Delhi High Court
National Highways Authority Of India … vs South Indian Bank Ltd And Union Bank Of … on 1 July, 2025
Author: Jasmeet Singh
Bench: Jasmeet Singh
$~J
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on: 18.03.2025
Judgment pronounced on: 01.07.2025
+ O.M.P. (COMM) 125/2025 & I.A. 6896/2025, I.A. 6897/2025, I.A.
6898/2025
NATIONAL HIGHWAYS AUTHORITY OF INDIA (NHAI)
.....Petitioner
versus
SOUTH INDIAN BANK LTD AND UNION BANK OF INDIA LTD
& ANR. .....Respondent
+ O.M.P. (COMM) 126/2025 & I.A. 6926/2025, I.A. 6927/2025,
I.A.6928/2025
NATIONAL HIGHWAYS AUTHORITY OF INDIA (NHAI)
.....Petitioner
versus
SOUTH INDIAN BANK LTD AND UNION BANK OF INDIA LTD
& ANR. .....Respondent
For Petitioners: Mr. Sudhir Nandrajog, Sr. Adv. with Mr. Nishant
Awana, Ms. Rini Badoni, Ms. Rebecca Mishra, Ms. Parul Yadav,
Advs.
For Respondents: Mr. Sandeep Sethi, Sr. Adv. with Mr. Krishna
Vijay Singh, Mr. Manish Dembla, Mr. Pradyuman Sewar, Ms.
Vaishnavi Chitneni, Mr. Shubham Kaushik, Advs.
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 1 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
CORAM:
HON'BLE MR. JUSTICE JASMEET SINGH
JUDGMENT
1. These are petitions filed under section 34 of Arbitration and
Conciliation Act, 1996 (“1996 Act”) seeking setting aside of the
Arbitral Award dated 13.11.2024 passed by the Arbitral Tribunal
(“AT”).
2. Since both the petitions were heard together and the submissions of
the learned counsel for the parties are identical in both the petitions,
the said petitions are decided by this common judgment.
3. The only difference between O.M.P. (COMM) 125/2025 and O.M.P.
(COMM) 126/2025 is that in O.M.P. (COMM) 125/2025, the parties
entered into an agreement for construction of Dindigul-Theni Section
and Theni-Kumili Section in the State of Tamil Nadu. In O.M.P.
(COMM) 126/2025, the parties entered into an agreement for
construction of Trichy – Karaikudi Road section including the Trichy
bypass in the State of Tamil Nadu.
FACTUAL BACKGROUND
4. In the present case, the petitioner is the National Highways Authority
of India, the respondent No. 1 is a Bank being the claimant in the
arbitration proceedings and the respondent No. 2 is the
Concessionaire.
5. The petitioner and the respondent No. 2 entered into a Concession
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 2 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
Agreement dated 12.07.2010 (“Concession Agreement”) for the
“Two-laning with paved shoulder of Dindigul-Theni Section from Km
2.750 to Km 73.400 of NH-45 (Extn.) and Theni-Kumili Section of
NH-220 from Km 215.500 to Km 273.600 in the State of Tamil Nadu
under NHDP Phase – III on a Design, Build, Finance, Operate and
Transfer (“DBFOT”) Annuity basis” (“Project Highway”). The
construction of the Project Highway was to be completed within 24
months from the appointed date. The appointed date was declared as
01.09.2011, and accordingly the Scheduled Two Laning Completion
Date (“SCOD”) was 31.08.2013.
6. On 08.01.2011, the respondent No. 1 and respondent No. 2 entered
into a Common Loan Agreement to tune of Rs. 198 crores. It is
pertinent to note that South Indian Bank Limited (“SIB”) executed the
Common Loan Agreement as a lender, Lenders‟ Agent and Security
Agent and disbursed a sum of Rs 100 crores in the Escrow Account
while Union Bank of India signed the said agreement as a lender and
disbursed a sum of Rs 98 crores in the Escrow Account. The petitioner
stipulated certain modifications in the Common Loan Agreement,
which were incorporated through the Supplementary Common Loan
Agreement dated 15.04.2011.On 04.05.2011, an Escrow Agreement
(“EA”) was executed between the parties herein. A Tripartite
Substitution Agreement dated 31.05.2013 (“SA”) was also executed
between the parties herein in the format provided in Schedule-V to the
Concession Agreement.
7. During the execution of work, several events took place which
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 3 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
affected the progress of work and resulted in delays. On 22.09.2014,
respondent No. 2 wrote to the Independent Engineer (“IE”) appointed
under the Concession Agreement requesting for grant of Provisional
Completion Certificate (“PCC”) under the Concession Agreement by
stating that it had completed all works in the land handed over by the
petitioner within 90 days from the appointed date.
8. The IE vide its letter dated 07.11.2014 addressed to the Project
Director of the petitioner stated that there had been major problems in
handing over the “Right of Way” and “Right to Access” for
construction of the highway right from the beginning of the Project
Highway by the petitioner. Further, the respondent No. 2 had more or
less completed the works in the length of the hindrance-free Project
Highway available to it. Relying on Article 14.2 of the Concession
Agreement, IE further stated that a Completion Certificate has to be
issued by IE on completion of construction works once tests are
successful and that the issue of PCC once requested by the
Concessionaire i.e respondent No. 2 cannot be withheld, if the reasons
for the delay in completion of the whole stretch of the Project
Highway is attributable to the petitioner for delay in handing over of
land and State Government Authorities in the case of delay in shifting
of utilities as per Articles 10.3.5, 14.3.1 and 11.2 of the Concession
Agreement. The IE also stated that the respondent No. 2 was entitled
to Annuity Payment of Rs. 20.5 crores as per Article 27.1.1 of the
Concession Agreement since the delay in completion of the Project
within the SCOD i.e. 31.08.2013 was due to the delay in handing over
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 4 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
of encumbrance free and vacant access to the respondent No. 2 by the
petitioner.
9. On 10.06.2015, the petitioner issued a Cure Period Notice calling
upon respondent No. 2 to cure the alleged defaults within 60 days
from the date of receipt of the notice. Respondent No. 2 vide its reply
dated 16.07.2015, amongst other reasons, stated that (i) land
acquisition and consequent non availability of land, (ii) delay in
finalization of the utility shifting estimates and iii) problem of borrow
earth areas in Tamil Nadu and non- cooperation of State Government
in issuing permits for procurement of the same lead to the delay and
further disputed that 100% of the land had been handed over to
respondent No. 2.
10. The petitioner issued a Notice of Intention to Terminate the
Concession Agreement under Article 37.1.2 of the Concession
Agreement. Respondent No. 2 vide its reply dated 26.08.2015 denied
the alleged breach on its part, and reiterated that the reasons for delays
caused in the Project Highway were solely attributable to the
petitioner.
11. On 27.08.2015, Respondent No. 2 and SIB entered into a Second
Supplementary Common Loan Agreement to bring on record the
factum of the delay in the Project, extension of commercial
operations, anticipation of provisional commercial operations being
accepted by the petitioner among others. On 28.09.2015, the petitioner
agreed to keep the „Notice of Intention to Terminate‟ dated
13.08.2015 in abeyance for a period of 90 days subject to certain
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 5 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
conditions.
12. Accordingly, the respondent No. 2 submitted the revised work
program alongwith Extension of Time (“EOT”) proposal for
completion of balance work vide letter dated16.10.2015 and infused
Rs. 6.80 Cr from its own sources. Thereafter, several Supplementary
Common Loan Agreements were executed.
13. The IE vide its letter dated 30.09.2016 recommended that since
majority of work had been completed by respondent No. 2 and
respondent No. 2 had executed an undertaking for completion of the
balance works, the PCC should not be withheld and must be issued at
the earliest for the completed portion of the project.
14. After inspection carried by the Chief General Manager (Tech) &
Regional Officer, Chennai, the petitioner also confirmed its
concurrence with IE‟s recommendation to award PCC and conveyed
the petitioner‟s recommendation for issuance of PCC. Thereafter, PCC
was granted on 08.12.2016.IE vide its letter dated 17.12.2016 to the
respondent No. 2 informed that the PCC had been kept in abeyance
until the completion of the Theni Bypass, as was agreed by the
respondent No. 2 qua the Supplementary Agreement.
15. As alleged by the petitioner that respondent No. 2 was violating the
terms of the Concession Agreement, the petitioner issued „Suspension
Notice‟ under Article 36.1 of Concession Agreement to the respondent
No. 2. Respondent No. 1 also issued a Notice of Financial Default
dated 26.03.2019 to the respondent No. 2 informing about the material
breach of the terms of the Common Loan Agreement. Respondent No.
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 6 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
2 replied to the said notice, however, the petitioner issued Termination
Notice dated 22.05.2019 thereby terminating the Concession
Agreement w.e.f. 09.04.2019 and informed the respondent No. 2 that
it had taken over the Project Highway.
