Delhi High Court
National Highways Authority Of India vs M/S Kurukshetra Expressway Private Ltd on 28 July, 2026
Author: Sachin Datta
Bench: Sachin Datta
$~J
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment pronounced on: 28.07.2026
+ O.M.P. (COMM) 542/2024, IA No.48442/2024, IA No.540/2025
NATIONAL HIGHWAYS AUTHORITY OF INDIA ..... Petitioner
Through: Mr. A.K. Nijhawan and Mr. Abdul
Vahiel, Advocates.
versus
M/S KURUKSHETRA EXPRESSWAY PRIVATE LTD.
..... Respondent
Through: Mr. Sandeep Sethi, Sr. Adv., Mr.
Dayan Krishnan, Sr. Adv., Mr. Rishi
Aggarwal, Mr. Sunil Mittal, Mr.
Daksh Arora, Ms. Shruti Arora, Mr.
Anant Shukla and Mr. Sukrit Seth,
Advocates.
CORAM:
HON'BLE MR. JUSTICE SACHIN DATTA
JUDGMENT
IA No.540/2025
1. The present application has been filed by the respondent seeking
dismissal of the petition filed under Section 34 of the Arbitration and
Conciliation Act, 1996 challenging the arbitral award dated 16.08.2024,
primarily on two grounds: (i) limitation, and (ii) suppression of material
documents.
2. The respondent contends that the petition has been filed beyond the
mandatory limitation period prescribed under Section 34(3) of the Act. The
award was passed on 16.08.2024 and the statutory period of three months
expired on 16.11.2024.
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3. It is submitted that as per case history, as on 29.11.2024 no award, no
Vakalatnama, and not even the memo of parties was filed. In fact, only 69
pages were filed. No single document/Annexure was filed. It is contended
that the same amounts to a ‘non-est’ filing.
4. Reliance has been placed on Brahmaputra Cracker & Polymer Ltd.
v. Rajshekhar Construction Pvt. Ltd., 2023/DHC/000642.
5. It is submitted that the petition was effectively filed only on
12.12.2024 (registered on 13.12.2024) without any application seeking
condonation of delay and is therefore liable to be dismissed as time-barred.
6. The respondent further alleges that the petitioner deliberately
suppressed material documents. While the arbitral record comprised
approximately 4,574 pages, the petitioner filed only 134 pages, omitting
several documents that formed the very basis of the Tribunal’s findings.
7. It is submitted that the omitted documents include the
“Disaggregation Letter” dated 04.02.2019, Independent Engineer’s Letter
dated 27.01.2022 and 29.03.2022, Statement of Claim, Statement of
Defence, evidence affidavits, cross-examination transcripts, letter dated
25.02.2022 issued by Bank of Baroda, relevant provisions of the Concession
Agreement, the Financial Model, and the Loan Agreement.
8. The respondent submits that the petitioner has selectively placed
documents on record to present an incomplete and misleading picture.
9. The petitioner opposes the respondent’s application for dismissal and
contends that the Section 34 petition is within the prescribed limitation
period and is not liable to be rejected on technical grounds.
10. The petitioner submits that the arbitral award was passed on
16.08.2024 and the Section 34 petition was initially filed on 13.11.2024,
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well within the statutory period of three months. As per the submissions of
the petitioner, the petition was accompanied by the arbitral award, relevant
portions of the Concession Agreement, the vakalatnama, and the memo of
parties. The subsequent re-filings were only to cure defects raised by the
Registry and to place additional pages of the Concession Agreement on
record pursuant to instructions from NHAI. The objections were ultimately
removed on 12.12.2024, and the petition was listed on 17.12.2024. It is,
therefore, asserted that the petition does not suffer from delay or latches, and
the judgments relied upon by the Respondent to make out a case of ‘non-est’
filing, are inapplicable.
11. The petitioner further denies any suppression of material documents,
contending that the entire Concession Agreement was eventually placed on
record and that the petition itself sought summoning of the complete arbitral
record, which is the normal practice in proceedings under Section 34.
12. The petitioner maintains that the petition complies with all procedural
requirements and that there has been no concealment of facts or documents.
13. It is further prayed that, in the event this Court comes to the
conclusion that the present petition has been filed beyond the prescribed
period of three months, this Court may be pleased to condone the delay.
14. Having heard the learned counsel for the parties this Court is not
inclined to allow the present application. It is the petitioner’s case that the
present petition was initially instituted on 13.11.2024, well within the
prescribed limitation period of three months under Section 34(3) of the
Arbitration and Conciliation Act, 1996. The petitioner has specifically
averred that, at the time of the initial filing, the petition was accompanied by
the arbitral award, the relevant extracts of the Concession Agreement, the
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Vakalatnama, and the Memo of Parties. The subsequent re-filings were
undertaken to cure the defects pointed out by the Registry. The Registry’s
objections were ultimately removed on 12.12.2024, whereafter the matter
was listed before the Court on 17.12.2024.
15. The specific averments made by the petitioner in its reply dated
04.02.2025 are reproduced as under –
“That the contents of para no.4 of the Application, It is contended by
the Respondent that “as on 29.11.2024, no Award, no Vakalatnama
and not even the Memo of Parties was filed”. In fact, on 13.11.2024,
the Petition alongwith Award and the relevant pages of the Contract
Agreement, Vakalatnama and Memo of Parties was filed before this
Hon’ble Court, to which the Registry of this Hon’ble Court had raised
objections. It is submitted here that during the process of removing the
Objections NHAI instructed the Counsel to file the more Agreement
pages may be filed such that during admission, in case certain queries
are raised’ by the Hon’ble Court the same could be replied effectively.
It may be relevant to mention that the Agreement was apart of the
Arbitration record and Petitioner had prayed that the same be called
for, however, in view of the instructions Petitioner refiled the Petition
with while removing fresh objections raised by the Registry, on
14.11.2024,”‘02.12.2024, 07.12.2024, 11.12.2024. Finally objection
were removed on 12.12.2024 and petition listed on 17.12.2024.”
16. Even in a situation where the petition under Section 34 was not filed
within the initial period of three months from the date on which the
petitioner received the arbitral award, Section 34(3) of the Arbitration and
Conciliation Act, 1996 expressly empowers the Court to entertain such an
application within a further period of thirty days, provided the applicant
establishes sufficient cause for not filing the application within the
prescribed period of three months. Section 34(3) reads as under –
“(3) An application for setting aside may not be made after three
months have elapsed from the date on which the party making that
application had received the arbitral award or, if a request had been
made under section 33, from the date on which that request had been
disposed of by the arbitral tribunal:
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Provided that if the Court is satisfied that the applicant was prevented
by sufficient cause from making the application within the said period
of three months it may entertain the application within a further
period of thirty days, but not thereafter.”
17. In Panjab Ali Alias Punjab Ali and Ors. v. State of West Bengal and
Ors., AP/92/2025 (order dated 19.1.2026), the Calcutta High Court has
observed as under –
“Section 34(3) of the Arbitration and Conciliation Act, 1996 mandates
that an application for setting aside an arbitral award must be made
within a period of three months from the date on which the party
making the application receives the arbitral award. The proviso to
Section 34(3) permits the Court, upon sufficient cause being shown, to
entertain the application within a further period of thirty days, but not
thereafter. Thus, the outer limit prescribed by law for filing a petition
under Section 34 is three months plus thirty days, i.e., a total of 120
days from the date of receipt of the award.
This position has been consistently reaffirmed, inter alia, in Simplex
Infrastructure Ltd. v. Union of India, (2019) 2 SCC 455, wherein the
Supreme Court reiterated that an application for setting aside an
arbitral award must be filed within three months from the date of
receipt of the award, extendable only by a further period of thirty days
on sufficient cause being shown, and not beyond. Any delay beyond
the outer limit of 120 days renders the application non-maintainable,
and the Court is rendered functus officio for the purpose of condoning
such delay.”
