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National Highways Act Arbitration: Section 3G(5), the Arbitrator the Government Appoints, and the Section 34 Challenge
If the State takes your field for a district road, you go to a court. If it takes the same field for a national highway, you do not. National Highways Act arbitration is a separate machinery: an officer of the Government fixes the compensation, and if you object, a second officer — appointed by the Central Government, not chosen by you and not sitting in any court — fixes it again. From there the only door is section 34 of the Arbitration and Conciliation Act 1996, which is not an appeal. Landowners who assume the highway route works like an ordinary land reference lose years, and sometimes the claim.
Under section 3G(5) of the National Highways Act 1956, a landowner who does not accept the competent authority’s compensation may apply for the amount to be determined afresh by an arbitrator appointed by the Central Government. The arbitrator’s award is challengeable only under section 34 of the Arbitration and Conciliation Act 1996.
Key Takeaways
- The compensation is first fixed by the competent authority under section 3G(1). That determination — not the arbitrator’s — is the “award” for several important purposes.
- The arbitrator is appointed by the Central Government alone. Section 11 of the Arbitration Act is unavailable; if the Government does not appoint, the remedy is a writ.
- Section 3G(7) lists four heads only. Solatium and the additional amount arrive from outside the section, through the Tarsem Singh line.
- The date of the section 3G(1) determination — before or after 1 January 2015 — now decides whether solatium and interest are computed at 1894 Act or 2013 Act rates.
- A section 34 challenge is not an appeal on quantum. Its real utility is the “patent illegality” ground where the arbitrator ignored the statutory valuation method.
- The constitutionality of sections 3G and 3J is pending before the Supreme Court. Nothing in this area should be treated as finally settled.
How National Highways Act Arbitration Begins
Chapter II of the National Highways Act 1956 runs its own short course from notification to payment. Intention to acquire is notified under section 3A; objections must be filed within twenty-one days under section 3C, and the competent authority’s order on them “shall be final”. On the section 3D declaration the land vests absolutely in the Central Government free from all encumbrances, and the declaration is not open to challenge in any court.
Compensation for land acquired under the National Highways Act is initially determined under section 3G(1): “an amount which shall be determined by an order of the competent authority” — in practice a revenue officer notified for the purpose.
Then comes the provision that defines the whole regime. Section 3G(5) provides that if that amount “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“. Section 3G(6) applies the Arbitration and Conciliation Act 1996 to every arbitration under the Act — but only “subject to the provisions of this Act”. Those five words carry a great deal of weight.
Why Section 11 Does Not Apply to National Highways Act Arbitration
The commonest and costliest mistake is to treat a stalled appointment as an ordinary arbitration default and file a section 11 petition. In NHAI v. Sayedabad Tea Co. Ltd., (2020) 15 SCC 161, the Supreme Court held such an application not maintainable. The National Highways Act is “a comprehensive code and a special enactment”; the words “subject to” in section 3G(6) give the 1956 Act overriding effect; and the legislature “intended to abrogate the power for appointment of an arbitrator under the provisions of the 1996 Act”.
That leaves the landowner facing an appointing authority with no deadline. Per National Highways and Infrastructure Development Corporation Ltd. v. Prakash Chand Pradhan, (2020) 15 SCC 533, where the Central Government does not appoint 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.” In practice the writ is the live remedy: a mandamus to appoint, not a court-appointed arbitrator.
One consequence of section 3G(6) does run the landowner’s way. Because the 1996 Act otherwise applies, its machinery provisions travel — the Delhi High Court has extended a section 3G(5) arbitrator’s mandate under section 29A, so an arbitration that runs out of time is not automatically dead.
Is the Arbitrator under Section 3G(5) Independent?
This is the sharpest question in the field, and both sides must be set out, because the answer a landowner would like is not the answer the case law currently gives.
The position as decided. A consistent Delhi High Court line has rejected the bias objection. In Anubhav Chand Kathuria v. Union of India, 2019 SCC OnLine Del 7307, a Division Bench held that “under Entry 1 of the Seventh Schedule to the AC Act, an employee of one of the parties would be disqualified… Admittedly, the DM is not an employee of the NHAI.” The reasoning is formal but not frivolous: the party to the reference is the acquiring body, not the Central Government, so section 12(5) is not engaged. An officer hearing twenty similar references engages instead the softer Fifth Schedule — a “justifiable doubts” objection under section 12(3), which must go to the arbitrator under section 13 first.
