Highway Concessionaire Claims ₹911 Crore Termination Payment After Force Majeure; Delhi High Court Upholds ₹650 Crore Project-Cost Cap and Refuses to Restore Arbitral Award
Concessionaire Cannot Unilaterally Increase Total Project Cost Through Disaggregation Letter, Delhi High Court Rules in Rohtak-Bawal Highway Arbitration
Facts
The dispute arose from a Concession Agreement dated 13 July 2010 between Kurukshetra Expressway Private Limited and the National Highways Authority of India (NHAI) for four-laning the Rohtak–Bawal section of NH-71 in Haryana on a Design-Build-Finance-Operate-Transfer basis. The concession period was 28 years commencing from 10 May 2011. KURUKSHETRA
Provisional completion certificates were issued in 2013 and 2014, toll collection began on 1 September 2013, and the final completion certificate was issued on 13 August 2018. This was the third round of arbitration between the parties. KURUKSHETRA
Toll operations were subsequently suspended for a prolonged period because of the Farmers’ Agitation and the COVID-19 pandemic. Kurukshetra Expressway treated these circumstances as an Indirect Political Force Majeure Event continuing beyond the contractual period and, by letter dated 7 October 2021, terminated the Concession Agreement under Clause 34.8. KURUKSHETRA
The concessionaire demanded a Termination Payment of ₹1,347.53 crore along with other amounts. When NHAI did not pay, the dispute went to arbitration. KURUKSHETRA
The three-member Arbitral Tribunal, by majority award dated 16 August 2024, awarded the concessionaire ₹911.13 crore under Claim No. 1, together with interest under Claim No. 2. KURUKSHETRA
NHAI challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996. The Single Judge accepted the challenge and set aside the award concerning Claim Nos. 1 and 2. Kurukshetra Expressway therefore filed the present Section 37 appeal. KURUKSHETRA
Issues
The central question was:
What “Total Project Cost” (TPC) had to be used for calculating the termination payment?
Two competing figures emerged:
Concessionaire’s case: ₹1,045.55 crore, based upon the actual project cost communicated through its Disaggregation Letter dated 4 February 2019.
NHAI’s case: The TPC remained governed by Article 48.1 of the Concession Agreement, under which the relevant calculation was subject to the contractual ₹650 crore ceiling, subject to contractual adjustments.
The connected legal question was whether the Tribunal’s interpretation represented a permissible construction of the contract, immune from Section 34 interference, or whether it effectively rewrote the parties’ bargain, thereby constituting patent illegality.
The Division Bench framed its Section 37 inquiry even more narrowly: did the Single Judge remain within the statutory limits of Section 34 when setting aside the award? KURUKSHETRA
Appellant’s Arguments — Kurukshetra Expressway
The concessionaire contended that it had raised debt of approximately ₹794.06 crore and invested equity of ₹251.49 crore in the project with NHAI’s knowledge and approval. Its financing package and financial model had been scrutinised by NHAI before financial closure. KURUKSHETRA
Its principal contention was that the Single Judge wrongly treated TPC and Termination Payment as synonymous.
According to the concessionaire, Article 34.9.2 independently prescribed the termination payment for an Indirect Political Event as:
Debt Due + 110% of Adjusted Equity. KURUKSHETRA
It argued that the ₹650 crore figure appearing in the definition of TPC was only an estimated project cost fixed at the bidding stage and could not subsequently be converted into an absolute ceiling upon termination liability. KURUKSHETRA
The concessionaire further relied upon the opening words of the definition clause—“unless repugnant to the context or meaning thereof”—to contend that the TPC definition need not mechanically apply where the context of termination required otherwise. KURUKSHETRA
It also relied heavily upon the Disaggregation Letter dated 4 February 2019, which notified a TPC of approximately ₹1,045.55 crore.
On that basis, the Tribunal calculated:
Debt Due: ₹561.30 crore
110% Adjusted Equity: ₹349.80 crore
Total: ₹911.13 crore. KURUKSHETRA
Most importantly, the concessionaire invoked the settled principle that where an arbitrator adopts a plausible interpretation of a contract, the Section 34 court cannot substitute its own interpretation merely because another interpretation appears preferable. KURUKSHETRA
Respondent’s Arguments — NHAI
NHAI argued that Article 48 expressly defined TPC as the lowest of three specified figures, one of which was ₹650 crore.
Therefore, the Tribunal could not calculate termination liability on a TPC of ₹1,045.55 crore without disregarding the express contractual definition. KURUKSHETRA
NHAI’s case was that the Disaggregation Letter merely divided the TPC into its debt and equity components. It did not empower the concessionaire to redefine or increase the TPC itself.