16. Consequently, respondent No. 1 wrote various letters to the petitioner
to release the Termination Payment amounting to Rs. 393,49,97,509
along with the applicable interest. The petitioner denied depositing the
Termination Payment into the Escrow Account vide its letter dated
24.06.2019 and stated that since the Commercial Operation Date
(“COD”) for the Project could not be achieved and the Concession
Agreement was terminated prior to the occurrence of COD, no
Termination Payment for the Project was payable. In its letter dated
24.06.2019, the petitioner also stated that the letter dated 17.12.2016
issued by the IE keeping the PCC in abeyance had been issued under
the instructions of the petitioner.
17. As the petitioner failed to deposit the said Termination Payment into
the Escrow Account, respondent No. 1 filed section 9 petition before
this Court being OMP (I) COMM. No. 406 of 2019.
18. In the meantime, respondent No. 1 also invoked arbitration vide its
notice dated 28.01.2020 under Clause 10 of the EA and Clause 8 of
the SA. The said clauses are extracted below:-
“Clause 10 of EA
10 DISPUTE RESOLUTION
10.1 Dispute resolution
10.1.1 Any dispute, difference or claim arising out of or inDigitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 7 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
connection with this Agreement, which is not resolved
amicably, shall be decided finally by reference to
arbitration to a Board of Arbitrators comprising one
nominee of each Party to the dispute, and where the number
of such nominees is an even number, the nominees shall
elect another person to such Board. Such arbitration shall
be held in accordance with the Rules of Arbitration of the
International Centre for Alternative Dispute Resolution,
New Delhi (the “Rules”) or such other roles as may be
mutually agreed by the Parties, and shall be subject to the
provisions of fee Arbitration and Conciliation Act, 1996”
Clause 8 of SA
8 DISPUTE RESOLUTION
8.1 Dispute resolution
8.1.1 Any dispute, difference or claim arising out of or in
connection with this Agreement which is not resolved
amicably shall be decided by reference to arbitration to a
Board of Arbitrators comprising one nominee each of the
Authority, Concessionaire and the Lenders’ Representative.
Such arbitration shall be held in accordance with the Rules
of Arbitration of the International Centre for Alternative
Dispute Resolution, New Delhi (the “Rules”) or such other
rules as may be mutually agreed by the Parties, and shall be
subject to provisions of the Arbitration and Conciliation
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 8 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
Act, 1996.”
19. As the respondent No. 2 failed to appoint its nominee arbitrator,
respondent No. 1 filed section 11 petition being Arb (P) No. 822 of
2021 wherein this Court appointed the third arbitrator. OMP (I)
COMM. No. 406 of 2019 was also disposed of with liberty to
approach the AT.
20. The AT, after hearing the parties and the evidences placed on record,
passed the impugned Arbitral Award dated 13.11.2024. Relevant
paragraphs of the said Award are extracted below:-
“XI. Tribunal’s Summary Findings
307. The Tribunal answers the issues as follows:
i. The claims with regard to the Termination Payment are
not beyond the scope of Escrow Agreement and/or the
Substitution Agreement but the claims with regard to Debt
Due are beyond the scope of the present arbitration.
ii. The Claimant is entitled to seek deposit of the
Termination Payment with interest thereon by NHAI in the
Escrow Account. The Claimant is not entitled to its claim of
90% Debt Due and interest thereon from the Respondent
No. 2 being (a) beyond the scope of the present arbitration
and (b) premature.
iii. The issue of “Debt Due” can be termed as a “dispute”
under the arbitration clause of the Escrow Agreement or the
Substitution Agreement but the same does not arise in the
present arbitration.
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 9 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
iv. The issue of “Debt Due” was not referred to arbitration
in accordance with notice under Section 21 of the
Arbitration and Conciliation Act, 1996.
v. The Claimant is entitled to a declaration that
“Respondent No. 2 is liable to deposit in the Escrow
account, the Termination Payment” but the Claimant is not
entitled in this arbitration to a declaration that it is entitled
to the release thereof in its favour to the extent of 90% of
Debt Due.
vi. Respondent No. 2 is liable to deposit in the Escrow
Account, i.e., account no. 0246073000005523 with the
Secunderabad Branch of SIB, the Termination Payment of
Rs. 229.50 crore on account of termination of the
Concession Agreement.
vii. Respondent No. 2 is not liable to pay 90% of the alleged
Debt Due of Rs. 2,58,13,11,357/- or any other amount to the
Claimant as damages for non deposit of Termination
Payment in the Escrow Account.
viii. The Claimant cannot claim damages on account of
default of Respondent No. 2 in not depositing the
Termination Payment. There was no such obligation of
NHAI towards the Lenders (i.e., the Claimant). The
obligation was to pay the Concessionaire the Termination
Payment by depositing the same in the Escrow Account. The
remedy for delay in making such deposit was provided in
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 10 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
Article 37.3.3 of the Concession Agreement by payment of
interest on the Termination Payment at the rate of 3% above
the Bank Rate into the Escrow Account.
ix. The Claimant is not entitled to a sum of
Rs.95,21,85,647/- from Respondent No. 2 towards alleged
pre-reference interest on the alleged 90% Debt Due at the
alleged rate of 12% p.a. for the period from 16.04.2019 to
12.05.2022 as purported damages for non-deposit of
Termination Payment in the Escrow Account.
x. The Claimant is not entitled to any pendente lite interest
as no principal amount is payable to the Claimant.
xi. Since the deposit of the Termination Payment along with
interest is to be made by Respondent No. 2 into the Escrow
Account and the Escrow Bank, under Clause 2.3.2 of the
Escrow Agreement, is mandated to maintain the Escrow
Account in accordance with the terms of the Escrow
Agreement and its usual practices and applicable
regulations, and pay the maximum rate of interest payable
to similar customers on the balance in the said account from
time to time, the Claimant is not entitled to future interest.
xii. The Claimant is entitled to costs. However, as the
Claimant has only partially succeeded in respect of its
claims, it would be reasonable to award about half of the
costs claimed. The Claimant has claimed Rs. 1,13,76,548.
Accordingly, the Claimant would be entitled to Rs.
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 11 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
56,88,274. However, the Claimant was also directed to
deposit, in terms of the Arbitration and Conciliation Act,
1996, a sum of Rs. 34,50,000 for all the arbitrators, as
Respondent No. 2 had failed to deposit its full share of fees.
Thus, the Claimant is entitled to a payment of Rs. 56,88,274
plus Rs. 34,50,000, i.e., Rs. 91,38,274/- towards costs from
Respondent No. 2. The Claimant is also entitled to simple
interest at the rate of 9% per annum on the costs, to be
calculated from the date of the award till realisation.
XII. Award Final Orders
308. For the reasons provided above, the Tribunal
DECIDES, DIRECTS and ORDERS as follows:
i. Respondent No. 2 is directed to deposit into the Escrow
Account, by way of Termination Payment, a sum of Rs.
229.50 crore, along with interest thereon at the rate of 3%
above the Bank Rate with effect from 16.4.2019 till the date
of such deposit.
ii. Respondent No. 2 is directed to pay the Claimant a sum
of Rs. 91,38,274/- towards costs.
iii. Respondent No. 2 is directed to pay the Claimant simple
interest at the rate of 9% per annum on the costs, to be
calculated from the date of the award till the date of
realisation.”
21. The petitioner being aggrieved by the passing of the impugned Award,
approached this Court by filing the present petitions.
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 12 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
SUBMISSIONSON BEHALF OF THE PETITIONER
22. Mr. Sudhir Nandrajog, learned Senior Counsel for the petitioner
vociferously urges that the Concession Agreement did not form part
either of the EA or the SA. Learned AT erred in arriving such a
conclusion as the Concession Agreement was merely annexed to EA
and SA as annexure and the terms of the Concession Agreement were
never made “part and parcel” of EA and SA. The intention of
annexing the Concession Agreement in EA and SA can be deduced
from Clause 2 and 3 of the SA and Clause 2.5 and 2.6 of the EA. It is
also submitted that the Concession Agreement was annexed to the EA
and SA only for the reason that the non-signatory to Concession
Agreement, i.e., the respondent No. 1 is aware of the terms of the
Concession Agreement so as to enable the respondent No. 1 to
exercise its rights under Clause 2 and 3 in the SA and Clause 2.5 and
2.6 of the EA.
23. The mere factum of the recital annexing the Concession Agreement to
the EA and SA does not make the Concession Agreement part and
parcel of EA and SA in the absence of a clear or specific indication
that the Concession Agreement in its entirety (including the arbitration
clause) was intended to be made part of the Escrow and Substitution
Agreements. Reliance is placed on M.R. Engineers & Contractors (P)
Ltd. v. Som Datt Builders Ltd., (2009) 7 SCC 696.