18. It is also well settled that Section 34(3) of the A&C Act governs the
initial institution of a petition; it has no application to delay thereafter
occasioned in curing defects pointed out by the Registry and in re-filing. In
Northern Railway v. Pioneer Publicity Corporation Pvt. Ltd., (2017) 11
SCC 234, the Supreme Court held that the rigours of Section 34(3) are
confined to the original presentation of the petition, and that delay in
removal of office objections and re-filing does not attract the same standard,
nor does it relate back so as to render an originally timely petition time-
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barred. The several re-filings effected by the petitioner on 14.11.2024,
02.12.2024, 07.12.2024 and 11.12.2024, culminating in removal of
objections on 12.12.2024, were accordingly steps in the process of curing
defects in a petition already instituted within limitation on 13.11.2024, and
stand on a wholly different footing from the institution of a fresh petition.
19. In the present case, the arbitral award is dated 16.08.2024. The
petition was initially filed on 13.11.2024, and after curing all the defects
pointed out by the Registry, it was ultimately re-filed on 12.12.2024. Thus,
even reckoning the period up to the date of re-filing, the petition was
brought on record within the outer limit of 120 days contemplated under
Section 34(3) of the Act. Considering that the aforesaid outer limit has not
been breached, even assuming that there was some delay (although it does
not appear to be so), the same would be liable to be condoned given the
voluminous nature of the record and the attendant facts and circumstances.
As such, no ground is made out to reject the petition on the ground of
limitation.
20. It is also significant to note that the petitioner has, in the prayer clause
of the petition itself, sought summoning of the records from the learned
Arbitral Tribunal. Had there been any intention on the part of the petitioner
to suppress any material document, such a prayer would not have been
made. This circumstance lends support to the petitioner’s contention that
there was no deliberate concealment or withholding of any document from
the Court.
21. In view of the aforesaid facts and circumstances, this Court finds no
merit in the present application. The same is, accordingly, dismissed.
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O.M.P. (COMM) 542/2024 and IA No.48442/2024
22. The present petition assails an arbitral award dated 16.08.2024
rendered in relation to disputes between the parties arising under a
Concession Agreement dated 13.07.2010. The said Agreement pertains to
the design, construction, development, finance, operation and maintenance
of the four-laning of the Rohtak-Bawal Section of NH-71, from KM
363.300 (design KM 363.300) to KM 450.800 (design KM 445.853), under
NHDP III in the State of Haryana.
23. The claimant (respondent herein), M/s Kurukshetra Expressway Pvt.
Ltd., is a Special Purpose Vehicle jointly promoted by M/s JMC Projects
(India) Ltd (Lead member) and M/s SREI Infrastructure Finance Limited.
24. The request for qualification for the short-listing of bidders in
connection with the aforesaid project was issued by the National Highways
Authority of India (NHAI) on 16.04.2009. Pursuant thereto, a bidding
process was conducted, culminating in the issuance of the Letter of Award
dated 04.02.2010 in favour of the respondent/concessionaire. Thereafter, the
Concession Agreement was executed on 13.07.2010, contemplating a
concession period of 28 years from the appointed date, i.e., 10.05.2011.
25. Provisional Completion Certificates were issued on 24.08.2013 and
30.09.2014 upon the substantial completion of the works. Toll collection
commenced on 01.09.2013. The Completion Certificate was issued on
13.08.2018.
26. On 08.04.2014, the concessionaire applied to the Authority for the
deferment of the annual premium payable by it, on the ground that the
project was under financial stress. Vide letter dated 08.12.2014, the NHAI
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sanctioned the deferment of the premium. Thereafter, certain disputes
arising under the Concession Agreement became the subject matter of an
arbitral reference, which culminated in an award dated 03.11.2018.
Subsequently, certain claims raised by the Respondent/Concessionaire on
account of the financial losses suffered by it were also referred to arbitration
for adjudication.
27. The impugned Award in the present proceedings effectively arise out
of the third round of arbitration between the parties. The same was
occasioned by the termination of the Concession Agreement by the
respondent/concessionaire in exercise of its rights under Clause 34.8 of the
Concession Agreement, which provides as follows:-
28. Vide letter dated 07.10.2021, the respondent/concessionaire
terminated the Concession Agreement on the ground of an “Indirect Political
Force Majeure Event” and sought a termination payment of Rs.1347.53
Crore, along with certain other sums. For the adjudication of the aforesaid
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disputes, the concerned Arbitral Tribunal, which has rendered the impugned
Award, was constituted.
29. A statement of claim came to be filed on 01.10.2022, wherein the
following claims were raised:-
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30. NHAI filed its Statement of Defence on 19.01.2023 along with
counter-claims as under:
31. A summary of amounts awarded under the various claims and
counter-claims are as under:-
CLAIMS of KEPL AMOUNT AMOUNT AWARDED (IN RUPEES)
CLAIMED
(IN RUPEES)
Claim No. 1 towards 1347.53 Cr 911.13 Cr
Termination Payment
Claim No. 2 towards 120.93 Cr Interest on the amount awarded by way
Interest on Termination of termination payment as follows:
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Payment Amount payable by way of interest @
3% above the bank rate for 90 days
(22.10.2021 to 20.01.2022).
Thereafter, interest @ 5% over and
above the bank rate on the said amount
from 21.01.2022 till 23.07.2022.
With effect from 24.07.2022, the
Concessionaire shall be entitled to
interest on this amount @ 9% per annum
till the date of realization.
Claim No. 3 towards Covid Rs. Covid Rs. 15.13 Cr Farmer Agitation Rs.
loss suffered on account 15.13 Cr 11.19 Cr
of force majeure events Farmers Total 26.32 Cr
Agitation Rs. ________________________
15.80 Cr The Concessionaire shall be entitled to
______________ interest on this amount @ 9% per annum
____ from 11.06.2022 till the date of
Total Rs. 30.93 realization
Cr.
Claim No. 4 towards 539 Cr Rejected
Additional Costs and
foregone benefits
Claim No. 5 towards 1768.60 Cr Rejected
Loss of Opportunity
Claim No. 6 towards 1,30,86,294 1,30,86,294
Refund of Insurance The Concessionaire is entitled to recover
Premium interest @9% per annum from
23.11.2021 till the date of realization.
Claim No. 7 towards _ Concessionaire is entitled for interest on
Interest the sums awarded under Claim Nos.1, 2,
3 & 6 @9% per annum from the dates
mentioned in respect claims till the date
of realization.
Claim No. 8 towards _ Rs. 1,10,00,000/- In case the payment is
Costs not made within 2 months from the date
of Award, the Concessionaire shall be
entitled for the interest @9% per annum
thereafter till the date of realization.
COUNTER CLAIMS
COUNTER CLAIMS AMOUNT AMOUNT AWARDED (IN
CLAIMED RUPEES)
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(IN RUPEES)
Claim No. 1 towards cost 183.28 Cr 80.49 Cr with 9% interest from
of maintenance of project 25.03.2022 till the date of Award. The
highway amount maybe adjusted against the
Award in favour of the Concessionaire.
Claim No. 2 towards 158.95 Cr Allowed subject to directions as
outstanding dues of contained in Paragraph 138 of the
deferred premium Award
Claim No. 3 towards 13.49 Cr 3.50 Cr with 9% interest from
outstanding payments to 28.12.2021 till the date of Award. The
agencies amount may be adjusted against the
Award in favour of the Concessionaire.
Claim No. 4 towards non 12.18 Cr Rejected
rectification of various
defects
Claim No. 5 towards 59.49 Cr Rejected
remuneration paid to the
I.E.
32. Although the present petition, filed under Section 34 of the
Arbitration and Conciliation Act, 1996 (hereinafter referred to as the ‘A&C
Act’), assails the award on various grounds, the primary controversy raised
by the Petitioner during the course of arguments pertains to the amount
awarded to the Respondent towards the “Termination Payment” (Claim No.
1).
33. The primary bone of contention is the award in respect of claim no.1.
The same reads as under:-
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34. It is the case of the petitioner that in determining the “termination
payment” to which the respondent is entitled, the impugned Award has
completely disregarded the framework and provisions of the Concession
Agreement.
35. Concededly, the “termination payment” is to be assessed on the basis
of the stipulation set out in Article 34.9.2 of the Concession Agreement
which provides as under:-
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36. In terms of the aforesaid provision, the respondent is entitled to: (i)
Debt Due; and (ii) Adjusted Equity. It is the case of the petitioner that the
components of the “termination payment” (debt due and adjusted equity),
form part of the “Total Project Cost”, which is defined as under:-
37. It is submitted that in view of the above definition (in terms of which
the TPC is the lowest of the “capital cost”, the “actual capital cost” or
“Rs.650 Crore”), it is wholly untenable to work out the “termination
payment” on the basis that the “total project cost” is Rs.1045.5 Crore.
