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2026 Supreme(Raj) 992
IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR
ARUN MONGA, SANDEEP TANEJA, JJ.
Jaipur Development Authority, Through Executive Engineer (PDC-1) Indira Circle, Jawaharlal Nehru Marg, Jaipur, Rajasthan – Appellant
Versus
Rohan Rajdeep Rajasthan Infra Project Limited, Through Director, Suhas K. Lunkad - Respondent
D.B. Civil Miscellaneous Appeal No. 1560 of 2025
Decided On : 17-08-2026
Important Points
Subject
Arbitration Law - Setting Aside Arbitral Awards
Act Referred
CIVIL PROCEDURE CODE: O.21 R.30
CONTRACT ACT: S.54, S.55, S.73
LIMITATION ACT: Art.113, Art.55
Headnote
(B) Design-Build-Finance-Operate-Transfer (DBFOT) Concessions - Risk Allocation - Where a contract contains an express disclaimer clause allocating investigation and design risk to the concessionaire, the arbitrator cannot disregard such risk-allocation to fasten financial consequences of redesign upon the authority (Paras 50-51, 61, 65) - Detailed Project Reports provided as reference documents cannot be elevated to binding design mandates if the contract and pre-bid clarifications explicitly state they are for reference and that deviations will not impact cost or concession period (Paras 52-53, 62).
(C) Quantum of Compensation and Interest - Internal Rate of Return (IRR) as an appraisal metric - IRR is a tool for project appraisal and not a guaranteed return or a contractual rate of interest; adopting a notional compounding IRR as the measure of recovery without contractual foundation is patently illegal (Paras 55-56, 71) - Law of damages is compensatory, not punitive; an award that transmutes a modest cost escalation into a massive liability through compounding notional rates, shocking the conscience of the court, conflicts with the fundamental policy of Indian law (Paras 79-81).
(D) Section 33 of the Arbitration and Conciliation Act, 1996 - Scope of Corrigendum - Jurisdiction is confined to the correction of computation, clerical, or typographical errors and does not extend to substantive modifications of the award’s quantum or relief (Paras 76-77).
Facts of the case:
Under a BOT agreement for the construction of a tunnel, the concessionaire claimed compensation for increased project costs due to defective design reports, loss of toll revenue due to traffic leakage and demonetization, and loss of advertising revenue. The arbitral tribunal allowed most claims, awarding monetary sums compounded at an Internal Rate of Return (IRR) of 20.33%. A subsequent corrigendum award removed a cap on the total amount, significantly increasing the liability. The commercial court refused to interfere under Section 34, leading to the present appeal.
Findings of Court:
The court found that the agreement provided only for the extension of the concession period as a remedy for cost overruns, not cash compensation. The contractor had expressly accepted the risk of errors in the design reports. No breach of any specific contractual obligation by the authority was established to justify damages. The use of IRR as a compounding interest rate was found to be without legal or contractual basis, resulting in an award that was grossly disproportionate to the actual loss and shocked the conscience of the court. The corrigendum was held to have exceeded the limited scope of Section 33.
Issues: (i) Whether the claim was barred by limitation; (ii) Whether the award suffered from patent illegality or conflicted with public policy; (iii) Whether the arbitrator exceeded the scope of the agreement; (iv) Whether the corrigendum award exceeded the scope of Section 33; and (v) Whether the commercial court failed to exercise its jurisdiction under Section 34.
Ratio Decidendi: An arbitral award is patently illegal if it substitutes a negotiated compensatory mechanism (e.g., time extension) with one not agreed upon (e.g., cash), ignores express risk-allocation disclaimers, or awards damages without a finding of breach. The use of a notional financial appraisal metric (IRR) as a guaranteed compounding interest rate is impermissible. A corrigendum under Section 33 cannot be used for substantive enhancements. An award that is so disproportionate that it shocks the conscience of the court violates the fundamental policy of Indian law.
Result: Appeal allowed. Order of the Commercial Court set aside. Arbitral award and corrigendum award set aside.
Advocate Appeared:
For the Appellants : Mr. Rajendra Prasad, AG, Mr. Tanay Goyal, Adv., Mr. Sheetanshu Sharma, Adv., Ms. Harshita Thakar, Adv., Ms. Dhriti Sharma, Adv.,
For the Respondents: Mr. Sudhir Gupta, Sr. Adv., Ms. Sweta Chauhan, Adv., Mr. Tarak Ahuja, Adv., Mr. Ishan Khanna, Adv., Mr. Aditya Shandilya, Adv., Mr. Rachit Somani,
Adv.