24. Learned senior counsel further submits that the AT incorrectly held
that the act of the IE in keeping the PCC in abeyance was non-est,
void ab-initio and beyond the scope and powers of the IE. Learned AT
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 13 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
failed to consider that in terms of clause 14.3.2 of Concession
Agreement, PCC could have only been issued upon completion of
75% of the total length of the Project Highway. Admittedly, the
respondent No. 2 had only completed 90.671 KM (which was less
than 75%) and therefore, the IE rightly corrected its mistake (of
issuing PCC) by keeping the same in abeyance (vide its Letter dated
17.12.2016) until 75% of the total length of the Project Highway was
completed. The AT failed to consider that in terms of clause 37.3.1 of
the Concession Agreement, the Termination Payment shall not be due
or payable on account of a respondent No. 2‟s default occurring prior
to COD. Therefore, Termination Payment never became due and
payable since admittedly the Project Highway had not achieved 75%
completion and CoD. Pertinently, the issue of withholding PCC is sub
judice before an AT wherein the petitioner and respondent No. 2 are
parties.
25. He further submits that the learned AT has wrongly concluded that
there is no requirement for the Concessionaire to demand Termination
Payment from the Authority. In this regard, he states that the learned
AT has given complete go-by to the categoric and unambiguous
provisions of clause 37.3.3 of the Concession Agreement. This
interpretation is altering the binding terms of the Concession
Agreement and hence, such a finding is patently illegal. In the present
case, despite the learned AT was not constituted under the Concession
Agreement and the same was beyond the scope of reference, learned
AT erred in altering the binding terms of the Concession Agreement.
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 14 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
26. Learned senior counsel further submits that Clause 5.1 of the SA
nowhere assigns any right to respondent No. 1 to call upon the
petitioner to deposit the Termination Payments, which have not
become due and payable. Clause 5.1 of the SA only restricts to the
Termination Payments which have become “due and payable”. As
such, Clause 5 is subject to Clause 37.3.3 of Concession Agreement.
Learned AT erred in holding that calculation of Termination Payment
was a “mechanical exercise” whereas the two preconditions for the
Termination Payments to become “due and payable” are that there
must be demand by the respondent No. 2 and the respondent No. 2
must submit necessary particulars. In the present case, both are
missing.
27. The petitioner could not have been directed to deposit Termination
Payments in accordance with Clause 3.2 of the EA as the same never
became “due and payable”. For Termination Payment to become “due
and payable”, the respondent No. 2 as well as the AT, were obligated
to follow the procedure prescribed under clause 37.3.3 of the
Concession Agreement.
28. He further submits that the Termination Payment under the
Concession Agreement is not payable if termination happens due to
Concessionaire‟s default prior to COD. Relying on several clauses of
the Concession Agreement and more particularly on Article 37.3.1, it
is submitted that the COD is achieved upon issuance of PCC which is
issued by IE. In the present case, COD was not achieved as the PCC
which was issued by IE was kept in abeyance by the IE as 75% of the
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 15 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
total length of the Project Highway was not completed by the
respondent No. 2 in terms of clause 14.3.2 of Concession Agreement.
Learned AT failed to consider the same. Therefore, issuance of PCC,
achieving COD, raising a demand by the respondent No. 2 for the
Termination Payment, and providing necessary particulars, all were a
sine qua non to the claim of Termination Payment. The said objection
was taken by the petitioner before the learned AT in its Statement of
Defense (“SOD”) and the learned AT failed to consider the same and
concluded that PCC cannot be kept in abeyance without considering
Clause 14.5 of Concession Agreement.
29. Lastly, learned senior counsel submits that the AT, in any case, could
not have arrived at the figure of Rs. 229.50 Crores as Termination
Payments. Adjudication on the quantum of Termination Payments is
beyond the scope of reference as there is no provision in the EA and
SA which enables the AT or the parties to these agreements to
calculate Termination Payment. The Termination Payment can only be
adjudicated when the disputes arise out of the Concession Agreement.
The AT also erred in holding that the petitioner did not dispute the
calculation made by the respondent No. 1 qua the Termination
Payment. Reliance is placed on Indian Oil Corporation Limited vs.
Shree Ganesh Petroleum Rajgurunagar, 2022 4 SCC 463.
SUBMISSIONS ON BEHALF OF THE RESPONDENT NO. 1
30. Mr. Sandeep Sethi, learned Senior Counsel for the respondent No. 1
submits that the petitioner‟s argument are effectively challenging the
interpretations of the contractual scheme by the AT which cannot be
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 16 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
interfered with. It is settled law that the interpretation of terms of the
agreements are absolutely within the domain of the AT and so long as
the interpretation given to the terms of a contract by the AT is a
possible or plausible one, the Court cannot substitute the AT‟s view
with its own under Section 34 of 1996 Act.
31. Learned senior counsel further submits that the petitioner had an
absolute obligation to deposit the Termination Payment in the Escrow
Account in terms of Clause 3.2 of the EA read with Article 37.3 of the
Concession Agreement. The contractual arrangement effectively
guaranteed that the Lender Banks would be entitled to receive
payments into the Escrow Account, allowing them to withdraw up to
90% of the Debt Due. Reliance is placed on National Highways
Authority of India vs. Punjab National Bank & Ors., 2017 SCC
OnLine Del 11312 (“PNB I”).
32. Had the petitioner deposited the Termination Payment into the Escrow
Account as required, the Lender Banks would have been able to
appropriate an amount equal to at least 90% of the Debt Due from the
Escrow Account, in accordance with Clause 4.2 of the Escrow
Agreement which is extracted below:-
“4.2 Withdrawals upon Termination
Upon Termination of the Concession Agreement, all
amounts standing to the credit of the Escrow Account shall,
notwithstanding anything in this Agreement, be
appropriated and dealt with in the following order:
(a) all taxes due and payable by the Concessionaire for and
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 17 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
in respect of the Project Highway;
(b) 90% (ninety per cent) of Debt Due excluding
Subordinated Debt;
(c) outstanding Concession Fee;
(d) all payments and Damages certified by the Authority as
due and payable to it by the Concessionaire pursuant to the
Concession Agreement, including {Premium,} repayment of
Revenue Shortfall Loan and any claims in connection with
or arising out of Termination;
(e) retention and payments arising out of, or in relation to,
liability for defects and deficiencies set forth in Article 39 of
the Concession Agreement;
(f) outstanding Debt Service including the balance of Debt
Due;
(g) outstanding Subordinated Debt;
(h) incurred or accrued O & M Expenses;
(i) any other payments required to be made under the
Concession Agreement; and
(k) balance, if any, in accordance with the instructions of
the Concessionaire:
Provided that the disbursements specified in Sub-clause (j)
of this Clause 4.2 shall undertaken only after the Vesting
Certificate has been issued by the Authority.”
33. Consequently, the Lender Banks (respondent No.1) were directly
impacted by NHAI‟s failure to deposit the Termination Payment into
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 18 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
the Escrow Account. The AT has rightly interpreted the contractual
scheme and its interpretation of the Contracts in question i.e. EA, SA,
and Concession Agreement in consonance with National Highways
Authority of India v. Punjab National Bank, 2021 SCC OnLine Del
3413 (“PNB II”).
34. He further submits that the AT had the jurisdiction to entertain the
claims. Clause 3.2 of the EA obligates the petitioner to deposit
Termination Payment into the Escrow Account as and when it
becomes due and payable. Respondent No.1 demanded Termination
Payment from the Petitioner vide letter dated 01.04.2019. According
to Respondent No.1, the Termination Payment became due and
payable on 16.04.2019. Despite the termination of the Concession
Agreement by the petitioner, the petitioner failed to deposit the
Termination Payment in the Escrow Account. The petitioner‟s failure
to deposit the same constitutes a violation of clause 3.2 of the EA and
therefore the dispute clearly fell within the ambit of arbitration clause
of the EA.
35. The EA is a Tripartite Agreement executed between: (i) SIB in its
capacity as “Lender‟s Representative” as well as “Escrow Bank”; (ii)
respondent No. 2; and (iii) the petitioner. Similarly, the SA is also a
Tripartite Agreement executed between respondent No.1, respondent
No.2, and the petitioner. Recital A of the EA and SA is identically
worded and inter alia states that a copy of the Concession Agreement
is “annexed hereto and marked as Annex – A to form part of this
Agreement.”. Hence, the argument that Concession Agreement is not
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 19 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
part and parcel is wholly incorrect. In this regard, reliance is placed on
para 184 and 202 of the impugned Arbitral Award.
36. Learned senior counsel further urges that the dispute resolution clause
of EA i.e. Clause 10.1 is widely worded and includes within its ambit,
“Any dispute, difference or claim arising out of or in connection with
this Agreement…”. The invocation letter which specifically states that
NHAI had wrongfully refused to deposit Termination Payment in the
Escrow Account. The said failure on the part of the petitioner was
referred to as the dispute in the invocation letter.
37. Reliance is heavily placed on the judgment passed by this Court in
PNB II wherein similar issue was raised and the Award passed by the
AT was upheld. The said Award was also upheld by the Hon‟ble
Supreme Court.