38. It is submitted that the award of Rs.911.13 Crore under the head of
“termination payment” is grossly excessive and in complete disregard of the
express terms of the Concession Agreement.
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39. On the contrary, it has been submitted on behalf of the respondent as
under:-
i. Article 34.9.2 does not limit the quantum of the “Termination
Payment” in any manner, including by reference to the lowest of the
“Total Project Cost”, as defined in Article 48.1;
ii. The definition of “Termination Payment” makes it clear that it is the
amount payable by the Authority to the concessionaire upon
termination of the Concession Agreement. The definition does not
prescribe any limitation on the quantum of such payment. It provides
what elements the Termination Payment “may” consist of which form
part of the Total Project Cost as per the CA.
iii. Thus, the elements of the “Termination Payment” are neither fixed
nor inflexible. The definition further clarifies that “the Concessionaire
shall notify to the Authority, the Total Project Cost as on COD and its
disaggregation between Debt Due and Equity.”;
iv. The estimated Capital Cost, i.e., the “Total Project Cost” as reflected
in the Financial Package, was Rs. 992.58 Crore. It is also noteworthy
that, in terms of Article 4.1.3(e) and (f), the Financing Agreement, the
Financial Package and the Financial Model were required to be
submitted to the NHAI upon their execution and prior thereto, in
terms of Articles 5.2.2 and 5.2.3, drafts thereof, were required to be
submitted, and, once executed, no changes or amendments could be
made thereto without the written consent of the NHAI. In the present
case, the Financial Package was approved by the NHAI;
v. There is no dispute that the actual “Total Project Cost” as on the COD
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of the Financing Agreement and the Financial Package, the “Total
Project Cost” was estimated at Rs. 992.58 Crore;
vi. Even though sub-clause (c) of the definition of the “Total Project
Cost” mentions Rs.650 Crore, the capital cost in the Financial
Package cannot be lost sight of and because of the expression “unless
repugnant to the context” in the opening sentence of the definition
would become irrelevant for “Termination Payment”. Any other
reading of definition of “Total Project Cost” would make large parts
of the contract otiose. Harmonious construction leads to only one
interpretation that if there is repugnancy to the context the definition
is to be ignored. The “Total Project Cost” as defined can mean larger
sums than Rs.650 Crore and due to the construction attributed to
Article 34.9.2, the limitation in sub clause (c) of the definition of
“Total Project Cost” becomes repugnant to the context;
vii. The definition of the “Termination Payment” contains critical words
that are destructive to the NHAI’s interpretation. These words are
“..and only the amounts so conveyed shall form the basis of
computing Termination Payment”. In other words, where the
concessionaire has notified the Total Project Cost as on the COD and
provided its disaggregation between the Debt Due and Equity in
respect of that actual “Total Project Cost”, the Concession Agreement
expressly restricts these amounts i.e. Debt Due, Equity and Total
Project Cost as on COD notified by the respondent as being the only
basis for computing the “Termination Payment”. No other basis could
therefore be used for the purpose of computing “Termination
Payment”;
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viii. NHAI is precluded from resorting to and relying on any lower amount
in the definition of “Total Project Cost” once the concessionaire
(respondent) has notified its actual “Total Project Cost” – “the
Concessionaire shall notify to the Authority, the Total Project Cost as
on COD and its disaggregation between Debt Due and Equity and
only the amounts so conveyed shall form the basis of computing
Termination Payment…”;
ix. The context in which therefore the “Total Project Cost” on COD is
used, is repugnant to the meaning sought to be given by NHAI in the
definition of the “Total Project Cost” as the lowest of the three
figures. In support of this contention, reliance is placed on the
judgments of the Supreme Court in Pernod Ricard India Ltd. vs. The
State of Madhya Pradesh, 2024 INSC 327; K.V. Muthu Vs.
Angamuthu Ammal, (1972) 2 SCC 53; Ramdev Food Products Ltd.
Vs. Arvindbhai Rambhai Patel, (2006) 8 SCC 726; Dy. Chief
Controller of Imports & K. T. Kosalram, (1970) 3 SCC 22.
x. Reliance is also placed on the judgment of the English Commercial
Court in the matter of Europa Plus SCA SIF v Anthracite
Investments (Ireland) Plc, [2016] EWHC 437 (Comm), wherein, the
Court explained the interplay between a definition clause and
operative parts of a contract. In particular, the Court noted that when
interpreting a contract, it should not be automatically assumed that the
parties intended a defined term to bear its defined meaning at all
times. Instead, the process of interpretation requires the Court to
consider whether giving effect to the defined meaning in a specific
context would lead to absurd commercial consequences; andO.M.P. (COMM) 542/2024 Page 31 of 69
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xi. It is submitted that the “Total Project Cost” of Rs.650 Crore becomes
relevant only if the concessionaire completely fails to notify the
“Total Project Cost” on COD with disaggregation of the Debt and
Equity on the said date.
REASONING AND CONCLUSION
40. As noticed, the fulcrum of the controversy is the award in respect of
claim no.1. The central issue is whether the award of Termination Payment
(under claim no.1) amounting to Rs.911.13 crore is liable to be interfered
with in the exercise of jurisdiction under Section 34 of the A&C Act.
41. At the outset, it is necessary for this Court to take note of the limited
scope of interference with an arbitral award under Section 34 of the A&C
Act. The legal position is well settled and has been reiterated time and again
by the Supreme Court that this Court would not interfere with the
interpretative exercise undertaken by an Arbitral Tribunal or with findings
of fact. The jurisdiction under Section 34 of the A&C Act is not akin to
appellate jurisdiction; rather, it is confined to scrutinizing the award within
the narrow confines and limited scope of Section 34. The view taken by the
Arbitral Tribunal, as long as it is a possible view (even if it is not the most
plausible view), must be sustained. In support of the said proposition, the
respondent has rightly placed reliance on Hindustan Construction
Company v. National Highways Authority of India, 2023 INSC 768; NHAI
v. ITD Cementation India Ltd., (2015) 14 SCC 21; Konkan Railway
Corporation Limited v. Chenab Bridge Project Undertaking, 2023 INSC
742; and Raghunath Builders Pvt. Ltd. v. Anant Raj Limited, 2023 DHC
8143-DB.
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42. At the same time, the deference which informs the exercise of
jurisdiction under Section 34 of the A&C Act has its own well-defined
limits. In Associate Builders v. Delhi Development Authority, (2015) 3
SCC 49 (at paragraph 42.3)1, the Supreme Court held that although the
construction of the terms of a contract is primarily a matter for the arbitrator,
the position is otherwise where the arbitrator construes the contract in such a
way that no fair-minded or reasonable person could do so. The said principle
stands codified in the ground of “patent illegality” under Section 34(2A) of
the A&C Act, as authoritatively expounded in Ssangyong Engineering &
Construction Co. Ltd. v. National Highways Authority of India, (2019) 15
SCC 131, wherein it was held as under:-
“40. The change made in Section 28(3) by the Amendment Act
really follows what is stated in paragraphs 42.3 to 45 in
Associate Builders (supra), namely, that the construction of the
terms of a contract is primarily for an arbitrator to decide,
unless the arbitrator construes the contract in a manner that no
fair-minded or reasonable person would; in short, that the
arbitrator’s view is not even a possible view to take. Also, if the
arbitrator wanders outside the contract and deals with matters
not allotted to him, he commits an error of jurisdiction. This
ground of challenge will now fall within the new ground added
under Section 34(2A).”
43. In PSA SICAL Terminals Pvt. Ltd. v. Board of Trustees of V.O.
1
42.3. (c) Equally, the third subhead of patent illegality is really a contravention of Section 28(3) of the
Arbitration Act, which reads as under:
“28.Rules applicable to substance of dispute.–(1)-(2)***
(3) In all cases, the Arbitral Tribunal shall decide in accordance with the terms of the contract and shall
take into account the usages of the trade applicable to the transaction.”
