National Highways Authority Of India vs Sayedabad Tea Co. Ltd. And Ors

CIVIL APPEAL NO(s). 6958­6959 OF 2009

NATIONAL HIGHWAYS AUTHORITY OF INDIA ….APPELLANT(S)

VERSUS

SAYEDABAD TEA COMPANY LTD. AND ORS. ….RESPONDENT(S)

WITH

CIVIL APPEAL NO(s). 6965­6966 OF 2009

JUDGMENT

Rastogi, J.

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 Signature Not Verified

provides for appointment of an Arbitrator by the Central Digitally signed by SATISH KUMAR YADAV Date: 2019.08.27 17:34:29 IST Reason:

Government.

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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 22 nd

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

2 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

3 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 sub­ section (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

4 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 8 th

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 7 th

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

5 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 6 th

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

6 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

7 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 sub­

sections(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.

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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 16 th 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. 6 th 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

9 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. 7 th

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 Others1.

1 2013(4) SCC 35

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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.

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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

12 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

13 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

14 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 Limited2in 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

15 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 respondent­

applicant 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

16 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

17 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.

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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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