38. The argument is raised by the petitioner that quantum of Termination
Payment could not have been adjudicated by the AT as it is beyond
the scope of reference. The said contention was never raised before
the AT and also, the petitioner did not dispute the calculation/quantum
of Termination Payment. Further, the AT has rightly held that the
formula for calculating Termination Payment is provided in Clause
37.3 of the Concession Agreement. In this regard, my attention is
drawn to para 157 and 158 of the Arbitral Award.
39. Lastly, Mr. Sethi submits that there was no provision in the
Concession Agreement to put the PCC in abeyance. Relying on
several articles of the Concession Agreement, he submits that the IE
could not withhold the PCC for reason of any work remaining
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 20 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
incomplete if the delay in completion thereof is attributable to NHAI.
The IE recommended issuance of PCC in March 2014 but the
recommendation was rejected by the petitioner. The IE issued the PCC
through its letter dated 08.12.2016 while requiring the Concessionaire
to execute a SA before 25.12.2016 and completing the balance works
by 31.10.2017. Merely nine days after the issuance of the PCC, and
much before the expiry of the date for execution of the SA and
completion of balance works (31.10.2017), the IE suddenly issued a
letter dated 17.12.2016 stating that the PCC is kept in abeyance.
40. The AT has rightly held that the Concession Agreement does not
contain any provision which provides that a PCC, once issued, can be
either kept in abeyance or withdrawn. Further, once the IE issued the
PCC, after being satisfied that the tests were successful and the
requisite portion of the highway was complete, the PCC remained
validly issued and it could not be withdrawn or kept in abeyance for
any reason. In this view, the decision of the IE to keep the PCC in
abeyance was invalid.
ANALYSIS AND FINDINGS
41. I have heard learned senior counsel for the parties and perused the
material available on record.
42. The jurisdiction of this Court under section 34 of 1996 Act has been
explained through a series of judgments rendered by the Hon‟ble
Supreme Court and this Court. I do not want to multiply the
authorities on this aspect. It has time and again been reiterated that the
challenge to an Arbitral Award is only to be seen through the limited
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 21 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
and specific grounds provided under section 34 of 1996 Act. The
Arbitral Award can be set aside on the ground, inter alia, being in
conflict with the public policy of India, patent illegality, violation of
principles of natural justice. The said grounds have been dealt by the
Hon‟ble Supreme Court in Batliboi Environmental Engineers Ltd. v.
Hindustan Petroleum Corpn. Ltd., (2024) 2 SCC 375. Relevant
paragraphs from the said judgment are extracted below:-
“36. Under clause (a) to sub-section (2) to Section 34 of
the A&C Act, a court can set aside an award on the
grounds in sub-clauses (i) to (v), namely, when a party
being under some incapacity; arbitration agreement is
not valid under the law for the time being in force; when
the party making an application under Section 34 is not
given a proper notice of appointment of the arbitrator or
the arbitration proceedings, or was unable to present its
case; and when the composition of the Arbitral Tribunal
or the arbitral procedure was not in accordance with the
agreement between the parties, unless such agreement
was in conflict with the mandatory and binding non-
derogable provision, or was not in accordance with Part
I of the A&C Act…………
41. ………….The public policy violation should be so
unfair and unreasonable as to shock the conscience of
the court. Arbitrator where s/he acts contrary to or
beyond the express law of contract or grants relief, suchDigitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 22 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
awards fall within the purview of Section 34 of the A&C
Act. Further, what would constitute public policy is a
matter dependent upon the nature of transaction and the
statute. Pleadings of the party and material brought
before the Court would be relevant to enable the Court
to judge what is in public good or public interest, or
what would otherwise be injurious to public good and
interest at a relevant point. So, this must be
distinguished from public policy of a particular
government.
45. Referring to the third principle in Western Geco
[ONGC Ltd. v. Western Geco International Ltd., (2014)
9 SCC 263 : (2014) 5 SCC (Civ) 12], it was explained
that the decision would be irrational and perverse if (a)
it is based on no evidence; (b) if the Arbitral Tribunal
takes into account something irrelevant to the decision
which it arrives at; or (c) ignores vital evidence in
arriving at its decision. The standards prescribed in
State of Haryana v. Gopi Nath & Sons [State of Haryana
v. Gopi Nath & Sons, 1992 Supp (2) SCC 312] (for short
Gopi Nath & Sons) and Kuldeep Singh v. Delhi Police
[Kuldeep Singh v. Delhi Police, (1999) 2 SCC 10 : 1999
SCC (L&S) 429] should be applied and relied upon, as
good working tests of perversity. In Gopi Nath & Sons
[State of Haryana v. Gopi Nath & Sons, 1992 Supp (2)Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 23 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
SCC 312] it has been held that apart from the cases
where a finding of fact is arrived at by ignoring or
excluding relevant materials or taking into
consideration irrelevant material, the finding is perverse
and infirm in law when it outrageously defies logic as to
suffer from vice of irrationality. Kuldeep Singh [Kuldeep
Singh v. Delhi Police, (1999) 2 SCC 10 : 1999 SCC
(L&S) 429] clarifies that a finding is perverse when it is
based on no evidence or evidence which is thoroughly
unreliable and no reasonable person would act upon it.
If there is some evidence which can be acted and can be
relied upon, however compendious it may be, the
conclusion should not be treated as perverse. This Court
in Associate Builders [Associate Builders v. DDA,
(2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] emphasised
that the public policy test to an arbitral award does not
give jurisdiction to the court to act as a court of appeal
and consequently errors of fact cannot be corrected.
Arbitral Tribunal is the ultimate master of quality and
quantity of evidence. An award based on little evidence
or no evidence, which does not measure up in quality to
a trained legal mind would not be held to be invalid on
this score. Every arbitrator need not necessarily be a
person trained in law as a Judge. At times, decisions are
taken acting on equity and such decisions can be just
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 24 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
and fair should not be overturned under Section 34 of
the A&C Act on the ground that the arbitrator’s
approach was arbitrary or capricious.
…………………………..
Further, “patent illegality” refers to three sub-heads :
(a) contravention of substantive law of India, which must
be restricted and limited such that the illegality must go
to the root of the matter and should not be of a trivial
nature. Reference in this regard was made to clause (a)
to Section 28(1) of the A&C Act, which states that the
dispute submitted to arbitration under Part I shall be in
accordance with the substantive law for the time being
in force. The second sub-head would be when the
arbitrator gives no reasons in the award in
contravention with Section 31(3) of the A&C Act. The
third sub-head deals with contravention of Section 28(3)
of the A&C Act which states that the Arbitral Tribunal
shall decide all cases in accordance with the terms of
the contract and shall take into account the usage of the
trade applicable to the transaction. This last sub-head
should be understood with a caveat that the arbitrator
has the right to construe and interpret the terms of the
contract in a reasonable manner. Such interpretation
should not be a ground to set aside the award, as the
construction of the terms of the contract is finally for theDigitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 25 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
arbitrator to decide. The award can be only set aside
under this sub-head if the arbitrator construes the award
in a way that no fair-minded or reasonable person
would do.”
Concession Agreement form part of the EA and SA
43. Learned senior counsel for the petitioner raised the first issue that the
Concession Agreement does not form part and parcel of the EA and
SA.
44. To my mind, the said argument is meritless.
45. It is necessary to extract the Recitals of EA and SA which read as
under:-
Recital of EA
“WHEREAS:
A. The Authority has entered into a Concession Agreement
dated 12th July 2010 with the Concessionaire (the
“Concession Agreement”) for Two – Laning with paved
shoulders of the Dindigul-Theni and Theni-Kumili the
Section NH 45(Extn) and NH 220 (km 2.750 to km 73.400
and from km 215.500 to km 273.600 (approx 134 km) on the
Dindigul-Theni and Theni-Kumili in the State of Tamil Nadu
on Design, built, Finance, operate and transfer on annuity
(DBFOT Annuity) basis, and a copy of which is annexed
hereto and marked as Annex-A to form part of this
Agreement.
Recital of SA
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 26 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
“WHEREAS:
(A) The Authority has entered into a Concession Agreement
dated 12th July 2010 with the Concessionaire (the
“Concession Agreement”) for Two – Laning with paved
shoulders from km 2.750 to km 73.400 and km 215.500 to
km 273.600 (approx 134 km) on the Dindigul-Theni and
Theni-Kumili Section of National Highway No. 45 (Extn)
and NH 220 in the State of Tamil Nadu on Design, built,
Finance, operate and transfer on annuity (DBFOT Annuity)
basis, and a copy of which is annexed hereto and marked as
Annex-A to form part of this Agreement.”
(Emphasis added)
46. On perusal of the above, the parties to the Agreements i.e. EA and SA
have clearly mentioned that the Concession Agreement “forms part of
this Agreement” which leaves no manner of doubt that the Concession
Agreement was an integral part of these Agreements. Both EA and SA
are tripartite agreements wherein all the parties herein were parties to
the EA and the SA. Also, EA and SA are subsequent agreements to
the Concession Agreement meaning thereby both these agreements
were executed mainly for the purpose of the smooth functioning of the
Project Highway.
