Delhi High Court Partly Sets Aside NHAI Arbitration Award; Holds Tribunal Cannot Grant Future O&M Payments or Rely on Material Without Hearing Both Parties
Delhi High Court Sets Aside Future O&M Payments Awarded Against NHAI; Holds Arbitrator Cannot Grant Relief Beyond the Claim
Facts
The National Highways Authority of India (NHAI) awarded a consultancy contract to The Louis Berger Group Inc. (JV with M/s COWI A/S) for the design, construction supervision and operation & maintenance (O&M) of a cable-stayed bridge across the Chambal River at Kota, Rajasthan.
During construction, the partly built bridge collapsed on 24 December 2009. A Committee of Experts (CoE) investigated the incident and NHAI issued a show cause notice proposing debarment and other action. However, despite the inquiry, NHAI neither terminated the consultancy contract nor imposed any penalty. Instead, it continued the respondent’s engagement for completion of the project.
The respondent sought payment for consultancy services rendered during the extended construction period and the extended O&M period. NHAI insisted that payment would be released only after execution of a supplementary agreement containing unilateral conditions imposed by its Executive Committee, which the respondent refused to accept.
The dispute was referred to arbitration. The Arbitral Tribunal substantially allowed the respondent’s claims. NHAI challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996.
Issues
- Whether the Tribunal ought to have first determined responsibility for the bridge collapse before awarding consultancy payments.
- Whether the Tribunal could award O&M charges for a period extending beyond the date of the arbitral award.
- Whether reliance on material supplied to the Tribunal without affording NHAI an opportunity to respond violated principles of natural justice.
- Whether the respondent’s claims were barred by limitation.
- Whether the invalid portion of the arbitral award could be severed while preserving the remaining award.
Petitioner’s Arguments
NHAI contended that:
- The Tribunal failed to decide the crucial issue of responsibility for the bridge collapse.
- The Tribunal wrongly granted O&M charges for services that had not yet been rendered, thereby granting relief beyond the claims referred to arbitration.
- The Tribunal relied upon financial information relating to the O&M expert, Sunil Bohra, which was furnished through an email without giving NHAI an opportunity to rebut or contest the material.
- The claims were barred by limitation since the dispute arose either in 2012 when the Executive Committee froze escalation or, at the latest, in 2016 when only part payment was released.
Respondent’s Arguments
The respondent argued that:
- Judicial interference in an international commercial arbitration is extremely limited.
- NHAI itself chose to continue the consultancy despite the bridge collapse and never terminated the contract or enforced the proposed penalties.
- The arbitration concerned non-payment for services rendered and not the issue of responsibility for the bridge collapse.
- O&M services continued until November 2023, and awarding payment for the remaining consultancy period avoided multiplicity of proceedings.
- The respondent’s claims arose only after NHAI finally rejected payment on 21 April 2020, making the arbitration invoked in January 2021 well within limitation.
Analysis of the Law
The Court examined:
- Sections 18 and 34 of the Arbitration and Conciliation Act, 1996.
- The principles governing judicial review of international commercial arbitral awards.
- The doctrine of severability under Section 34.
The Court reiterated that:
- Patent illegality under Section 34(2A) does not apply to international commercial arbitrations.
- Interference is confined to the grounds enumerated under Section 34(2).
- Every party must receive a full and fair opportunity to present its case under Section 18.
- An arbitral tribunal cannot grant relief beyond the scope of the reference or decide matters not submitted to arbitration.
Precedent Analysis
The Court relied upon:
- Ssangyong Engineering & Construction Co. Ltd. v. NHAI (2019) 15 SCC 131 — held that an award may be set aside where a party is denied an opportunity to present its case or where the award decides matters beyond the scope of arbitration.
- Gayatri Balasamy v. ISG Novasoft Technologies Ltd. (2025) 7 SCC 1 — reaffirmed that courts may sever and set aside only the invalid portion of an arbitral award where it is separable from the valid part.
The Court distinguished NHAI v. IRB Pathankot Amritsar Toll Road Ltd., observing that unlike that case, NHAI itself had never carried its proceedings regarding responsibility for the bridge collapse to their logical conclusion and had continued to avail the respondent’s services under the original contract.
Court’s Reasoning
The Court rejected NHAI’s contention that the Tribunal was first required to determine responsibility for the bridge collapse.
It observed that although NHAI had constituted a Committee of Experts, issued a show cause notice and considered imposing penalties, it ultimately neither terminated the contract nor executed the proposed supplementary agreement. Instead, it continued the respondent’s engagement under the original contractual terms. Consequently, liability for the bridge collapse was not the dispute referred to arbitration.
However, the Court found merit in NHAI’s challenge to Claim No. 2.
First, the Tribunal awarded O&M charges up to 19 November 2023, although the award itself was delivered on 4 May 2023. This amounted to granting payment for future services not yet rendered, thereby travelling beyond the scope of the reference and violating Section 34(2)(a)(iv).
Secondly, while determining deductions relating to the O&M expert, the Tribunal relied upon financial information supplied by the respondent through email without giving NHAI an opportunity to rebut or contest the material. This violated Section 18 of the Arbitration and Conciliation Act and the principles of natural justice.
On limitation, the Court held that the respondent’s cause of action arose only when NHAI finally rejected the payment claim by communication dated 21 April 2020. Arbitration invoked on 26 January 2021 was therefore within limitation.
Since Claim No. 2 was independent and severable from Claim No. 1, only that portion of the award required to be set aside.
Conclusion
The Delhi High Court partly allowed NHAI’s petition.
The Court upheld the arbitral award relating to consultancy charges during the extended construction period and rejected NHAI’s objections regarding responsibility for the bridge collapse and limitation.
However, it set aside the award under Claim No. 2, holding that the Tribunal had granted future O&M payments beyond the scope of arbitration and had violated principles of natural justice by relying upon material without giving NHAI an opportunity to respond.
Applying the doctrine of severability, the Court preserved the remainder of the arbitral award.
Case Details
Case: National Highways Authority of India v. The Louis Berger Group Inc. JV with M/s COWI A/S
Court: Delhi High Court
Case Number: O.M.P. (COMM) 351/2023
Judge: Hon’ble Mr. Justice Avneesh Jhingan
Date: 03 August 2026
Result: Petition partly allowed. Award relating to Claim No. 2 (O&M charges) set aside as being beyond the scope of arbitration and violative of Section 18; remaining award upheld.
