Delhi High Court
National Highway Authority Of India vs Gmr Highways Ltd on 6 May, 2026
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 28.04.2026
Judgment pronounced on: 06.05.2026
+ O.M.P. (COMM) 263/2018 & I.A. 3084/2023
NATIONAL HIGHWAY AUTHORITY OF
INDIA .....Petitioner
Through: Mr. Arun Kumar Varma, Sr.
Adv. with Mrs. Asha Gopalan
Nair, Mr. Sandeep Narain &
Ms. Nivedita Nair, Advs.
versus
GMR HIGHWAYS LTD .....Respondent
Through: Mr. Rajshekhar Rao, Sr. Adv.
with Ms. Richa Kapoor, Mr.
Kunal Anand, Ms. Aditi
Rathore & Mr. Wamic Wasim
Nargal, Advs.
CORAM:
HON'BLE MR. JUSTICE AVNEESH JHINGAN
JUDGMENT
1. This petition is filed under Section 34 of the Arbitration and
Conciliation Act, 1996 (for short „the Act‟) against the arbitral award
dated 24.02.2018 (for brevity „the award‟).
2. The brief facts are that the Government of India through the
petitioner/National Highways Authority of India (for short „NHAI‟)
invited bids for development of the stretch of National Highway from
28 km to 121 km of Tambaram-Tindivanam section of NH-45 in
Tamil Nadu. The respondent through a consortium was a successful
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bidder and was issued a Letter of Acceptance dated 16.08.2001. In
terms of the proposal, the consortium incorporated a special purpose
vehicle i.e. the respondent for implementing the project. The
Concession Agreement dated 09.10.2001 (for short „CA‟) was entered
between the petitioner and the respondent. The project was on Build
Operate and Transfer (for short „BOT‟) basis. The construction was
completed on 11.10.2004, and the concession period was of seventeen
years and six months, ending on 08.11.2019. The project was
successfully completed and there is no dispute relating to the
completion and operation of the project. The respondent raised a claim
for additional cost incurred consequent to change in rates of Minimum
Alternate Tax (for short „MAT‟) under Chapter XII-B of the Income
Tax Act, 1961 (for brevity „1961 Act‟), Fringe Benefit Tax (for short
„FBT‟) under Chapter XII-H of the 1961 Act and Service Tax (for
short „ST‟) under Chapter V of the Finance Act, 1994.
2.1 The change in rates was subsequent to the proposal due date i.e.
31.05.2001. The respondent vide letter dated 19.04.2012, raised claim.
The Independent Engineer forwarded the claim to the independent
auditor in terms of Article 11.3(b) of the CA. The petitioner on
05.12.2014, rejected the claim for reimbursement of additional cost.
The terms and conditions agreed between the parties provided for
dispute resolution through arbitration. The arbitration was invoked at
the instance of the respondent and culminated in the impugned award.
The claim of the respondent to the tune of Rs.14,51,57,902/- was
allowed. Interest in terms of Article 19.2 of the CA up to the date of
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the award was granted and on failure to pay the awarded amount by
07.04.2018, interest at the rate of 7% from the date of the award till
actual payment was awarded.
3. Learned senior counsel for the petitioner contended that the
claim was barred by limitation. The cause of action arose to the
respondent when the rates of tax varied in financial years (for short
„FY‟) 2007-08 but the claim was raised after three years vide
communication dated 19.04.2012.
3.1 It is argued that the variation in rates of tax under the 1961 Act
does not fall within the ambit of „additional cost‟ and under Article 11
of the CA. The submission is that the tribunal erred in reading the
definition of „tax‟ in isolation and not along with the definition of
„additional cost‟.
3.2 The award is challenged to be perverse as the claim was
allowed in the absence of evidence to establish that the taxes at the
enhanced rates were actually paid by the respondent and that the tax
rates varied after the proposal due date.
3.3 The grievance is that the contentions raised in the statement of
defence (for short „SOD‟) were not considered by the tribunal. The
notifications dated 27.07.2009 and 20.06.2012 were relied to contend
that no ST was payable on services provided by respondent to
petitioner.
4. Per contra, the claim is within limitation. It is contended that
the cause of action arose in the year 2010 when the additional cost
incurred exceeded rupees one crore and thereafter the respondent
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proceeded in terms of Article 11 of the CA to raise the claim vide
communication dated 19.04.2012.
