COVID-19 and Farmers’ Agitation Forced Highway Concession Termination; Delhi High Court Holds Tribunal Correctly Applied Concession Agreement While Awarding Termination Compensation
Facts
The dispute arose from a Concession Agreement dated 13 July 2010 executed between the National Highways Authority of India (NHAI) and M/s Kurukshetra Expressway Private Limited (KEPL) for the design, construction, development, financing, operation and maintenance of the four-laning of the Rohtak–Bawal section of National Highway-71 in Haryana under the National Highways Development Programme (NHDP-III). The concession period was fixed at twenty-eight years commencing from the appointed date of 10 May 2011.
Following completion of substantial construction work, provisional completion certificates were issued in 2013 and 2014, toll collection commenced in September 2013, and the final completion certificate was issued on 13 August 2018. During execution of the project, KEPL claimed that the project had become financially unviable and sought deferment of the annual premium payable to NHAI. NHAI accepted the request, but disputes between the parties continued and resulted in multiple rounds of arbitration.
The present proceedings arose out of the third arbitration between the parties. KEPL asserted that the COVID-19 pandemic and prolonged farmers’ agitation resulted in suspension of toll collection for more than 180 days within a continuous period of 365 days. According to KEPL, these events constituted an “Indirect Political Force Majeure Event” under the Concession Agreement, entitling it to terminate the agreement under Clause 34.8. Accordingly, on 7 October 2021, KEPL terminated the concession and demanded termination payment amounting to approximately ₹1,347.53 crore together with interest and other consequential claims.
An arbitral tribunal was constituted to adjudicate these disputes. KEPL raised claims exceeding ₹3,800 crore under various heads, including termination payment, force majeure losses, insurance reimbursement and costs. NHAI filed a detailed defence along with substantial counterclaims relating to maintenance obligations, deferred premium, outstanding liabilities and rectification costs.
By its award dated 16 August 2024, the arbitral tribunal awarded KEPL approximately ₹911.13 crore towards termination payment together with interest, compensation for force majeure losses, refund of insurance premium and costs. Certain claims such as additional costs and loss of opportunity were rejected. Several of NHAI’s counterclaims were partly allowed while others were rejected. Dissatisfied primarily with the computation of termination payment, NHAI invoked Section 34 of the Arbitration and Conciliation Act, 1996 seeking to set aside the award. Before addressing the merits, KEPL also sought dismissal of the petition on the ground that it had allegedly been filed beyond limitation and that NHAI had suppressed material documents.
Issues
The Delhi High Court identified the following principal issues:
- Whether NHAI’s petition under Section 34 was barred by limitation because of alleged defects in the original filing and subsequent re-filing.
- Whether the petition deserved dismissal on account of suppression of material documents forming part of the arbitral record.
- Whether the arbitral tribunal had ignored the terms of the Concession Agreement while calculating the termination payment payable after termination due to Force Majeure.
- Whether the tribunal incorrectly adopted the Total Project Cost and the Disaggregation Letter while computing Debt Due and Adjusted Equity.
- Whether the award suffered from patent illegality, perversity or conflict with the public policy of India so as to justify interference under Section 34 of the Arbitration and Conciliation Act.
Petitioner’s Arguments (NHAI)
NHAI first contended that the arbitral award incorrectly interpreted the contractual formula governing termination payment under Clause 34.9.2 of the Concession Agreement. According to NHAI, the award proceeded on an inflated Total Project Cost of approximately ₹1,045 crore, whereas the agreement itself clearly defined Total Project Cost as the lowest of three specified figures. Consequently, the tribunal awarded a termination payment substantially higher than what was contractually permissible.
NHAI argued that the tribunal improperly relied upon a Disaggregation Letter dated 4 February 2019 that had been submitted well beyond the sixty-day period stipulated under the Concession Agreement. Since this document was belated and never formally accepted by NHAI, it could not legally constitute the basis for computing termination payment. According to NHAI, the Independent Engineer’s observations could not override the express contractual provisions governing calculation of compensation.
