The Supreme Court has held that where parties have consciously agreed to a contractual rate of interest in a commercial agreement, courts must ordinarily uphold such a bargain while examining arbitral awards under the Arbitration and Conciliation Act, 1996.

The Court observed that party autonomy is one of the most sacrosanct principles of arbitration law, and courts cannot interfere with agreed contractual terms merely on considerations of reasonableness unless the rate of interest is so excessive as to shock the conscience of the Court.

The Court was hearing an appeal arising out of arbitral proceedings between Madhya Pradesh Road Development Corporation Ltd. (MPRDC) and a concessionaire company concerning termination of a concession agreement relating to a road infrastructure project executed on a Build Operate and Transfer (BOT) basis.

The appeal challenged concurrent findings of the Arbitral Tribunal, District Court and Madhya Pradesh High Court upholding termination payments and contractual interest awarded in favour of the concessionaire.

A Division Bench of Justice J.K. Maheshwari and Justice Atul S. Chandurkar observed: “When the parties have, in exercise of their party autonomy, laid down in the terms of the contract itself, the contractual rate of interest, we see no reason to go behind the agreement reached between them at a time when there was no dispute. Party autonomy is one of the most sacrosanct principles relating to arbitration law and in fact it is the backbone of alternative dispute resolution mechanism”.

This Court is only to uphold the bargain between the parties and their agreement in true sense and not go into the thicket of reasonability behind such bargain, unless the interest rate is so perverse and so unreasonable as to shock the conscience of this Court”, the Bench added.

Attorney General R. Venkataramani, Additional Solicitor General K.M. Nataraj & Advocate General Prashant Singh represented the appellants. Senior Advocates Dr Abhishek Manu Singhvi and Vivek Tankha appeared on behalf of the respondents.

Background

MPRDC, a wholly owned undertaking of the State of Madhya Pradesh, had invited bids for development, construction, operation and maintenance of the Jabalpur-Sagar-Damoh road project on a BOT basis. A Malaysian company emerged as the successful bidder and incorporated a Special Purpose Vehicle to execute the project. Thereafter, the parties entered into a concession agreement for the implementation and operation of the road project.

The concessionaire subsequently entered into a loan agreement with EXIM Bank Malaysia for financing of the project. However, disputes later arose between the parties concerning the delay in handing over land and the implementation of the project. Eventually, the concession agreement was terminated by MPRDC, following which arbitration proceedings were initiated by the concessionaire.

Before the Arbitral Tribunal, the concessionaire raised multiple claims, including reimbursement of work executed, damages, interest on loans, overhead expenses, legal expenses and loss of profit. The concessionaire also sought interest at the contractual rate of 14.75%. Significantly, MPRDC itself claimed the same rate of interest in its counterclaims before the Arbitral Tribunal.

The Arbitral Tribunal passed a majority award in favour of the concessionaire and granted post-award interest at 18% per annum till realisation. Challenges raised by MPRDC under Sections 34 and 37 of the Arbitration and Conciliation Act were rejected by the District Court and the Madhya Pradesh High Court, respectively, leading to the present appeal before the Supreme Court.

Court’s Observation

The Supreme Court undertook an extensive examination of the scheme, object and legislative philosophy underlying the Arbitration and Conciliation Act, 1996. At the very outset, the Court made broader observations concerning arbitration jurisprudence in India and cautioned against excessive judicial interference in arbitral processes.

The Court further observed that judicial interference in arbitral proceedings often undermines commercial certainty and affects ease of doing business. The Bench emphasised that “certainty, uniformity and finality” are cherished values in arbitration jurisprudence and courts must remain conscious of the limited role assigned to them under the Arbitration Act.

The Supreme Court thereafter analysed the structure of the Arbitration and Conciliation Act, 1996 and reiterated that the statute is a complete code intended to ensure speedy resolution of disputes with minimal court intervention. Referring to Section 5 of the Act, the Court reiterated that judicial authorities can interfere only in situations expressly contemplated under the statute.

Relying upon Interplay Between Arbitration Agreements under the Arbitration Act, 1996 & Stamp Act, 1899, In re (2024), the Court reiterated that the principle of judicial non-interference is fundamental to both domestic and international commercial arbitration. The Bench observed that arbitral autonomy and party autonomy form the core of alternative dispute resolution mechanisms, and judicial intervention must remain confined to situations where such support is indispensable for the successful implementation of the arbitral process.

The Court also extensively discussed the limited scope of challenge under Sections 34 and 37 of the Arbitration Act. Referring to Dyna Technologies Pvt. Ltd. v. Crompton Greaves Ltd. (2019), Consolidated Construction Consortium Ltd. v. Software Technology Parks of India (2025) and Municipal Corporation of Greater Mumbai v. R.V. Anderson Associates Ltd. (2026), the Bench reiterated that proceedings under Section 34 are not appellate proceedings and courts cannot reappreciate evidence, allow belated jurisdictional objections, or substitute their own interpretation merely because another view is possible.