NHAI also argued that treating ₹1,045.55 crore as the TPC and awarding ₹911.13 crore effectively rewrote the commercial bargain and exposed the public authority to liabilities it had never contractually undertaken. KURUKSHETRA
Accordingly, the Tribunal’s approach amounted to patent illegality under Section 34(2A) rather than merely an alternative interpretation of the contract. KURUKSHETRA
Analysis of the Law
Section 37 Review Is Even Narrower Than Section 34
The Division Bench began by emphasising the restricted nature of its jurisdiction.
A Section 37 appeal is not a fresh appeal against the arbitral award.
The question for the appellate court is whether the Section 34 court acted within the statutory grounds available to it. The Section 37 court cannot independently reappreciate the evidence or reconsider the merits of the underlying dispute. KURUKSHETRA
The Court referred to:
- Bombay Slum Redevelopment Corporation (P) Ltd. v. Samir Narain Bhojwani;
- Reliance Infrastructure Ltd. v. State of Goa;
- Haryana Tourism Ltd. v. Kandhari Beverages Ltd.;
- Somdatt Builders-NCC-NEC (JV) v. NHAI; and
- AC Chokshi Share Broker (P) Ltd. v. Jatin Pratap Desai.
The Court described Section 37 scrutiny as effectively operating as a “double filter”, because Section 34 jurisdiction itself is already narrow. KURUKSHETRA
Interpretation Versus Rewriting a Contract
The Court recognised the ordinary rule that interpretation of contractual provisions belongs primarily to the arbitrator.
If the arbitrator’s interpretation is reasonably possible, a Section 34 court cannot interfere simply because another interpretation appears better.
However, there is an important boundary.
An arbitrator may interpret a contract, but cannot rewrite it.
The Court explained the distinction:
- Interpretation assigns a meaning that the contractual words are reasonably capable of bearing.
- Rewriting adds to, subtracts from, overrides or neutralises what the parties expressly agreed.
The Court relied upon Associate Builders v. DDA, Ssangyong Engineering & Construction Co. Ltd. v. NHAI and PSA SICAL Terminals Pvt. Ltd. v. Board of Trustees of V.O. Chidambranar Port Trust. KURUKSHETRA KURUKSHETRA
Why the ₹650 Crore TPC Ceiling Could Not Be Ignored
The High Court agreed with the Single Judge.
Article 48.1 did not contain an incidental or irrelevant definition. It defined the TPC through a three-limbed mechanism and incorporated the ₹650 crore figure as one of the limiting components.
The Tribunal nevertheless treated the concessionaire’s ₹1,045.55 crore figure in the Disaggregation Letter as the operative TPC and calculated a termination payment of ₹911.13 crore from it. KURUKSHETRA
The Division Bench found that Article 34.9.2 and Article 48.1 had to be read harmoniously.
Article 34.9.2 prescribed the formula for calculating termination payment:
Debt Due + 110% Adjusted Equity.
But the definitions of Debt Due and Adjusted Equity themselves depended upon Total Project Cost.
Thus, Article 34.9.2 could not be isolated from Article 48.1. The formula operated within the TPC framework, rather than displacing it. KURUKSHETRA
“Restricted To” Was Crucial
The definition of “Termination Payment” stated that it may consist of payments on account of and “restricted to” Debt Due and Adjusted Equity forming part of the TPC.
The Court regarded this language as deliberately restrictive.
It reasoned that contractual words such as:
“restricted to”
and
“which form part of the Total Project Cost”
could not simply be deprived of operative effect.
Those words established an outer boundary to NHAI’s termination liability. KURUKSHETRA
Disaggregation Letter Could Not Increase TPC
This was another major aspect of the judgment.
The concessionaire argued that its Disaggregation Letter notifying ₹1,045.55 crore became the operative basis for calculating termination payment.
The Court rejected that interpretation.
It explained that “disaggregation” means breaking an existing whole into constituent parts.
Accordingly, the letter’s purpose was to apportion an already determined TPC between:
- Debt Due; and
- Equity.
It was not a contractual mechanism permitting the concessionaire to unilaterally redefine the TPC itself. KURUKSHETRA
Otherwise, the concessionaire could increase NHAI’s termination liability merely by notifying a higher project-cost figure, thereby defeating the negotiated contractual ceiling.
NHAI’s Approval of Higher Financing Did Not Remove the Cap
The concessionaire relied heavily upon NHAI’s knowledge and approval of a financing package reflecting capital costs substantially exceeding ₹650 crore.
The Court rejected the argument.
The financing package served a different commercial purpose. NHAI’s scrutiny of financing arrangements did not amount to an agreement that it would underwrite the entire actual project cost upon termination.