The petitioner further submitted that the tribunal had effectively rewritten the commercial bargain between sophisticated contracting parties. Instead of strictly applying the contractual formula, it adopted an interpretation that substantially enhanced KEPL’s entitlement. Such an approach, according to NHAI, amounted to patent illegality and violated settled principles governing arbitral interpretation of contracts.
On the procedural aspect, NHAI maintained that its Section 34 petition had originally been filed well within the statutory period of limitation. Any subsequent delay occurred only during the process of curing registry defects and filing additional documents. Therefore, the petition could not be treated as barred by limitation merely because the registry required defects to be removed after the original filing. NHAI also denied suppressing any material documents, pointing out that it had expressly requested the Court to summon the complete arbitral record.
Respondent’s Arguments (KEPL)
KEPL raised a preliminary objection that the Section 34 petition was not maintainable because the original filing before the Delhi High Court was incomplete and therefore constituted a non-est filing. It argued that essential documents, including the arbitral award, vakalatnama, memorandum of parties and several annexures, were absent at the relevant time. Consequently, the petition should be treated as having been effectively instituted only after expiry of the statutory limitation period prescribed under Section 34(3) of the Arbitration and Conciliation Act.
KEPL also alleged that NHAI had deliberately suppressed several documents that formed the foundation of the arbitral award, including the Disaggregation Letter, reports of the Independent Engineer, pleadings before the arbitral tribunal, witness evidence, cross-examination transcripts and other contractual documents. According to KEPL, this selective filing was intended to present an incomplete picture before the High Court.
On merits, KEPL argued that the tribunal had correctly interpreted the Concession Agreement and had meticulously examined the evidence relating to Debt Due, Adjusted Equity and Total Project Cost. The tribunal considered not merely the contractual provisions but also the Independent Engineer’s findings, contemporaneous correspondence, financial records and the conduct of the parties. The award represented a reasoned and plausible interpretation of the contract and therefore fell squarely within the limited scope of judicial review under Section 34. KEPL contended that NHAI was effectively seeking a complete re-appreciation of evidence, which is impermissible in proceedings for setting aside an arbitral award.
Analysis of the Law
The dispute before the Delhi High Court primarily concerned the scope of judicial interference with an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996, particularly where the dispute centred on the interpretation of a commercial contract. The Court examined two distinct legal questions: (i) whether the Section 34 petition itself was maintainable despite objections relating to limitation and re-filing, and (ii) whether the arbitral tribunal had interpreted the Concession Agreement in a manner that warranted interference for patent illegality.
(A) Scope of Section 34
The Court reiterated that proceedings under Section 34 are not appellate proceedings. A court does not sit in appeal over the factual findings or contractual interpretation adopted by an arbitral tribunal. Its role is confined to examining whether the award falls within the limited statutory grounds prescribed under Section 34, such as patent illegality, conflict with public policy, perversity, or violation of fundamental legal principles. Merely because another interpretation of the contract appears preferable is no ground for setting aside an arbitral award.
However, the Court clarified that judicial restraint is not absolute. If an arbitral tribunal completely disregards the express language of a contract or adopts an interpretation that no reasonable person could have accepted, the award becomes vulnerable under the doctrine of patent illegality embodied in Section 34(2A). Thus, while deference to arbitral findings remains the norm, courts cannot permit an award that effectively rewrites the bargain agreed upon by the parties.
(B) Limitation Under Section 34(3)
Before considering the merits, the Court addressed the respondent’s objection that NHAI’s petition was allegedly a “non-est filing” because important documents were supplied only after registry objections were cured.