The Supreme Court observed that arbitral tribunals remain the “master of evidence” as well as of contractual interpretation, and courts must ordinarily defer to plausible interpretations adopted by arbitral tribunals. The Court emphasised that interference is justified only where perversity goes to the root of the matter or where the award shocks the conscience of the court.

The Bench also discussed the structure of appellate scrutiny under Section 37 of the Arbitration Act and observed that the hierarchy of judicial review in arbitral matters resembles a “narrowing pyramid”, where higher courts must exercise even greater restraint while interfering with arbitral awards. The Court observed that the legislative intent behind the Arbitration Act would stand frustrated if courts engage in routine merits review of arbitral awards.

On the issue concerning the applicability of the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983, the Court noted that the issue regarding jurisdiction and applicability of the Arbitration Act had already attained finality between the parties in earlier proceedings. The Bench observed that once the dispute had been conclusively held to be arbitrable under the Arbitration and Conciliation Act, the appellant could not seek to reopen the issue at a later stage of the proceedings.

The Court further noted that the Arbitral Tribunal, the District Court and the High Court had concurrently found that the claims relating to termination payments fell within the scope of arbitration and were properly adjudicated upon by the Tribunal. The Bench found no perversity or jurisdictional error warranting interference under Sections 34 or 37 of the Arbitration Act.

The Supreme Court also examined the issue of termination payments under the concession agreement and rejected the appellant’s contention that the Arbitral Tribunal had travelled beyond the scope of reference. The Court noted that the issue concerning termination payments had been specifically pleaded, contested and adjudicated upon before the Tribunal and therefore could not be characterised as a decision beyond the scope of arbitration.

The Court took note of the prolonged delay in the resolution of disputes involving foreign investment and infrastructure contracts. Referring to the India-Malaysia Bilateral Investment Treaty, the Court observed that commercial disputes involving international investment inherently carry expectations of stability, consistency and reliability in the application of domestic arbitration law.

The Bench referred to SAIPEM S.P.A v. People’s Republic of Bangladesh before the International Centre for Settlement of Investment Disputes (ICSID) and observed that improper judicial interference with arbitral awards may have wider consequences in the context of foreign investment and investor confidence. The Court stressed that stability and uniformity in arbitration law are important metrics for ease of doing business and international commercial confidence.

Referring to State of U.P. v. Reliance Industries Ltd. (2026), a judgment also authored by Justice Maheshwari, the Court reiterated that “stability and uniformity in application of our domestic laws, especially those pertaining to dispute resolution, bring about reliability which is an important metric for ease of doing business and it is this reliability which attracts foreign investment”.

On the question of interest, the Supreme Court noted that the contractual rate had been consciously agreed upon by the parties at a stage when there was no dispute between them. The Court also found it significant that MPRDC itself had claimed interest at the same rate before the Arbitral Tribunal in its counterclaim.

The Court observed: “Interestingly, even the Appellant has sought for the same rate of interest in their counterclaim filed before the Arbitral Tribunal.”

“There may be various reasons for the Appellant to have contractually accepted a higher rate of interest as the parties were seeking international finance and technology in executing the contract, we are not required to go into this question and attempt to perceive the reason behind such acceptance, but only to acknowledge that the contractual rate is set”, the Bench added.

Furthermore, while referring to Gayatri Balasamy v. ISG Novasoft Technologies Ltd. (2025), the Bench reiterated that “post-award interest are future oriented and depends on facts and circumstances of each case”, and concluded that “in the holistic consideration of facts and circumstances that we do not see any reason to interfere with the saddling of the contractual and statutory interest rate on the Appellant, which is completely just and fair".

Conclusion

The Supreme Court held that the concurrent findings of the Arbitral Tribunal, District Court and High Court did not warrant interference under Sections 34 and 37 of the Arbitration and Conciliation Act. The Court upheld the award of contractual interest and reiterated that judicial review in arbitral matters remains extremely limited, particularly where parties have consciously agreed to contractual terms in the exercise of party autonomy.

Accordingly, the Court dismissed the appeal and directed the release of the deposited amount along with accrued interest to the respondent concessionaire. The Court also directed MPRDC to pay the remaining amount with accrued interest within the stipulated period.

Cause Title: Madhya Pradesh Road Development Corporation Ltd. Through Its Managing Director v. M/s Jabalpur Corridor Pvt. Ltd. Through Its Managing Director (Neutral Citation: 2026 INSC 590)

Appearances

Appellant: Attorney General R. Venkataramani; Additional Solicitor General K.M. Nataraj; Advocate General Prashant Singh; Advocates Harmeet Singh Ruprah, Anvesh Shrivastava, Kanishk Sharma and Karan Singh.

Respondent: Senior Advocates Dr Abhishek Manu Singhvi and Vivek Tankha; Advocates Rishabh Sancheti, Padmapriya and Nishant Kumar; Advocate-on-Record K. Paari Vendhan.

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