This last contravention must be understood with a caveat. An Arbitral Tribunal must decide in accordance
with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it
will not mean that the award can be set aside on this ground. Construction of the terms of a contract is
primarily for an arbitrator to decide unless the arbitrator construes the contract in such a way that it could
be said to be something that no fair-minded or reasonable person could do.
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Chidambranar Port Trust, Tuticorin, 2021 SCC OnLine SC 508, the
Supreme Court, upon finding that the arbitral tribunal had, in effect, foisted
upon the parties a bargain which they had never made, set aside the award,
holding as under:-
“85. ….In our view, re-writing a contract for the parties would
be breach of fundamental principles of justice entitling a Court
to interfere since such case would be one which shocks the
conscience of the Court and as such, would fall in the
exceptional category.”
44. The touchstone which emerges from the aforesaid line of authority is
that interpretation is an exercise performed upon the words of the contract; it
consists in ascribing to those words a meaning which they are reasonably (or
possibly) capable of bearing. Re-writing, on the other hand, is an operation
performed upon the contract itself; it consists in adding to, subtracting from,
or overriding the stipulations of the parties, so as to produce a bargain
different from the one which they made. The former is the legitimate
province of the arbitral tribunal, howsoever erroneous the outcome may
appear to a court; the latter is a jurisdictional transgression which vitiates the
award on the ground of patent illegality.
45. In the above conspectus, this Court has examined the award insofar
as it relates to the Termination Payment awarded under Claim No. 1 (Rs.
911.13 crore), which is the primary bone of contention between the parties.
46. At the outset, it is important to take note of the relevant contractual
provisions governing the Termination Payment, which becomes payable in
the event of termination of the Concession Agreement on account of an
“Indirect Political Event”. The relevant provisions are set out hereunder:-
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i. Definition of Total Project Cost (TPC) (Article 48.1) is reproduced as
under –
ii. Definition of Debt Due (Article 48.1) is reproduced as under –
iii. Definition of Equity (Article 48.1) is reproduced as under –
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iv. Definition of Termination Payment (Article 48.1) is reproduced as
under –
v. Termination Payment for Indirect Political Event is provided for in
Article 34.9.2. The same is reproduced as under –
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47. In light of the aforesaid contractual provisions, the central question is
whether the definition of TPC – with its lowest of three formulation and the
Rs.650 Crore cap in sub-clause (c) – operates as a ceiling on the
“Termination Payment” or whether the project cost as notified in the
Disaggregation Letter (Rs.1045.55 crore) displaces it.
48. The Tribunal answered the aforesaid question in favour of the
respondent. It held that the contents of the disaggregation letter formed an
integral part for the computation of the “Termination Payment”. (Para 45 of
the award).
49. It was further held that Rs.650 Crore cap in the definition of TPC
would not be relevant in view of the fact that clause 1.4.2(a) of the Contract
provides that “between two or more Clauses of this Agreement, the
provisions of a specific Clause relevant to the issue under consideration shall
prevail over those in other Clauses”. (Para 49 of the award)
50. The Arbitral Tribunal held that in terms of the definition of the
“Termination Payment” under Article 48.1, the disaggregation of debt and
equity as notified to the authority had to be the basis for computing the
Termination Payment. (Para 52 of the award)
51. Having perused the award, this Court is of the opinion that the
Arbitral Tribunal has grievously erred and committed patent illegality in
arriving at the above conclusion; the error is of a nature that warrants
interference under Section 34 of the A&C Act. The reasons are as under:
THE AWARD DEFEATS THE VERY PURPOSE OF DEFINING
“TOTAL PROJECT COST”
52. As noticed hereinabove, Article 48.1 of the Concession Agreement
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defines “Total Project Cost” as the lowest of the following three alternatives:
(a) the capital cost of the project as set-forth in the financial package; (b) the
actual capital cost of the project upon completion of four laning of the
project highway; and (c) a sum of Rs.650 Crore, less equity support.
53. This three limbed definition, particularly the cap contained in sub-
clause (c), lies at the very heart of the Concession Agreement and cannot be
treated as surplusage for the purpose of determining the “Termination
Payment”. The purpose of this provision is clearly to limit the financial
exposure of NHAI upon termination. Indeed, this provision is at the very
heart of risk allocation in the Concession Agreement.
54. Evidently, NHAI, as a public authority, set out this cap in the RFP
document itself so that its maximum financial exposure upon termination
would be confined to the project cost. This cap serves a specific and vital
commercial purpose; it protects NHAI against cost over-run incurred by the
concessionaire (whether due to inefficiency, over borrowing or for any other
reason) being passed on to NHAI in the guise of a “Termination Payment”.
Without this cap, a concessionaire could borrow far in excess of the
sanctioned project cost and on termination, present NHAI with a demand
that NHAI never agreed to underwrite. The award by accepting the “total
project cost” at Rs.1045.5 Crore has rendered sub-clause (c) entirely
nugatory, effectively reducing it to a dead letter.
55. A copy of Request for Proposal (RFP) has been filed by the
Respondent. Clause 1.1.1 of the RFP clearly mentions the estimated project
cost as Rs. 650 Crore. The relevant portion of the same is reproduced as
under –
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56. Evidently, the figure of Rs. 650 crore represented the estimated
Project Cost as reckoned at the time of bidding. By making it the ceiling in
the definition of the “Total Project Cost,” the parties sought to ensure that,
even if the actual cost exceeded this amount, NHAI’s financial exposure
towards Termination Payment would continue to be anchored to this ceiling.
The unmistakable commercial rationale underlying the contractual provision
is that NHAI assumes the risk of cost overruns during construction only to
the extent contemplated under sub-clause (c), and not in respect of any
unlimited or excessive expenditure that the Concessionaire may incur.
57. The Concession Agreement is founded upon a concession framework,
under which the termination liabilities of the Authority are capped. It is on
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the strength of this risk matrix that bids were invited, that the premium of
Rs.12 crore per annum (escalating at 5% annually) was offered by the
respondent, and that the financial exposure of the public exchequer stood
crystallised. The ceiling ensures that the consequence/s of any cost overrun
or over-leveraging is not transmuted into a liability of the Authority upon
termination. To construe the Agreement in a manner which dissolves this
ceiling is to redistribute, ex post facto, the very risk which the parties had
definitively allocated inter-se.
THE APPROVAL OF THE FINANCIAL PACKAGE DOES NOT
ASSIST THE RESPONDENT
58. Considerable emphasis was laid on behalf of the respondent on the
circumstance that the Financial Package (reflecting a capital cost of
Rs.992.58 crore), the Financial Model and the Financing Agreements were
scrutinised and approved by NHAI prior to financial close. The submission
is of no avail to the respondent. Sub-clause (a) of the definition of “Total
Project Cost” itself refers to “the capital cost of the Project, as set forth in
the Financial Package”. The parties were, therefore, fully alive to the fact
that the Financial Package would reflect a capital cost, and that such cost
might well exceed Rs.650 crore; it is precisely for this reason that the
definition stipulates that the Total Project Cost shall be the lowest of the
three specified amounts. The Financial Package figure thus stands
internalised within the definition itself – it supplies limb (a); it does not, and
cannot, abolish limb (c). The scrutiny of the financing documents by the
Authority serves an altogether distinct purpose, namely, to ensure that the
Concessionaire does not enter into arrangements with its lenders which
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imperil the interests of the Authority; such scrutiny cannot be construed as
an undertaking by the Authority to underwrite the entirety of the said cost
upon termination. Moreover, in terms of Article 1.4.1 of the Concession
Agreement, the Agreement prevails over all other documents.