47. The argument of the learned senior counsel for the petitioner that mere
annexing does not make the Concession Agreement part and parcel of
the EA and SA in the absence of a clear and unambiguous/declaration
is devoid of merit as the wordings of the Recital quoted above clearly
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 27 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
indicates that the Concession Agreement has been made part of EA
and SA which is a clear indication in itself.
48. Learned senior counsel for the petitioner has placed reliance on M.R.
Engineers & Contractors (P) Limited (supra) and the operative paras
of the said judgment are extracted below:-
“24. The scope and intent of Section 7(5) of the Act may
therefore be summarised thus:
(i) An arbitration clause in another document, would get
incorporated into a contract by reference, if the following
conditions are fulfilled:
(1) the contract should contain a clear reference to the
documents containing arbitration clause,
(2) the reference to the other document should clearly
indicate an intention to incorporate the arbitration clause
into the contract,
(3) the arbitration clause should be appropriate, that is
capable of application in respect of disputes under the
contract and should not be repugnant to any term of the
contract.
(ii) When the parties enter into a contract, making a general
reference to another contract, such general reference would
not have the effect of incorporating the arbitration clause
from the referred document into the contract between the
parties. The arbitration clause from another contract can be
incorporated into the contract (where such reference isDigitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 28 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
made), only by a specific reference to arbitration clause.
(iii) Where a contract between the parties provides that the
execution or performance of that contract shall be in terms
of another contract (which contains the terms and
conditions relating to performance and a provision for
settlement of disputes by arbitration), then, the terms of the
referred contract in regard to execution/performance alone
will apply, and not the arbitration agreement in the referred
contract, unless there is special reference to the arbitration
clause also.
(iv) Where the contract provides that the standard form of
terms and conditions of an independent trade or
professional institution (as for example the standard terms
and conditions of a trade association or architects
association) will bind them or apply to the contract, such
standard form of terms and conditions including any
provision for arbitration in such standard terms and
conditions, shall be deemed to be incorporated by reference.
Sometimes the contract may also say that the parties are
familiar with those terms and conditions or that the parties
have read and understood the said terms and conditions.
(v) Where the contract between the parties stipulates that
the conditions of contract of one of the parties to the
contract shall form a part of their contract (as for example
the general conditions of contract of the Government where
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 29 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
the Government is a party), the arbitration clause forming
part of such general conditions of contract will apply to the
contract between the parties.”
49. Reliance on the said judgment is misplaced as the same deals with the
incorporation of an arbitral clause when a document is merely referred
to in a Contract whereas the present case does not deal with the
incorporation of an arbitration clause. The EA and SA by clear
phraseology incorporates the Concession Agreement in both the EA as
well as the SA. When the recitals of EA and SA are clear and
unambiguous, there is no need for any external aid. A perusal of the
Recitals quoted above show that the Concession Agreement was not
merely a reference or a statement in the passing but the parties
expressly agreed to it forming and becoming a part of the two
Agreements i.e. EA and SA. Reading anything else would be counter
productive to the clear terms agreed upon between the parties and
would in effect be rewriting the terms of the Contract.
50. Relevant paragraphs dealing with the said issue from the Arbitral
Award are extracted below:-
“96. There are as many as four agreements that are
relevant to the present matter. The first is a Concession
Agreement entered into between the Concessionaire
(Respondent No. 1) and NHAI (Respondent No. 2). Next,
there is a Common Loan Agreement between the lenders
and the Concessionaire, whereby the lenders (the Claimant)
advanced loans to the Concessionaire for the execution ofDigitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 30 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
the Project. Importantly, this Common Loan Agreement was
vetted / approved by NHAI. There are also Supplementary
Loan Agreements. There are also two agreements between
the Claimant, Respondent No. 1 and Respondent No. 2, i.e.,
an Escrow Agreement and a Substitution Agreement. The
present arbitration is invoked under these two agreements.
It is important to note that, as per the recitals of both these
agreements, the parties have agreed that the Concession
Agreement form part and parcel of these agreements as
well. All these agreements are interlinked and define the
rights and obligations of the parties, and relevant
provisions from these are discussed in more detail in the
following paragraphs.
xxxxxxxxxxx
126. It may be noted that as per Recital (A) of the Escrow
Agreement, the Concession Agreement now forms a part of
the Escrow Agreement.
xxxxxxxxxxx
132. It is noted that, as per Recital (A), it is clear that the
Concession Agreement, which is annexed to this agreement,
forms a part of the Substitution Agreement as well, in a
manner similar to that which is provided in the Escrow
Agreement.
xxxxxxxxxxx
184. Recital A of both the Escrow Agreement and
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 31 of 56
By:MAYANK
Signing Date:01.07.2025
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Substitution Agreement are identically worded and, among
other things, states that a copy of the Concession Agreement
is “annexed hereto and marked as Annex- A to form part of
this Agreement.” Thus, the Concession Agreement forms a
part of both the Escrow Agreement and the Substitution
Agreement as per the express words used in those
agreements.”
51. Hence, the AT has rightly held that the Concession Agreement forms
part of the EA and SA. The conclusion of the AT calls for no
interference. As a result, the said contention raised by the petitioner is
rejected.
PCC cannot be kept in abeyance
52. Next submission advanced by the learned senior counsel for the
petitioner is that the AT erred in holding that the PCC cannot be kept
in abeyance. The sole argument of the petitioner, in this regard, is that
as the Project Highway was not completed 75% of the total length in
terms of clause 14.3.2 of Concession Agreement, and the PCC could
not have been granted. The IE was right in keeping the PCC in
abeyance. The respondent No. 2 had only completed 90.671 KM out
of 133.793 being less than 75%
53. To deal with the said contention, for the sake of perusal, relevant
clauses of the Concession Agreement are extracted below:-
“Clause 10
10.3.2
Without prejudice to the provisions of Clause 10.3.1, theDigitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 32 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
Parties hereto agree that on or prior to the Appointed Date,
the Authority shall have granted vacant access and Right of
Way such that the Appendix shall not include more than
20% (twenty per cent) of the total area of the Site required
and necessary for the Two- Lane with paved shoulders
Project Highway, and in the event Financial Close is
delayed solely on account of delay in grant of such vacant
access and Right of Way, the Authority shall be liable to
payment of Damages under and in accordance with the
provisions of Clause 4.2.
10.3.4
The Authority shall make best efforts to procure and grant,
no later than 90 (ninety) days from the Appointed Date, the
Right of Way to the Concessionaire in respect of all land
included in the Appendix, and in the event of delay for any
reason other than Force Majeure or breach of this
Agreement by the Concessionaire, it shall pay to the
Concessionaire Damages in a sum calculated at the rate of
Rs. 50 (Rupees fifty) per day for every 1,000 (one thousand)
square metres or part thereof, commencing from the 91 st
(ninety first) day of the Appointed Date and until such Right
of Way is procured.
10.3.5
Upon receiving Right of Way in respect of any land included
in the Appendix, the Concessionaire shall complete theDigitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 33 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
Construction Works thereon within a reasonable period to
be determined by the Independent Engineer in accordance
with Good Industry Practice; provided that the issue of
Provisional Certificate shall not be affected or delayed on
account of vacant access to any part of the Site not being
granted to the Concessionaire or any construction on such
part of the Site remaining incomplete on the date of Tests on
account of the delay or denial of such access thereto. For
the avoidance of doubt, it is expressly agreed that
Construction Works on all lands for which Right of Way is
granted within 90 (ninety) days of the Appointed Date shall
be completed before the Project Completion Date. It is
further agreed that the obligation of the Concessionaire to
complete the affected Construction Works shall subsist so
long as the Authority continues to pay the Damages
specified herein, and upon the Authority ceasing to pay such
Damages after giving 60 (sixty) days’ notice thereof to the
Concessionaire, the obligation of the Concessionaire to
complete such works on such part of the Site shall cease
forthwith. It is also expressly agreed that completion of the
respective Construction Works within the time determined
by the Independent Engineer hereunder shall be deemed to
be Project Milestones for the purposes of levy and recovery
of Damages under and in accordance with the provisions of
Clause 12.4.2.
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 34 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
Clause 14
14.3 Provisional Certificate
14.3.1 The Independent Engineer may, at the request of the
Concessionaire, issue a provisional certificate of
completion substantially in the form set forth in Schedule-J
(the “Provisional Certificate”) if the Tests are successful
and the Project Highway can be safely and reliably placed
in commercial operation though certain works or things
forming part thereof are outstanding and not yet complete.
In such an event, the Provisional Certificate shall have
appended thereto a list of outstanding items signed jointly
by the Independent Engineer and the Concessionaire (the
“Punch List”); provided that the Independent Engineer
shall not withhold the Provisional Certificate for reason of
any work remaining incomplete if the delay in completion
thereof is attributable to the Authority.
