A change in the arbitrator under the National Highways Act cannot derail arbitrations already pending, the Patna High Court has held, but it has also set aside the award passed for land acquired for NH-82 in Gaya and directed fresh assessment of compensation with solatium and interest under the Land Acquisition Act, 1894.
Patna: The Patna High Court has held that the Centre’s notification of June 21, 2018 appointing Divisional Commissioners as arbitrators under the National Highways Act, 1956 operates only prospectively and could not take away a pending arbitration from the Additional Collector, Gaya, while at the same time setting aside the arbitral award on land acquired for the four-laning of NH-82 for failing to apply the statutory parameters for compensation [Bihar State Road Development Corporation Limited and Others v. Shiv Shankar Prasad and Others].
A Division Bench of Justice Bibek Chaudhuri and Justice Rana Vikram Singh directed the competent authority to reassess compensation for the land in Khesra No. 3243, along with solatium, interest and interest on solatium under the 1894 Act, within three months.
The case
The landowners jointly held plots at Mauja Dakhingaon in Wazirganj, Gaya. By a notification of March 4, 2014 under Section 3A(1) of the National Highways Act, the Centre acquired about 2.8676 acres for widening NH-82 in Gaya and Nawada. Treating the land as agricultural, the competent authority fixed compensation, which the owners accepted under protest, contending that the land was in fact commercial or residential.
Under an October 10, 2017 notification, the Additional Collector, Gaya was the arbitrator for NH-82 acquisitions. The owners invoked arbitration, and while the proceeding was pending, the Centre on June 21, 2018 appointed Divisional Commissioners as arbitrators. On August 4, 2018, the Additional Collector passed an award holding that Khesra No. 3243 was “developing” land because of pillars and structures in the vicinity, while upholding the agricultural valuation of another plot.
In December 2018, the Bihar State Road Development Corporation Limited (BSRDCL) wrote to the Additional Collector asking him to recall the award and send the records to the Divisional Commissioner. On a writ petition, a single judge quashed that letter in January 2024, held that the 2018 notification did not affect the pending arbitration, and directed the award to be implemented with 12 per cent interest. BSRDCL appealed.
Notification has no retrospective effect
Framing the primary question as whether the Additional Collector’s order ceased to operate because of the June 2018 notification, the Bench examined its text and found that it had not been issued in supersession of the 2017 notification. It held:
“It is needless to say that an administrative notification operates prospectively. There is no retrospective operation of the notification, dated 21.06.2018. Therefore, the pending proceedings before the Additional Collector is required to be adjudicated/settled by him only.”
The Court accordingly upheld the single judge’s decision to quash BSRDCL’s letter of December 21, 2018.
Award ignored statutory factors
The State argued that the arbitrator had not applied Section 3G(7) of the Act, which requires the arbitrator to consider the market value on the date of the Section 3A notification, damage from severance, injurious affection to other property or earnings, and the cost of any compelled change of residence or business. The Bench noted that such a challenge would ordinarily lie under Section 34 of the Arbitration and Conciliation Act, 1996, but proceeded to examine whether the High Court could itself fix interest on compensation, and what the governing law was.
Relying on the Supreme Court’s decisions in Union of India v. Tarsem Singh and Manav Bhanot v. National Highway Authority of India, 2026 INSC 973, the Court held that since the land was notified on March 4, 2014, before January 1, 2015, the owners were entitled to solatium, interest and interest on solatium as provided under the Land Acquisition Act, 1894.
Examining the award, the Court found that it addressed none of the Section 3G(7) factors:
“The order of the Arbitrator does not contain any adjudication on the above-mentioned points contemplated in Section 3G(7) of the said Act. The order dated 4th of August, 2018 only states that as there are some pucca pillars and constructions in the vicinity of the acquired land, the land in question is developing land. The arbitral award did not speak about the amount of compensation, differing from the compensation fixed by the competent authority.”
Noting further that the arbitrator had not considered the 1894 Act provisions on solatium and interest “at all,” the Bench described the award and the appellate order as “bad in law, inoperative and capricious” and set them aside.
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The outcome
While affirming the single judge’s order to the extent that it quashed BSRDCL’s December 2018 letter, the Division Bench set aside the rest of the January 2024 order, including the direction to implement the award with 12 per cent interest. It directed the competent authority to reassess compensation for Khesra No. 3243 with solatium, interest and interest on solatium under the 1894 Act within three months of receiving the order, and disposed of the appeal.
The ruling settles two points for highway acquisitions in Bihar: a later notification changing the arbitrator does not transfer or unsettle arbitrations already pending, and an award that does not engage with the mandatory factors in Section 3G(7) cannot be enforced merely because it was passed by the correct arbitrator.
Case Title: Bihar State Road Development Corporation Limited and Others v. Shiv Shankar Prasad and Others [Letters Patent Appeal No. 924 of 2024 in CWJC No. 16226 of 2019]
Bench: Justice Bibek Chaudhuri and Justice Rana Vikram Singh, Patna High Court
Date of Judgment: October 1, 2026
Appearances: Senior Advocate P.K. Shahi with Advocate Manish Dhari Singh for the Appellants; Senior Advocate Jitendra Singh with Advocates Yash Singh, Snehil Pratik, Tej Pratap Singh and Saurabh Kumar for Respondent Nos. 1, 2, 3 and 5; Advocates Ajay Kumar Singh and Vijay Kumar for Respondent No. 4; Dr.
Maurya Vijay Chandra with Advocates Gaurav Govinda, Preety Ranjan, Rajesh Kumar Shandilya and Sanjeev Kumar for the NHAI; Shiv Pratap, AC to AAG-11 for the State