THE DEFINITION “TOTAL PROJECT COST” INCORPORATES A
TERMINATION SPECIFIC PROVISO – CONFIRMING ITS
APPLICABILITY FOR THE PURPOSE OF DETERMINING
“TERMINATION PAYMENT”
59. The definition of “Total Project Cost” contains the following proviso:
“provided that in the event of Termination, the Total Project Cost shall be
deemed to be modified to the extent of variation in WPI or Reference
Exchange Rate occurring in respect of Adjusted Equity and Debt Due, as
the case may be, in accordance with the provisions of this Agreement;
provided further that in the event WPI increases, on an average, by more
than 6% (six per cent) per annum for the period between the date hereof
and COD the Parties shall meet, as soon as reasonably practicable, and
agree upon revision of the amount herein before specified such that the
effect of increase in WPI, in excess of such 6% (six per cent), is reflected
in the Total Project Cost;”
60. This proviso is of significant importance. It expressly addresses the
termination scenario and provides for the modification of the “Total Project
Cost” figure, but only to the extent of variation in the WPI. The fact that the
Concession Agreement itself incorporates a termination-specific proviso into
the definition of the “Total Project Cost” conclusively establishes two
things:
(i) that the definition is intended to apply in the context of
termination and is neither rendered inapplicable nor repugnant for
the purpose of determining the “Termination Payment”. A definition
which itself provides for the termination scenario cannot, in the
same breath, be branded as repugnant to that very scenario ;
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(ii) that the parties specifically contemplated that the “Total
Project Cost” might require upward revision in a termination
scenario, but only by way of WPI adjustment and, where the WPI
exceeded 6% per annum, through mutual agreement between the
parties. There is no mechanism under the Concession Agreement
permitting the Concessionaire to unilaterally enhance the “Total
Project Cost” by relying upon a disbursement letter reflecting actual
project costs far in excess of the contractual cap.
61. If the parties had intended that the actual project cost notified in the
disaggregation letter would entirely displace or render nugatory the
definition of “total project cost”, there would have been no need whatsoever
for this proviso. Its very existence, providing a measured / WPI linked
adjustment mechanism, demonstrates that the parties never intended the
contractual cap to be by-passed by a unilateral cost notification /
disaggregation letter.
62. A unilateral notification by the Concessionaire of its actual
expenditure is not a mode of modification of the “Total Project Cost”
recognised anywhere in the Agreement. It is elementary that a contract can
be varied only in the manner provided therein or by the mutual agreement of
the parties; it cannot be varied by the unilateral act of one party. Yet, the
construction adopted by the Tribunal ascribes to the disaggregation letter (a
unilateral communication), the effect of an amendment of the contractually
defined “Total Project Cost” from Rs.650 crore to Rs.1045.55 crore. No
canon of interpretation sanctions such an outcome.
DEFINITION OF “TERMINATION PAYMENT” EXPRESSLY
INCORPORATES THE CEILING REFERRED TO IN THEO.M.P. (COMM) 542/2024 Page 42 of 69
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DEFINITION OF “TOTAL PROJECT COST”
63. The definition of “Termination Payment” in Article 48.1 provides that
it “may consist of payments on account of and restricted to, the Debt Due
and Adjusted Equity, as the case may be, which form part of the Total
Project Cost in accordance with the provisions of this Agreement”.
64. Three expressions in this definition are of significant importance and,
independently support the relevance of the ceiling for the purpose of
determining the Termination Payment :
(i) “Restricted to” – the use of these words is intended to limit the
extent of the Termination Payment and to make it circumscribed;
(ii) “Which form part of the Total Project Cost” – this is a qualifying
and limiting stipulation. Only such Debt Due and Adjusted Equity as
form part of the contractually defined “Total Project Cost” are
payable. The inevitable consequence is that payments in excess of
the “Total Project Cost” are expressly excluded;
(iii) “In accordance with the provisions of this Agreement” – this
cross-reference ties the computation of the “Termination Payment” to
the definition of the “Total Project Cost” and precludes the
possibility of importing a different “Total Project Cost” figure from
outside that is at variance with, or inconsistent with, the contractual
ceiling contained in the definition of the “Total Project Cost.”
THE DISAGGREGATION LETTER CANNOT OVERRIDE THE
CAP IN THE DEFINITION OF “TOTAL PROJECT COST”; IT
OPERATES WITHIN IT
65. The respondent’s principal submission, as accepted by the Arbitral
Tribunal, is that the disaggregation letter clause contained in the definition
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of “Termination Payment” makes the notified “Total Project Cost” figure
the sole basis for computing the “Termination Payment,” thereby displacing
the contractual cap of Rs. 650 crore. This argument fundamentally
misconstrues the function and purpose of the disaggregation letter.
66. The disaggregation letter clause requires the Concessionaire to notify
NHAI of the “Total Project Cost” as on the COD, together with its
disaggregation into Debt Due and Equity. The purpose of this requirement is
to inform NHAI how the “Total Project Cost”, already determined under the
Concession Agreement as the lowest of the three alternatives, is apportioned
between its Debt Due and Equity components so that the formula prescribed
under Article 34.9.2 (Debt Due + 110% Adjusted Equity) can be correctly
applied.
67. The word “disaggregation” is itself dispositive. To disaggregate
means to break down a whole into its component parts. The disaggregation
letter mechanism is intended to allocate the “Total Project Cost” between
Debt Due and Equity. It is not a mechanism by which the Concessionaire
has been granted carte blanche to unilaterally ‘re-determine’ the “Total
Project Cost” or to undermine or nullify the contractual ceiling prescribed
thereunder.
68. If the interpretation canvassed by the respondent were correct, the
disaggregation letter would become an instrument by which the
Concessionaire could inflate NHAI’s termination liability simply by
notifying a higher “Total Project Cost” figure, regardless of the contractual
ceiling prescribed for the same. This would lead to absurd consequences and
would be manifestly contrary to the intention of the parties, who deliberately
defined the “Total Project Cost” as the lowest of the three alternatives
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precisely to prevent such an outcome.
69. No rational commercial party could have intended that the
applicability of a ceiling, negotiated for the protection of one party, should
depend upon the unilateral election of the very party whom it constrains.
The deeming provision in the definition of “Termination Payment”
demonstrates that whether or not a disaggregation letter is furnished, the
contractually defined “Total Project Cost” remains operative; the letter fixes
the internal apportionment between debt and equity, and nothing more. On
the face of it, the letter is intended to convey a “disaggregation”, not a
unilateral re-valuation.
MISCONCEIVED RELIANCE ON THE EXPRESSION “ONLY THE
AMOUNT SO CONVEYED SHALL FORM THE BASIS OF
COMPUTING TERMINATION PAYMENT” (OCCURING IN THE
DEFINITION OF “TERMINATION PAYMENT” AS DEFINED
UNDER ARTICLE 48)
70. The reliance placed by the Arbitral Tribunal on this expression is
untenable. The Arbitral Tribunal has, unfortunately, laid emphasis on only a
part of the relevant contractual provision while overlooking the preceding as
well as the succeeding parts of the same clause. The first paragraph of the
relevant clause defining “Termination Payment” makes it expressly clear
that the “Termination Payment” is to be restricted to Debt Due and Adjusted
Equity, which form part of the “Total Project Cost.” The succeeding
clarificatory paragraph refers to the “Total Project Cost” and requires the
Concessionaire to notify the Authority of its disaggregation into Debt Due
and Equity. The stipulation that only the amount so conveyed or notified
shall form the basis for computing the “Termination Payment” was clearly
not intended to override the contractual ceiling contained in the definition of
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the “Total Project Cost.” Had that been the intention of the parties, nothing
would have been easier than to expressly provide so.
71. The use of the expression “only the amount so conveyed shall form
the basis of computing the Termination Payment” was intended only to
preclude reliance upon extraneous sources for the purpose of disaggregation.
The concluding portion of the same paragraph is significant. It provides that,
in the event such disaggregation is not notified to the Authority, the Equity
shall be deemed to be the amount arrived at by subtracting the Debt Due
from the “Total Project Cost.”
72. The above clearly demonstrates that the disaggregation letter is only
intended for the purpose of internal split between debt due and equity; the
outer limit as set out in the definition of the “total project cost” is not
rendered irrelevant.
THE FINDINGS QUA THE DISAGGREGATION LETTER DO NOT
CONCLUDE THE ISSUE
73. The Tribunal has devoted considerable attention to establishing that
the disaggregation letter dated 04.02.2019 exists; that the delay in its
submission was not attributable to any default or malafide on the part of the
Concessionaire; that its contents were not specifically traversed by the
Authority in its pleadings; and that the Independent Engineer treated it as the
formal disaggregation for the purpose of computing the Termination
Payment (paras 33 to 46 of the award). This Court has no reason to disturb
any of the said findings; they are findings of fact within the exclusive
domain of the Tribunal. The said findings, however, do not carry the matter
any further, inasmuch as the existence, genuineness and bona fides of the
letter were never determinative of the controversy. The controversy
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concerns the legal effect of the letter under the Concession Agreement and
as to whether it is capable in law of enlarging the “Total Project Cost”
beyond the contractual ceiling.
