An appellate court must exercise judicial restraint regarding interim arbitral orders, refusing to substitute its own discretion for the tribunal's plausible contractual interpretation unless the order is shown to be perverse or patently illegal, notwithstanding the pendency of related performance disputes.

Background

1. The present appeal has been filed under Section 37(2)(b) of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) against the interim order dated 03rd January, 2026 (“impugned order”), passed in the on-going arbitration proceedings, titled as “N.K. Toll Road Limited Versus National Highway Authority of India”. The Arbitral Tribunal, vide the impugned order, disposed of the application of the appellant/claimant/concessionaire, i.e., N.K. Toll Road Limited, filed under Section 17 of the Arbitration Act, seeking stay on the operation and effect of the Cure Period Notice dated 07th October, 2025, issued by the respondent, namely, National Highway Authority of India (“NHAI”) under Articles 32.1.1 and 32.1.3 of the Concession Agreement dated 30th January, 2006 (“Concession Agreement”), executed between the parties.

2. More particularly, the Arbitral Tribunal restrained the respondent from taking any action with respect to the breaches/defaults alleged by it in Para 9(a)(i) to (iii) of the Cure Period Notice, since the said allegations were subject matter of adjudication by the Arbitral Tribunal in the on-going arbitration proceedings. However, the Arbitral Tribunal held that the respondent would be well within its right to proceed with the Cure Period Notice in respect of the alleged default of non-compliance of divestment requirements under the Concession Agreement, as mentioned in Para 9(a)(iv) of the Cure Period Notice.

3. By way of the present appeal, the appellant has confined its challenge to the limited extent that while the Arbitral Tribunal has granted interim protection to the appellant against the alleged defaults relating to periodic overlay obligations, consequential damages, and FASTag remittance forming part of the Cure Period Notice [Para 9(a)(i) to (iii)], it nevertheless permitted the respondent to proceed further with the said Cure Period Notice, insofar as it concerns the alleged non-compliance of Article 34.11 of the Concession Agreement [Para 9(a)(iv)], thus, rendering the Concession Agreement exposed to forthwith termination.

Factual Matrix

4. The facts, in brief, leading to the filing of the present appeal are as follows:

4.1. The parties entered into the Concession Agreement dated 30th January, 2006 for design, construction, development, finance, operation and maintenance of a project highway from Km 258.645 (end of Namakkal Bypass) to Km 292.600 (start of Karur Bypass), on NH-7 from a two-lane to a four-lane highway, covering 33.48 Kms to be executed on a Build-Operate-Transfer (“BOT”) Toll basis. Additionally, the project involved the improvement, operation and maintenance of the Sections from Km 248.625 (start of the proposed flyover on Namakkal Bypass) to Km 258.645 (end of Namakkal Bypass) on NH-7 on a BOT basis.

4.2. The aforesaid Concession Agreement commenced from 29th July, 2006, and is scheduled to expire on 28th July, 2026, i.e., for a period of twenty (20) years, which is further extendable by three (3) months.

4.3. In furtherance of the Concession Agreement, the appellant completed the construction of the project highway, and thereby, commenced the toll operations. However, during the operation and maintenance of the project highway, various disputes arose between the parties, in relation to the interpretation and enforcement of specific provisions of the Concession Agreement.

4.4. Upon failure of resolution of the disputes amicably, the appellant herein invoked the arbitration clause, i.e.