14.3.2 The Parties hereto expressly agree that a Provisional
Certificate under this Clause 14.3 may, upon request of the
Concessionaire to this effect, be issued for operating part of
the Project Highway, if at least 75% (seventy five per cent)
of the total length of the Project Highway has been
completed. Upon issue of such Provisional Certificate, the
provisions of Article 15 shall apply to such completed part.
14.5 Withholding of Provisional Certificate
14.5.1 If the Independent Engineer determines that theDigitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 35 of 56
By:MAYANK
Signing Date:01.07.2025
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Project Highway or any part thereof does not conform to
the provisions of this Agreement and cannot be safely and
reliably placed in commercial operation, it shall forthwith
make a report in this behalf and send copies thereof to the
Authority and the Concessionaire. Upon receipt of such a
report from the Independent Engineer and after conducting
its own inspection, if the Authority is of the opinion that the
Project Highway is not fit and safe for commercial service,
it shall, within 7 (seven) days of receiving the aforesaid
report, notify the Concessionaire of the defects and
deficiencies in the Project Highway and direct the
Independent Engineer to withhold issuance of the
Provisional Certificate. Upon receipt of such notice, the
Concessionaire shall remedy and rectify such defects or
deficiencies and thereupon Tests shall be undertaken in
accordance with this Article 14. Such procedure shall be
repeated as necessary until the defects or deficiencies are
rectified.”
(Emphasis added)
54. On conjoint reading of Clauses 10.3.2, 10.3.4 and 10.3.5, it was the
sole responsibility of the Authority (in the present case, the petitioner)
to provide access and vacant land as per the Appendix to the
respondent No. 2 within the 90 days period from the date of
Appointed Date and if there was any delay in providing the same, it
was to attract damages payable to the respondent No. 2 by the
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 36 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
petitioner. Further, the construction work on the land provided was to
be completed within 90 days and the issuance of PCC was not be
delayed due to access being not granted to any part of the site. It is
necessary to highlight the said clauses as in the present case as it is a
case where the project site was not fully handed over by the petitioner
to the respondent No. 2.
55. As per Clause 14.3.1 and 14.3.2, upon the request of the
Concessionaire (in the present case, the respondent No. 2), the IE may
issue PCC subject to tests being successful and if the Project Highway
could be safely and reliably placed in commercial operation. Further,
the IE was not to withhold the PCC if the work was incomplete due to
delay attributable to the petitioner. Also, PCC was only to be issued if
the 75% of the total length of the project highway was completed.
Clause 14.5 states that if the IE determined that Project Highway was
not in conformity with the provisions of the Concession Agreement
and could not be safely placed in commercial operation, IE should
forthwith send a report to the petitioner and respondent No. 2. If the
petitioner was also of the same opinion, then the petitioner could
direct the IE to withhold the PCC.
56. The respondent No. 2, after completion of the construction work
within 90 days from the appointed date, issued a letter dated
22.09.2014 to IE requesting grant of PCC. IE responded to the said
letter of the petitioner, vide letter dated 07.11.2014 by stating that
respondent No. 2 had completed the work in the length available and
there were major problems at the petitioner‟s end in handing over the
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 37 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
“Right of Way” and “Right to access” for construction meaning
thereby that the respondent No. 2 was entitled to Annuity Payment as
there was delay in handing over of encumbrance free and vacant
access to the respondent No. 2 by the petitioner. Vide letter dated
17.04.2014, IE informed the respondent No. 2 that PCC request has
been rejected by the petitioner on the ground that 75% of the Project
Highway was not completed.
57. IE again wrote a letter dated 07.11.2014 to the petitioner by reiterating
the above grounds. In the meanwhile, the petitioner issued Cure
Period Notice on 10.06.2015. Again, after the additional work was
completed, IE vide letter dated 30.09.2016 expressed its intention to
issue PCC. The petitioner vide letter dated 24.10.2016 confirmed the
request of the IE after inspecting the 90.671 km of the Project
Highway. Thereafter, the IE vide letter dated 08.12.2016 issued PCC
for the completed stretch of 90.671 KM of the Project Highway and
further stated that the respondent No. 2 shall complete the
Periyakulam Bypass or Theni Bypass before the first annuity payment
falls due i.e. 08.05.2017 (6 months after issuance of PCC) and the
remaining bypasses before 31.10.2017 and to execute SA.
58. Relevant paragraphs from the letter dated 08.12.2016 are extracted
below:-
“24. As per the above Circular dated 07.09.2010, the
Concessionaire in such cases shall be entitled to Annuity
payments in full as per para 3.2 (b). However, the aspect
needs to be looked in to further as 6 bypasses totalingDigitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 38 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
43.122 Km (new construction except Theni Bypass on which
about 30% work has been completed)are yet to taken up and
completed. The Concessionaire should complete either
Periyakulam Bypass or Theni Bypass before the first
Annuity payment falls due and the remaining 5 Bypasses
before 31.10.2017. The Supplementary Agreement time
frame for completion of the remaining 6 Bypasses of 43.122
Km is set for 10months from the date of issue of PCC or
latest by 31.10.2017.
25. The Provisional Completion Certificate for 90.671 Km
completed stretches, duly signed by the Concessionaire and
Independent Engineer, is enclosed. The checklist/guidelines
for the IE regarding issue of Provisional Certificate have
been complied with.
26. A Supplementary Agreement for completion of balance
length of 43.122 Km of Project Highway as per Schedule
“B” & “C” of Concession Agreement need to be signed
between NHAI and the Concessionaire, as provided for in
the NHAI Circular dated 07.09.2010, para 3.2 (b). Draft
Supplementary Agreement is attached as Annexure-IV.”
59. IE again issued a letter dated 17.12.2016 informing the respondent No.
2 that PCC had been kept in abeyance by stating that “until completion
of the Theni Bypass as agreed by the Concessionaire in the draft
Supplementary Agreement and signing of the Supplementary
Agreement as mentioned in paras 24 and 26 respectively of our
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 39 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
aforesaid letter dated 08.12.2016″.The operative part of letter dated
17.12.2016 is extracted below:-
“Ref: ICT letter no.ICT:654:TPV:10532 dt. 08.12.2016
Dear Sir,
In continuation to our letter no.10532 dated 08.12.2016, it
is hereby notified that Provisional Certificate dated
08.12.2016 enclosed herewith for the above mentioned
project is kept in abeyance, until completion of the Theni
Bypass as agreed by the Concessionaire in the draft
Supplementary Agreement and signing of the Supplementary
Agreement as mentioned in paras 24 and 26 respectively of
our aforesaid letter dated 08.12.2016.”
60. To my mind, the letter dated 17.12.2016 is contrary to the letter dated
08.12.2016 as the former is against the deadlines/instructions provided
in the latter.
61. A perusal of the letter dated 17.12.2016 show that the PCC was kept
in abeyance till Theni bypass is completed and the SA is signed.
However, the letter dated 08.12.2016, while issuing PCC, the IE
himself had granted time to complete the bypasses and signing of the
SA. Respondent No. 2 was not given time to complete the
requirements as mentioned in the letter of 08.12.2016. Further, clause
14.5 of Concession Agreement only gives the liberty to withhold the
PCC before it is issued by the IE but does not give any liberty to
withhold the PCC once it is issued.
62. Keeping the PCC in abeyance by the IE vide letter dated 17.12.2016
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 40 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
was beyond the terms of the said clause i.e. 14.5. The fact that the
PCC was granted after the petitioner confirmed its concurrence and
recommended its authorization then its issuance cannot be ignored.
The Concession Agreement nowhere provides that the PCC once
issued can be kept in abeyance or withdrawn. The interpretation given
by the learned senior counsel for the petitioner that IE after realizing
its mistake, kept the PCC in abeyance as 75% of the total length of the
Project Highway was not completed is against the clause quoted above
which gives IE the only right to withhold the PCC „before‟ it is issued
but not once the PCC is issued. Additionally, the PCC was issued after
inspection by the IE and approval by the petitioner. If the
interpretation propounded by the petitioner is accepted then the said
clause will lead to absurdity.
63. Relevant paragraphs from the Arbitral Award are extracted below:-
“257. The Tribunal has thoroughly examined the
Concession Agreement, and is of the view that the said
agreement does not contain any provision which provides
that a PCC, once issued, can be either kept in abeyance or
withdrawn.
258. It is the Tribunal’s considered view that once the I.E.
issued the PCC, further to its letter of 08.12.2016, after
being satisfied that the tests were successful, and the
requisite portion of the highway was complete, the PCC
remained validly issued, and it could not be withdrawn or
kept in abeyance for any reason. The Tribunal also notesDigitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 41 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
that the decision of the I.E. to keep the issuance of the PCC
in abeyance on grounds mentioned in its letter of
17.12.2016 was invalid, as the PCC had already been
issued. Additionally, the letter issuing the PCC of
08.12.2016 stated certain conditions that had to be met, but
the Concessionaire was never given the opportunity to meet
these requirements at all. In the circumstances, not only was
the decision to keep the PCC in abeyance invalid, it was
also contradictory to the position taken by the authority
previously.