74. The reliance placed by the Tribunal on National Highway Authority
of India v. PNC-BEL (JV), 2019 SCC OnLine Del 9461 (at para 46 of the
award) is misplaced. It was held therein that the certification by the
Independent Engineer in that case, of rates in respect of non-BOQ items,
which the Engineer had certified and submitted for approval, cannot be
selectively disregarded by the Authority. Evidently, the certification in
question pertained to a function which the contract contemplated from the
Engineer. No such function (for re-determining “Total Project Cost” in
derogation/disregard of the contractual ceiling) has been committed to the
Independent Engineer in the present case (as is evident from contractual
provisions noticed hereinbelow).
75. The reliance on Jetpur Somnath Tollways Limited v. National
Highways Authority of India, 2017 SCC OnLine Del 9453 (at para 53 of
the award) is equally misplaced. The said decision was rendered on petitions
under Section 9 of the A&C Act (by the concessionaire therein and by its
lender), seeking interim measures of protection pending arbitration, in the
nature of a direction to NHAI to secure the termination payment. The
observations therein were, ex facie, rendered at a prima facie stage, for the
limited purpose of moulding interim relief; they did not constitute a final
adjudication of the quantum of the termination payment. Further, the
question considered in paragraph 81 of the said decision was an altogether
different one. NHAI had sought, on the strength of Recital B to the Common
Loan Agreement dated 19.08.2011 executed in that case (which recorded a
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debt-equity ratio of 72.58:27.42 ) to import the said ratio so as to make a
further adjustment to the “Debt Due”. It was in that context that the Court
observed that there was “admittedly, no such stipulation in the Termination
Payment clause that any such adjustment is to be made prior to payment of
the Debt Due” and that “only the actual Debt Due has to be taken into
account”. The decision thus declined to permit an adjustment extraneous to
the contractual provisions. The said judgement did not deal with the
operation of a definitional ceiling, forming an express part of the contractual
text itself. The said decision points against the respondent rather than in its
favour inasmuch as its ratio is fidelity to the ‘Termination Payment’
provisions as written. In the present case, the award disregards the
contractual ceiling of Rs.650 crore, and the words of restriction in the
definition of “Termination Payment”.
76. Pertinently also, the function assigned to the Independent Engineer
under the Concession Agreement do not extend to determining the “Total
Project Cost”. Article 23.2.1 provides that the Independent Engineer “shall
discharge its duties and functions substantially in accordance with the terms
of reference set forth in Schedule-Q.” The relevant portions of Schedule-Q
read as under:-
“3.1 The role and functions of the Independent Engineer shall include
the following:
(vi) determining, as required under the Agreement, the costs of any works
or services and/or their reasonableness; …
8.1 The Independent Engineer shall determine the costs and/or their
reasonableness that are required to be determined by it under the
Agreement”
77. The cost-determination function of the Independent Engineer is a
power exercisable only in respect of costs which the Agreement specificallyO.M.P. (COMM) 542/2024 Page 48 of 69
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requires his determination. No provision of the Concession Agreement
commits the determination of “Total Project Cost” to the Independent
Engineer. The definition of “Total Project Cost” in Article 48.1 is self-
executing: it is the lowest of three arithmetically stated figures, subject only
to the WPI proviso (as already noticed). What the Independent Engineer
was called upon to examine was whether the disaggregation letter dated
04.02.2019 “be considered by the Authority as acceptable within the
definition as stipulated in the Concession Agreement” ( para 34 of the
award). This is a question of the timeliness and procedural acceptability of
the letter. The Tribunal’s treatment of the Independent Engineer’s
recommendation as though it were a determination of quantum does
violence to both the language and purport of the contract. The Agreement
nowhere empowers the Independent Engineer to approve, sanction or certify
a substitute “Total Project Cost” put forward unilaterally by the
Concessionaire.
REPUGNANCY ARGUMENTS
78. The respondent has vehemently argued that the definition of the
“Total Project Cost” as on the COD is repugnant to the meaning sought to
be given by NHAI thereto. The said argument is thoroughly misconceived.
79. Repugnancy can be said to arise only where the application of the
contractual definition results in a direct contradiction or absurdity. It cannot
be said to arise merely because the application of the contractual definition
results in a financially inconvenient outcome or yields a lower recovery than
that which the respondent would prefer.
80. Applying the “Total Project Cost” cap in the context of “Termination
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Payment” does not create any absurdity or contradiction. On the contrary, it
produces precisely the outcome that the parties agreed to when they
executed the Concession Agreement. The cap is not repugnant to the context
of the “Termination Payment”, rather, it is entirely consonant with it.
81. Importantly, as noticed hereinabove, the definition of the “Total
Project Cost” itself contains a termination-specific proviso addressing WPI
adjustments. A definition that expressly accounts for a termination scenario
cannot simultaneously be said to be repugnant to the context of
“Termination Payment.”
82. The authorities cited on behalf of the respondent in this behalf, far
from advancing its case, affirm the settled position that the defined meaning
is the rule and its displacement the exception. In K.V. Muthu v. Angamuthu
Ammal, (1997) 2 SCC 53, the Supreme Court held that where a definition is
preceded by the words “unless the context otherwise requires”, the definition
is ordinarily to be applied and given effect to, and may be departed from
only if there is something in the context to show that the definition could not
be applied at all. (paragraphs 10 to 12) 2.
2
10. Apparently, it appears that the definition is conclusive as the word “means” has been used to specify
the members, namely, spouse, son, daughter, grandchild or dependant parent, who would constitute the
family. Section 2 of the Act in which various terms have been defined, opens with the words “in this Act,
unless the context otherwise requires” which indicates that the definitions, as for example, that of “family”,
which are indicated to be conclusive may not be treated to be conclusive if it was otherwise required by the
context. This implies that a definition, like any other word in a statute, has to be read in the light of the
context and scheme of the Act as also the object for which the Act was made by the legislature.
11. While interpreting a definition, it has to be borne in mind that the interpretation placed on it should not
only be not repugnant to the context, it should also be such as would aid the achievement of the purpose
which is sought to be served by the Act. A construction which would defeat or was likely to defeat the
purpose of the Act has to be ignored and not accepted.
12. Where the definition or expression, as in the instant case, is preceded by the words “unless the context
otherwise requires”, the said definition set out in the section is to be applied and given effect to but this
rule, which is the normal rule may be departed from if there be something in the context to show that the
definition could not be applied.
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CLAUSE 1.4.2(a): NEITHER ATTRACTED NOR OF ANY
ASSISTANCE TO THE RESPONDENT
83. The Arbitral Tribunal has relied upon Article 1.4.2(a), which provides
that between two or more clauses, the specific clause relevant to the issue
under consideration shall prevail. Article 34.9.2 is indeed the specific
provision governing the quantum of the “Termination Payment” in the event
of an Indirect Political Event. However, the impugned majority award
overlooks the fact that Article 34.9.2 operates by reference to the defined
terms “Debt Due” and “Adjusted Equity,” both of which are, in turn, defined
by reference to the “Total Project Cost.”
84. Thus, it is wholly untenable for the purpose of Article 34.9.2 to ignore
the definition of “Total Project Cost” inasmuch as the latter gives content to
the relevant components of “Termination Payment”.
THE AWARD RE-WRITES THE CONTRACT NOT MERELY
INTERPRETS THE RELEVANT PROVISIONS
85. The Supreme Court has consistently drawn a line between the
interpretation of a contract which is within the Arbitral Tribunal’s
jurisdiction, and re-writing of a contract which constitutes patent illegality
warranting interference under Section 34 of the A&C Act. An award that
departs from an express, unambiguous contractual provision crosses this
line. In the present case, the award does not merely re-interpret the
Concession Agreement, it rewrites it in the following specific and
identifiable ways –
(i) It renders sub-clause (c) of the definition of the “Total Project
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Cost”, which prescribes the contractual cap of Rs. 650 crore,
inoperative in the very context for which it was most significant,
namely, the determination of the “Termination Payment.”