ORDER :
1. Appeal herein is directed against the order dated 27.01.2025 passed by the learned District Judge, Commercial Court, Jaipur, whereby the objection petition preferred by the appellants under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act of 1996"), assailing the arbitral award dated 25.06.2023 and the corrigendum award dated 31.07.2023, was dismissed.
2. The controversy pertains to disputes, arising out of a Tripartite Concession Agreement dated 27.11.2009 executed between the Government of Rajasthan, Jaipur Development Authority and the respondent-concessionaire in relation to the construction, operation and maintenance of an alternate route to “Ghat Ki Guni”, through a tunnel in the Jhalana Hills to connect with NH-11 (Agra Road), Jaipur on Build, Operate and Transfer (BOT) basis.
3. Salient features of the work scope are tabulated as below:
| Project Cost as per Bid Docs. | Rs. 150 Crores |
| Project Cost as quoted by Respondent Scope - Rs. 207.87 crores (as per claimant/respondent) | Rs. 150 Crores |
| Date of Letter for agreement of Award | 13.10.2009 |
| Date of signing of Agreement | 27.11.2009 |
| Concession Period w.e.f.commencement date | 13 years 05 months 20 days |
| IRR As per Cash Flow Projection of claimant | 20.33% |
| Proposed Commencement date | 01.12.2009 |
| Actual commencement date | 15.12.2010 |
| Stipulated date of completion | 14.06.2013 |
| Actual date of completion | 31.01.2013 |
4. The claims preferred before the learned Arbitral Tribunal as per statement of claim dated 15.02.2019 are tabulated as under:-
| S. No. | Particulars | Amount |
|---|---|---|
| 1. | Claim No. 1: For increase in project cost | 175.67 crores |
| 2. | Claim No. 2: For loss of toll | 188.02 crores |
| 3. | Claim No. 3: For compensation of toll loss due to delay in achieving the Commercial Operations Date (COD) | 40.71 crores |
| 4. | Claim No. 4: For revenue loss on account of denial of use of right of way for displaying advertisements | 8.49 crores |
Besides above, declaratory reliefs and Internal Rate of Return (IRR) @20.33% and arbitral costs were also sought.
The arbitral proceedings culminated in an award, whereby Claim No. 1 and Claim No. 4 were allowed, Claim No. 2 was partly allowed, and Claim No. 3 was rejected.
5. The decision of the learned Arbitral Tribunal on various claims is culled out and tabulated as under:
| S.No. | Particulars | Decision | Amount (in Rupees) |
|---|---|---|---|
| 1. | Claim No. 1: Increase in Project Costs | allowed in toto | 175.67 crores |
| 2. | Claim No.2 Loss of Toll | ||
| i). On account of leakage of traffic through old GKG road. | allowed | 12.20 crores | |
| ii). On account of diversion of traffic through Kho-Nagoriyan road after accident on 6th June, 2017 | disallowed | -- | |
| iii). On account of demonetization | allowed | 1.68 crores | |
| iv). On account of traffic leakages through other competing roads. | disallowed | -- | |
| 3. | Compensation of toll loss of 7 months due to delay in achieving COD | disallowed | -- |
| 4. | Loss of revenue due to prohibition to use ROW for Advertisements | allowed | 8.49 crores |
| 5. | Total award (as on date of filing statement of claim on 16.02.2019) | 198.04 crores | |
| 6. | Costs on account of payment of arbitral fee, legal expenses etc. | 23,66,061/- |
Aside above, the learned Arbitral Tribunal also awarded IRR @ 20.33% per annum on the allowed claims, up to the date of the Award. It was further directed that, in the event the awarded amount was not paid within a period of 90 days from the date of the Award, the same would carry post-award interest @12% per annum until its actual payment.
6. Subsequently, vide a corrigendum award dated 31.07.2023, also assailed herein, the learned Sole Arbitrator, exercising powers under Section 33 of the Act of 1996, allowed the Respondent-Claimant's application for correction of clerical errors. The Corrigendum, inter alia, deleted the words "amounting to Rs. 198.04 Crores", (i.e. sum total of the award) from paragraph 141 and made the original Award dated 25.06.2023 without any upper cap, by adding IRR @20.33% on compounding basis per annum.
7. Apropros the award, the respondent i
