Kerala High Court Sets Aside Order Directing NHAI to Deposit Compensation Amid Pending Appeals

Court rules NHAI not required to deposit arbitrator-determined amounts until statutory challenges are resolved.

In a significant judgment, the Division Bench of the Kerala High Court has set aside a lower court's directive that mandated the National Highways Authority of India (NHAI) to deposit compensation amounts, including solatium and interest, determined by an arbitrator. The ruling came in response to an appeal filed by NHAI, challenging the Single Judge's decision which directed them to make the payments under the National Highways Act, 1956.

The case stemmed from compensation fixed by the competent authority which was subsequently challenged by the claimants before an arbitrator. The arbitrator awarded solatium and interest on the compensation, which NHAI contested in the District Court under Section 34 of the Arbitration and Conciliation Act, 1996. The District Court modified these awards, prompting NHAI to file an Arbitration Appeal No. 6 of 2024 under Section 37 of the same Act. A stay on this appeal had already been granted by the High Court.

The NHAI argued that under the National Highways (Manner of Depositing the Amount by the Central Government; Making Requisite Funds Available to the Competent Authority for Acquisition of Land) Rules, 2019, they were not obliged to deposit the disputed amounts until all statutory remedies had been exhausted. The pertinent provision under Rule 3(i)(b) stipulates that the excess amount determined by an arbitrator need not be deposited if the award is further challenged.

In their judgment, Justices A. Muhamed Mustaque and Harisankar V. Menon concurred with the NHAI's stance, noting that the directive to deposit the amount before the resolution of statutory challenges was legally unsustainable. The court acknowledged the legal provisions and the existing stay, ultimately allowing the appeal and setting aside the impugned judgment.

This ruling reaffirms the importance of adhering to statutory procedures and challenges before executing awards determined by arbitration, providing clarity on the obligations of NHAI under the current legal framework.

Bottom Line:

National Highways Authority of India is not bound to deposit the amount as determined by the arbitrator under Section 3-G(7) of the National Highways Act, 1956, if the award has been further challenged and is pending adjudication - Direction to deposit such an amount before exhausting statutory remedies is legally unsustainable. 

Statutory provision(s): National Highways Act, 1956 Section 3H(1), National Highways (Manner of Depositing the Amount by the Central Government; Making Requisite Funds Available to the Competent Authority for Acquisition of Land) Rules, 2019 Rule 3(i)(b), Arbitration and Conciliation Act, 1996 Sections 34 and 37

National Highways Authority of India v. Lawerence, (Kerala)(DB) : Law Finder Doc Id # 2783404