259. A case was made out that the PCC was withheld under
the terms of Article 14.5 of the Concession Agreement. The
Tribunal has considered the provision, and finds that
several conditions need to be met in order for Article 14.5 to
operate. Pertinently, the provision specifically relates to
withholding of PCC, but does not apply once the PCC has
been issued. Therefore, in the present case, as the PCC was
already issued, this provision would not come into
operation.
260. Even if one persists with examining the applicability of
Article 14.5 further, it becomes clear that the facts of the
case do not allow for such applicability. For Article 14.5 to
apply, a series of conditions must be met. At the outset, the
I.E. ought to have determined that the Project Highway or
any part thereof did not conform to the provisions of theDigitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 42 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
Concession Agreement and could not be safely placed in
commercial operation, and made a report to such effect.
The conditions in Article 14.5 further require that upon
receipt of such a report, Respondent No. 2 would inspect the
Project Highway, and notify Respondent No. 1 of such
defects and deficiencies in the Project Highway and direct
the I.E. to withhold issuance of the PCC.
261. On the contrary, what transpired was in fact quite
different. The Tribunal notes that the I.E. initially
recommended issuance of PCC, stating that delays were
caused due to Respondent No. 2. After a series of
communications, Respondent No. 2, the I.E., the Project
Director and Respondent No. 1, jointly conducted an
inspection, in which it was concluded that the portion of the
highway that had been completed was indeed fit for
commercial operation. No report suggesting that it was not
fit was made, and none of the subsequent requirements (as
under Article 14.5) were met. I.E.’s letter dated 17.12.2016
which stated that the PCC was being kept in abeyance, said
that this decision was to stand until completion of the Theni
Bypass which was supposedly agreed by Respondent No. 1
in terms of a “draft supplementary agreement”. The
Tribunal notes that the earlier letter issued by the I.E.,
dated 08.12.2016, in which it had issued the PCC, had
clearly stated that the Theni bypass was to be completedDigitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 43 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
before the first annuity payment date, i.e., 6 months after
PCC date (para 24 of the letter dated 08.12.2016). The
decision to keep the PCC in abeyance for reason of not
completing the Theni bypass, went against the earlier
decision granting the Concessionaire time to do so till 6
months thereafter. This was a clearly contradictory exercise
of authority, and cannot be held to be valid.
262. In the Tribunal’s view, therefore, the PCC has
remained validly issued by the I.E. It follows that, after the
Concession Agreement was terminated, the Claimant’s
request for Termination Payment is also valid, and ought to
be fulfilled.
263. Accordingly, Issue No. 5 is answered as follows:
Answer to Issue No. 5. The letter dated 17.12.2016 issued by
I.E. purportedly keeping the PCC dated 08.12.2016 in
abeyance was non est, void ab-initio and beyond the scope
and powers of I.E and Respondent No. 2″
64. I concur with the view taken by the AT and is the correct view. Even
assuming remotely that the view propounded by the petitioner is valid,
the view of the AT most definitely is a plausible view and does not
shake the conscience of the Court. To hold otherwise would be
interpreting the clauses of the Agreement as given by the AT which is
not within the domain of this Court.
Jurisdiction of the AT over the disputes
65. Learned senior counsel for the petitioner contended that the AT
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 44 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
exceeded its jurisdiction as the issue of Termination Payment can only
be adjudicated when the disputes arise out of the Concession
Agreement. The respondent No. 1 initiated arbitration under the EA
and SA and not under the Concession Agreement.
66. From the facts noted above, the center of the dispute is the non deposit
of the Termination Payment by the petitioner into the Escrow Account
which led to the invocation of the arbitration clause, filing of section 9
petition and thereafter, the reference and constitution of the AT.
67. Before going further, it is incumbent to reflect on the arbitration
clause of the EA cited above. The respondent No. 1 invoked the
arbitration clause of the EA which is Clause 10. On perusal of the
same, it clearly indicates that “any dispute, difference or claim arising
out of or in connection with this Agreement” shall be referred to
arbitration. To my mind, it includes the disputes arising in connection
with the EA which also includes the Concession Agreement. In the
preceding paragraphs of this judgment, I have already observed that
the Concession Agreement forms part of the EA and SA.
68. Clause 3 of the EA reads as under:-
“3 DEPOSITS INTO ESCROW ACCOUNT
3.1. Deposits by the Concessionaire
3.1.1 The Concessionaire agrees and undertakes that it
shall
deposit into and/or credit the Escrow Account with:
(a) all monies received in relation to the Project from any
source, including the Senior Lenders, lenders ofDigitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 45 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
Subordinated Debt and the Authority;
(b) all funds received by the Concessionaire from its
shareholders, in any manner or form;
(c) all Annuity received by the Concessionaire;
(d) any other revenues from or in respect of the Project
Highway; and
(e) all proceeds received pursuant to any insurance claims.
3.1.2 The Concessionaire may at any time make deposits of
its other funds into the Escrow Account, provided that the
provisions of this Agreement shall apply to such deposits.
3.2 Deposits by the Authority
The Authority agrees and undertakes that, as and when due
and payable, it shall deposit into and/or credit the Escrow
Account with:
(a) Annuity and any other monies disbursed by the Authority
to the Concessionaire;
(b) Deleted;
(c) Deleted and
(d) Termination Payments
Provided that the Authority shall be entitled to appropriate
from the aforesaid amounts, any Concession Fee due and
payable to it by the Concessionaire, and the balance
remaining shall be deposited into the Escrow Account.”
69. On perusal, the clauses clearly provide that as and when the
Termination Payment is due and payable, the same shall be deposited
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 46 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
into the Escrow Account by the petitioner. It is the case of the
respondent No. 1 that the petitioner refused to deposit the Termination
Payment vide letter dated 24.06.2019 which clearly violated clause 3.2
of the EA. Hence, the respondent No. 1 was constrained to invoke the
arbitration clause of the EA. I have no hesitation to hold that the AT
had the jurisdiction to entertain the disputes arising out of the Escrow
Agreement and more particularly non deposit of Termination Payment
by the petitioner in the Escrow Account.
70. Paragraphs of the Arbitral Award qua jurisdiction are extracted
below:-
“201. The main contention of the Claimant is that the
Termination Payment became due and payable on
16.04.2019, and Respondent No. 2 failed to deposit the
same in the Escrow Account in breach of Clause 3.2 of the
Escrow Agreement. The Claimant had sent various
communications to Respondent No. 2 requesting it to
deposit the Termination Payment in the Escrow Account.
However, Respondent No. 2 neither replied to such
communications nor deposited the Termination Payment.
202. In the Tribunal’s view, this is clearly a dispute arising
under the Escrow Agreement. Respondent No. 2 has
attempted to argue that the question as to whether
Termination Payment has become due and payable is an
issue which can be decided only by referring to the
provisions of the Concession Agreement. However, asDigitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 47 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
clearly provided in the language of the Escrow Agreement,
the Concession Agreement forms a part of the Escrow
Agreement. Therefore, the dispute clearly falls within the
scope of the Escrow Agreement.”
71. The above reasoning is sound, borne out of the correct interpretation
of the contractual terms and consequently, I find no merit in the
contention of the petitioner that the AT lacked jurisdiction over the
dispute of non deposit of Termination Payment in the Escrow
Account.
Contentions qua Termination Payment
72. Learned senior counsel for the petitioner has further argued that
Termination Payment could become due and payable only upon the
Concessionaire/respondent No. 2 raising a demand within 15 days of
the termination which is not in the present case. Hence, in view of the
Clause 37.3.3 of the Concession Agreement, respondent No. 1 could
not demand the Termination Payment from the petitioner.
73. Clause 40 of the Concession Agreement reads as under:-
“40.3 Substitution Agreement
40.3.1 The Lenders’ Representative, on behalf of Senior
Lenders, may exercise the right to substitute the
Concessionaire pursuant to the agreement for substitution
of the Concessionaire(the “Substitution Agreement”) to be
entered into amongst the Concessionaire, the Authority and
the Lenders’ Representative, on behalf of Senior Lenders,
substantially in the form set forth in Schedule – V.”
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 48 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
74. A perusal of the said clause makes it evident that the parties herein
were obligated to enter into SA. Pursuant to the said clause, the parties
herein entered into the SA on 31.05.2013.
75. Clause 2 of the SA reads as under:-
“2. ASSIGNMENT
2.1 Assignment of rights and title
The Concessionaire hereby assigns the rights, title and
interest in the Concession to, and in favour of, the Lenders’
Representative pursuant to and in accordance with the
provisions of this Agreement and the Concession Agreement
by way of security in respect of financing by the Senior
Lenders under the Financing Agreements.”
