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2025 Supreme(Online)(Del) 3245
IN THE HIGH COURT OF DELHI AT NEW DELHI
Jasmeet Singh, J
NATIONAL HIGHWAYS AUTHORITY OF INDIA (NHAI) – Appellant
Versus
SOUTH INDIAN BANK LTD AND UNION BANK OF INDIA LTD – Respondent
O.M.P. (COMM) 125/2025 & O.M.P. (COMM) 126/2025
For the Appellants/Petitioners: Mr. Sudhir Nandrajog, Sr. Adv., Mr. Nishant Awana, Ms. Rini Badoni, Ms. Rebecca Mishra, Ms. Parul Yadav
For the Respondents: Mr. Sandeep Sethi, Sr. Adv., Mr. Krishna Vijay Singh, Mr. Manish Dembla, Mr. Pradyuman Sewar, Ms. Vaishnavi Chitneni, Mr. Shubham Kaushik
Court upheld arbitration validity on claims related to Termination Payment under the Escrow Agreement, affirming the authority of the Independent Engineer regarding Provisional Completion Certificates.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 34 - Request for setting aside the Arbitral Award dated 13.11.2024 regarding Termination Payment for highway project - Court confirms that the Concession Agreement forms part of the Escrow Agreement and disputes under the latter were validly arbitrated. The Independent Engineer's authority to issue a Provisional Completion Certificate cannot be kept in abeyance post issuance. (Paras 30, 52, 90)
(B) Jurisdiction - Arbitral Tribunal could decide on disputes arising from the Escrow Agreement which references the Concession Agreement. The claim for Termination Payment was properly addressed according to the conferred jurisdiction. (Paras 66, 68)
(C) Terms of Contract - The requirements for Termination Payment to become due, including demand protocols and failure thereof due to Concessionaire’s default were adequately adjudicated. (Paras 82, 85)
| Table of Content |
|---|
| 1. petitions for setting aside arbitration awards. (Para 1 , 2 , 4) |
| 2. details of construction agreements and financial arrangements. (Para 3 , 5 , 6 , 7 , 8) |
| 3. disputes regarding project delays and claims. (Para 9 , 10 , 11 , 12) |
| 4. overview of arbitral award findings. (Para 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20) |
| 5. contentions raised by petitioner. (Para 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29) |
| 6. defendants' arguments regarding contract interpretation. (Para 30 , 31 , 32 , 33 , 34) |
| 7. court's observations on jurisdiction and scope. (Para 35 , 36 , 37 , 38 , 39) |
| 8. grounds for setting aside arbitral award. (Para 41 , 42 , 43 , 44) |
| 9. final decision on the arbitration award. (Para 90) |
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 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 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 fr
