JUDGMENT

VIBHU BAKHRU, J Introduction

1. Haryana State Industrial and Infrastructure Development Corporation Limited (hereafter ‘HSIIDC’) has filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter the ‘A&C Act’) impugning an arbitral award dated 24.03.2020 (hereafter the ‘impugned award’) delivered by an Arbitral Tribunal comprising of two former Judges of the Supreme Court of India with a Former Chief Justice of India acting as a Presiding Arbitrator (hereafter the ‘Arbitral Tribunal’).

2. The impugned award was rendered in the context of claims made by respondent no.1 (hereafter ‘IDBI’) on its behalf as well as on behalf of the ‘Senior Lenders’, against HSIIDC. In this order, a reference to IDBI unless the context indicates otherwise, be construed as referring to the ‘Senior Lenders’ or to IDBI acting as the ‘Lender’s Representative’.

3. IDBI claimed that HSIIDC had breached its obligations under the tripartite Substitution Agreement dated 08.01.2007 (hereafter the ‘Substitution Agreement’) as HSIIDC had appointed Concessionaires after terminating the Concession in favour of respondent no.2 (hereafter ‘KMPEL’) to complete the development of the KMP Expressway, without safeguarding the dues of the Senior Lenders (represented by IDBI as the Lenders’ Agent). The Arbitral Tribunal found in favour of IDBI and against HSIIDC and, awarded damages in favour of IDBI for a sum of ₹1737.11 crores along with future interest at the rate of 9% per annum from the date of the impugned award. The Arbitral Tribunal further found that HSIIDC would be entitled to reimbursement of the amount that IDBI would recover from KMPEL pursuant to the proceedings instituted before the Debts Recovery Tribunal. Further, IDBI would be liable to pay simple interest at the rate of 9% per annum on the recovered amount if the same is not paid to HSIIDC within one month from the date of recovery of such amount.

4. The Arbitral Tribunal had quantified the aforesaid damages equivalent to the amount due to IDBI from KMP against the loan disbursed by IDBI (representative of the Senior Lenders), for the development of the Kundli-Manesar-Palwal Expressway (hereafter the ‘KMP Expressway’).

5. HSIIDC contends that the impugned award is vitiated by patent illegality on the face of the award as HSIIDC had not incurred any liability towards IDBI. HSIIDC contends that it had entered into a Substitution Agreement only to secure Senior Lenders (represented by IDBI) in respect of financial assistance extended by the Senior Lenders to the Concessionaire (KMPEL) for development of the KMP Expressway. It is contended on behalf of HSIIDC that although IDBI has instituted proceedings against KMPEL under The Recovery of Debts due to Banks and Financial Institutions Act, 1993, the Arbitral Tribunal has in effect directed HSIIDC to pay the debt due from KMPEL, which is ex-facie erroneous.

Factual Context

6. The Government of Haryana had appointed HSIIDC as the Nodal Agency for Development of 135.650 km long KMP Expressway in the State of Haryana and its operation and maintenance, on a Build, Operate and Transfer basis (BOT basis).

7. HSIIDC had invited proposals for the development and operation of KMP Expressway on a BOT basis (hereafter the ‘Project’). Pursuant to the said invitation, M/s Madhucon Projects Limited, M/s Apollo Enterprises Limited and M/s D.S. Constructions Limited had submitted their bid as a consortium with M/s Madhucon Projects Limited as the Consortium Leader. The said bid was accepted and, HSIIDC issued a Letter of Acceptance (hereafter the ‘LOA’) dated 14.11.2005 requiring execution of a Concession Agreement within a period of 45 days. The said period was subsequently extended. On 31.01.2006, KMPEL and HSIIDC entered into a Concession Agreement for the aforesaid Project (hereafter the ‘Consortium Agreement’). The consortium promoted and incorporated KMPEL (respondent no.2) as a Special Purpose Vehicle for developing and opera