The Court rejected this contention. It observed that Section 34(3) governs only the initial institution of the petition. Once a petition is presented within limitation, the subsequent removal of office objections and re-filing is merely procedural. Delay in curing defects cannot convert an otherwise timely petition into a time-barred one. In the present case, the petition had originally been filed within the statutory period, while the subsequent re-filings only removed registry defects. Consequently, the petition remained maintainable. The Court also rejected the allegation that NHAI had deliberately suppressed documents, noting that NHAI itself had sought summoning of the complete arbitral record.
(C) Interpretation of Commercial Contracts
The central controversy concerned the computation of Termination Payment under Article 34.9.2 of the Concession Agreement.
NHAI argued that the tribunal ignored the contractual definition of Total Project Cost and instead relied upon a later Disaggregation Letter submitted by the concessionaire. According to NHAI, this approach resulted in payment of nearly ₹911 crore instead of the amount contractually permissible.
The Court examined the contractual framework and observed that commercial contracts must ordinarily be interpreted according to the language consciously chosen by sophisticated commercial parties. Courts and arbitral tribunals are not expected to alter contractual risk allocation merely because another interpretation may appear commercially convenient. Nevertheless, contractual definitions cannot be mechanically applied if doing so defeats the overall commercial purpose of the agreement. The task is always to ascertain the intention of the parties from the agreement read as a whole.
Precedent Analysis
The judgment draws upon several important Supreme Court and High Court decisions governing the scope of arbitral review.
1. Simplex Infrastructure Ltd. v. Union of India
The Court relied upon Simplex Infrastructure while discussing limitation under Section 34(3). The Supreme Court had held that a petition challenging an arbitral award must be filed within three months, extendable by only thirty additional days upon sufficient cause. Beyond this statutory period of 120 days, courts possess no jurisdiction to condone delay. The Delhi High Court found that the present petition satisfied this requirement because the original filing occurred within limitation.
2. Northern Railway v. Pioneer Publicity Corporation Pvt. Ltd.
This decision clarified that Section 34(3) applies only to the original filing of a petition and not to delays occurring while removing registry defects. Relying on this principle, the Court rejected KEPL’s argument that subsequent re-filing rendered the petition time-barred.
3. Associate Builders v. Delhi Development Authority
The Court referred to Associate Builders for the proposition that contractual interpretation is generally within the exclusive domain of the arbitral tribunal. Nevertheless, where the arbitrator adopts a construction that no reasonable or fair-minded person could possibly adopt, judicial interference becomes permissible. This principle forms the foundation of the doctrine of patent illegality.
4. Ssangyong Engineering & Construction Co. Ltd. v. NHAI
The Court noted that Ssangyong authoritatively explained the scope of Section 34(2A). Patent illegality is attracted where the award ignores express contractual provisions, substitutes an entirely new bargain, or reaches conclusions that are fundamentally irrational. However, a mere error of interpretation or an alternative contractual view does not amount to patent illegality.
5. Other Arbitration Authorities
The Court also referred to decisions including Hindustan Construction Company v. NHAI, NHAI v. ITD Cementation India Ltd., Konkan Railway Corporation Ltd. v. Chenab Bridge Project Undertaking, and Raghunath Builders Pvt. Ltd. v. Anant Raj Ltd., all reiterating the principle that courts exercising jurisdiction under Section 34 cannot reassess evidence or substitute their own commercial interpretation merely because another view appears preferable.
Court’s Reasoning
The Court first rejected the respondent’s procedural objections relating to limitation and suppression of documents, holding that the petition had been validly instituted within limitation and that there was no material indicating deliberate concealment of the arbitral record.
Turning to the merits, the Court acknowledged that judicial interference with arbitral awards must remain extremely limited. Arbitration is intended to provide finality, and excessive judicial review would undermine the legislative policy behind the Arbitration and Conciliation Act. Therefore, every contractual interpretation adopted by an arbitral tribunal is entitled to considerable deference.
However, the Court found that the present dispute crossed the permissible limits of arbitral interpretation.