The position under challenge. On 20 March 2025 the Punjab and Haryana High Court, in Sohan Lal v. Union of India, 2025:PHHC:040091-DB, declared sections 3G and 3J unconstitutional. The Supreme Court stayed that judgment on 30 May 2025, so the machinery revived and the constitutional question is undecided. But in its order of 13 January 2026 in M/s Riar Builders Pvt Ltd v. Union of India — reported at 2026 LiveLaw (SC) 65 — the Court recorded that the reference “is adjudicated not by a judicial authority but by an officer notified by the Central Government”, that “invariably, the Collectors or Commissioners of the Revenue Districts/Divisions are notified to act as arbitrators”, and that these officers “do not have the desired experience of a judicially trained mind”. Contrasting the highway landowner with one under the general law — who gets a District Judge and a first appeal on the evidence — the Court said the two classes are treated differently “apparently without any intelligible differentia”, and asked the Union to consider parity under Article 300A.
So the objection stands rejected as a ground of legal challenge, while being endorsed at the highest level as a matter of principle. Raise it before the arbitrator under section 12(3) so that it is preserved for later; do not expect it to succeed today.
What Factors Determine Compensation under Section 3G?
Section 3G(7) directs the competent authority or the arbitrator to consider four things: market value on the date of publication of the section 3A notification; damage by severing the acquired land from the owner’s other land; damage by injurious affection of his other immovable property or his earnings; and the reasonable expenses of a compelled change of residence or business.
What is not there is as important: no solatium clause, no additional-amount clause, and no residuary equity clause of the kind the 2013 Act contains. The gap in the National Highways Act compensation framework has been filled from two directions.
First, by the courts. In Union of India v. Tarsem Singh, (2019) 9 SCC 304, the Supreme Court held that sections 23(1-A), 23(2) and the proviso to section 28 of the Land Acquisition Act 1894 apply to National Highways Act acquisitions, section 3J being unconstitutional to that extent and no further. On review, in 2026 INSC 291 (25 March 2026), the benefit was confined to claims pending on or after 28 March 2008, with no reopening of concluded claims.
Second, by the statute book. The Fourth Schedule to the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013 lists the 1956 Act, and the Removal of Difficulties Order of 28 August 2015 (S.O. 2368(E)), in force from 1 September 2015, extended the First, Second and Third Schedules to it. Whether the body of the 2013 Act travels with the Schedules is contested — NHAI v. P. Nagaraju (Civil Appeal 4671 of 2022, 11 July 2022) and Project Director, NHAI v. Alfa Remidis Ltd, 2026 INSC 480, pull one way, the Kerala High Court in Sreeja v. Malabar Devaswom Board, 2026 LiveLaw (Ker) 289, the other. That fight is set out in our companion article on the 2015 Order.
The 1 January 2015 line — A very Recent Development
On 8 September 2026, in Manav Bhanot v. National Highway Authority of India, 2026 INSC 973, the Supreme Court decided which enactment supplies the rates of solatium and interest. The test is the date of the award: before 1 January 2015, the 1894 Act; after, the 2013 Act. Crucially for arbitration practice, the relevant “award” is the competent authority’s determination under section 3G(1). The arbitrator’s determination is not the award at all; it is, the Court said, in the nature of a civil court’s determination on a reference under section 18 of the 1894 Act. A 2019 arbitral award on a 2014 departmental determination therefore attracts 1894 Act rates.
The Risk Nobody Warns Landowners About
Section 3G(5) is available to either party, and the Act has no equivalent of section 25 of the Land Acquisition Act 1894, which forbids a reference court going below the Collector’s figure. On the plain words the arbitrator may therefore fix an amount lower than the competent authority determined, and the acquiring side can itself set the reference in motion. That is the sharpest structural difference from the ordinary reference, where the award is a statutory floor, and a claimant with a thin valuation case should weigh it before applying.
Time Limits: Two Clocks, One of Them Invisible
The National Highways Act prescribes no specific limitation period for an application under section 3G(5). That is not a licence. The residuary Article 137 of the Limitation Act 1963 — three years — is the obvious candidate, but no decision we would put before a court settles the point. The safe course is to apply as soon as the competent authority’s determination is known, so that the question never arises.
The second clock is hard-edged. A section 34 petition must be filed within three months of receipt of the award, extendable by a further thirty days on sufficient cause — “but not thereafter”. A further appeal lies to the High Court under section 37. In the Riar Builders batch the Court had to invoke Article 142 to revive section 34 petitions withdrawn in reliance on a judgment later stayed, because fresh petitions would have been time-barred.