4.1 The submission is that the petitioner for rejecting the claim
erred in relying upon the definition of „tax‟ in the Model Concession
Agreement which came into existence subsequent to the execution of
the CA and more so when „tax‟ is defined in the CA. It is emphasised
that the project was on BOT basis, after construction the project was
handed over to the petitioner for collection of toll and the respondent
was to receive payment of annuity for the stipulated period. Reliance
is on communication dated 30.01.2012, to contend that petitioner was
put to notice that the profitability of the respondent reduced due to
variation in tax rates. The argument is that the share of additional cost
for FY 2007-08 to 2012-13 to be borne by the respondent amounting
to rupees six crores was reduced and only the balance amount was
claimed.
4.2 The argument is that the notifications relied upon by the
petitioner to contend that no ST was leviable on services provided for
construction and maintenance of roads used by the general public are
not applicable. The claim for ST by the respondent was in respect of
services rendered by the professionals engaged by the respondent and
the hiring of the professionals was in compliance with the terms of the
CA.
4.3 Reliance is on the decision of the Supreme Court in Som Datt
Builders Ltd. v. State of Kerala, (2009) 10 SCC 259 to contend that
reasoned award is not to be equated with a judgment of a court. The
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reasons implicit from the reading of award as a whole would suffice.
Learned senior counsel refers to the written submissions filed before
the tribunal to demonstrate that the award is reasoned.
4.4 It is contended that the definition of „tax‟ and „additional cost‟
is widely worded and would include the variation in rates of MAT,
FBT and ST and claim was illegally rejected by the petitioner. It was
not considered that the respondent is an SPV and would not be able to
avail the credit of MAT after completion of the project.
5. Before proceeding further it would be apposite to reproduce
Article 11 of the CA and the definitions of „tax‟ and „additional cost‟:-
“ARTICLE 11
11.1 Change In Law
Change in Law means the occurrence or coming into force
of any of the following, after the Proposal Due Date:
a) the enactment of any new Indian law;
b) the repeal, modification or re-enactment of any existing
Indian law;
c) a change in the interpretation or application of any
Indian law by a court of record;
d) any change in the rates of any of the Taxes.
Provided that Change in Law shall not include;
(i) coming into effect, after the Proposal Due Date, of any
provision of a statute which is already in place as of the
Proposal Due Date or
(ii) any new law or any change in the existing law under
the active consideration of or in the contemplation of any
government as of the Proposal Due Date, which is a matter
of public knowledge.
11.2 Relief to Concessionaire
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Subject to the Concessionaire taking necessary measures to
mitigate the impact or the likely impact of Change in Law
on the Project, if as a direct consequence of a Change in
Law, the Concessionaire is obliged to incur Additional
Cost in any Accounting Year, such Additional Cost shall
(without duplication) be allocated and shared between the
Concessionaire and NHAI as under:
Increase in Capital NHAI‟s Share
Expenditure (Rs. In
Million)
From Rs. 0 to 60 Million 0%
Above Rs. 60 Million 100% of the capital
expenditure in excess of Rs.
60 Million.
Increase in Costs/ Taxes NHAI‟s Share
(Rs. In Million)
From Rs. 0 to 10 Million 0%
Above Rs. 10 Million 100% of the amount in
excess of Rs. 10 Million.
11.3 Obligations of the Concessionaire
(a) Upon occurrence of a Change in Law, the
Concessionaire may, if it is entitled to claim relief
under the provisions of Article 11.3, notify NHAI and
the Independent Engineer, of the following:-
i. the nature and the impact of Change in Law on the
Project;
ii. in sufficient detail, the estimate of the Additional
Cost likely to be incurred by the Concessionaire on
account of the Change in Law;
iii. the measures, which the Concessionaire has taken or
proposes to take to mitigate the impact of Change in
Law; including in particular, minimising the
Additional Cost;
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iv. the relief sought by the Concessionaire.
(b) Upon receipt of the notice of Change in Law issued by
the Concessionaire pursuant to the preceding sub-
article(a), NHAI and the Concessionaire shall along
with the Independent Engineer hold discussions and
take all such steps as may be necessary including
determination/certification by the Independent Engineer
and where necessary by the Independent Auditor of the
Additional Cost and to determine the quantum of the
Additional Cost to be borne and paid by NHAI.
(c) NHAI shall within 30 days from the date of
determination of quantum of Additional Cost, provide
relief to the Concessionaire in either of the following
ways:
i. by lump-sum reimbursement of the Additional Cost
to the Concessionaire:
ii. reimbursement of the Additional Cost to the
Concessionaire, in not exceeding four half yearly
instalments, subject to payment of interest at SBI
PLR + 2% on the amount the payment of which is
deferred.”
“Additional Cost means the additional capital
expenditure and/or the additional operating costs or
additional taxes or both as the case may be, which the
Concessionaire has or would be required to incur and
which has arisen as a result of Change of Scope or Change
in Law.”
“Tax means and includes all taxes, fees, cesses, levies that
may be payable by the Concessionaire under any
Applicable Law.
