ARBITRATION UNDER A CODE: A COSTLY AFFAIR

by Arpita Satangi, 4th-year student, HNLU

The Supreme Court recently in the case of National Highways Authority of India v. Sayedabad Tea Company and Ors.[i] was faced with the question about the application of Section 11 of the Arbitration and Conciliation Act, 1996[ii] (hereinafter “Act 1996”) in view of Section 3G(5) of the National Highways Act, 1956 (hereinafter “Act 1956”) which provides for appointment of an Arbitrator by Central Government.

Relevant Provisions of the Act 1956.

Section 3D of the Act 1956 empowers the Central Government to acquire property. Moreover, Section 3G of the Act 1956 provides that an amount has to be paid to the other party as determined by the competent authority. Further, Section 3G(5) provides that if the amount is not acceptable to either of the parties, they may file an application for re-determination of the said amount by an Arbitrator as appointed by Central Government.[iii]

Facts of the above case.

The Appellant acquired some property through Section 3D of the Act 1956. The Respondent being dissatisfied with the amount determined filed an application for appointment of an Arbitrator to re-determine the said amount on 8th December 2006. The Central Government did not respond within the prescribed time limit of 30 days as mandated under Section 11(5) of the Act 1996.[iv] Hence, the Respondent filed an application under Section 11(6)[v] of the Act 1996 to the CJ of Calcutta HC to appoint an Arbitrator on 7th March 2007. In the meantime, an Arbitrator was appointed by Central Government in the month of April.

The Calcutta High Court took note of the appointment of Arbitrator by the Central Government and held it to be invalid. The Court held that the right of Central Government to appoint an Arbitrator under the Act 1956 is forfeited by the application of Section 11(6) of the Act 1996.

The appellant, feeling aggrieved filed a review petition in the High Court contending that the Act 1956 is a special enactment laying down a procedure for appointment of Arbitrator. Hence, an application of Act 1996 cannot be allowed. However, the Court did not consider it as a valid ground for a review application.

Hence, feeling aggrieved the appellant preferred an appeal to the Supreme Court of India. The appellant contended that the enactment is a code in itself providing not only for the procedure of acquisition but also for the determination of compensation and as a result, the respondent could not take the help of the Act 1996. It also relied on the judgement of General Manager (Project) National Highways and Infrastructure Development Corporation Ltd. vs. Prakash Chand Pradhan &Ors[vi].,where a similar dispute arose, the Court held that the Act 1996 cannot be applied and appointment of an Arbitrator can only take place via Section 3G of the Act 1956.

The Respondent relied on Section 3G (6) of the Act 1956. The Section provides that subject to the provisions of the Act 1956, the provisions of the Act 1996 shall apply to every arbitration carried out under the Act 1956.[vii] Hence, the Respondent contended that they are empowered to take the help of Act 1996 when no appointment was made by Central Government within 30 days from the filing of application. Therefore, the Central Government forfeits its right of appointment when an application under Section 11(6) of the Act 1996 is made for appointment.

The Decision of the Court.

The Supreme Court relying upon the Judgement cited by the Appellant held that the Act 1956 is a special enactment and a code in itself. Hence, Act 1996 cannot be applied. On the question of the interpretation of Section 3G (6) of the Act 1956, the Court held that use of the expression “Subject to” indicates that the legislature intended to give overriding effect to the Act 1956. Hence, provisions of Act 1996 can be applied to the extent where Act 1956 is silent. Therefore, recourse to Act 1996 cannot be taken for appointment of Arbitrator as Act 1956 clearly stipulates for the same.

The Lacuna of the above Interpretation.

In these circumstances, the question that arises is what remedy does a party have if the Central Government has the sole repository of power to appoint an Arbitrator and it mischievously lingers it for long. On this question the Court held that the only remedy available would be to file a writ directing the Central Government to appoint an Arbitrator. However, it is pertinent to note that writs are costly and all may not afford it. This would lead to a travesty of justice as party would be left either with a costly remedy or none at all.


[i]2019 SCC OnLine SC 1102

[ii]The Arbitration and Conciliation Act, 1996, §11.

[iii] The National Highways Act, 1956, § 3G(5).

[iv]The Arbitration and Conciliation Act, 1996, §11(5).

[v]The Arbitration and Conciliation Act, 1996, §11(6).

[vi]2018 SCC OnLine SC 3245

[vii]The National Highways Act, 1956, § 3G(6).

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