National Highways Authority of India v. M/S Kurukshetra Expressway Private Ltd.

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: 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 timebarred. 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.

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. O.M.P. (COMM) 542/2024 and IA No.48442/2024

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 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 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:-

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 CLAIMED (IN RUPEES)

AMOUNT AWARDED (IN RUPEES) Claim No. 1 towards Termination Payment 1347.53 Cr 911.13 Cr Claim No. 2 towards Interest on Termination

120.93 Cr Interest on the amount awarded by way of termination payment as follows: 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 loss suffered on account of force majeure events Covid Rs. 15.13 Cr Farmers Agitation Rs. 15.80 Cr ____ Total Rs. 30.93 Cr. Covid Rs. 15.13 Cr Farmer Agitation Rs.

11.19 Cr Total 26.32 Cr The Concessionaire shall be entitled to interest on this amount @ 9% per annum from 11.06.2022 till the date of realization Claim No. 4 towards Additional Costs and foregone benefits 539 Cr Rejected Claim No. 5 towards Loss of Opportunity 1768.60 Cr Rejected Claim No. 6 towards Refund of Insurance Premium 1,30,86,294 1,30,86,294 The Concessionaire is entitled to recover interest @9% per annum from 23.11.2021 till the date of realization. Claim No. 7 towards Interest _ Concessionaire is entitled for interest on 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 Costs _ Rs. 1,10,00,000/- In case the payment is 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 CLAIMED AMOUNT AWARDED (IN RUPEES) (IN RUPEES) Claim No. 1 towards cost of maintenance of project highway

183.28 Cr 80.49 Cr with 9% interest from 25.03.2022 till the date of Award. The amount maybe adjusted against the Award in favour of the Concessionaire. Claim No. 2 towards outstanding dues of deferred premium

158.95 Cr Allowed subject to directions as contained in Paragraph 138 of the Award Claim No. 3 towards outstanding payments to agencies

13.49 Cr 3.50 Cr with 9% interest from 28.12.2021 till the date of Award. The amount may be adjusted against the Award in favour of the Concessionaire. Claim No. 4 towards non rectification of various defects

12.18 Cr Rejected Claim No. 5 towards remuneration paid to the I.E.

59.49 Cr Rejected

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:-

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:-

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.

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 (i.e., 13.08.2018) was Rs.1045 Crore and that prior thereto, at the time 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”; 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; and 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.

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.

REASONING AND CONCLUSION

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.

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:-

43.

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: In PSA SICAL Terminals Pvt. Ltd. v. Board of Trustees of V.O. “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. 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:-

44.

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. 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.

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: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 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 –

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 ” 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 subclause (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 –

56. Evidently, the figure of Rs. 650 crore

57. 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. The Concession Agreement is founded upon a concession framework, under which the termination liabilities of the Authority are capped. It is on 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.

58.

THE APPROVAL OF THE FINANCIAL PACKAGE DOES NOT ASSIST THE RESPONDENT 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 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. T

(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; his 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:

(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 THE 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

64. Three expressions in this definition are of significant importance and, independently support the relevance of the in accordance with the provisions of this Agreement”. 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.”

65. The respondent’s principal submission, as accepted by the Arbitral Tribunal, is that the disaggregation letter clause contained in the definition THE DISAGGREGATION LETTER CANNOT OVERRIDE THE CAP IN THE DEFINITION OF “TOTAL PROJECT COST”; IT OPERATES WITHIN IT 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”

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 or to undermine or nullify the contractual ceiling prescribed thereunder. 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.

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 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) 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 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.

75. 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). 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 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;...

77. 8.[1] The Independent Engineer shall determine the costs and/or their reasonableness that are required to be determined by it under the Agreement” The cost-determination function of the Independent Engineer is a power exercisable only in respect of costs which the Agreement specifically 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 selfexecuting: 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.

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.

REPUGNANCY ARGUMENTS

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 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.

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.

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

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

(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; “Termination Payment.”

(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 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:–

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.

91. Insofar as the award in respect of other claims are concerned, this Court finds no basis to interfere therewith.

OTHER CLAIMS

92. The findings and conclusions in respect of other claims and counter claims are briefly summarized hereinbelow.

Highway i. Upon consideration of the record, the Tribunal observed that, following a joint inspection conducted by the Authority, the 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 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.

I. Counter-Claim No. 3 - Outstanding dues to the Agencies i. The findings of the Tribunal with respect to the Counter Claim No. 3 are reproduced as under – 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 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.

A regards Claim No. 6, following observation has been made – 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