Jurisdiction U/S 34 A&C Act, Though Narrow, Is Not Akin To "Rubber Stamp": Delhi High Court Sets Aside NHAI Arbitral Award
The Court held that Arbitral Tribunal re-wrote Concession Agreement by allowing a unilateral disaggregation letter to override the contractually defined ceiling on "Total Project Cost", erasing risk allocation negotiated between the parties.
Justice Sachin Datta, Delhi High Court
The Delhi High Court has set aside an arbitral award insofar as it awarded termination payment to a highway concessionaire, holding that judicial restraint under Section 34 of the Arbitration and Conciliation Act, 1996 and fidelity to contractual terms by an Arbitral Tribunal are correlative obligations, and that interference becomes necessary where the latter has not been honoured.
The Court held that the Tribunal, by treating a unilaterally issued disaggregation letter as capable of displacing the contractually defined cap on "Total Project Cost," had not merely interpreted the Concession Agreement but effectively rewritten it, rendering the risk-allocation mechanism negotiated between the National Highways Authority of India and the concessionaire wholly nugatory.
A Single Bench of Justice Sachin Datta observed, “…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”.
A.K. Nijhawan appeared for the petitioner and Senior Advocate Sandeep Sethi, Dayan Krishnan appeared for the respondent.
The dispute arose from a Concession Agreement dated July 13, 2010 for the four-laning of the Rohtak–Bawal section of NH-71, terminated by the concessionaire, M/s Kurukshetra Expressway Pvt. Ltd., on grounds of an "Indirect Political Force Majeure Event." The Tribunal awarded Rs. 911.13 crore towards termination payment, computed on the basis of a "Total Project Cost" of Rs. 1045.5 crore notified through a disaggregation letter, as against the contractual ceiling of Rs. 650 crore prescribed under Article 48.1 of the Agreement.
The respondent-concessionaire had earlier sought dismissal of the Section 34 petition on grounds of limitation and suppression of documents, both of which the Court rejected, holding that the petition was instituted within time and that re-filings to cure Registry objections did not attract fresh limitation.
On merits, the Court held that the definition of "Total Project Cost," being the lowest of three specified figures including the Rs. 650 crore cap, formed the heart of risk allocation under the Agreement and could not be rendered a dead letter through a unilateral notification. The Court found that the disaggregation letter mechanism was intended only to apportion an already-capped cost between debt and equity, not to re-determine that cost, and that the Tribunal's contrary construction amounted to patent illegality under Section 34(2A), since no fair-minded person could arrive at such a conclusion consistent with the contract's express terms.
Accordingly, the Court set aside the award to the extent it concerned Claim No. 1 (termination payment) and the consequential interest under Claim No. 2, while declining to interfere with the Tribunal's findings on the remaining claims and counter-claims, holding those to be plausible views not warranting interference.
Cause Title: National Highways Authority of India v. M/s Kurukshetra Expressway Private Ltd. (2026:DHC:5961)
Appearances:
Petitioner: A.K. Nijhawan and Abdul Vahiel, Advocates.
Respondent: Sandeep Sethi, Sr. Adv., Dayan Krishnan, Sr. Adv., Rishi Aggarwal, Sunil Mittal, Daksh Arora, Shruti Arora, Anant Shukla and Sukrit Seth, Advocates.