Court modifies arbitration agreement by mutual consent of parties, directs tribunal to oversee dispute arising from termination of NHAI concession agreement
In a significant judgment delivered on September 10, 2026, the Delhi High Court, presided over by Mr. Justice Sachin Datta, constituted a three-member Arbitral Tribunal to adjudicate disputes between D P Jain Bangalore Chennai Expressways Private Limited (Petitioner) and the National Highways Authority of India (NHAI) (Respondent No.1). The disputes arose from NHAI's termination of the Concession Agreement dated February 4, 2022, related to the construction of the four-lane Bangalore-Chennai Expressway section from Arakkonam to Kancheepuram in Tamil Nadu.
The petitioner approached the Court under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim reliefs including a stay of the termination notice dated September 1, 2026, restraining NHAI from taking possession of the project site or appointing a replacement agency, and prohibiting invocation of bank guarantees and adverse credit classification. The petitioner contended that the termination was a retaliatory act following a favorable judgment by the Madras High Court's Division Bench on August 20, 2026, which declared the project eligible for free fly ash with free transportation, a benefit that NHAI had failed to provide, causing the petitioner to incur substantial additional costs.
NHAI defended the termination asserting persistent contractual defaults by the petitioner such as non-achievement of milestones and cessation of work since May 16, 2025, unrelated to the fly ash supply issue. The Court noted that the termination notice stated immediate takeover of the project by NHAI and encashment of performance securities.
Importantly, the Concession Agreement prescribed a tiered dispute resolution mechanism culminating in arbitration under the auspices of the Society for Affordable Resolution of Disputes (SAROD). However, recognizing the urgency and mutual consent of the parties, the Court modified the arbitration agreement pro tanto, constituting an independent three-member Arbitral Tribunal comprising retired Supreme Court judges: Mr. Justice S. Ravindra Bhat as Presiding Arbitrator, Mr. Justice Ramayyagari Subhash Reddy nominated by NHAI, and Mr. Justice J.K. Maheshwari nominated by the petitioner.
The Court directed that the arbitral proceedings proceed in accordance with the Fourth Schedule to the Arbitration and Conciliation Act, 1996, and required arbitrators to make necessary disclosures under Section 12 of the Act. The parties agreed to share the tribunal's fees and costs equally. Further, the Court converted the Section 9 petition into an application under Section 17 of the Act, mandating the tribunal to consider interim measures to preserve the subject matter of arbitration and prevent reliefs from becoming infructuous.
This judgment underscores the judiciary's proactive role in facilitating efficient dispute resolution by enabling modification of arbitration agreements with mutual consent, ensuring timely constitution of arbitral tribunals. It also reinforces the principle that parties must continue performance of contractual obligations pending dispute resolution.
The matter concerning invocation of mobilisation advance bank guarantees remains pending before the Court and will be heard subsequently.
Bottom Line:
Arbitration and Conciliation Act, 1996 Section 9 petition seeking interim measures in the context of termination of a Concession Agreement - Court has the authority to modify the arbitration agreement by mutual consent of parties and constitute an Arbitral Tribunal during the proceedings.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Sections 9, 12, 17