(ii) It rendered the word “restricted to ……. which form part of the
total project cost” in the definition of “Termination Payment” entirely
meaningless and otiose. Such manifest disregard of contractual
provision/s cannot pass muster under Section 34 of the A&C Act;
(iii) It treats the disaggregation letter as a document capable of
overriding express contractual definitions contrary to the priority
clause in Article 1.4.1 which makes the Concession Agreement
supreme over all other documents;
(iv) In reaching the conclusion that the expression “Total Project
Cost” as expressly defined in the Concession Agreement is not
relevant for the purpose of “Termination Payment”, the award
disregards the fact that the definition of the “Total Project Cost” itself
expressly contemplates and speaks of termination and provides for a
WPI based adjustment. It is thus wholly incongruous and contrary to
express contractual provisions, to declare the definition of the “Total
Project Cost” as being irrelevant for the purpose of assessing
“Termination Payment”; and
(v) It elevates a unilateral notification issued by the Concessionaire,
to the status of a binding contractual mandate, and thereby effectively
denudes the contractual stipulation/s of their intended effect.
86. These are not errors within the permissible zone of arbitral
interpretation. They are fundamental departures from express terms of the
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Concession Agreement resulting in excess payment of hundreds of crores, a
sum which the Concession Agreement never authorised. The same constitute
patent illegality on the face of the record within the meaning of Section
34(2A) of the A&C Act.
87. Before concluding the discussion on Claim No.1, it is again necessary
to note that the law leans heavily, and rightly, against interference with
arbitral awards. Arbitration is a forum of the parties’ own choosing, and a
court which subjects awards to a review on merits defeats the very object of
the A&C Act. This Court is conscious that judicial intervention with arbitral
awards must be kept to the barest minimum, lest the efficacy of arbitration
itself be undermined, and the endeavour of the Court must always be to
sustain the view taken by the arbitral tribunal. However, the jurisdiction
under Section 34 of the A&C Act, though narrow, is not akin to a ‘rubber
stamp’. Restraint on the part of the Court and fidelity to the contract on the
part of the tribunal are two sides of the same compact, and the first cannot
be invoked where the second has not been kept. That is the position here; the
parties wrote a ceiling into their bargain for the express eventuality of
termination payment/s, and the award has erased it at the very moment it
was meant to operate. Interference with such an award does not diminish the
authority of arbitration; it is the award which does. In these circumstances,
and with due circumspection, that this Court is unable to sustain the award
in respect of Claim No.1.
88. The award in respect of Claim No.1 is, accordingly, set aside.
89. Under Claim No. 2, the Tribunal awarded interest on the Termination
Payment. The relevant portion of the award is reproduced as under:-
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90. Since the Award on Claim No. 1, which determined the quantum of
the Termination Payment, has been set aside by this Court, the foundation of
Claim No. 2 no longer survives. Consequently, the award of interest, being
entirely dependent upon the determination of the Termination Payment
under Claim No. 1, cannot be sustained, and is also set aside.
OTHER CLAIMS
91. Insofar as the award in respect of other claims are concerned, this
Court finds no basis to interfere therewith.
92. The findings and conclusions in respect of other claims and counter
claims are briefly summarized hereinbelow.
A. Claim No. 3 – Claims arising out of loss suffered on account of Force
Majeure Events being Covid-19 & Farmers’ Agitation
i. The Concessionaire sought Rs. 30.93 crore towards losses arising
from Force Majeure events, comprising Rs. 15.13 crore for the
COVID-19 pandemic and Rs. 15.80 crore for the Farmers’
Agitation.
O.M.P. (COMM) 542/2024 Page 54 of 69 Signature Not Verified Digitally Signed By:ABHISHEK THAKUR Signing Date:28.07.2026 13:38:51 ii. As regards the claims made by the Concessionaire in relation to the COVID-19 pandemic, the Tribunal accepted the
Concessionaire’s claim for the period from March 2020 to
September 2020. It noted that the Statutory Auditor had certified
the claim at Rs. 15.80 crore, the Authority had neither challenged
the certification nor cross-examined the witnesses with respect to
the same, and the Independent Engineer’s recommendation
covered only a shorter period. Considering the prolonged impact of
the pandemic, the Tribunal allowed the claim of Rs. 15.13 crore. It
further awarded interest at 9% per annum from 11.06.2022 until
realization.
iii. The Concessionaire claimed Rs. 15.8 crore towards Force Majeure
costs arising from the Farmers’ Agitation. The Tribunal observed
that the IE had assessed the claim in accordance with the NHAI
Policy Guidelines dated 02.07.2021, which provided for
reimbursement of 50% of O&M and interest, besides extension of
period for the days tolling has been impacted. Since the Authority
did not dispute the IE’s calculations and merely stated that the
recommendation was pending approval, the Tribunal allowed the
claim to the extent recommended by the IE, i.e., Rs.
11,19,50,485.39, together with interest at 9% per annum from
11.06.2022 till realization.
iv. The aforesaid findings returned by the learned Arbitral Tribunal
are findings of fact based on the appreciation of the evidence on
record. This Court, while exercising its jurisdiction under Section
34 of the Arbitration and Conciliation Act, 1996, cannot
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reappreciate the evidence or interfere with such factual findings
merely because another view may be possible.
B. Claim No. 4 – Additional Cost and Foregone Benefits Claim – rejected
by the Tribunal.
C. Claim No. 5 – Loss of opportunity from the Termination date till the
Concession Period – rejected by the Tribunal.
D. Claim No. 6 – Refund of Insurance Premium
i. The findings of the Tribunal with respect to the Claim No. 6 are
reproduced as under –
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ii. The aforesaid findings recorded by the learned Arbitral Tribunal
are largely factual in nature, predicated on contractual provisions,
and are not amenable to reappreciation by this Court in
proceedings under Section 34 of the Arbitration and Conciliation
Act, 1996.
E. Claim No. 7 – Interest
i. The Arbitral Tribunal observed that an arbitrator is a creature of an
agreement and therefore he cannot award interest if prohibited by
the contractual terms. However, in absence of any stipulation in
the Contract Agreement in this respect, the arbitrator is competent
to award interest for pre-reference, pendente lite and post-award
period at a reasonable rate as provided under Section 31 (7) of the
Act, 1996.
ii. It further observed that since interest had already been awarded
wherever the Concessionaire’s claims were allowed, the Tribunal
did not record any separate findings on this claim.
iii. The Arbitral Tribunal has rightly observed that it is well settled
that, in the absence of any contractual stipulation prohibiting the
grant of interest, an arbitral tribunal is empowered to award
interest for the pre-reference, pendente lite, and post-award
periods.
F. Claim No. 8 – Costs
i. The Arbitral Tribunal held that under Section 31A of the
Arbitration and Conciliation Act, 1996, costs ordinarily follow the
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event, and the successful party is entitled to recover the reasonable
costs incurred in the proceedings. While awarding costs, the
Tribunal considered factors such as the parties’ conduct and the
outcome of the arbitration etc.
ii. The Tribunal noted that the arbitration involved total claim of Rs.
1,347.53 crore and counterclaim of Rs. 368 crore, which were
adjudicated over 32 sittings. Despite repeated directions, the
Authority failed to pay its share of the Tribunal’s fees, compelling
the Concessionaire to deposit on behalf of the Authority as well.
Considering the Authority’s conduct and the substantial expenses
incurred by the Concessionaire in pursuing the arbitration, the
Tribunal awarded Rs. 1.10 crore towards cost, inclusive of the
Authority’s unpaid share of arbitral fees. The awarded cost was
directed to be paid within two months, failing which, it was
directed that, they would carry interest at 9% per annum until
realization.
iii. This Court finds no ground to interfere with the aforesaid findings
of the learned Arbitral Tribunal in the exercise of its jurisdiction
under Section 34 of the Arbitration and Conciliation Act, 1996,
particularly when the petitioner failed to deposit its share of the
arbitral tribunal’s fees.
G. Counter-Claim No. 1 – Claim for the Maintenance of the Project
Highway
i. Upon consideration of the record, the Tribunal observed that,
following a joint inspection conducted by the Authority, the
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Independent Engineer, and the Concessionaire, the Independent
Engineer had quantified the divestment cost at Rs. 80.49 crores, and
the Concessionaire had expressly accepted this assessment by its letter
dated 25.03.2022.
ii. The Tribunal rejected the Authority’s reliance on subsequent letters
dated 21.08.2022 and 21.10.2022, by which the claim had been
increased first to Rs. 152.74 crores and then to Rs. 183.28 crores,
including a 20% penalty under Article 17.9 of the Concession
Agreement. It held that these letters were based on inspections
conducted without notice to or participation of the Concessionaire,
contrary to the mandatory procedure prescribed under Article 38.2.
