Case Commentary

National Highways Authority of India (Appellant)

v.
Sayedabad Tea Company Ltd. and Ors.
(Respondent(s))
(2019 SCC Online SC 1102)

Submitted to-
Prof. Mr. Nishikant
Bibhu Assistant Professor
School of Law
Bennett University
Submitted by-
Kumar Aditya (L19BALB014)
Dherya Maheshwari
(L19BALB029) Sharadindu Shekhar
(L19BALB046) Course- BA-LLB(H)
Batch-A (2019-24)
School of Law
Bennett University
Factual Background of the Case

The relevant facts are that the appellant (National Highways Authority of India) acquired the
subject land, which consists of "Sayedabad Tea Estate" located at Mouza Purba Madati, J.L.
No. 108, Police Station Phansidewa, Dist. Darjeeling, measuring 5.08 acres, in the exercise of
powers under Section 3(D) of the National Highway Act, 1956 via notification dated
November 22, 2005, under L.A.P. Case No. 4/200405.

On December 8, 2006, the Respondent(s) applicant, unsatisfied with the compensation award
made by the competent authority under subsection (1) of Section 3G of the National Highway
Act, 1956, requested the Central Government for the appointment of an Arbitrator under
Section 3G (5).

The application for the appointment of an Arbitrator was filed on March 7, 2007, to the Chief
Justice/his designate, citing Section 11(6) of the Arbitration and Conciliation Act, 1996,
because the Central Government had not responded to the stipulation for the appointment of
an Arbitrator in the setting of a letter dated December 8, 2006 within 30 days of receiving the
solicitation.

The High Court of Calcutta, after noting that the Arbitrator was appointed by the Central
Government under Section 3G(5) of the National Highways Act, 1956, following the
Respondent(s) applicant's proposal to the Chief Justice/his Designate under Section 11(6) of
the Arbitration and Conciliation Act, 1996, held that the Central Government's right to
appoint an Arbitrator is disallowed because it stands failed owing to the submission of the
application under Section 11(6) of the Arbitration and Conciliation Act, 1996 before the High
Court of Calcutta, and an appointment of an Arbitrator during the pendency of proceedings
cannot be said to be a legitimate appointment, and thus the matter was alluded to the Chief
Justice for mentioning an Arbitrator vide its Order dated 6th July 2007.

The Appellant appealed the decision in the Apex Court after his review application was
dismissed by the Hon'ble High Court of Calcutta.

Issue Related to the Case

Whether or not Section 11(6) of the Arbitration and Conciliation Act of 1996 stands forfeited
when the Central Government exercised its right which is bestowed by Section 3G (5) of the
National Highways Act 1956 to appoint an Arbitrator?
 (OR)

Whether or not the procedures for the appointment of arbitrator given in the National
Highways Act 1956 overrides the course of actions given in the existing Arbitration and
Conciliation Act of 1996?

Relevant Provisions referred in the Case

Section 11 of the Arbitration and Conciliation Act 1996 provides the procedures for the
appointment of the arbitrator and further, directs the aggrieved party to approach the Chief
Justice in case of any failure in performing the act as required under the procedure given.

Section 3D of The National Highways Act of 1956 allows the Central government to
acquire land for the purpose of declaring national highways provided no objections have been
raised. Section 3G also gives the competent authority the option to determine the amount to
be paid as compensation for the land acquisition. In the event that any party objects to the
compensation decided, Section 3G (5) of the Act allows for the appointment of an arbitrator
to redetermine the compensated sum.

Arguments from the side of the Appellant

The appellant contended that the National Highways Act of 1956, being a special enactment,
is a code in itself, providing not just the acquisition procedure but also the method of
determining compensation by the concerned competent authority, and that any person who is
aggrieved by the compensation determined under the 1956 Act can assuredly file an
application to the Central government for the appointment of an Arbitrator, whom it is
obligated to appoint on receiving of the application under s.3G of the 1956 Act.

However, the appellant claimed that before the matter could be addressed for further action
by the Central government under the aforementioned section, the Respondent(s) pursued to
the High Court by filing an application under s.11(6) of the Arbitration and Conciliation Act
of 1996. Appellant argued that this action of the Respondent(s) is not maintainable because it
is a well settled principle of law that special law prevails over the general law. The provisions
of 1996 Act could not be invoked under the present facts of the case at least for the
appointment of an arbitrator as it will abrogate the Central Government's power to appoint the
Arbitrator as contemplated by Section 3G (5) of Act 1956, and this is an apparent legal error
done by the Calcutta High Court which need to be rectified by the Supreme Court.
In support of his argument, the appellant cited the case of General Manager (Project),
National Highways and Infrastructure Development Corporation Ltd. v. Prakash Chand
Pradhan & Ors.1, in which a two-judge bench court, while considering the scope of
subsections
(5) and (6) of Section 3G of the Act 1956 with reference to Section 11 of the 1996 Act, held
that the 1956 Act, as a special enactment, and s.3G in specific provides an inbuilt mechanism
for the appointment of an Arbitrator by the Central Government.

Hence, the Respondent(s) contended that s.11 of the Act of 1996 has no application in the
present case, and the power of appointment of an arbitrator in the present case is exclusively
vested in the hands of Central Government under s.3G(5) of the Act and thus, the order given
by the High Court of Calcutta in the appointment of an Arbitrator under s.11(6) of the Act of
1996 is not legally sound, and both of the High Court's orders should be set aside by quashing
them.