The contractual definition expressly contemplated that the financing package might show a higher capital cost while still requiring the TPC to be determined through the contractual formula. KURUKSHETRA
Thus:
knowledge of higher financing ≠ acceptance of higher termination liability.
Termination-Specific WPI Provision Was Important
The TPC definition itself contained a proviso dealing specifically with adjustment “in the event of Termination”, including WPI variation.
The Court considered this highly significant.
If TPC ceased to matter upon termination, there would have been no reason for the parties to expressly prescribe how TPC should be adjusted in a termination situation.
Further, where WPI exceeded the contractual threshold, revision required mutual agreement.
There was no contractual provision allowing the concessionaire to increase TPC unilaterally through a Disaggregation Letter. KURUKSHETRA
“Unless Repugnant to the Context” Argument Rejected
The concessionaire argued that the contractual definition could be departed from because Article 48.1 was prefaced by language equivalent to “unless repugnant to the context.”
The Court rejected this.
Repugnancy does not arise merely because applying the contractual definition produces a financially disadvantageous result for one party.
There must be a genuine contradiction or absurdity.
Here, applying the TPC definition to termination did not produce absurdity. On the contrary, the definition itself contained a termination-specific adjustment mechanism.
Therefore, the contractual definition was entirely compatible with the termination-payment provisions. KURUKSHETRA
Precedent Analysis
Associate Builders v. DDA
Recognised that contractual interpretation ordinarily belongs to the arbitrator, but an interpretation which no fair-minded or reasonable person could adopt can justify interference.
Ssangyong Engineering v. NHAI
An arbitrator who travels outside the contract or adopts a construction that no reasonable person could adopt may render an award patently illegal under Section 34(2A). KURUKSHETRA
PSA SICAL Terminals v. V.O. Chidambranar Port Trust
An arbitral tribunal cannot effectively impose upon parties a bargain that they never entered into. This authority supported the distinction between contractual interpretation and rewriting. KURUKSHETRA
K.V. Muthu v. Angamuthu Ammal
Where a definition contains words such as “unless the context otherwise requires,” the defined meaning remains the normal rule. Departure is justified only where the context demonstrates that applying the definition is genuinely inappropriate. KURUKSHETRA
Jetpur Somnath Tollways Ltd. v. NHAI
The Court distinguished this precedent because it concerned Section 9 interim protection, not final adjudication of the amount of termination payment. KURUKSHETRA
Court’s Reasoning
The Court ultimately agreed with the Single Judge that the Tribunal had crossed the boundary between interpreting the contract and rewriting it.
The Tribunal’s interpretation effectively:
- treated the Disaggregation Letter as capable of increasing TPC from the contractual figure to ₹1,045.55 crore;
- neutralised the restrictive language in the definition of Termination Payment;
- rendered the ₹650 crore limb of the TPC definition substantially redundant;
- disregarded the termination-specific WPI adjustment mechanism; and
- allowed a unilateral communication by the concessionaire to alter the financial risk allocation agreed between the parties.
The Division Bench therefore found no basis to fault the Single Judge for treating the award on Claim No. 1 as suffering from patent illegality under Section 34(2A). The Single Judge had not merely substituted one plausible contractual interpretation for another; the finding was that the Tribunal’s construction could not reasonably coexist with the express contractual limitation. KURUKSHETRA KURUKSHETRA
Conclusion
The Delhi High Court declined to restore the majority arbitral award granting ₹911.13 crore as termination payment.
The Court upheld the essential reasoning of the Single Judge that the contractual definition of Total Project Cost could not be displaced by the concessionaire’s Disaggregation Letter, and that Article 34.9.2 had to operate together with the TPC definition rather than independently of it.
The judgment is significant for the distinction it draws between:
a plausible interpretation of a commercial contract, which courts must ordinarily respect, and a construction that effectively deletes or overrides an express contractual limitation, which can amount to patent illegality.
Case Details
Case: Kurukshetra Expressway Private Limited v. National Highways Authority of India
Court: High Court of Delhi at New Delhi
Case Number: FAO(OS)(COMM) 211/2026 with CM APPL. 53404–53407/2026 KURUKSHETRA
CNR: DLHC010371002026
Judges: Justice Anil Kshetrapal and Justice Shail Jain KURUKSHETRA
Reserved: 15 September 2026
Pronounced: 28 September 2026 KURUKSHETRA
Result: Section 37 challenge did not succeed in restoring Claim Nos. 1 and 2 of the majority arbitral award; the Single Judge’s interference with the ₹911.13 crore termination-payment award was sustained.