The Section 34 Challenge, and What Survived 2025
Section 34 is not an appeal on quantum; a court cannot re-value the land. The workable ground is patent illegality under section 34(2A) — an award that adopts no method, ignores a statutory method the arbitrator was bound to apply, or gives no reasons. Alfa Remidis is the model: a section 3G(5) award that did not follow the section 26 methodology, and built an “average sale price” out of a single sale deed, was set aside as patently illegal.
Valuation grounds matter here because the arbitrator’s commonest shortcut is to adopt the guideline or “jantri” figure without more. The authorities on comparable sales, the guideline register and the deduction for development are the same ones fought over in an ordinary reference, and are set out in our article on the section 18 and section 64 reference. What differs is the forum: they must be put to the arbitrator, and if he ignores them the point is framed as a departure from a statutory method, not a disagreement about value.
On remedy, the position changed in 2025. NHAI v. M. Hakeem, (2021) 9 SCC 1, held that a section 34 court may set aside but not modify. A Constitution Bench in Gayatri Balasamy v. ISG Novasoft Technologies Ltd., 2025 INSC 605 (4:1), has since recognised a limited modification power in four situations: severing an invalid part; correcting a clerical or computational error apparent on the record; varying post-award interest under section 31(7)(b); and the Supreme Court’s own power under Article 142. Enhancement on the merits is not among them.
National Highways Act Arbitration vs Ordinary Land Acquisition Reference
| NH Act 1956, s.3G(5) | RFCTLARR 2013, s.64 | |
|---|---|---|
| Who fixes compensation first | Competent authority (revenue officer), s.3G(1) | Collector, s.23 |
| Forum on objection | Arbitrator appointed by the Central Government | Land Acquisition, Rehabilitation and Resettlement Authority |
| Is that forum a court? | No | Deemed a civil court; proceedings are judicial proceedings |
| Time to invoke | Not prescribed | Six weeks / six months, plus one year on condonation by the Collector |
| Solatium | Not in s.3G(7); supplied by the Tarsem Singh line | 100% of compensation, s.30(1) |
| Interest on excess | 9% p.a. from possession, s.3H(5), and discretionary (“may”) | 9% rising to 15% after one year, s.72 |
| Challenge | s.34 of the 1996 Act — no re-valuation | First appeal to the High Court, s.74 |
What this means for you
- Do not wait. Object within twenty-one days under section 3C, put your sale instances on record before the competent authority, and apply under section 3G(5) as soon as the determination is known. The absence of a prescribed period protects nobody.
- Build the valuation record early. The arbitrator’s file is usually thin, and a section 34 court cannot repair it later.
- Take advice before applying if your valuation case is weak. Unlike an ordinary reference, there is no floor at the competent authority’s figure, and the acquiring side can invoke section 3G(5) too.
- Keep a note of the date of the competent authority’s order. After Manav Bhanot, that single date decides whether your solatium and interest are computed on 1894 or 2013 Act rates.
- Raise the independence objection before the arbitrator, in writing, under section 12(3). It is unlikely to succeed now, but it cannot be raised for the first time at the section 34 stage.
- Record a protest when you accept payment — no statutory bar applies under the 1956 Act, but it costs nothing and forecloses an argument — and diarise the section 34 clock the day the award is received. Three months and thirty days, and no more.
Glossary
- Competent authority — the officer notified under the National Highways Act to acquire land and fix the amount under section 3G(1).
- Arbitrator — here, the person appointed by the Central Government under section 3G(5) to re-determine that amount. Not a court, and not chosen by the parties.
- Solatium — a statutory sum added to market value to compensate for the compulsory nature of the taking.
- Patent illegality — the ground in section 34(2A) allowing a domestic award to be set aside where the illegality goes to the root and appears on the face of the award.
- Jantri / guideline value — the State’s ready-reckoner of land rates for stamp duty. Not, by itself, market value.
- Severance — the loss caused when the acquired strip is cut out of a larger holding, reducing the value of what is left.
- Injurious affection — damage to the owner’s other property or earnings caused by the acquisition, apart from the value of the land taken.
- Mandamus — a High Court order under Article 226 directing a public authority to perform a duty it has failed to perform, such as appointing the arbitrator.
- Seventh Schedule (Arbitration Act) — the list of relationships, such as being an employee of a party, that make a person legally ineligible to act as arbitrator. The Fifth Schedule is the softer list, which merely raises justifiable doubts.
Frequently Asked Questions
Who appoints the arbitrator in a national highway land acquisition case?
