Authority: High Court of Delhi

Order Date: 09 July 2026

Case Overview

  • Parties: Appellant – National Highways Authority of India (NHAI). Respondents – South Indian Bank Ltd (Respondent No. 1) and Union Bank of India Ltd (Respondent No. 2) together with other parties (ANR).
  • Nature of proceedings: Appeals filed under Section 37 of the Arbitration and Conciliation Act, 1996 challenging the single judge’s order dated 01‑07‑2025 that dismissed NHAI’s petitions under Section 34 challenging arbitral awards dated 13‑11‑2024. Two appeals (FAO‑OS (COMM) 137/2025 and 152/2025) were heard together as they arose from a common impugned judgment.
  • Background of the project:
  • On 12‑07‑2010 NHAI and the concessionaire (respondent No. 2) entered into two Concession Agreements (CA‑I and CA‑II) for DBFOT two‑laning of NH‑210 (Trichy‑Karaikudi) and NH‑45/220 (Dindigul‑Theni‑Kumili) in Tamil Nadu, scheduled completion dates 31‑08‑2013 (CA‑I) and 14‑05‑2013 (CA‑II).
  • On 08‑01‑2011 the lenders (South Indian Bank and Union Bank) entered into a Common Loan Agreement (CLA) providing financial assistance of ₹ 198 crore and ₹ 187 crore respectively to the concessionaire.
  • On 04‑05‑2011 an Escrow Agreement (EA) and a Substitution Agreement (SA) were executed among NHAI, the lenders and the concessionaire.
  • Land hand‑over & progress:
  • By 27‑07‑2011 NHAI handed over 85.150 km of the required 133.793 km (63.64 %).
  • By 31‑12‑2013 hand‑over increased to 110.177 km (82.34 %).
  • Despite 82 % land hand‑over, project progress from Apr 2013 to Mar 2014 was only 1.83 %; work stopped by Dec 2013.
  • By 28‑02‑2015 NHAI had handed over 100 % of the land (133.793 km).
  • Notices & termination:
  • Independent Engineer (IE) and NHAI issued several letters (15‑04‑2014, 16‑04‑2014, 21‑01‑2015, 25‑02‑2015) urging resumption – no response.
  • On 10‑06‑2015 NHAI issued a Cure Period Notice under Article 37.1 of the CA.
  • On 13‑08‑2015 NHAI issued a Notice of Intention to Terminate; on 27‑08‑2015 a supplementary CLA was executed and the termination notice was kept in abeyance for 90 days.
  • Provisional Completion Certificate (PCC) was issued on 08‑12‑2016 but kept in abeyance on 17‑12‑2016 pending completion of the Theni bypass.
  • On 22‑05‑2019 NHAI terminated the CA (effective 09‑04‑2019) and took over the project; lenders filed petitions under Section 9 of the Act seeking deposit of the termination payment in the escrow account.
  • Arbitration:
  • Respondent No. 2 invoked arbitration on 26‑11‑2019; Respondent No. 1 invoked arbitration on 28‑01‑2020 under EA and SA clauses.
  • The arbitral tribunal was constituted on 12‑05‑2022; Respondent No. 2 did not appear, proceeding was ex‑parte.
  • Issues framed (see paragraphs 78‑94 of the award) included scope of EA/SA, entitlement to termination payment, calculation of debt due, interest, and costs.
  • Arbitral Awards (13‑11‑2024):
  • For CA‑I: Respondent 2 directed to deposit Rs 229.50 crore in the escrow account, interest at “3 % above Bank Rate” from 16‑04‑2019, pay costs of Rs 91,38,274 and simple interest on costs at 9 % p.a.
  • For CA‑II: Respondent 2 directed to deposit Rs 181.81 crore in escrow, costs of Rs 91,85,618 (including arbitrators’ fee) with 9 % simple interest.
  • Applications under Section 33 for modification were rejected as filed beyond 30 days.
  • Single Judge’s Findings (order dated 01‑07‑2025):
  • Confirmed that the CA forms part of the EA and SA; no need for external aid.
  • Held that the PCC could not be kept in abeyance once issued; the IE’s action was void ab‑initio.
  • Declared that the tribunal had jurisdiction under Clause 10 of the EA to entertain the dispute over non‑deposit of termination payment.
  • Accepted that the termination payment became due and payable because COD was achieved on issuance of the PCC (08‑12‑2016) and the CA was terminated after that date.
  • Found that the calculation of termination payment (Rs 229.50 cr and Rs 181.81 cr) was a factual matter within the tribunal’s remit and not a jurisdictional error.
  • Dismissed NHAI’s arguments that the CA was only annexed and not incorporated, that only the concessionaire could demand payment, and that the PCC was improperly kept in abeyance.
  • Court’s Final Analysis & Conclusion:
  • Re‑affirmed that the CA is incorporated into the EA and SA by express wording “Annex‑A to form part of this Agreement”.
  • Confirmed that the PCC issued on 08‑12‑2016 was valid; the subsequent abeyance notice was contrary to Article 14.5 which only allows withholding before issuance.
  • Held that the lenders, as “Lenders’ Representative”, stepped into the shoes of the concessionaire under the SA and were entitled to enforce the escrow‑deposit mechanism.
  • Determined that termination payment became due because COD was achieved; therefore NHAI must deposit the amounts specified in the award.
  • Ordered NHAI to pay the costs awarded to the lenders (approximately Rs 91.86 lakh) with 9 % simple interest from the date of the award.
  • Dismissed the appeals under Section 37 and held all pending applications infructuous.

Final Outcome

  • The High Court dismissed both appeals filed by NHAI, upheld the single judge’s order, and affirmed the arbitral awards directing NHAI to deposit a total termination payment of Rs 411.31 crore (Rs 229.50 crore for CA‑I and Rs 181.81 crore for CA‑II) with interest into the escrow account, and to pay costs of Rs 91.86 lakh with 9 % interest.

Topics: Arbitration, Infrastructure Contracts