONDENTS THIS MFA IS FILED U/S.37(1)(c) OF THE ARBITRATION AND CONCILIATION ACT, 1996, AGAINST THE JUDGMENT DATED 12.03.2025 PASSED IN A.P.NO. 4/2024 ON THE FILE OF THE IV ADDITIONAL DISTRICT AND SESSIONS JUDGE AND COMMERCIAL COURT, D.K.MANGALUJRU, ALLOWING THE PETITION FILED U/S.34 OF THE ARBITRATION AND CONCILIATION ACT. 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 JOSHI ORAL JUDGMENT (PER: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE) 1. The National Highway Authority of India [NHAI] has filed the present appeal under Section 37(1)(c) of the Arbitration and Conciliation Act, 1966 [A&C Act] impugning an order dated 12.03.2025 passed by the learned IV Additional District Judge and Commercial Court, D.K., Mangaluru [Commercial Court] in A.P.No.4/2024 captioned National Highways Authority of India Vs. Smt.Sunaina S. Rai and others. - 3 - HC-KAR NC: 2025:KHC:31776-DB MFA No. 4061 of 2025 2. NHAI had filed the said application (A.P.No.4/2024) under Section 34 of the A&C Act read with Section 3G(6) of the National Highways Act, 1956 [NH Act] impugning an arbitral award dated 12.12.2023 [impugned award] passed by the Arbitrator and Deputy Commissioner, Mangaluru, D.K. [Arbitrator], whereby the compensation for land comprising in Sy.No.128/1 measuring 146 sq.mtrs located in Kudupu Village, Mangaluru taluk was enhanced. 3. NHAI had acquired the said land for the purpose of widening National Highway No.169 (13). Notification under Section 3A(1) of the NH Act was issued on 16.03.2016. The final Notification under Section 3D(1) and 3D(2) of NH Act was published on 15.03.2017 and a public notice was also issued in the newspaper. The respondents determined the compensation for the subject land at ₹73,533/- per cent. The total compensation for the subject land was determined at ₹7,15,898/-, which was inclusive of solatium and additional market value. This was on the premise of the subject land was dry agricultural land. The respondents claimed that the subject land was commercially converted land, therefore, compensation was required to be determined at rates of commercially converted lands. - 4 - HC-KAR NC: 2025:KHC:31776-DB MFA No. 4061 of 2025 4. The respondents had applied for enhancement of compensation and the said dispute was considered by respondent No.5[Arbitrator]. The learned Arbitrator delivered the impugned award enhancing the compensation on the basis of the subject land being a commercially converted land. The learned Arbitrator had noted that the subject property was converted in terms of an order dated 01.04.2015 (File No.C.DIS.LNA(2).CR.1139/2004-05) by the Deputy Commissioner, Mangaluru. 5. NHAI filed the aforementioned application (AP.No.4/2024) U/s 34 of A&C Act, before the learned Commercial Court impugning the said arbitral award. 6. Learned Commercial Court did not find any ground to interfere with the impugned award under Section 34 of the A&C Act. Accordingly, the court dismissed the petitioner's application to set aside the impugned award. 7. The learned counsel appearing for the NHAI submitted that learned Arbitrator had erred in enhancing the compensation on the basis of the subject land was a commercial property. He submitted that the respondents had not produced any evidence or material on - 5 - HC-KAR NC: 2025:KHC:31776-DB MFA No. 4061 of 2025 record to show that the subject land was being used for commercial purpose. He submitted that neither any commercial building was raised nor any such activity was carried out on the subject land. However, he is unable to dispute that the subject land in question was converted to commercial land in terms of the order dated 01.04.2005 passed by the Deputy Commissioner, Mangaluru, which is referred to in the impugned award. 8. Once it is accepted that the use of the subject land was converted for commercial use, the value of the subject property would have to be determined on the basis of rates for such property. It is not necessary for the respondents to physically exploit the subject land for commercial purposes; it is sufficient if the owners of the subject land are entitled to use the property for commercial purposes. The value of the properties is required to be determined on the basis of which it can be put to use. 9. An arbitral award can be set aside only on the basis of grounds as set out in Sections 34(2) and 34(2A) of the A&C Act. In the present case, we are unable to fault the impugned award on - 6 - HC-KAR NC: 2025:KHC:31776-DB MFA No. 4061 of 2025 the ground that it is vitiated by patent illegality or is a conflict with the public policy of India. 10. The appeal is unmerited and accordingly, dismissed. Sd/- (VIBHU BAKHRU) CHIEF JUSTICE Sd/- (C M JOSHI) JUDGE NR/- List No.: 1 Sl No.: 42