The Central Government, and nobody else. Section 3G(5) provides that the amount shall, on an application by either party, be determined by “the arbitrator to be appointed by the Central Government”. The landowner has no say in the choice and no right to a panel.
Can I file a section 11 application in the High Court if no arbitrator is appointed?
No. Sayedabad Tea holds that section 11 has no application, because the National Highways Act is a self-contained code. Where the Government does not appoint within a reasonable time, Prakash Chand Pradhan indicates the remedy is a writ under Article 226, or a suit.
How long do I have to apply for arbitration under section 3G(5)?
The Act prescribes no period. The residuary three-year period under Article 137 of the Limitation Act 1963 is the obvious candidate, but the question is not settled by authority we would rely on. Apply at once.
Can the arbitrator award solatium and interest, or only market value?
Section 3G(7) lists market value, severance, injurious affection and relocation expenses. Solatium and additional amount come from the Tarsem Singh line, confined on review to claims pending on or after 28 March 2008. Interest on the excess is provided by section 3H(5) at nine per cent per annum from the date possession was taken — and note that the sub-section says the arbitrator “may” award it.
Can a Collector act as an arbitrator under the National Highways Act?
On the decided cases, yes: the officer is not an employee of the acquiring body, so the Seventh Schedule ineligibility is not attracted. But the Supreme Court in Riar Builders has said in terms that such officers lack a judicially trained mind and that the resulting classification appears to have no intelligible differentia, and the constitutional challenge to sections 3G and 3J is pending.
Can a court increase the compensation the arbitrator awarded?
Only in the four narrow situations recognised in Gayatri Balasamy, none of which is enhancement on the merits. The realistic route to more money is to have the award set aside for patent illegality and re-determined.
Read Next
- Land Acquisition Compensation in India: the LARR Act, the National Highways Act and the Railways Act — the cluster pillar.
- Section 18 Reference: challenging a Collector’s compensation award in court — the route for ordinary acquisitions.
- The Removal of Difficulties Order 2015 — what it extended to highway and railway acquisitions, and what it did not.
- Partial land acquisition and the severed residue — when a landowner can insist the whole be acquired.
Sources
- National Highways Act 1956, sections 3A, 3C, 3D, 3G, 3H and 3J — India Code.
- Arbitration and Conciliation Act 1996, sections 12, 13, 29A, 31(7)(b), 34, 34(2A), 34(3) and 37.
- Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013, sections 26, 30, 64, 72, 74 and the Fourth Schedule.
- RFCTLARR (Removal of Difficulties) Order 2015, S.O. 2368(E) dated 28 August 2015, in force 1 September 2015.
- Limitation Act 1963, Article 137.
- NHAI v. Sayedabad Tea Co. Ltd., (2020) 15 SCC 161.
- National Highways and Infrastructure Development Corporation Ltd. v. Prakash Chand Pradhan, (2020) 15 SCC 533.
- Anubhav Chand Kathuria v. Union of India, 2019 SCC OnLine Del 7307.
- Union of India v. Tarsem Singh, (2019) 9 SCC 304; NHAI v. Tarsem Singh, 2026 INSC 291 (25 March 2026).
- NHAI v. P. Nagaraju @ Cheluvaiah, Civil Appeal 4671 of 2022, decided 11 July 2022.
- Project Director, NHAI v. Alfa Remidis Ltd, 2026 INSC 480 (12 May 2026).
- Sreeja v. Malabar Devaswom Board, Kerala High Court, 2026 (reported at 2026 LiveLaw (Ker) 289 — no neutral citation traced).
- Sohan Lal v. Union of India, 2025:PHHC:040091-DB (20 March 2025) — operation stayed by the Supreme Court on 30 May 2025.
- M/s Riar Builders Pvt Ltd v. Union of India, Supreme Court order dated 13 January 2026 (reported at 2026 LiveLaw (SC) 65 — no neutral citation traced).
- Manav Bhanot v. National Highway Authority of India, 2026 INSC 973 (8 September 2026).
- NHAI v. M. Hakeem, (2021) 9 SCC 1; Gayatri Balasamy v. ISG Novasoft Technologies Ltd., 2025 INSC 605.
Advocate Aaditya Bhatt
Senior Standing Counsel Income Tax Department, Advocate Gujarat High Court. Aaditya combines his technical and legal expertise to deliver strategic counsel in litigation, constitutional, and regulatory matters. He represents clients before High Courts and Tribunals with a technology-driven approach.