76. On perusal, it is clear that the Concessionaire has assigned its rights,
title and interest in favour of the Lenders Representative, pursuant to
execution of the SA, i.e. the respondent No. 1. Furthermore, the
respondent No. 2 under the Concession Agreement has been described
as “Concessionaire” which includes its successors and permitted
assigns and substitutes. On conjoint reading, it is clear that there is a
conscious and deliberate intent on the part of the contracting parties to
transfer and assign all rights, title, and interest held by the
Concessionaire to the Lenders Representative i.e. the respondent No.
1. Consequently, the respondent No. 1 after execution of the SA, steps
into the shoes of the Concessionaire. Hence, the respondent No. 1
acting in the capacity of the respondent No. 2 is entitled to make such
demands.
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 49 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
77. Assuming for the sake of argument that the Concessionaire can only
demand the Termination Payment, such a contention completely
ignores the plain language and “commercial purpose” of the
Agreements and if it is implemented, it will render effective the
carefully crafted substitution mechanism. This interpretation would
disregard the intent of the parties, who clearly intended that the lender,
upon substitution, would possess all the rights necessary to recover its
dues including the Termination Payment.
78. In somewhat similar circumstances, a coordinate bench of this Court
in PNB II observed as under:-
“36. Besides, the debt had been extended, by the lenders,
led by PNB, to JST, for the project forming subject matter of
the Concession Agreement. Once the Concession Agreement
itself stood terminated, the loaned amount was required to
be returned. The lenders, led by PNB, had no concern with
the inter se disputes between NHAI and JST. It is for this
reason that the Concession Agreement, rightly, made
deposit by NHAI, into the Escrow Account, as well as the
withdrawal, thereby, by the lenders, the inevitable sequitur
to termination of the Concession Agreement. The amounts
claimed by NHAI from JST were subject matter of the inter
se dispute between NHAI and JST. The right of NHAI to
claim these amounts from JST cannot be gainsaid. That,
however, was rightly made subject matter of a separate
arbitral proceeding, which is presently pending. WhateverDigitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 50 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
be the outcome of the arbitral proceeding, the fact that the
Concession Agreement stands terminated and that, thereby,
NHAI became liable to deposit, into the Escrow Account, at
least 90 of the Debt Due, is an undeniable, even if
uncomfortable (to NHAI), contractual reality. The attempt
of NHAI to “adjust”, from the said figure, the amounts
which, according to it, are liable to be paid by JST, amounts
to taking, from Peter, what is due from Paul. NHAI and
Paul may be at loggerheads in the first arbitral proceeding;
that cannot delegate from the right of Peter, to the return of
the debt extended by it.”
(Emphasis added)
79. The AT in paragraph 275 of the Arbitral Award in this regard has
observed as under:-
“275. Respondent No. 2 maintains that the demand for
Termination Payment should and could have been made
only by the Concessionaire in order for the Termination
Payment to become due and payable. However, this
argument, as discussed earlier, has no merits. The Tribunal
is of the view that the Concessionaire need not request for
the Termination Payment at all; making such a request
mandatory would nullify and effectively defeat the entire
purpose of the scheme laid out in Article 37.3 of the
Concession Agreement read with the Escrow Agreement
and the Substitution Agreement.”
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 51 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
80. Hence, the contention of the petitioner that the demand of the
Termination Payment can only be made by respondent No. 2 is
rejected.
81. It is also argued that if the Concession Agreement is terminated due to
the defaults committed by the respondent No. 2 before achieving
COD, the Termination Payment shall not be due and payable.
82. Clause 37.3 of the Concession Agreement reads as under:-
“37.3 Termination Payment
37.3.1 Upon Termination on account of a Concessionaire
Default during the Operation Period, the Authority shall
pay to the Concessionaire, by way of Termination Payment,
an amount equal to the discounted value of future Annuity
payments, the discounting factor applied being the then SBI
PLR + (plus) 3% less Insurance Cover; provided that if any
insurance claims forming part of the Insurance Cover are
not admitted and paid, then 80%(eight per cent) of such
unpaid claims shall be deducted from the Termination
Payment so assessed. For the avoidance of doubt, the
Concessionaire hereby acknowledges that no Termination
Payment shall be due or payable on account of a
Concessionaire Default occurring prior to COD.
37.3.2 Upon Termination on account of any Authority
Default, the Authority shall pay to the Concessionaire, by
way of Termination Payment, an amount equal to the
discounted value of future Annuity payments, theDigitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 52 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
discounting factor applied being the then SBI PLR -(minus)
3%.
37.3.3 Termination Payment shall become due and payable
to the Concessionaire within 15 (fifteen) days of a demand
being made by the Concessionaire to the Authority with the
necessary particulars, and in the event of any delay, the
Authority shall pay interest at a rate equal to 3% (three per
cent) above the Bank Rate on the amount of Termination
Payment remaining unpaid; provided that such delay shall
not exceed 90 (ninety) days. For the avoidance of doubt, it is
expressly agreed that Termination Payment shall constitute
full discharge by the Authority of its payment obligations in
respect thereof hereunder.
37.3.4 The Concessionaire expressly agrees that
Termination Payment under this Article 37 shall constitute a
full and final settlement of all claims of the Concessionaire
on account of Termination of this Agreement for any reason
whatsoever and that the Concessionaire or any shareholder
thereof shall not have any further right or claim under any
law, treaty, convention, contract or otherwise.”
83. On perusal, Clause 37.3.1 states that the if the Agreement is
terminated on account of the Concessionaire default during the
operation period then the Authority i.e. the petitioner would pay as per
the clause quoted above. Further, if the Agreement terminated prior to
COD on the Concessionaire default, no amount shall be due or
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 53 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
payable. Clause 37.3.2 and 37.3.3 states the formula to be applied for
Termination Payment alongwith the interest component.
84. I have already observed that the letter dated 17.12.2016 is contrary to
the letter dated 08.12.20216 and once PCC is issued in terms of the
Concession Agreement, the same cannot be kept in abeyance and/or
withdrawn. PCC was validly issued on 08.12.2016. Therefore, COD
was achieved on the date of issuance of PCC as per Article 15 of the
Concession Agreement and the demand made by the respondent No. 1
for Termination Payment was valid. Further the Concession
Agreement was terminated vide Termination Notice dated 22.05.2019
w.e.f. 09.04.2019. The argument of the petitioner that the Agreement
was terminated prior to COD is devoid of merit as PCC (08.12.2016)
was issued before the Termination Notice dated 22.05.2019 w.e.f.
09.04.2019.
85. It was lastly argued that in the absence of any provision in the EA and
SA to enable the parties or the AT to calculate the Termination
Payment, the AT, beyond the scope of reference, adjudicated on the
quantum of the Termination Payment and arrived at a figure of Rs.
229.50 crores. The issue of Termination Payment can only be
adjudicated when the disputes arise out of the Concession Agreement.
86. I am unable to agree with the said argument.
87. I have already observed above that the Concession Agreement forms
part of the EA and SA. Hence, there is no question that the AT
exceeded its jurisdiction. Also, the calculation of the Termination
Payment is a question of fact not a question of jurisdiction. The
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 54 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
answer to the said contention i.e. calculation of Termination Payment,
clearly lies in Clause 37 of the Concession Agreement and more
particularly in Clause 37.3.2 and 37.3.3. Further, the petitioner has not
argued that the amount of Rs. 229.50 crores suffer from any errors or
that extra amounts have been added instead of this, only a mere
averment has been made without any evidence. On perusing the SOD
filed by the petitioner, the calculation of Termination Payment has not
been disputed.
88. The AT has dealt with the said contention in paragraph 157 which is
extracted below:-
“157. Respondent No. 2 further argues that the quantum of
Termination Payment should be determined after all
additions and deductions are considered, and that this
calculation exercise cannot be undertaken by the lenders
alone, and that only after such calculation can the said
payment be deposited. The Tribunal notes that this
argument is also brought up for the first time, and is not
backed by any pleadings. The Tribunal also notes that all
calculations of the Termination Payment were duly
provided by the Claimant, backed by documentation and
evidence, and none of this was challenged at any stage by
Respondent No. 2. The Tribunal further notes that
Respondent No. 2 also offers no alternative calculation for
the quantum of the Termination Payment itself, and merely
states that this value can be determined only by all threeDigitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 55 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44
parties. The Tribunal additionally notes that this question of
calculation of Termination Payment is a matter of merit,
and has nothing to do with the question of jurisdiction.”
89. A perusal of the above paragraph shows that the AT has rightly dealt
with the said contention and hence, no interference is required.
CONCLUSION
90. Keeping in mind the above principles and my discussions, I find no
reasons to interfere with the Arbitral Awards dated 13.11.2024 passed
by the AT. Consequently, the present petitions are dismissed.
91. Pending applications, if any, are also disposed of accordingly.
JASMEET SINGH, J
JULY 01,2025/(MSQ)
Digitally Signed O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025 Page 56 of 56
By:MAYANK
Signing Date:01.07.2025
16:15:44