Provided that for the purpose of Article 11.2, Tax shall not
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or payable by the Concessionaire on account of non-
payment, short payment or delayed payment of Tax or on
account of any other default.”
6. The construction of the project was completed on 11.10.2004,
and the concession period ended on 08.11.2019. The claim for
additional expenses due to variation in rates of MAT, FBT and ST is
from the FY 2007-08 to 2015-16. The cause of action arose in 2010
when the quantum of additional cost incurred exceeded rupees one
crore. The respondent proceeded under Article 11 of the CA and after
rejection of the claim on 05.12.2014, arbitration was invoked. The
objection of limitation does not merit acceptance. The tribunal rightly
held the claim to be within limitation and no ground is made out for
interference with the finding.
7. The respondent claimed that the additional cost incurred due to
variation in rates of MAT, FBT and ST was covered under Article 11.
Before proceeding to deal with the issue as to whether this claim was
maintainable under Article 11 it is necessary to consider as to whether
the claim made was proved before the tribunal.
8. The respondent vide communication dated 18.08.2014 invoked
Article 11 for raising a claim for the FY 2007-08 to 2012-13
tabulating the variation in tax rates, the effect thereof and the share of
the additional cost to be borne by the petitioner but the claim was
rejected. In the statement of claim filed before the tribunal, the
respondent furnished a tabulated statement for the FY 2007-08 to
2015-16. Both the tabulated statements are reproduced hereunder:-
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Additional Cost/ Taxes incurred under
Financial Minimum Fringe Service Tax Total of Amount to be Share of
Year Alternate Benefit (ST) Additional borne by Additional
Tax (MAT) Tax (c) Cost Concessionaire cost to be
(a) (FBT) (d)= (e) borne by
(b) (a)+(b)+(c) NHAI
(f)= (d)-(e)
2007-08 92,05,272 6,15,225 11,49,441 1,09,69,938 1,00,00,000 9,69,938
2008-09 1,03,70,252 4,44,324 6,66,995 1,14,81,571 1,00,00,000 14,81,571
2009-10 4,05,80,618 0 22,22,327 4,28,02,945 1,00,00,000 3,28,02,945
2010-11 2,62,33,044 0 19,84,999 2,82,18,043 1,00,00,000 1,82,18,043
2011-12 2,91,56,640 0 28,55,846 3,20,12,486 1,00,00,000 2,20,12,486
2012-13 1,59,87,589 0 42,90,447 2,02,78,036 1,00,00,000 1,02,78,036
TOTAL 13,15,33,415 10,59,549 1,31,70,055 14,57,63,019 6,00,00,000 8,57,63,019Financial Year Increase in tax Increase in tax Increase in tax Share of Additional cost
(FY) rate under rate under rate under ST to be borne by NHAI due
MAT (In %) FBT (In %) (In %) to differential tax
liability caused by
increase in MAT, FBT
and ST (in Rupees)
2007-08 11.330 30.00 12.24 & 12.36 9,69,939
2008-09 11.330 30.00 12.36 & 10.30 14,81,571
2009-10 16.995 30.00 10.30 3,28,02,945
2010-11 19.9305 – 10.30 1,82,18,043
2011-12 20.0077 – 10.30 2,20,12,486
2012-13 20.0077 – 12.36 1,02,78,037
2013-14 20.9605 – 12.36 1,97,96,105
2014-15 20.9605 – 12.36 2,08,74,346
2015-16 21.3416 – 14.00 & 14.50 1,87,24,430
TOTAL 14,51,57,902
9. Apart from the tabulated claim, no evidence was led by the
respondent to prove the change in rates of tax after the proposal due
date and that the tax at the enhanced rates was actually paid by the
respondent. Copies of the returns and proof of tax deposited were not
produced. The fundamental requirement under Article 11 was the
incurring of additional cost and in the absence of proof of tax having
been paid at the enhanced rates the foundation of the claim for
additional cost is missing.
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10. The law is well settled that filing of a claim by itself is not a
proof to substantiate the claim. Reference is to the following decisions
of the Supreme Court:
10.1 In Ssangyong Engg. & Construction Co. Ltd. v. NHAI,
(2019) 15 SCC 131 wherein it was held as under:
“41. What is important to note is that a decision which is
perverse, as understood in paras 31 and 32 of Associate
Builders [Associate Builders v. DDA, (2015) 3 SCC 49 :
(2015) 2 SCC (Civ) 204] , while no longer being a ground
for challenge under “public policy of India”, would
certainly amount to a patent illegality appearing on the
face of the award. Thus, a finding based on no evidence
at all or an award which ignores vital evidence in arriving
at its decision would be perverse and liable to be set aside
on the ground of patent illegality. Additionally, a finding
based on documents taken behind the back of the parties
by the arbitrator would also qualify as a decision based on
no evidence inasmuch as such decision is not based on
evidence led by the parties, and therefore, would also
have to be characterised as perverse.”
