Tribunal's Interpretation Deemed Patent Illegality; Court Affirms Rs. 650 Crore Cap on Termination Payment
In a significant ruling, the Delhi High Court's Division Bench upheld the decision of a Single Judge to set aside the arbitral award granted to Kurukshetra Expressway Private Limited against the National Highways Authority of India (NHAI). The bench, comprising Justices Anil Kshetarpal and Shail Jain, dismissed the appeal filed by Kurukshetra Expressway, affirming the Single Judge's finding of patent illegality in the arbitral award concerning the computation of termination payment.
The dispute originated from a concession agreement dated July 13, 2010, for the four-laning of the Rohtak-Bawal section of NH-71. Kurukshetra Expressway, the concessionaire, terminated the agreement citing an Indirect Political Force Majeure Event due to the farmers' agitation and the COVID-19 pandemic, demanding a termination payment of Rs. 1,347.53 crore. The arbitral tribunal awarded Rs. 911.13 crore, which was contested by NHAI under Section 34 of the Arbitration and Conciliation Act, 1996.
The Single Judge had set aside the award, holding that the tribunal exceeded its jurisdiction by ignoring the Total Project Cost (TPC) cap of Rs. 650 crore stipulated in the concession agreement. The tribunal's reliance on a disaggregation letter to enhance the TPC beyond the contractual ceiling was deemed a rewriting of the contract.
The Division Bench confirmed that the Single Judge correctly applied the limited grounds under Section 34, emphasizing that the tribunal's interpretation could not be sustained as a possible view. The court reiterated that the TPC cap was integral to the agreement's risk allocation and could not be unilaterally altered by the concessionaire.
The judgment underscores the judiciary's role in ensuring arbitral awards adhere to contractual terms and statutory provisions, reinforcing the principle that commercial contracts must be construed as per the parties' original bargain.
Bottom Line :
Arbitration - Scope of interference under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 - Arbitral Tribunal cannot rewrite a commercial contract under guise of interpretation - In concession agreement, Total Project Cost (TPC) cap governed computation of termination payment - Disaggregation letter could only apportion debt and equity within TPC and could not unilaterally enhance TPC beyond contractual ceiling - Single Judge rightly set aside award on claim for termination payment and interest on ground of patent illegality.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Sections 34, 37