Moreover, these documents were merely internal communications of
the Authority, were neither proved as admissible evidence nor shown
to have been communicated to the Concessionaire.
iii. The Tribunal further held that the Concessionaire’s contractual
liability to maintain the Project Highway ceased on 04.02.2022, i.e.,
120 days after termination (as per Article 39.1). Consequently,
reliance on letters issued after that date was held to be legally
inconsequential. The Tribunal also found that although several notices
had been issued before termination, the Authority failed to establish
compliance with the procedure prescribed under Article 17.9.
iv. Accordingly, the Tribunal concluded that the Authority’s claim of Rs.
183.28 crores was grossly exaggerated and unsupported by admissible
evidence. However, observing that the Independent Engineer’s
assessment of Rs. 80.49 crores, made on 02.02.2022, had been
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accepted by the Concessionaire on 25.03.2022, the Tribunal held that
the Authority was entitled only to that amount.
v. The Tribunal therefore partly allowed Counter-Claim No. 1, awarding
the Authority Rs. 80.49 crores, together with interest at 9% per annum
from 25.03.2022 till the date of the Award.
vi. The learned Arbitral Tribunal, upon a due appreciation of the
evidence on record and the relevant contractual provisions, has
arrived at a reasoned finding of fact. Such a finding, being founded on
an appreciation of the evidence and the terms of the contract, does not
warrant interference in the exercise of this Court’s limited jurisdiction
under Section 34.
H. Counter-Claim No. 2 – Outstanding dues of Deferred Premium
i. Upon consideration of the rival submissions, the Tribunal took note
of all the relevant documents, the provisions of the Agreement, and
the MoRTH Policy dated 04.03.2014. The Tribunal also examined
the evidence on record, including the cross-examination of the
Concessionaire’s witness.
ii. It further took note of the Independent Engineer’s letter dated
31.01.2022, which recommended recovery of the outstanding
deferred premium and had quantified the dues at Rs. 132.98 crore.
However, the Authority had ultimately claimed Rs. 158.95 crore on
the basis of Annexure R-15 of the arbitral record, the contents of
which had been specifically denied by the Concessionaire. The
Tribunal held that the Authority had failed to formally prove the said
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document and, therefore, it could not be relied upon. Referring to
Section 101 of the Evidence Act, 1872, as well as the principles of
natural justice, the Tribunal held that the burden of proving the
computation rested upon the Authority and that an unproved
document could not constitute the basis for granting the claim.
iii. The Tribunal thereafter interpreted Clause 25.4 of the Concession
Agreement, which expressly provided as under –
iv. Applying principles of contractual interpretation, the Tribunal held
that the provision is clear and unambiguous and must be given its
plain meaning. It concluded that the parties had consciously agreed
that the premium would be payable only from the gross revenue of
the project. It further observed that the entire gross revenue of the
project goes to the Escrow Account. Consequently, it was observed
that the Concessionaire could not be compelled to satisfy the
premium liability from its own independent resources. The Tribunal
further observed that the very purpose of the Premium Deferment
Scheme was to protect the concessionaires from financial hardships.
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v. Accordingly, it was observed that the Concessionaire is not liable to
pay any amount in this respect and if the payment is to be made, it is
required to be made from the Escrow Account itself. It further
observed that this factual and legal obligation has been conceded
very fairly by the Learned Counsel for the Authority.
vi. Liberty was given to the Authority to make the recovery as per the
amount due and to the extent of availability of funds in the Escrow
Account.
vii. The conclusions arrived at by the learned Arbitral Tribunal cannot be
said to have transgressed the limits of its jurisdiction. The Tribunal
has adopted a plausible and reasonable interpretation of the relevant
provisions of the Agreement.
viii. The Tribunal has also independently recorded that the said position
was fairly conceded by the learned counsel appearing for the
Authority.
ix. In the exercise of its jurisdiction under Section 34 of the Arbitration
and Conciliation Act, 1996, this Court cannot substitute its own
interpretation of the contractual provisions merely because an
alternative view is possible. So long as the interpretation adopted by
the learned Arbitral Tribunal is a possible one and does not suffer
from any patent illegality or contravene the fundamental policy of
Indian law, no interference is warranted.
I. Counter-Claim No. 3 – Outstanding dues to the Agencies
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i. The findings of the Tribunal with respect to the Counter Claim No. 3
are reproduced as under –
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ii. The Arbitral Tribunal has partly allowed the petitioner’s
counterclaim after considering the IE’s letter dated 28.12.2021
and the Concessionaire’s reply thereto. The Tribunal has observed
that it is not the Authority‘s case that it had made the payment to
any agency. Equally, in the absence of any specific pleadings or
cogent evidence to establish that the Concessionaire had failed to
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make such payment to any agency, the Tribunal returned the
aforesaid finding. The Tribunal has further placed reliance upon
Clause 31.4 of the Concession Agreement as well as the
provisions of the Escrow Agreement while adjudicating the issue.
This Court finds no infirmity in the findings and conclusions
arrived at by the learned Arbitral Tribunal. The view taken is a
plausible one, based on the material available on record and the
interpretation of the contractual provisions, and therefore warrants
no interference in the exercise of this Court’s jurisdiction under
Section 34 of the Arbitration and Conciliation Act, 1996.
J. Counter- Claim no. 4 – For non-rectification of defects
i. The Tribunal held that the Authority had failed to establish the
essential prerequisites for recovery under the Concession Agreement,
namely, issuance of notices by the IE or the Authority, failure of the
Concessionaire to comply and execution of remedial works by the
Authority, and the actual expenditure incurred. The Tribunal found
that the chart (annexed as Annexure R-16 of the arbitral record) was
inadmissible, as it was disputed by the Concessionaire and remained
unproved.
ii. It also held that the claims, largely relating to the period 2013-2020,
were time barred under Section 43 of the Arbitration and Conciliation
Act, 1996, and, except for two items, were additionally barred by the
principles of Order II Rule 2 CPC.
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iii. Accordingly, the Tribunal rejected Counter-Claim No. 4 in its
entirety.
iv. The learned Arbitral Tribunal has recorded its findings on the basis of
the evidence adduced before it and, upon an appreciation thereof, has
arrived at findings of fact. Such findings are not amenable to
interference by this Court in the exercise of its jurisdiction under
Section 34 of the Arbitration and Conciliation Act, 1996.
K. Counter- Claim no. 5 – Towards IE’s remuneration
i. The Arbitral Tribunal observed that Article 23.3 requires the
Concessionaire to reimburse 50% of the IE’s remuneration after
receiving a statement of expenditure from the Authority. The Tribunal
found that the Authority had failed to produce any evidence showing
the amount paid by it in respect of the fees of the IE, the date on
which such payment was made, or that it had issued any statement of
expenditure or demand for reimbursement to the Concessionaire.
ii. It is further observed that there is no pleading that the Authority had
actually paid the IE’s fees after October 2020. Consequently,
Counter-Claim No. 5 was rejected.
L. Counter- Claim no. 6 – Interest
A regards Claim No. 6, following observation has been made –
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M. Counter- Claim no. 7 – Cost
Regarding Claim no. 7, following has been observed –
93. Similarly, no interference is warranted with the findings recorded by
the learned Arbitral Tribunal in respect of Counter Claim Nos. 5, 6 and 7.
94. Thus, in respect of the aforesaid claims and counterclaims, the learned
Arbitral Tribunal has duly considered the pleadings, the evidence, and the
documents placed before it before recording its findings. The interpretation
accorded by the Tribunal to the contractual provisions is a plausible and
reasonable view based on the terms of the Agreement.
95. In exercise of jurisdiction under Section 34 of the A&C Act, this
Court is not inclined to interfere with the above (except in respect of Claim
Nos.1 and 2).
96. In the circumstances, the present petition is partly allowed; the
impugned award in respect of Claim Nos.1 and 2 is set aside.
97. Pending applications also stand disposed of.
SACHIN DATTA, J
JULY 28, 2026/r, sv
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