Arguments from the side of the Respondent(s)

While supporting the order passed by the High Court of Calcutta which was in his favour the
Respondent(s) argued that s.3G(6) of 1956 Act clearly states that, subject to the 1956 Act's
provisions, the provisions of 1996 Act will apply to any arbitration under the National
Highways Act of 1956.

Respondent(s) argued that if the authority to whom an application for appointment of an

Arbitrator was filed under Section 3G(5) of the 1956 Act failed to discharge its obligations
within 30 days of presentation of the application, which was undisputedly 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., March 7, 2007, the Respondent(s) was
justified in resorting to take recourse for appointment of an Arbitrator under s.11(6) of the
1996 Act.

The Respondent(s) also claimed that the appellant had forfeited its right to appoint an
Arbitrator under the Act of 1956 after filing an application under the Act of 1996 with the
High Court of Calcutta, and that in the circumstances, there was no legal obstacle before the
High Court of Calcutta in appointing an Arbitrator invoking Section 11(6) of Act 1996, and
relied on the Court's decision in the case of Deep Trading Company v. Indian Oil
Corporation and Others2.

1
Civil Appeal No. 5250 of 2018 decided on 16th May 2018.
2
2013(4) SCC 35.
Judgment:

Petition was filed before the Calcutta High Court for appointment of arbitrator under s.11(6)
of 1996-Act, meanwhile, the Central Government3 appointed an arbitrator vide s.3G(5) of
1956-Act. But the HC held that the CG had forfeited his right to appoint an arbitrator once
the application has been moved to the HC, and appointment during pendency cannot be
termed as valid.

Thus, CG filed an appeal before the Supreme Court contending that the power granted under
s.3G(5)&(6) of 1956-Act referring to General Manager (Project), National Highways and
Infrastructure case, where the SC held that 1956-Act is special enactment and the power
vested in CG through s.3G which provides for inbuilt mechanism regarding appointment of
arbitrator, thus, 1956-Act will have overriding effect on s.11 of 1996-Act, and only if the
appointment has not been done within reasonable period, recourse to Article-226 can be
taken by the aggrieved party.

SC held that 1956-Act was enacted through Entry-234 of the Union List which gives
legislating power to the Parliament on such subject-matter. And, the said Act is
comprehensive code and special enactment which will not only be applicable in initiating
acquisition but also till culmination of proceeding by the arbitrator deciding over amount of
compensation as an Arbitrator is competent authority to decide over any dispute with respect
to compensation which is to be given in case pertaining to land acquisition for the purpose of
building national highways vide s.3G(1)&(2) of 1956 Act, and through s.3J, the application
of Land Acquisition Act, 1894, is also been eliminated resulting into implied exclusion of
general law contained in 1996 Act.

Furthermore, the application of 1996-Act is limited to the extent till which 1956-Act is silent,
but, with respect to appointment of an Arbitrator by CG, s.3G(5) of 1956-Act will prevail.
And the respondents will have no recourse to s.11 of 1996-Act in the case pertaining to
determination of compensation given under 1956-Act. Because the provisions of 1996-Act is
made “subject to” to 1956-Act vide application of s.3G(6) of latter Act. Thus, the Calcutta
HC has no competence to appoint arbitrator through s.11(6) of 1996-Act.

3
Hereinafter CG.
4
The Constitution of India, 1950, Schedule-VII, List-I, Entry-23.
Moreover, respondent referred to Deep Trading Company Case, that since CG had not
appointed an Arbitrator within 30-days vide s.3G(5) of 1956-Act, it had forfeited its
competence to appoint arbitrator has no merit as the impugned provision did not impose any
limitation period for appointment of an Arbitrator. But it does not give unrestrained
discretionary power to the government, as it should be within reasonable time, in violation of
which, recourse of Article-226, or the jurisdiction of Civil Courts can be invoked.
Furthermore, Deep Trading Company case is of no assistance because it does not deal with
appointment of arbitrator by CG. However, in the instant case, since too much time has been
consumed in litigation, the SC observed that though appointed Arbitrator cannot continue
after the order of Calcutta HC, but since arbitrator who was later appointed in response to the
impugned order by the HC had recused himself, the CG can appoint an arbitrator who should
conclude the arbitration proceedings within reasonable time but that should not exceed more
than 6-months from the date when the respondent had recorded its presence in the
proceedings. Thus, the order of Calcutta HC has been set aside and the appeal is allowed.

Analysis & Conclusion

In the above case, the Supreme Court had rightly interpreted the concerned statutory
provisions with respect to appointment of an arbitrator under 1956 and 1996 Act. As it is
accepted principle of law that the specific law shall always prevail over general law. And, in
the instant case, since 1956-Act bestows power of appointment of an arbitrator on the CG, it
cannot be taken away through the application of general provision contained in 1996-Act.
Furthermore, in absence of explicit mention of limitation period within which the government
has to appoint an arbitrator on the concerned subject-matter has not been provide under the
impugned provisions of 1956-Act, it does not mean that the CG has unrestrained power in
matters of appointment, because it will result in bestowing arbitrary power on the CG which
is not allowed. Thus, in such situation, referring to facts and circumstances of the case, the
appointment process should be concluded within reasonable time, otherwise, the aggrieved
party reserves all the right to file writ petition vide Art.226 of the Constitution, or can take
recourse to the jurisdiction of Civil Court.

And, the SC had rightly dismissed the order of Calcutta HC, as it was creating bad precedent
defeating the very purpose of s.3G(5) of 1956-Act, because, it says that after filing of an
application by the aggrieved once 30-days has been expired, through application of s.11(6) of
1996-Act, CG forfeited its power of appointment.