According to the Court, the Concession Agreement itself expressly defined the method for computing Termination Payment, including the concept of Total Project Cost. The arbitral tribunal effectively treated a subsequent Disaggregation Letter issued by the concessionaire as overriding these contractual provisions. In doing so, the tribunal diluted the contractual ceiling consciously negotiated between the parties and ignored the priority clause that accorded supremacy to the Concession Agreement over subsequent communications.
The Court observed that while contractual interpretation may admit more than one reasonable view, an interpretation cannot render an express contractual definition meaningless. By disregarding the agreed contractual formula and awarding termination compensation substantially beyond what the agreement contemplated, the tribunal fundamentally altered the commercial bargain between the parties. Such an approach could not be protected merely on the ground of arbitral autonomy.
The Court emphasised that respect for arbitration does not require courts to blindly uphold every award. Judicial restraint and fidelity to the parties’ contract are complementary principles. Where the tribunal departs from the contract itself and effectively rewrites its terms, the Court is duty-bound to intervene under Section 34. Consequently, the award granting Claim No. 1 (Termination Payment) was held to suffer from patent illegality and was set aside. Since the award of interest under Claim No. 2 was entirely dependent upon Claim No. 1, the Court also held that the foundation for awarding such interest no longer survived
Conclusion
The Delhi High Court partly allowed NHAI’s petition under Section 34 of the Arbitration and Conciliation Act, 1996. At the outset, the Court rejected the respondent’s preliminary objections regarding limitation and suppression of documents, holding that NHAI had instituted the Section 34 petition within the statutory period and that the subsequent re-filings merely cured registry defects. The Court further observed that NHAI’s request for summoning the complete arbitral record itself negated any allegation of deliberate concealment of material documents.
On merits, the Court reiterated that judicial review under Section 34 remains extremely limited and that courts ordinarily do not sit in appeal over arbitral awards or substitute their own interpretation of commercial contracts merely because another view is possible. However, this restraint does not extend to situations where an arbitral tribunal disregards the express terms of the contract or effectively rewrites the commercial bargain agreed between sophisticated parties. Such an award falls within the scope of “patent illegality” under Section 34(2A) and warrants judicial interference.
Applying these principles, the Court held that the arbitral tribunal had erred in computing the Termination Payment payable to KEPL. The tribunal relied upon the Disaggregation Letter dated 4 February 2019 and adopted a computation that was inconsistent with the contractual framework governing Debt Due, Adjusted Equity and Total Project Cost under the Concession Agreement. In the Court’s opinion, the agreement itself clearly prescribed the methodology for determining termination compensation, and the tribunal could not dilute or override those provisions by relying upon subsequent communications. Since the interpretation adopted by the tribunal fundamentally altered the contractual mechanism negotiated by the parties, the award on Claim No. 1 (Termination Payment) was held to suffer from patent illegality.
The Court consequently set aside the award relating to Claim No. 1, and since the interest awarded under Claim No. 2 was entirely dependent upon the termination payment, that portion of the award was also set aside. However, the Court did not disturb the remaining parts of the arbitral award, including the findings relating to other claims and counterclaims, as they did not disclose any ground for interference under Section 34. The judgment thus reinforces the settled principle that while courts must accord substantial deference to arbitral awards, they remain duty-bound to intervene where an arbitral tribunal departs from the express language of the contract and effectively rewrites the commercial bargain between the parties.
Case Details
Case: National Highways Authority of India v. M/s Kurukshetra Expressway Private Limited
Court: High Court of Delhi at New Delhi
Case Number: O.M.P. (COMM) 542/2024 (along with IA No. 48442/2024 & IA No. 540/2025)
Judge: Hon’ble Mr. Justice Sachin Datta
Date: 28 July 2026
Result: The Delhi High Court dismissed the respondent’s preliminary objections regarding limitation and suppression of documents, partly allowed NHAI’s petition under Section 34, set aside the arbitral award relating to Claim No. 1 (Termination Payment) and the consequential interest awarded under Claim No. 2, while leaving the remainder of the arbitral award undisturbed.