10.2 In State of Rajasthan and Anr. v. Ferro Concrete
Construction Private Limited (2009) 12 SCC 1 it was held:
“55.While the quantum of evidence required to accept a
claim may be a matter within the exclusive jurisdiction of
the arbitrator to decide, if there was no evidence at all and
if the arbitrator makes an award of the amount claimed in
the claim statement, merely on the basis of the claim
statement without anything more, it has to be held that the
award on that account would be invalid. Suffice it to say
that the entire award under this head is wholly illegal and
beyond the jurisdiction of the arbitrator, and wholly
unsustainable.”
(emphasis supplied)
11. As per Article 11 the respondent was to bear the additional cost
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incurred up to rupees one crore in each accounting year and could
claim only the amount in excess thereof. From the tabulated statement
placed before the tribunal, it is not forthcoming that such deduction
was made for the FY 2013-14 to 2015-16. No evidence was adduced
to prove that the amount claimed for these FY was in accordance with
Article 11 of the CA.
12. Section 31(3) of the Act mandates a reasoned award. The law is
well settled that the requirement of Section 31(3) of the Act is not a
mere formality. The reasoning in an appropriate case can be implied
upon a fair reading of the award and the documents referred to therein.
Reference is to the decision of the Supreme Court in Dyna
Technologies Pvt. Ltd. v. Crompton Greaves Ltd. (2019) 20 SCC 1
wherein it was held as under:
“34. The mandate under Section 31(3) of the Arbitration
Act is to have reasoning which is intelligible and
adequate and, which can in appropriate cases be even
implied by the courts from a fair reading of the award and
documents referred to thereunder, if the need be. The
aforesaid provision does not require an elaborate
judgment to be passed by the arbitrators having regard to
the speedy resolution of dispute.”
12.1 In Som Datt Builders Ltd. (supra), it was held as follows:
“25. The requirement of reasons in support of the award
under Section 31(3) is not an empty formality. It
guarantees fair and legitimate consideration of the
controversy by the Arbitral Tribunal. It is true that the
Arbitral Tribunal is not expected to write a judgment like
a court nor is it expected to give elaborate and detailed
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submissions of the parties or reference to documents is no
substitute for reasons which the Arbitral Tribunal is
obliged to give……”
(emphasis supplied)
13. From the perusal of the award it is forthcoming that there is no
discussion of the material relied upon to award the claimed amount.
There is no material on record to prove the variation in rates of tax and
tax deposited at the enhanced rates.
14. The grievance of learned counsel for the petitioner regarding
non-consideration of the issues raised in the SOD deserves acceptance
and is fatal to the award. The petitioner relied upon notifications dated
27.07.2009 and 20.06.2012, refuting the claims made for enhanced
rate of ST. It was canvassed that no ST was leviable on the project
awarded to the respondent. The defence of the petitioner was neither
noted nor dealt with. The contention of learned counsel for the
respondent that the notifications were not applicable was an issue to
be considered by the tribunal for the award to be a reasoned award.
15. There cannot be a quarrel with the proposition propounded by
learned senior counsel for the respondent that the award is to be read
as a whole, fairly and with the documents referred to therein to
determine the compliance of Section 31(3) of the Act. However, in the
case in hand the award is bereft of reasons. There is no discussion of
the evidence produced and relied upon for awarding the claim. The
contentions raised by the petitioner in the SOD were brushed under
the carpet and the issue as to whether the ST was leviable in view of
the notifications relied upon was not dealt with.
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16. Allowing the claim without evidence by an unreasoned award
renders the award perverse and in conflict with the public policy of
India and is consequently set aside.
17. The issue as to whether variation of rates in tax of MAT, FBT
and ST is covered under Article 11 read with the definition of „tax‟
and „additional cost‟ would also involve the following issues: (i)
whether the definition of „tax‟ would include direct taxes leviable
under the 1961 Act and (ii) whether „additional cost‟ would cover
taxes impacting only the profit earned by the respondent? These issues
need not be dilated upon after the award having been set aside in view
of the discussion above.
18. Similarly, the issue as to whether the FBT arising from the
division of remuneration of employees of the respondent in fringe
benefits and cash emoluments would constitute an additional cost for
the project or whether it affected the only profitability of the
respondent need not be gone into.
19. The petition is allowed and the award is set aside. Pending
applications if any are disposed of.
AVNEESH JHINGAN, J
MAY 06, 2026
Ch
Reportable:- Yes
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