SC slams parts of NHAI Act, asks govt to examine
The Supreme Court criticized the National Highways Act for denying landowners judicial recourse and urged the government to ensure fair compensation adjudication.
New Delhi: The Supreme Court on Monday came down heavily on provisions of the National Highways Act, 1956 (NHAI Act), calling them “bad” for depriving landowners of judicial recourse and imposing a unilateral dispute resolution mechanism that places adjudicatory powers in the hands of bureaucrats rather than judicial officers.
A bench led by justice Surya Kant questioned why the act vests the determination of compensation with officers of the executive when even smaller state acquisitions require judicial oversight under the Land Acquisition Act and other laws.
“There is a valid heartburn for these landowners. Why do officers and bureaucrats have to decide and adjudicate? For a large chunk of land acquired by NHAI, officers decide. And for a 500 square metre land acquired by the state, it has to be approved by a district judge. Why this discrimination?” the bench asked solicitor general (SG) Tushar Mehta.
The bench, also comprising justice Joymalya Bagchi, pressed the Union government to consider making necessary clarification in the law so that the adjudication of compensation, solatium and interest for acquired land is conducted by judicial officers rather than executive authorities.
“You may harmonise the provision by saying that adjudication may be done by a judicial officer,” the court suggested, reminding the SG that the issue could also fall foul of last year’s Constitution bench ruling in Central Organisation for Railway Electrification (2024), which invalidated unilateral arbitrator appointments by government entities on grounds of violating Article 14 (equality) of the Constitution.
The court noted that while the NHAI Act provides for a “competent authority” (a collector) to determine compensation, with appeals to higher bureaucrats such as a deputy commissioner or commissioner, the absence of an independent judicial mechanism undermines the fairness of the process.
Stressing that land acquisition involves compulsory deprivation of property under Article 300A of the Constitution, the judges underscored that compensation must be “just, fair and equitable” and cannot be determined unilaterally by the acquiring authority.
The observations came during the hearing of an appeal against a March 2025 judgment of the Punjab and Haryana high court. In that decision, the high court struck down Sections 3J and 3G of the NHAI Act as unconstitutional. It held that excluding solatium and interest, while simultaneously imposing a unilateral arbitration mechanism, violated Article 14 and deprived landowners of equal treatment. The high court directed that compensation under the NHAI Act must include statutory benefits available under the Land Acquisition Act, 1894, such as solatium at 30% and additional interest at 9% and 15%.
The high court had also criticised Section 3G’s arbitration framework as legally deficient, noting that it prescribed a compulsory and one-sided arbitration process controlled by the acquiring authority, with no scope for independent judicial review. It found this scheme incompatible with principles of natural justice and inconsistent with protections afforded under both the 1894 Act, and the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation, and Resettlement Act, 2013 (LARR Act).
During Monday’s hearing, the Supreme Court echoed these concerns, pointing out that the discriminatory treatment of landowners under the NHAI Act compared to other acquisition statutes was indefensible. “Why cannot a member of a superior or a higher judicial service or an officer of the rank of district judge decide such matters? Adjudicatory power must lie with the judiciary,” said the bench, requesting SG Mehta to intervene at the government level.
The bench ultimately refrained from ruling on the validity of the provisions at this stage but formally recorded its expectation that the Union government “examine and revisit” provisions of the NHAI Act to align them with constitutional principles and established jurisprudence.
